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Dark clouds gathering

Botswana’s EU blacklisting to hurt local banks

The blacklisting of Botswana by the European Union (EU) back in May is set to harm the financial services as local banks will face difficulties conducting business with their European counterparts.

The Permanent Secretary in the Ministry of Finance and Economic Development, Dr Wilfred Mandlebe recently told the Public Accounts Committee (PAC) that the listing also affects the processing of financial transactions and reduces investor confidence.

Ultimately, this leads to a loss in business opportunities for the country.

Despite the blacklisting, the Finance PS stressed Botswana considers the fight against money laundering, terrorism financing, and the proliferation of weapons of mass destruction ‘a top priority’.

“Government is doing everything possible to build a robust Anti-Money Laundering, Counter Financing of Terrorism and Counter-Proliferation Financing (AML/CFT/CPF) system to protect the financial system from being used for money laundering, the financing of terrorism and proliferation,” maintained Mandlebe.

In 2016, the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) conducted a review of Botswana’s Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) and Countering Proliferation Financing (CPF) measures for compliance with the Financial Action Task Force (FATF) Standards against Money Laundering (ML), Terrorist Financing (TF) and Proliferation Financing (PF).

Based on these results, Botswana was put under the category of countries with strategic AML/CFT deficiencies and was subsequently placed under a year observatory period to address compliance deficiencies.

According to Mandlebe, in October 2018, the International Cooperation Review Group (ICRG), which is an organ of FATF, recommended that Botswana be placed under monitoring by the ICRG.

The recommendation was ultimately adopted by the FATF in the same year, leading to Botswana being placed on the FATF website under the ‘Jurisdictions with Strategic Deficiencies’ commonly referred to as ‘Grey Listing’.

Almost two years later and the shade turned decidedly darker

According to Mandlebe, the result of Botswana’s blacklisting means the country has been added to the EU list of high-risk third countries following the results of the Mutual Evaluation AML/CFT conducted by ESAAMLG in 2017.

This listing is expected to have dire consequences on local financial institutions such as banks as they will face a hurdle in dealing with their counterparts in Europe.

“Botswana continues to make concerted efforts to address the deficiencies identified in the 2017 Mutual Evaluation report and complete the ICRG action plan,” Mandlebe said on the steps Botswana is making to remedy the situation.

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