Opinion

Author: Samir Zacarias, Researcher.

Introduction

Combating Money Laundering and Terrorist FinancingBC/FT poses a number of challenges for governments around the world. Mozambique, like other countries, needs to implement effective strategies and measures to combat these illicit practices that damage the economy. For these measures to have the necessary and desired effect, it is important that the strategies and measures to be implemented take into account the country's reality and international best practices.

Mozambique was placed on the Financial Action Task Force's (FATF) enhanced watch list in October 2022 due to the outstanding activities presented in the 2021 Mutual Evaluation Report. The reasons for this inclusion have been duly published on its official website.

Since then, the FATF has recognized that Mozambique has made significant progress on some of the recommendations in improving and strengthening its CBC/FT regime, highlighting the finalization of the first National CBC/FT Risk Assessment and the strengthening of its asset confiscation efforts.

Making a general analysis of the AML/CFT regime in recent years, looking at the problem of terrorism in Cabo Delgado province and the high rates of AML in the country, as constantly presented in the reports of the Basel Institute, on the one hand, and on the other, taking into account recent events, it can be seen that the country is on the right track to have a more effective regime in the fight against money laundering and terrorist financing, however, it will have to face challenges in the following aspects: (1) Legislation and Regulation; (2) Strengthening Institutions; (3) International Cooperation; and (4) Public Awareness.

1. legislation and regulations

An important milestone in the Mozambican legal framework on this issue came in 2013 and 2014 when the law and its respective regulation were approved, guiding and presenting the rules, measures and activities to be adopted and carried out to combat Money Laundering (ML) and Terrorist Financing (TF). This law was the first to comprehensively address the issue, taking into account the FATF's 40 recommendations. However, these documents were not properly accompanied by sectoral regulations, with the exception of the financial sector, which in 2015 approved the respective Notice containing the rules dedicated to this sector.
In the following years, the insurance sector and the Games of Luck and Chance sector approved a warning on the subject, precisely in mid-2019, and the real estate sector approved its legislation in mid-2022, practically 5 and 7 years, respectively, after the law was passed.

In this sense, it is necessary for the government to ensure that the approval of regulations or regulatory updates concerning CBC/FT are approved at the right time in order to provide a legal basis for the CBC/FT regime.

We also need to encourage other regulators in sectors (wildlife, precious stones, among others) with high-risk activities in terms of money laundering and terrorist financing to approve regulations and implement measures to prevent this type of crime.

The more developed countries that already have more robust CBC/FT regimes and more digitalized economies contribute most to the essential recommendations of the FATF, which is the source for all legislation around the world. This presents a challenge to developing countries with a huge informal economy and developing financial inclusion strategies. The CBC/FT legislation should not create an exclusion or slow down the efforts of the financial inclusion strategy. The regulation is clear about the requirements for opening an account for commercial activities, which are duly aligned with the FATF recommendations. On the other hand, we have an extremely informal economy, where there are street vendors, social media marketers, hustlers, mukheristas e.t.c., most of whom do not have the necessary documentation to open a business account, such as a commercial certificate. These individuals always end up using an individual account for commercial purposes, thus failing to make a tax contribution and unconsciously evading tax. Legislation should seek to cover this sector since this group moves a lot of money and is also responsible for the continuous circulation of valuables outside the financial system, which is a huge risk for ML/TF.

In other words, CBC/FT regulations should not be a reason for exclusion, but should take into account national social and economic realities with a view to covering all economic sectors and ensuring greater integration of money into the formal financial system.

2. Strengthening National Institutions (Supervisory and Inspection)

The fight against ML/TF requires the intervention of various institutions, including regulatory, supervisory and inspection bodies, and obliged entities, among others. These entities must be properly strengthened, trained and equipped with the human and technical capital to implement and enforce the rules for combating ML/TF.

