On 13 February 2020, Botswana, along with 23 other jurisdictions, was included on an updated list of high-risk third jurisdictions with strategic deficiencies in their anti-money laundering/ counter financing of terrorism (AML/CFT) regimes published by the European Commission of the European Union (“EU”). Further, to the classification of Botswana as a high-risk third country, the EU blacklisted Botswana with effect from 1 October 2020.
What are the consequences of the blacklisting with respect to financial transactions connected to Botswana?
Being on the EU AML/CFT list of blacklisted jurisdictions has several implications for Botswana. Firstly, EU obliged entities, such as financial institutions and certain professionals, are now required to conduct enhanced customer due diligence, on transactions involving Botswana clients and those involving Botswana intermediaries. This enhanced due diligence entails enhanced examination of the background and purpose of the transactions connected to Botswana, and increasing the degree and nature of the monitoring of business relationships where the parties involved are linked to Botswana, to determine whether the transaction or business relationship is suspicious. Secondly, the blacklisting has attendant implications for the ease of doing business- potentially constraining the Botswana Investment and Trade Centre’s efforts of attracting foreign business into Botswana, cross-border transactions, and financial transactions flows.
How will business transactions be affected?
It is to be noted that being blacklisted by the EU does not prohibit specified parties in terms of the Financial Intelligence Act, No. 11 of 2019 from making international transactions. However, specified parties are bound to experience some modicum of delays in respect to transactions involving EU member states, as Botswana transactions are classified as inherently high risk in respect of commission of financial offences.
Does the blacklist affect Botswana business transactions globally?
It is noteworthy that the applicability of Botswana’s blacklist is with respect to the EU member states only. With respect to the rest of the world, in terms of the Financial Action Task Force (FATF), it is to be noted that Botswana is listed as one of the jurisdictions under increased monitoring (“grey listed”). This means that Botswana has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring.
Therefore, Botswana is currently actively working with the FATF to address strategic deficiencies in her regime to counter money laundering, terrorist financing, and proliferation financing. Pending Botswana addressing her strategic deficiencies, the EU blacklist will remain extant, thereby hindering the efficiency of business transactions with respect to the EU only.
For further information contact Thuto Senwedi on (+267 3912397) or email: thuto@bookbinderlaw.co.bw.