FATF grey-lists Zimbabwe

By Tendai Sahondo

The Financial Action Task Force (FATF) recently grey-listed Zimbabwe, a move that is likely to heap more challenges on the country’s troubled banking sector.

As part of its ongoing review of compliance with Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) standards, FATF listed Zimbabwe as one of the countries with ‘strategic deficiencies that that pose a risk to the international financial system. Iceland and Mongolia were also added to the grey-list while Sri Lanka, Ethiopia and Tunisia were delisted.

“In October 2019, Zimbabwe made a high-level political commitment to work with the FATF and Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to strengthen the effectiveness of its AML/CFT regime. Zimbabwe will work to implement its action plan, including improving understanding of the key Money Laundering/Terrorism Financing (ML/TF) risks among the relevant stakeholders and implementing the national AML/CFT policy base on the identified risks. Zimbabwe will also implement risk-based supervision for Financial Institutions (FIs) and Designated Non-Financial Businesses and Professions including through capacity building among the supervisory authorities. The country will ensure development of adequate risk mitigation measures among FIs and DNFBPs, including applying proportionate and dissuasive sanctions to breaches,” read a statement from FATF.

Zimbabwe is also expected to develop a comprehensive legal framework and mechanism to collect and maintain accurate and updated beneficial ownership information for legal persons and ensuring timely assessment by the competent authorities.

FATF however commended Zimbabwe for progress made on a number of its Mutual Evaluation Report (MER) recommended actions to improve its technical compliance and effectiveness. Commendable efforts by the country include establishment of a national coordination and cooperation structure on AML/CFT issues. Zimbabwe has also successfully amended the AML/CFT legal framework to apply a risk-based approach to supervision of FIs and DNFBPs Furthermore, the country has widened its scope of disseminating financial intelligence and established an asset forfeiture unit within the National Prosecuting Authority.

Speaking to Journalists recently, Financial Intelligence Unit (FIU) Deputy Director Oliver Chiperesa said the grey-listing is unfortunate.

“We are worried that the recent addition of Zimbabwe on the FATF grey list will have a big negative impact as the country and the region as a whole have been struggling with correspondence banking. The western financial institutions have been trying to exit markets were they think they do not make much of a profit as well as markets perceived highly risky. There have been institutions in Zimbabwe that have been fined for violating US sanctions dictates while services Zimbabwean companies and individuals.

“Our reputation with corresponding banks has therefore already been ruined by the US sanctions which has discouraged a number of them from doing business with us. To this end, the grey listing will just add another layer to our troubles. Following the listing, governments are likely to issue warnings to their financial institutions to be careful when dealing with us which will only give western banks more reason to exit from our markets; we have seen this in Botswana and Ghana. The listing will present a very precarious situation for our banks as they are likely to lose their correspondence with western banks,” he said.

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