Africa-Press – Zimbabwe. ZIMBABWE’S legal and corporate structures have turned into magnets for illicit finance, with the authorities ranking them as medium-to-high risk for money laundering, a new report shows.
In the Financial Intelligence Unit’s (FIU) new 3rd National ML Risk Assessment Presentation released last week, it was revealed that companies, trusts and offshore-linked entities are being abused to conceal beneficial ownership, dodge taxes and move illicit funds.
Hence, the FIU called for urgent legal reforms to tighten loopholes in the Companies Act and related laws.
“The overall national vulnerability rating was based on the attractiveness of Zimbabwe as a formation or incorporation centre for legal structures by non-residents,” FIU said in the presentation.
“The country has nine types of registerable legal structures, and limited liability companies were considered to pose the highest exposure to ML [money laundering] risk.
“Also the following predicate offences were noted to be prevalent among legal structures in Zimbabwe: fraud (especially procurement fraud); smuggling (including contravention of Gold Proceeds Act); corruption (criminal abuse of office, bribery, and concealing of transactions); and tax evasion.”
According to the FIU, these offences are generating vast sums of illicit money.
“The assessment identified 16 predicate offences to ML. However, six key predicate offenses contributed significantly to money laundering. These include smuggling, illegal dealings in gold and precious stones, corruption, tax evasion, fraud and drug trafficking,” FIU said.
“The total estimated proceeds from the 16 offenses is about US$1,23 billion annually. This equates to roughly 3,4% of Zimbabwe’s 2023 GDP [gross domestic product] of US$35,2 billion. Common sectors where the laundered funds were channelled to include motor vehicles and real estate.”
Much of this money, FIU notes, is obscured through legal persons and arrangements — shell companies, trusts and incorporation vehicles — that are routinely abused to conceal ownership, disguise illicit proceeds and channel funds into assets.
To combat this, the FIU said there was a need to amend several laws, including the Deeds Registry Act, Companies and Other Business Entities (COBE) Act, Exchange Control Act and the Zimbabwe Investment Development Agency Act.
These amendments are necessary to align with Financial Action Task Force (FATF) requirements on beneficial ownership and foreign trusts.
The requirements are part of the global standards outlined in recommendations and special recommendations that countries must implement to combat money laundering, terrorist financing, and the financing of weapons proliferation.
The FATF is an intergovernmental body established in 1989 by the G7 to set international standards for combating ML, terrorist financing and proliferation financing.
“Amend Beneficial Ownership Declaration Form CR16 under the COBE Act. Include provisions for foreign legal structures with significant links to Zimbabwe,” FIU said.
“Registrar of Companies should resource inspection and compliance departments to facilitate effective monitoring of legal structures.”
The FIU called for the monitoring and reviewing of beneficial ownership information for accuracy and reliability.
It also called for the issuance of sanctions on non-compliant companies, enhanced information exchange, and the facilitation of inter-agency cooperation in accessing beneficial ownership information.
“Zimbabwe’s vulnerability to money laundering was rated medium-high, an increase from medium that was recorded in the 2019 assessment.
“The rating was derived from combining national combating ability and overall sectoral vulnerability,” FIU said.
“There was increased overall sectoral vulnerability from the previous rating of 0,53 in 2019 to a medium high rating of 0,75.
“Highly vulnerable sectors included car dealers, real estate, dealers in precious stones and precious stones, and banking sectors.”
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