Why Botswana got FATF graylisted

Botswana has just exited the Financial Action Task Force (FATF) graylist which the country has been under since 2018. But why was Botswana graylisted in the first place?

According to the Minister of Finance and Economic Development, Honourable Peggy Serame, Botswana was graylisted on the basis that Botswana’s level of compliance with FATF recommendations in the Mutual Evaluation Report (MER) of 2017, was in the main that, generally Botswana’s Anti-money Laundering and Counter-terrorism Financing (AML/CTF) regime is not yet developed, with competent authorities still in the process of understanding their responsibilities and building capacity to deal with Money Laundering and Terrorism Financing (ML/TF).

“In so far as the legal framework is concerned, the reviewers concluded that ‘TF legal framework has major deficiencies arising mainly from non-criminalization of individual terrorist, non-criminalization of financing of proliferation, the penalties are not proportionate and do not cover legal persons, and that competent authorities responsible for investigating TF have different levels of understanding of the TF offence and risks’.” Minister Serame explained.

Serame further explained that the assessors also concluded that Botswana does not have a legal framework to implement United Nations Security Council Resolutions (UNSCRs) relating to targeted financial sanctions.

On the other hand many believe that the main reason why Botswana got graylisted was because of the Hundred Billion Pula (P100 Billion) case. The government accused Wilhelmina Maswabi codenamed ‘Butterfly’ of money laundering and financing terrorism. It was alleged that Hundred Billion Pula was smuggled from the Bank of Botswana. The government has recently lost the case against ‘Butterfly’, the court ruled that the evidence presented by the state was fabricated.

In the same time period, there was also a case of money laundering from the National Petroleum Fund (NPF) in which it was alleged that Two Hundred and Fifty Million Pula (P250 Million) was stolen from the fund. Similarly, the government has lost the case. The recent frequent increases in fuel prices have been associated with the case.

But what does being in the graylist mean for the country? Minister Serame has outlined;

  1. Financial transactions by banks and other financial institutions between the EU the listed country are subjected to enhanced due diligence;
  2. Firms operating in the listed country are not eligible to receive funding from the EU;
  3. Reduces investment flows;
  4. Negatively affects business confidence in the financial system;
  5. Affects efforts to attract foreign direct investment.

According to Serame, exiting the graylist doesn’t mean Botswana is off the hook, the Minister says Botswana will now be monitored by the regional body. However, upon the exit from the graylist, Botswana has been advised by the FATF;

  • Sustain the strong political will to combat money laundering, counter financing of terrorism and counter financing of proliferation;
  • Promote coordination and cooperation among all stakeholders; to ensure that all sectors appropriately address the risk identified in the National Risk Assessment;
  • Continue to update their understanding of the anti-money laundering, counter terrorism financing and counter proliferation financing.

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 and its objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, financing of terrorism, financing of proliferation of arms of war and NBC weapons and other related threats to the integrity of the international financial system.

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