ZIMBABWE
Summary

Sanctions:

EU & US Financial and Arms embargo

FAFT AML Deficient

No

Higher Risk Areas:

 

Not on EU White list equivalent jurisdictions

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

Medium Risk Areas:

US Dept of State Money Laundering assessment

Weakness in Government Legislation to combat Money Laundering

Compliance with FATF 40 + 9 Recommendations

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Zimbabwe is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Latest FATF Statement - 27 February 2015

Since June 2011, when Zimbabwe made a high-level political commitment to work with the FATF and ESAAMLG to address its strategic AML/CFT deficiencies, Zimbabwe has made significant progress to improve its AML/CFT regime. Zimbabwe has substantially addressed its action plan at a technical level, including by: adequately criminalising money laundering and terrorist financing; establishing adequate procedures to identify and freeze terrorist assets; establishing a financial intelligence unit; ensuring financial institutions are aware of and comply with their obligations to file suspicious transaction reports in relation to ML and FT; and ratifying the Terrorist Financing Convention. The FATF will conduct an on-site visit to confirm that the process of implementing the required reforms and actions is underway to address deficiencies previously identified by the FATF.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Zimbabwe was undertaken by the Financial Action Task Force (FATF) in 2016. According to that Evaluation, Zimbabwe was deemed Compliant for 11 and Largely Compliant for 9 of the FATF 40 Recommendations.

Key Findings

Zimbabwe has a relatively new AML/CFT regime following the recent comprehensive review of its legal and institutional framework. Implementation of the new measures is emerging.

Zimbabwe has assessed and identified ML/TF risks in the NRA report which was released a few weeks before the on-site visit, and therefore too soon to impact on understanding of risks. Generally, the understanding of the risks is generic and fragmented. While the FIs particularly large banks and FIs with affiliation to international financial groups have a better understanding and modest mitigation controls, the other FIs and DNFBPs showed little or no understanding of ML/TF risks.

Zimbabwean laws do not require FIs and DNFBPs nor the company’s registry to establish and verify the identity of a beneficial owner except in circumstances where a customer carries out a transaction classified as prescribed transaction. The FIs and, to a limited extent, the DNFBPs apply general basic CDD requirements but have limited understanding of the beneficial ownership requirements. In general, some FIs and the rest of the DNFBPs are yet to appreciate the concept of verification of the identity of a customer using independent, reliable sources of information.

Overall, Zimbabwe has a cross-cutting issue of low resources capacity, which has negatively affected the implementation of the AML/CFT measures by competent authorities.

Competent authorities have demonstrated a good national cooperation and coordination in the preparation of the NRA and the AML/CFT Strategy. There is however limited information on practical implementation of the coordination and cooperation measures against ML.

The quality and use of financial intelligence is less developed largely due to expertise and resources constraints to conduct, (i) proper analysis of reports by the BUPSML Unit and, (ii) parallel financial investigations to identify potential ML/TF cases by the Police and other LEAs.

There are no feedback mechanisms from the BUPSML Unit to reporting institutions on the reports filed, on the one hand, and on the Police and other LEAs’ use of financial intelligence or other relevant information from the BUPSML Unit to initiate or support ML/TF cases, on the other hand.

There is little evidence on the use of financial intelligence from the BUPSML Unit to carry out ML investigations and prosecution.

Zimbabwe has not yet prioritised application of seizure and confiscation measures on property involving illegal proceeds as policy at national level. As a result, there is insignificant cases of seizure and confiscation of property related to ML and TF.

Zimbabwe regards TF as low risk and has demonstrated a good understanding of TF risks in the country.

The authorities demonstrated a good national cooperation and coordination when they investigated a suspected financing of terrorism case in which financial intelligence was prioritised to identify the movements of funds involved and successfully complete the investigation.

The legal and regulatory framework for registration and licensing as well as monitoring of the NPO sector is less developed, owing to a number of deficiencies and resources constraints at the NPO regulator. There has been no outreach to the NPO sector and the regulator has not yet identified the NPOs which pose high TF risk with a view to apply proportionate monitoring controls. Despite this, the national security agencies and specialised terrorism units have demonstrated a good understanding of the vulnerabilities facing the sector and with the cooperation of the NPO regulator have put in place mitigating controls to monitor the NPOs suspected of terrorism-related activities

Zimbabwe has a sound legal and regulatory framework to implement targeted financial sanctions in respect of UNSCRs 1267 and 1373. FIs have a good understanding of the requirements and, as such, have put in place adequate procedures and processes to apply the lists issued by the BUPSML Unit on the customers and transactions. The DNFBP sector showed very little awareness of the UNSCRs requirements.

