ROLE OF PROFESSIONAL GATEKEEPERS IN

COMBATING MONEY LAUNDERING AND

TERRORISM FINANCING

Financial Intelligence Unit

August 2024

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 Presentation overview
 What is money laundering?

 What is terrorism financing?

 The national AML/CFT framework

 The FATF and the international AML/CFT framework

 Key AML/CFT obligations of FIs and DNFBPs

(a) AML/CFT Policy and Procedures
(b) Identifying, assessing and mitigating ML/TF risks
(c) Customer identification / verification and Customer Due Diligence
(d) Reporting suspicious transactions
(e) Record keeping
(f) AML/CFT training program

 Special ML/TF vulnerabilities of accounting profession

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 What is money laundering
ML is variously defined as –
 A transaction designed or meant to disguise the illicit nature and origin
of proceeds of crime to make such proceeds appear legitimate;
 the concealment of the origins of illegally obtained money, typically by
means of transfers involving foreign banks or legitimate businesses.
 Money launderers various financial intermediaries in the economy such
as banks, stockbrokers, estate agents, lawyers, accountants, casinos, etc
to successfully launder proceeds of crime into the economy.
 These intermediaries are often abused unknowingly. In some cases,
however, the intermediaries are complicit in that they are knowing and
willing facilitators of the laundering or they know or suspect that the
funds are proceeds of crime but choose to turn a blind eye, motivated
solely by making business profits.
 More sophisticated launderers or organized criminal groups go as far as
owning or controlling financial banks or other intermediaries in order to
facilitate their laundering activities more easily.
 The offence of ML is provided for under section 8 of the MLPC Act 3
 What is terrorism financing
Terrorism financing (TF) is defined as –
Providing or mobilising funds to support terrorists,
terrorist organisations, or terrorist activities;
Knowingly, or by gross negligence, participating in or
facilitating a transaction intended for TF purposes

 The offence of financing of terrorism is provided for under section 9

of the Money Laundering and Proceeds of Crime Act

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 The International AML/CFT framework
 The country’s AML/CFT framework is modelled in compliance
with the Financial Action Task Force recommendations,
otherwise known as the FATF Forty Recommendations
 The Financial Action Task Force (FATF) is an intergovernmental body
established in 1989 with the mandate to set AML/CFT Standards and to
oversee compliance by countries . In pursuit of its mandate, the FATF issued
what are known as the FATF the Forty Recommendations
 Every country is required to implement the FATF Forty Recommendations
and to ensure that “designated institutions” implement AML/CFT measures
to guard the institutions against being used by criminals as conduits to
clean-up proceeds of crime or to finance terrorism.
 The FATF monitors compliance by countries through a global network of
FATF-Style Regional Bodies (FSRBs). The Eastern and Southern Africa Anti
Money Laundering Group (ESAAMLG) is one of the eight global FSRBs,
which Zimbabwe is a member of.
 Countries are periodically assessed to determine the extent of their
compliance with the FATF Forty Recommendations. The FATF
Recommendations have elements for implementation by public sector
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institutions as well as by private sector institutions.
 The international AML/CFT
framework
 At its formation in 1989, the FATF’s mandate was focused on measures to
combat money laundering arising from drug trade whose proceeds were
being laundered into legitimate businesses mostly in the USA and Western
Europe.
 Following the infamous terrorists attacks on the USA on 11 September 2001
by the Al Qaida terrorist group , the FATF’s mandate was expanded in 2002 to
include special measures to combat financing of terrorism.
 The FATF Standards are reviewed continuously and have now been further
expanded to include measures to combat financing of proliferation of
weapons of mass destruction.
 The FATF works through a network of regional bodies known as FATF Style
Regional Bodies (or FSRBs) with a collective membership over 200 countries.
 Zimbabwe belongs to the Eastern and Southern Africa Anti Money
Laundering Group (ESAAMLG) which has 21 members.
 Apart from ESAAMLG, there are 8 other FSRBs around the world.
 Countries are periodically assessed either by the FATF itself or by their
respective regional bodies to assess level of compliance with the FATF
Recommendations.
 Countries deemed to have weak measures may be placed under a “grey list”
or, when the country does not cooperate or does not make progress 6it is
 The international AML/CFT
framework
 Zimbabwe was last assessed in 2015 under ESAAMLG’s 2 nd

