Tanzania: BoT needs better strategy to deal with money laundering, says CAG

The Bank of Tanzania (BoT) lacks adequate strategies to tackle terrorist funding and money laundering activities despite the existence of laws expressly prohibiting such activities in the country, it has been revealed.

According to the latest report of the Controller and Auditor General (CAG), the BoT is required to be particularly vigilant on issues related to both money laundering and terrorist funding.

Such extra-vigilance entails knowing the purpose of remittances made via local commercial banks and other financial institutions, the report specifies.

It notes that the Anti-Money Laundering Act of 2006 and its 2007 regulations give the central bank sufficient mandate to exercise its duties as a ’’regulatory authority, and at the same time as a reporting entity.’’

But the bank lacks comprehensive policies and procedures for its own use in carrying out this mandate, the report states.

’’Furthermore, the bank (BoT) has no comprehensive guidelines in place covering all of the relevant areas of the bank, including the directorate of banking, foreign exchange, bank branch operations and staff duties, government deposits monitoring, and other deposits monitoring,’’ it continues.

The CAG highlighted the need for the central bank to come up with integrated policies for tackling money laundering and monitoring terrorist funding movements.

Says the report: ’’This implies that in the absence of integrated internal BoT anti-money laundering policies cutting across directorates and departments, there are risks of the bank failing to effectively and efficiently execute its core obligation.’’

’’Therefore, the bank should develop a policy and procedures manual dealing with money laundering.’’

The anti-money laundering legislation was set up to make better provisions for prevention and prohibition of money laundering activities in the country.

The law requires financial institutions and their customers to disclose information regarding money laundering.

The government subsequently established a Financial Intelligence Unit (FIU) and the national multi-disciplinary committee on money laundering.

Experts say money laundering activities have become quite rampant in Tanzania, with beneficiaries of proceeds from various fraudulent and corrupt deals usually stashing away their ill-gotten wealth in offshore bank accounts.

Money laundering activities have already been traced to a number of major scandals in the country, including the BoT’s external payment arrears (EPA) account embezzlement scam and the overpriced military radar deal.

Regarding terrorism, Tanzania was a victim of the 1998 US Embassy bombing in Dar es Salaam by Al Qaeda, and is still considered at risk from such terrorist activities, along with other countries in the East African region.

It has been reported that in the months following the September 11, 2001 attacks on the World Trade Centre and the Pentagon in the United States, the international community - led by the US - was able to freeze approximately $100m of terrorist funding.

Subsequent efforts over the next three years have failed to add much more than $40m to the total of frozen or confiscated funds.

Some of the reasons for this are traceable to the inherent inadequacies of global regimes designed to combat terrorist financing; others stem from the availability to terrorist networks of alternative methods of raising and moving money.

Yet others reflect the agility, flexibility, adaptability, and sheer ingenuity of terrorist networks that are not burdened with the constraints of sovereignty, not confined to the use of formal financial institutions, and not dependent on state sponsorship for their income.

Source: This Day