Zimbabwe has no specific legal or regulatory measures to implement targeted financial sanctions in respect of proliferation financing.

Supervisors are in the process of developing a risk-based approach supervision framework following the recent release of a NRA findings. Generally, AML/CFT supervision of FIs and DNFBPs in Zimbabwe is less developed. Only the BUPSML Unit has carried out supervision of banks and recently started carrying out joint inspections with the non-bank supervisors, as they develop their own capacity. There has been no supervision of DNFBPs as the focus of the authorities was on FIs. No sanctions have been issued by the supervisors for noncompliance with AML/CFT requirements.

There is no adequate legal and regulatory framework to obtain and maintain beneficial ownership information on legal persons and arrangements. No comprehensive and sufficient risk assessment of ML/TF risks has been conducted on companies. The Registrar has no supervisory capacity including ensuring that the information it obtains and keeps, is accurate and up-to-date.

Zimbabwe has a sound framework for provision of MLA and other forms of international cooperation. However, these measures have been applied on predicate offences only and not on ML and TF cases.

Risks and General Situation

Since the last Mutual Evaluation in 2007, Zimbabwe underwent a comprehensive review of its AML/CFT regime. This exercise led to a number of new laws and amendments to the Mutual Evaluation Report of Zimbabwe-September 2016 existing legislations to strengthen the regime. Before this process, the primary legislations underpinning the AML/CFT regime were; Criminal Law (Codification and Reform) Act, 2006, Serious Offences Act, 2001 and the Bank Use Promotion and Suppression of Money Laundering Act, 2002. In 2013, Zimbabwe passed the Money Laundering and Proceeds of Crime Act (MLPC Act) which is a composite legislation criminalising money laundering (ML) and terrorist financing (TF). The Act also provides for provisional and confiscation measures, preventative measures and supervision responsibilities, and sanctions for failure to comply with obligations and commission of ML and TF offences.

Although Zimbabwe has strengthened its AML/CFT legal framework, the country has low institutional capacity to implement the new measures. The majority of the Financial Institutions (FIs), Designated Non-Financial Businesses and Professions (DNFBPs) and the Competent Authorities are still in the early stages of developing and implementing their policies, procedures and processes to take into account the new framework.

Zimbabwe has no measures in place to implement proliferation financing requirements.

Zimbabwe completed a National Risk Assessment (NRA) in July 2015, and has identified five predicate offences generating the most proceeds, as follows: smuggling, illegal dealings in precious stones, corruption, fraud and tax crimes including externalisation of currency (in that order). The NRA showed that 16 predicate crimes contributed about USD 1.8 billion in 2013. This was estimated at 13 percent of Gross Domestic Product (GDP) in 2013. There were some ML cases investigated and prosecuted arising from some of the predicate offences.

The general ML risk situation in Zimbabwe changed during the period of hyperinflation which resulted in structural changes to the economy, as follows:

-        Zimbabwe introduced a multi-currency system in 2009 in which nine currencies1 became legal tender in place of the Zimbabwean Dollar (ZWD) which had collapsed. Botswana Pula, the South African Rand (ZAR) and the United States of America Dollar (USD) are widely used. The USD is the settlement currency for international transactions and central securities depository systems. Following the introduction of the multi-currency system, the authorities identified increase in criminal activities with organised cross-border characteristics mainly to conversion of foreign currencies, in particular, transactions involving the ZAR and the USD.

-        Zimbabwe experienced significant rise in inflows of remittances mainly from Botswana and South Africa as well as the USA and the United Kingdom due to the substantial increase in emigration. The official estimated figure was 5.9 percent of GDP in 2013.

-        The economy has become cash-intensive and informal following the collapse of the ZWD which had eroded public confidence in the formal financial sector. This means that the transactions conducted in cash and outside of the formal sector are not being recorded and therefore difficult to monitor by the authorities.

The NRA identified “externalisation of currency” (i.e. sending currency out of Zimbabwe without formal approval from the Exchange Control Department of the Reserve Bank of Zimbabwe) as a major concern. The main typologies observed were, (i) individuals who physically carried cash across the borders, (ii) and legal entities transferring funds to foreign jurisdictions using personal or non-business accounts to avoid detection.

Among the existing FIs, the NRA has identified the banking sector (based on materiality and links with the global financial sector) as the most exposed to risks of ML and proceeds of associated predicate crimes. The most vulnerable DNFBPs to ML and proceeds associated predicate crimes are precious stones and metals dealers, lawyers and the real estate sectors. Cash couriers largely use informal, unregulated foreign currency changers to convert proceeds. Botswana Pula, South African Rand and the United States of America Dollar are the currencies which are widely used in the illegal transactions.

