Botswana was recently blacklisted by the European Union (EU) due to its shortfalls in anti-money laundering and terrorist financing prevention. The effect of the blacklisting may be that:
- Botswana is deemed a high-risk country;
- investors may opt to de-risk and terminate business relations with Botswana and related entities; and
- all businesses in Botswana are subjected to enhanced customer due diligence processes before they can participate in international investments.
Botswana enacted the Financial Intelligence Act of 2019 (FIA) for purposes of compliance with the Financial Action Task Force Recommendations of 2012. Though FIA is robust and progressive, the challenge has been implementation and adoption of FIA requirements across sectors.
FIA requires non-banking financial institutions, societies, banks, professional practitioners and all entities registered, incorporated or licenced under any law to conduct Customer Due Diligence (CDD) on potential clients, an aspect of which is commonly known as ‘Know-Your-Customer’ (KYC). KYC is an integral component of anti-money laundering (AML) measures recommended in terms of FIA. KYC is the means of identifying and verifying the identity of a customer/client and their source of funds. At minimum, businesses are required to:
- establish and verify the identity of a customer;
- establish and verify the identity of the beneficial owner;
- enquire and understand the anticipated purpose and intended nature of the transaction; and
- obtain approval of senior management especially when dealing with a high-risk customer/client.
All businesses in Botswana must develop a KYC process which allows them to identify and report all suspicious transactions to the Financial Intelligence Agency. The KYC process must be conducted when a business:
- establishes a new business relationship or concludes a transaction with a customer;
- carries out a transaction in excess of BWP10 000.00;
- when there is doubt about the veracity or adequacy of previously obtained customer identification data; or
- where there is a suspicion of a commission of a financial offence.
KYC process must be undertaken on a continuous basis. An AML policy and the KYC process are crucial for effective risk management and compliance with anti-money laundering and combating of financial crimes as prescribed by FIA. Any business that fails to conduct CDD is liable to a fine of BWP1 000 000.00.
If you have any questions on the above and need assistance in reviewing your KYC process, CDD protocols, AML policy and / or creating a one, please feel free to contact Olorato Plaatjie at olorato@peolegal.co.bw or alternatively call +267 3975779.