ANTI-MONEY LAUNDERING AND COUNTER FINANCING OF TERRORISM (AML/CFT): TANZANIA PERSPECTIVE S.E. Nyakulinga Assistant Commissioner of Police Money Laundering & Asset Recovery Investigation Unit
Outline Definition and Evolution Legal framework Accountant and Auditor s responsibilities to combat ML/FT The Role of Accountants in MLA/CFT Investigation Current status of AML/CFT and challenges Summary
Definition and Evolution Literal meaning; ML Is the process of making money or assets derived from crime to appear clean. TF Is an act of providing funds or any material support for terrorists activities.
Definition and Evolution 4 Money Laundering is not a single act but is in fact a process in three basic steps. These steps can be taken at the same time in the course of a single transaction, but they can also appear in a well separable forms. Placement to conceal the true nature, source or ownership; Layering to maintain control of the proceeds; Integration to change the form of the proceeds generated by the initial criminal activity. 1/24/2017
Definition and Evolution Placement Bulk cash smuggling, Convert to negotiable instrument, Money exchange, Put into cash businesses, etc Layering Commingle with legal source Move between multiple businesses/bank accounts Use of gate keepers Integration Consulting fees Real estate investments Investment in security markets Over/under invoices
Definition and Evolution Money Laundering and Terrorist Financing existed before the enactment of the laws. Alphonce Capone Mafia, etc.
UN Convention against Transnational Organized Crime 2000 (Palermo Convention) Deeply concerned by the negative economic and social implications related to organized criminal activities. Seeks to take effective measures against transnational organized crime and to forge and strengthen cross border links between States. Tanzania ratified the Convention on 24 May 2006. UN Convention against Corruption 2003 (Melida Convention) concerned that corruption is no longer a local matter but a transnational phenomenon that affects all societies and economies. Tanzania ratified the Convention on 25 May 2005 UN Convention against the Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988 (Vienna Convention) Recognizing that eradication of illicit traffic is a collective responsibility of all States United Republic of Tanzania ratified the Convention on 17 April 1996 UN Conventions Related to AML &CFT International Convention for the Suppression of the Financing of Terrorism 1999. Tanzania acceded to the Convention on 22 January 2003.
Legal Framework ML S. 3 of AMLA 2006 Money laundering means engagement of person or persons, direct or indirectly in conversion, transfer, concealment, disguising, use or acquisition of money or property known to be of illicit origin and in which such engagement intends to avoid the legal consequence of such action and includes offences referred in S. 12.
9 S.12 Any person who; Legal Framework - ML. a) Engages, directly or indirectly, in a transaction that involves property that is a proceeds of a predicate offence while he knows or ought to know or ought to have known that the property is the proceeds of a predicate offence; b) Converts, transfers, transports or transmits. for the purposes of concealing, disguise the illicit origin assist to evade legal consequences 1/24/2017
Legal Framework - ML. 10 C) Conceals, disguises or impedes establishment of the true nature, sources, location or disposition. d) Acquires, possesses, uses or administer property e) Participates in, associates with, conspire to commit, attempts to commit, aids and abets, or facilitates and counsels the commission of (a) to (d) above 1/24/2017
Legal Framework - TF S. 13-15 of POTA, 2002 Any person who provides, or intending, or knowing, or collects or uses funds or property directly or indirectly, in whole or in part for the purpose of committing or facilitating the commission of a act of terrorist or for the purpose of benefiting any person involved in terrorist act.
Legal Framework ML/FT Prevention: -Customer due diligence, -Reporting, -Regulation & Supervision, -Sanctions. Enforcement: -Predicate crimes, -Investigation -Prosecution & punishment, -Confiscation. Pillars of AML/CFT
AML/CFT Cycle and Role of Accountants & Auditors Criminal commit crimes Reporting persons file suspicious reports FIU Receives, Analyses and disseminate Law Enforcement Conduct investigation
AML/CFT Cycle and Role of Accountants & Auditors.. Accountants and Auditors in their capacity of reporting person, have legal obligation for AML/CFT prevention. Section 15 require an accountant or auditor to satisfy himself as to the true identity of a person seeking to enter into business relationship (as provided under reg. 3-15). Section 16 require accountants and auditors to keep records of all transactions for five years from the end of the business as provided by regulation 29.
AML/CFT Cycle and Role of Accountants & Auditors.. Section 21 override customer confidentiality norms and give room for disclosure of customer information if you have any suspicion. Section 17 provide obligation for accountants and auditors to report any suspicion not later than 24hrs. Section 22 provide protection for breach of professional secrecy regarding to any disclosure made in good faith.
The role of Accountants in MLA/CFT Investigation Accountants play a great role to assist investigators to determine funds derived from illegal activity. Forensic accounting technique is an effective tool that can enable to determine the income and expenditure or value.
Accountants in AML/CFT. For determination of value we may use gross or net proceeds. The gross revenue method Proceeds = gross revenue paid The net proceeds method Proceeds = Net revenue Net revenue = gross revenue minus costs / expenses
For example; Gross or Net Proceeds In return for bribes amounting to USD 5 million, a company obtained projects to build communications networks and control systems for the ministry of Communication. The total project value earned by the company was USD 100 million. The company indicated USD 25 million as cost for goods sold for the project. The company disguised the bribes as a legitimate expense in its books and records, and deducted the expense from its taxes. Calculate the benefit.
Gross or Net Proceeds Solution; Revenue received : USD 100,000,000 Subst: Cost of goods sold: USD 25,000,000 Add: Total amount of bribe: USD 5,000,000 Equals: Total benefit derived: USD 80,000,000
Expenditures Method of Proof Formula Add: Application of Funds Increase in assets Decrease in liability Personal expenditure Subtract: Known Sources of Funds Decrease in assets Increase in liability Legitimate known source of money Equals: Funds from illegal activity ***Remember to establish a starting point
Current Status of AML/CFT Money Laundering Cases 45 cases have been instituted in court since 2010 to 2016. 12 cases instituted in 2016 20 cases conclude with 8 convictions, 7 acquittals, 1 case abated and 4 withdrawn; 25 cases pending in court. 14 cases related to corruption (PCCB) and 31 cases originated from TPF Terrorism cases Total 74 cases reported from 2013 4 cases are related to FT No case has been concluded
Challenges Porous boarders Cash based economy Inadequate tax regime Limitation of enforcement mechanism Lack of regulator for real assets International legal requirements
Summary Sun Tzu said: In the practical art of war, the best thing of all is to take the enemy s country whole and intact; to shatter and destroy it is not so good. So, too, it is better to recapture an army entire than to destroy it, to capture a brigade, a detachment or a company entire than to destroy them. Hence to fight and conquer in all your battles is not supreme excellence; supreme excellence consists in breaking the enemy s resistance without fighting. Sun Tzu Art of the War: Chapter III
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