Round of Mutual Evaluations. The resultant Mutual Evaluation

Report was adopted in September 2016 and is published on
the ESAAMLG website.
 The FATF Assessment Methodology that is in use assesses
countries under two criteria namely:
(a)Technical Compliance; and
(b)Effectiveness
 Technical Compliance criteria assesses the adequacy of a
country’s legal and institutional framework in complying with
the Forty Recommendations.
 Effectiveness criteria assesses the effectiveness of a
country’s entire AML/CFT regime and its various components
in combating ML and TF. The assessment seeks to answer
the question: How well is the country using its laws and
institutional framework to combat ML and TF?
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 The international AML/CFT
 According to the 2016framework
Mutual Evaluation Report on Zimbabwe,
the country was rated as follows:
 Under Technical Compliance criteria, the country was rated as
either Largely Compliant or Fully Compliant in 20 out of the FATF
40 Recommendations. The other 20 Recommendations were rated
either Non-Compliant or Partially Compliant.
 Under the Effectiveness criteria, which measures effectiveness
under 11 thematic areas known as Immediate Outcomes,
Zimbabwe was rated as Low effectiveness in 9 out of the 11
Immediate Outcomes and Moderate effectiveness in the other two
Immediate Outcomes.
 These below par ratings evidenced serious shortcomings in the
Zimbabwe’s AML/CFT regime and ultimately led to the country
being put on the FATF so-called grey list of jurisdictions with weak
AML/CFT systems.

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 The international AML/CFT
 Over framework
the years Zimbabwe has made improvements to its
AML/CFT regime. The significant improvements contributed to
Zimbabwe’s removal from the FATF grey list in March 2022.
 Under Technical Compliance, Zimbabwe is now rated either
Fully Compliant or Largely Compliant in 37 out of the 40 FATF
Recommendations, a compliance level which is among the best
in the region
 In terms of the Effectiveness criteria, while the country has
made good progress, a lot of work still needs to be done for the
country to attain the desirable rating of Substantial or High
effectiveness. Zimbabwe’s updated effectiveness ratings will be
determined when ESAAMLG carries out its 3rd round of Mutual
Evaluations which are scheduled to commence in 2026

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 The international AML/CFT
framework
 Under Technical Compliance, the only three Recommendations in
which Zimbabwe is rated below par (either Non Compliant or
Partially Compliant) are:

 Rec. 2: National Cooperation and coordination (Rated

Partially Compliant)

 Rec. 8: Regulation and monitoring of high risk NPOs to

protect them from abuse / misuse for purposes of funding
terrorism. (Rated Non-Compliant)

 Rec. 15: Regulation of virtual assets (VAs) and virtual assets

service providers (VASPs) (Rated Partially Compliant)

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 The international AML/CFT
framework
 At national level, the country’s AML/CFT framework is set
out under the Money Laundering & Proceeds of Crime Act,
complemented by a number of other instruments.
 The MLPC Act must be read together with directives,
circulars and guidance issued by the FIU from time to time.
 The AML/CFT legal framework provides for the following:
 Criminalization of money laundering;
 Criminalization of financing of terrorism;
 Seizure and confiscation of proceeds of crime;
 International co-operation on AML/CFT matters;
 Implementation of UN Security Council Resolutions on
Freezing of Assets of persons and entities designated by the
UNSC as terrorists;
 Establishment of a financial intelligence unit (FIU); 11
 AML/CFT obligations of FIs and DNFBPs

 Designated Institutions
 There are two main classes of institutions that are
subject to AML/CFT obligations, both in terms of the
FATF Recommendations and in terms of the MLPC
Act, i.e.
Financial institutions; and
Designated Non Financial Businesses and
Professions (DNFBPs)

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 AML/CFT obligations of FIs and DNFBPs