This aspect was emphasized in the mutual evaluation report, and was also reinforced in the political commitment made by the Mozambican government, where it is expected that:

a) Training is carried out for all entities on mutual legal assistance in order to strengthen the collection of evidence or the seizure/confiscation of the proceeds of crime;

b) Adequate financial and human resources are made available to the supervisory authorities by developing and implementing a risk-based supervisory plan;

(c) adequate resources are provided to the authorities to initiate the collection of adequate, accurate and up-to-date information on the beneficial owners of legal persons;

d) Increase the human resources of the Financial Intelligence Unit (UIF).

The Mozambican government has shown a willingness to strengthen the fight against ML/TF and all possible preceding crimes. This is due to the recent creation of the GCCCOT in 2022, dedicated to the fight against organized crime, the constant training on BC/FT matters for SERNIC and the Public Prosecutors. This understanding was shared by the Attorney General's Office.

The efforts to be made within the scope of CBC/FT have their coordination and centrality in the financial intelligence unit (UIF), which is Mozambique's Financial Information Office (GIFIM), with the aim of preventing and combating the use of the national financial system and other sectors of economic activity for money laundering, terrorist financing and other related crimes.

There has recently been a change in the leadership of the organization, which on a positive note could mean a refreshment and the start of a new era, given that the previous board did an excellent job of laying solid foundations for an efficient fight against ML/TF and the optimal functioning of the FIU. The newly sworn-in board has the mission of removing the country from the infamous "Gray List" and strengthening and implementing measures for the other sectors.

Since the fight against ML/TF is multi-sectoral, the Mozambican government, through the UIF, has a duty to strengthen and empower other entities so that they can contribute to the fight against ML/TF. Without limiting itself, the priority entities are the regulators of high-risk sectors that currently don't have a properly established program, such as: the General Gaming Inspectorate, GIFIM as the regulator of the real estate sector, among others.

It is therefore necessary to establish partnerships with national regulators (e.g. Banco de Moçambique) in order to transfer knowledge and experience.

It is also necessary to invest in building local knowledge in the fight against ML/TF in partnership with universities and local experts in order to incorporate local realities and adjust international recommendations.

3. International cooperation

ML/TF is a transnational crime that can be regional, intercontinental or even international. To combat ML/TF effectively, as previously mentioned, the Government of Mozambique must establish comprehensive legislation that criminalizes these practices. It is important that these laws comply with international standards, such as the recommendations of the Financial Action Task Force (FATF). In addition, the government must guarantee the effective enforcement of these laws, allocating adequate resources for investigating and punishing offenders.

International cooperation plays a key role in this fight. The Mozambican government should strengthen its relations with other countries and international organizations, promoting the exchange of information and collaboration in joint investigations. The exchange of information should also be improved, not limited to adherence to relevant international treaties and agreements, such as the United Nations Convention against Transnational Organized Crime, as well as bilateral agreements.

In this context, it is necessary to establish partnerships with international organizations, as well as with other governments (preferably in the region due to the similarity of the markets) in order to exchange knowledge, experience and information quickly, efficiently and effectively.

This issue should be on the priority list of interests for the state's diplomatic journey.

4. Public Awareness

Finally, public awareness is a key component in the fight against ML/TF. The ultimate actors in the fight against ML/TF are the individuals who carry out economic activities, carry out financial transactions and are the most qualified to identify and report existing cases of ML/TF that occur on a daily basis. The legislation passed must ensure that it is mandatory to train employees in all high-risk sectors on an ongoing basis in matters of combating ML/TF, preferably once every 12 months as applied in the financial sector.

The entities responsible for monitoring legality, such as the Public Prosecutor's Office, the Defense and Security Forces (Police of the Republic of Mozambique), among others, who constantly interact with the population, must be properly trained in BC/FT combat in order to be the disseminators of knowledge in the communities.

The Mozambican government should also invest in educational campaigns to inform citizens about the risks and consequences of these illicit practices, both at the level of the Mozambican state and at an individual level for economic associations and other segments of society. This can be done through school programmes and collaboration with civil society organizations.

In conclusion, the government must ensure that information on how to combat ML/TF, specifically how to identify it and how to report it, is disseminated throughout society and the local community.