The fight against money laundering in Zambia revamped: A review of the Financial Intelligence Centre Act
Situlile Ngatsha, Lupiya Simusokwe, Chanda Kasanda and Charles Mkokweza
Corpus Legal Practitioners
The year 2010 saw the enactment of the new Anti-Corruption Commission Act No. 38 of 2010, the Financial Intelligence Centre Act (No. 46 of 2010) (the FIC Act) and the Forfeiture of the Proceeds of Crime Act (No. 19 of 2010) (the FPC Act). These Acts read together with the Prohibition and Prevention of Money Laundering Act (No. 14 of 2001) (the Money Laundering Act) reveal a much more holistic approach to the prevention of financial crimes including the financing of terrorism. For most institutions, financial and otherwise, this means increased regulation which might not be welcome. In the long run however, such regulation is seen as a positive step towards ensuring that perpetrators of serious crimes do not derive economic gain from their illicit activities.
The above mentioned legislative developments have also been influenced by similar trends at international and regional levels. Zambia is part of the regional Eastern and Southern African Anti-Money Laundering Group and is obliged to provide for adequate domestic legislation designed to combat various financial crimes. Consequently, Parliament enacted the Money Laundering Act in 2001 and pursuant to this Act, Zambia's central bank; the Bank of Zambia (BOZ) issued Anti-Money Laundering Directives in 2004. These directives were issued with a view to ensuring that banks and other financial institutions could enhance the prevention and detection of money laundering and related activities. Close to a decade later, the FIC and FPC Acts have come into force creating a well structured system designed to curb inter alia, money laundering in several institutions. This feature focuses on the FIC Act.
The most notable feature of the FIC Act is that it creates the Financial Intelligence Centre (the Centre), which it clothes with corporate personality and is chiefly tasked to administer the Act. The principal objective of the Centre is to prevent money laundering and the financing of terrorism. The Centre therefore has no authority to prosecute crimes; instead, it is designed to ensure that various institutions, financial and otherwise, are not used as vehicles for illicit economic gain. The Centre is also responsible for the receipt, requesting, analysing, disclosure and dissemination of Suspicious Transaction Reports (STRs). An STR is defined as a report submitted on suspected money laundering, financing of terrorism or other serious offences. In this vein, the agency creates tools for law enforcement agencies, which if used well could curb money laundering and other related crimes.
While making provision for various offences, the FIC Act mainly contains provisions which are intended to ensure that money laundering and the financing of terrorism are prevented and/or detected. In this quest, the Act proscribes inter alia, the establishment and maintenance of anonymous accounts and shell banks. The FIC Act defines a shell bank as a bank that has no physical presence in the country in which it is incorporated and licensed, unless such a bank is wholly owned by one or more financial institutions forming part of a regulated financial services group.
The FIC Act places various obligations on supervisory authorities and reporting entities (defined as institutions regulated by a supervisory authority). Supervisory authorities include BOZ; the registrar of pensions and insurance; the Securities and Exchange Commission; the Patents and Companies Registration Agency; the Zambia Development Agency; the Licensing Committee established by the Tourism and Hospitality Act; the Law Association of Zambia and the Zambia institute of Chartered Accountants. The supervisory authorities are under an obligation to monitor and ensure compliance by reporting entities with their obligations under the FIC Act. In order to galvanize this role, the supervisory authorities are given authority to compel the production of any information by reporting entities and to impose sanction for any failure by reporting entities to comply with their obligations under the FIC Act.
The FIC Act further imposes due diligence and other obligations on reporting entities; for instance, the Act makes provision for record keeping and customer identification procedures. Additionally, the FIC Act requires that a reporting entity or a director, principal, officer, partner, professional or employee of a financial institution, that suspects or has reasonable grounds to suspect that any property (a) is the proceeds of crime or (b) is related or linked to, or is to be used for, terrorism, terrorist acts or by terrorist organisations or persons who finance terrorism, should submit a report setting out the suspicions to the Centre and non compliance with these reporting requirements is criminalised. The FIC Act therefore has broad application in that it ensures that various institutions, financial and otherwise, are regulated to prevent money laundering.
Assessment of the Act
While questions may be raised as to whether the provisions of the FIC Act will prove effective in practice, the fact that the Act gives the officers of the agency immunity goes a long way in ensuring that such officers carry out their duties without reservation. Further, questions would still remain as to how effective collaboration with law enforcement agencies will be ensured. This is mainly due to the fact that some of the functions of the agency overlap with those of the Anti-Money Laundering Unit which is a law enforcement agency established under the auspices of the Money Laundering Act. The FIC Act in this regard, could be viewed as creating a duplication of functions which may have the effect of frustrating inter-agency co-operation and thereby diminishing efficiency. All in all, as a piece of legislation, the FIC Act is for the most part a positive step in the fight against money laundering.