Africa-Press – Eswatini. The country ‘s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime recognises motor vehicle dealers as accountable institutions, placing them under scrutiny for potential involvement in money laundering activities.
The draft National Risk Assessment (NRA) report classifies local motor vehicle dealers as less risky compared to their import/grey counterparts.
It says that this stems from their predominant use of financial institutions for transactions, which enhances transparency and traceability. However, the report acknowledges that even local dealers are not entirely immune to ML risks.
The import/grey car market paints a starkly different picture. Dominated by foreign nationals, particularly Asians, this sector thrives on cash transactions, often exceeding the threshold for mandatory customer due diligence (CDD), according to the report. “This opaqueness creates a breeding ground for potential money laundering activities,” it says.
Several practices within the import/grey market raise significant concerns such as the sector’s heavy reliance on cash transactions which makes it difficult to track the origin and flow of funds, hindering the detection of suspicious activity.
The report highlights instances where buyers retain the dealer’s name on the registration book even after purchase, which create opportunities for misuse and obfuscate ownership trails.
It highlights the reluctance of many dealers to open bank accounts and this isolates their financial activities from scrutiny, making it challenging for authorities to monitor their operations.
The report states that potential links to underground value transfer systems like Hawala raise additional concerns about the movement of illicit funds outside the formal financial sector.
It further identifies shortcomings in the current AML/CFT framework such as inadequate supervision and lax cash transaction limits.
It says the Financial Intelligence Unit (FIU), responsible for supervising accountable institutions, has yet to effectively oversee the import/grey car market, creating a vulnerability. Moreover, it outlines that the current exemption for CDD on cash transactions below a certain threshold allows criminals to exploit this loophole for smaller-scale money laundering.
The report recommends several measures to address these concerns such as equipping the FIU with the resources and expertise to effectively supervise the import/grey car market. It further recommends lowering the threshold for mandatory CDD on cash transactions to prevent criminals from exploiting the current exemption.
It also encourages dealers to open bank accounts and mandating closer monitoring of their transactions, as well as implementing stricter regulations to ensure accurate and transparent vehicle ownership records.
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