The legal regime on terrorism and terrorism financing is contained in the Suppression of Foreign and International Terrorism Act and the MLPCA. The NRA concluded that the risk of TF in the country is low considering a number of factors including risk level in the region, understanding of TF threats and risks by relevant competent authorities and FIs’ risk assessments and absence of known TF or terrorism cases in the country.

 

US Department of State Money Laundering assessment (INCSR)

Zimbabwe was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

Perceived Risks:

Zimbabwe is not a regional financial center, but it does face problems related to money laundering and corruption. Serious financial crime in Zimbabwe generally appears in the form of various violations of exchange control rules; underground banking; cross-border crime; organized syndicates, both domestic and international; non-transparency in diamond production receipts; and increased cooperation among criminal networks and links with legal business activity, resulting in corruption and bribery.

Regulatory and enforcement deficiencies in Zimbabwe’s AML/CFT regime expose the country to illicit finance risks, but there are no reliable data as to the actual extent of the problem. Commercial banks, building societies, moneylenders, insurance brokers, realtors, and lawyers in Zimbabwe are all vulnerable to exploitation by money launderers. Nearly all transactions in Zimbabwe are carried out with either the U.S. dollar or the South African rand.

The United States, Canada, Australia, and the EU have imposed targeted financial sanctions and travel restrictions on some political leaders and a limited number of private companies and state-owned enterprises for complicity in human rights abuses or for undermining democratic processes or institutions in Zimbabwe. Effective November 1, 2014, the EU lifted Article 96 restrictions, which previously limited EU development assistance to Zimbabwe. Currently, the EU maintains active restrictions against President Mugabe, Grace Mugabe, and Zimbabwe Defense Industries, and an arms embargo. The EU reviews its restrictions annually. Although the EU delisted the Zimbabwe Mining Development Corporation (ZMDC) and the Minerals Marketing Corporation of Zimbabwe (MMCZ) from its list of sanctioned entities in September 2013, the United States maintains sanctions on the ZMDC and MMCZ.

 

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SANCTIONS

The EU and US have imposed an arms embargo together with a freeze on the assets of selective members of the Government of Zimbabwe and individuals associated with them.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good/0-Bad)

Transparency International Corruption Index

22

World Governance Indicator – Control of Corruption

7

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

Zimbabwe’s economy grew rapidly following the formation of the coalition government in 2009 after a decade of contraction that culminated in hyperinflation. The rebound appears to be over, and the World Bank estimates that Zimbabwe’s economy grew by 1.8 percent in 2013 and projects real economic growth will rise slightly to 3.1 percent in 2014. Economic growth is constrained by the continued tight liquidity situation, limited growth in government revenues against large recurrent expenditures, and a widening current account deficit thanks to sluggish growth in exports in the face of rising demand for imports and low capital inflows. Public finances remain under pressure as government employment costs consume more than 70 percent of the budget.

Zimbabwe recognizes the need to boost investment and has implemented a number of measures meant to attract foreign direct investment (FDI) since 2009. The country’s adoption of the multicurrency monetary regime in 2009, under which the U.S. dollar dominates most transactions, continues to stabilize and restore business confidence in the economy because it removes the exchange-rate risk associated with the use of domestic currencies. In addition, Zimbabwe’s participation in an ongoing International Monetary Fund (IMF) Staff-Monitored Program (SMP) signed in June 2013 acts as a useful anchor for implementation of more sensible policies. Zimbabwe also has a number of incentives designed to attract FDI such as tax breaks for new investment by foreign and domestic companies, and allowing capital expenditures on new factories, machinery, and improvements to be fully deductible. The government also waives import taxes and surtaxes on capital equipment.

In spite of these positive developments, corruption is rife and there is little protection of property rights, particularly with respect to agricultural land. The government routinely expropriates land without compensation. Moreover, the inconsistent application of “indigenization” regulations that set minimum ownership levels by black Zimbabweans of enterprises valued over $500,000 at 51 percent in most economic sectors continues to discourage investment. Zimbabwe’s arrears in payments to international financial institutions and high external debt overhang of over $10.7 billion complicates the situation by limiting the country’s ability to access official development assistance at concessional rates. Additionally, the country’s banks do not offer financing for periods longer than two years, with most financing available for 180 days or less.

As a result of these negative factors, Zimbabwe generally ranks poorly in global comparisons of economic competitiveness. For example, in the World Bank’s "Doing Business" rankings for 2014, Zimbabwe ranks 170 out of 189 economies studied.

 

 

 

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