 Designated Institutions
 Financial institutions fall into two broad categories, i.e.
Banks; and
Non-bank financial institutions:
 Non-bank financial institutions include entities in the
insurance and securities sectors, money transfer
agencies and bureau de change.
 DNFBPs include: Legal practitioners; accountants;
estate agents; casino operators, stockbrokers, life
insurance service providers, precious stones /precious
metals dealers, car dealers and trust and corporate
service providers (TCSPs) 13
 AML/CFT obligations of FIs and DNFBPs
AML/CFT obligations of financial institutions
(i) Identifying, assessing and understanding the FI’s ML/TF risks and effectively
mitigating the risks (the Risk Based Approach)
(ii) Board-approved AML/CFT policy: (These are high level principles that
guides the institution on AML/CFT compliance
(iii) AML/CFT procedures: These detail processes that must be followed by staff
in implementing the various AML/CFT obligations. AML/CFT procedures
must be in synch with the AML/CFT Policy
(iv) Internal controls: These are safeguards and checks designed to ensure that
the AML/CFT compliance program is functioning as intended
(v) Customer Due Diligence (CDD): This includes:
 Customer identification and verification;
 Identification and monitoring of high risk customers and high risk transactions;
 Identification of Politically Exposed Persons and mitigating risks posed by PEPs;
(vi) Identifying and reporting suspicious transactions
(vii) Submitting threshold-based Cash Transaction Reports (CTRs)
(viii) Screening transactions / customers against UN sanctions lists
(ix) Record-keeping requirements 14
 AML/CFT obligations of FIs and DNFBPs
Money laundering vulnerabilities of the accounting profession
 The Money Laundering and Proceeds of Crime Act and the international
AML/CFT standards are couched in general language to apply to all
prescribed types of financial institutions and DNFBPs.
 There is therefore need to understand how the standards apply
practically to each designated profession.
 The FATF has come up with Guidance documents that try to zero in on
how the AML/CFT requirements apply to a particular profession, hence
the FATF Risk Based Approach Guidance for the Accounting Profession,
issued in 2019.
 The list of functions performed by accountants may differ country by
country or in some cases, between firms within the same country.
 In general, the following are some of the common services known to be
offered by accountants and which expose accountants to be misused /
abused for terrorism financing.
 It is therefore important for an accounting professional to be aware of
and understand the money laundering vulnerabilities arising from offering
those services and to put in place appropriate risk-based controls. 15
 AML/CFT obligations of FIs and DNFBPs
Money laundering vulnerabilities of the accounting profession
Such services include:
 a) Audit and assurance services (including reporting accountant work in
initial public offerings);
 b) Book-keeping and the preparation of annual and periodic accounts;
 c) Tax compliance work;
 d) Tax advice;
 e) Trust and company formation or management services;
 f) Internal audit (as a professional service), and advice on internal control
and risk management);
 g) Regulatory and compliance services, including outsourced regulatory
examinations and remediation services;
 h) Company liquidation/insolvency/receiver-managers/bankruptcy related
services;
 i) Advice on the structuring of transactions;
 j) Due diligence in relation to mergers and acquisitions
 k) Succession advice;
 l) Advice on investments and custody of client money; and
 m) Forensic accounting
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 AML/CFT obligations of FIs and DNFBPs
Money laundering vulnerabilities of the accounting profession

Some of the functions performed by accountants that are the most

susceptible to the potential launderer include:
a) Financial and tax advice
criminals may pose as individuals seeking financial or tax advice to
place assets out of reach in order to avoid future liabilities.
b) Company and trust formation
criminals may attempt to confuse or disguise the links between the
proceeds of a crime and the perpetrator through the formation of
corporate vehicles or other complex legal arrangements (eg trusts).

c) Buying or selling of property

criminals may use property transfers to serve as either the cover for
transfers of illegal funds (layering stage) or else the final investment
of these proceeds after their having passed through the laundering
process (integration stage). 17
 AML/CFT obligations of FIs and DNFBPs
Money laundering vulnerabilities of the accounting profession

d) Performing financial transactions

criminals may use accountants to carry out or facilitate various
financial operations on their behalf (e.g. cash deposits or
withdrawals on accounts, retail foreign exchange operations,
issuing and cashing cheques, purchase and sale of stock,
sending and receiving international funds transfers, etc.).

e) Gaining introductions to financial institutions

criminals may use accountants as introducers or
intermediaries. This can occur both ways as criminals may use
financial institutions to gain introductions to accountants as
well.

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 AML/CFT obligations of FIs and DNFBPs
The Risk Based Approach to Combating Money Laundering and
Terrorism Financing
The risk-based approach (RBA) is central to the effective implementation of the
FATF Recommendations.

It means that accountant professions in public practice should identify, assess,

and understand the money laundering and terrorist financing (ML/TF) risks to
which they are exposed, and implement the most appropriate mitigation
measures, commensurate with the identified risks.

The RBA approach enables them to focus their resources where the risks are
higher.

Undertaking a documented and well reasoned risk assessment is, therefore, a

necessary starting point for the effective implementation of AML/CFT
obligations. The FATF recommendations and our Money Laundering and
Proceeds of Crime Act also make a risk assessment a pre-requisite for
implementation of AML/CFT measures.
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Furte
AML/CFT obligations of FIs and DNFBPs
Further reading
 Money Laundering and Proceeds of Crime Act [Chapter 9:29]
 Various AML/CFT directives and guidance issued by the FIU from time to
time (www.fiu.co.zw)

 FATF Risk Based Approach Guidance for the Accounting Profession

https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Rba-accounting-profession.html

 FATF Guidance for a Risk Based Approach for Trust and Corporate Service
Providers
https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Rba-trust-company-service-provi
ders.html

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DISCUSSION

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