Zim is one of the countries with a high risk of money laundering


Prosper S Maguchu

The 10th Basel Anti-Money Laundering Index, released on September 13, 2021, showed that Zimbabwe scored 6.78 out of 10 (with 10 indicating the highest risk level) and landed in the top 12 of the unenviable list of high risk funds Wash countries of the world.

The result is an undesirable development at a time when the country is working to be removed from the Financial Action Task Force (FATF) gray list. This is also known as the list of countries that are under “enhanced surveillance” due to strategic deficiencies in the fight against money laundering, terrorist financing and proliferation controls. According to this year’s report, Zimbabwe’s risk score has risen since 2020 largely due to the higher risks of human trafficking.

The Basel Institute is an independent non-profit foundation committed to working with public and private partners around the world to prevent and combat corruption.

To date, the Basel AML Index is the only research-based risk assessment of countries in this area that has been compiled by an independent non-profit institution. It is used by the private sector as an established AML country risk rating tool for compliance purposes and in the public sector for research and policy measurement.

The Basel AML index measures the worldwide annual progress in the fight against money laundering (ML) and terrorist financing (TF). It has been published annually since 2012.

Money laundering risks are a moving target and evolving rapidly, as are the tools and data available to assess them. That is why the Basel AML is constantly being reviewed.

This year’s index was compiled using a composite methodology based on 16 indicators relevant to assessing GW / TF country risk.

These are grouped into five areas according to the five key factors that contribute to high money laundering / TF risk: deficit in the AML / CFT framework, poor financial standards and transparency, weak political rights and rule of law, poor public transparency and accountability, and corruption and bribery.

On the other hand, there are no quantitative data. In practice, the Basel Index does not measure the actual existence of money laundering activities or the amount of dirty money that has accumulated in the country, but only shows a country’s risk or weakness in serving as a place for money laundering and terrorist financing.

As mentioned earlier, the Basel AML index methodology is evolving every year to capture ML / TF risks more accurately, which affects the comparability of results from year to year.

Still, it is worrying to note that the Zimbabwe Risk has seen an increase this year compared to the previous index, when it hit 6.54 points and ranked 21st in the world.

Comparability between the countries is also severely hampered by the fact that the countries are not fully recorded in the fourth round of the FATF.

The Basel Index only lists countries that have undergone the most recent mutual evaluation, ie an in-depth country review that analyzes the implementation and effectiveness of anti-money laundering measures.

However, some comparison is necessary to understand the problem. The average risk score for all 110 countries included in the public edition of the Basel AML Index this year is 5.3 out of a maximum risk score of 10, compared to 5.22 last year.

In short, too many countries remain too exposed to money laundering and terrorist financing risks. Regional infographics show how countries fare in relation to each other.

Africa has the highest overall risk value of any region. Eighteen African countries have been rated this year and Zimbabwe ranks 11th.

In the Sadc region, it is only behind three countries – Mozambique, Democratic Republic of the Congo, and Madagascar.

This year’s ranking is especially important for Zimbabwe as it is under review this month by the FATF to see if it will be graylisted, removed, or blacklisted.

Falling on that list means Zimbabwe is not considered a safe jurisdiction to prevent terrorist financing and money laundering, so the results could be a pretty blatant indictment against the country.

Perhaps even more depressing, money laundering is behind the illicit financial flows (IFFs) at the heart of Zimbabwe’s financial problems: undermining service delivery and creating an uncompetitive business climate.

The African Development Bank report estimates that Zimbabwe has lost a total of $ 12 billion to IFFs over the past three decades, from opaque financial deals to tax avoidance and illegal commercial activities.

The rampant corruption, cross-border crime and terrorism in the Cabo Delgado area of ​​Mozambique have increased Zimbabwe’s complications, affecting the FATF case.

From now on, Zimbabwe should concentrate on optimally processing the areas highlighted in the Basel AML index report.

This year’s Basel AML Index Report highlights that four areas of AML / CFT policy urgently need more attention: A stronger response to virtual asset threats; a greater focus on money laundering prevention, not just enforcement; faster and more robust implementation of beneficial ownership transparency measures; and fixing GW / TF vulnerabilities outside the financial sector in lawyers, accountants, real estate agents and other professions.

Prosper S Maguchu is an Associate Professor of Law and Researcher. He is also a senior advisor to the Zimbabwe Anti-Money Laundering Institute.

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