Casinos: A platform for cleaning dubious money in Zambia

A BOOM in any given sector of the economy is usually a blessing to the development of the country. But it seems this is not the case with the increased casino business activities in Zambia.

Gambling is legal in the country. This applies to casinos, slot machines and the national lottery, but that is just half of the story.

About 10 years ago, Zambia had three casinos operating legally. These these were found at New Fairmount Hotel and Falls Casino in Livingstone while the Majestic Casino was located in Lusaka.

However, there has been a massive increase in Casino businesses, with latest figures indicating that over 35 casinos are conducting business; the majority of which being located in Lusaka and registered in the last five years.

Most casino structures are well built and posh-looking with ultra-modern amenities. But who is establishing these gambling joints? who is benefiting from these businesses? Is it an indication of a rising middle class with enough money for gambling? Are there any economic indicators reflecting in this business? What if there is an aspect of placement, layering and integration of laundered money into the normal financial system?

This is what the Zambia Financial Intelligence Centre (FIC) is afraid of. That is why the FIC is calling for the strengthening of regulations governing casino operations in Zambia because gambling is a vulnerable platform for illicit financial flows.

According to the national money laundering and terrorist financing risk assessment report released by the FIC, vulnerability to money laundering of the casino sector is rated as high as 0.73 from 1.00.
The FIC has since recommended that applications for casino licences should be properly vetted to prevent criminals or their associates from having any controlling interest in the business.

It stated that the sector was vulnerable due to the fact that it was not being regulated comprehensively and effectively.

“The law provides for regulation through the Licencing Committee, which in practice is not operational. Instead there is an individual who has been given the role of licencing casinos at Ministry of Tourism and Arts. The licensing process is therefore vulnerable for the sector as the one individual cannot carry out thorough checks on the applicants for licences,” the report read in part.

The report noted that other factors contributing to the sectors’ vulnerability were the fact that most of the high value clients were foreigners and politically exposed persons (PEP).

In financial regulations, PEP is a term describing someone who has been entrusted with a prominent public function. PEPs, generally presents a higher risk for potential involvement in bribery and corruption by virtue of their position and the influence that they may hold.

The FIC report further stated: “Casinos offer online gambling which is not properly understood or regulated by the licensing authority. Identification of customers is not performed and source of income is not established. There are large cash transactions that take place involving foreigners and PEPs making the sector vulnerable to tax evasion and fraud. As a matter of priority, there is need to amend the Tourism and Hospitality Act and other relevant laws that deal with the casino sector to provide for effective and comprehensive overall and anti-money laundering supervision.”

At the time of the assessment last year July, there were over 35 registered casinos in Zambia, with the sector’s contribution to Gross Domestic Product (GDP) standing at a paltry 0.03 percent.

There is no doubt that the casinos business has some skeletons in its closets, because it is not very clear why the business is booming yet it’s players are kept under wraps. It is hard to dispute the notion that the casino business is used by people allegedly involved in illegal money making ventures who attempt to legitimise their illegally acquired money.

During a recent workshop on how to combat money laundering activities hosted by investment and financial advisory firm Deloitte, Stanbic Bank Zambia risk compliance manager Daniel Luswili said there was need to strengthen regulations governing operations of some institutions that handle huge sums of money if Zambia was to reduce cases of illicit financial flows.”

“Commercial banks are heavily regulated by the central bank but sub-sectors such as casinos are not highly regulated yet huge sums of money are transacted there. We need to bring on board everyone [real estate agents, law firms, mobile money agencies] who handle cash so that they are well regulated. We want to see the flow of money being done correctly, this is why banks are kept awake due to the increase in cyber crimes, internet fraud and related crimes,” Luswili said.

Echoing Luswili’s sentiments, FIC deputy director Clement Kapalu observed that financial crimes had significantly increased due to lack of such regulation.

“Our statistics are based on any suspicious transactions such as drug trafficking, corruption and abuse of office, among other offences. So far, we have gathered over 1, 000 reports which have been presented to various law enforcement agencies for action and very soon, we are going to see more prosecutions,” he said.

The FIC doesn’t have powers to prosecute but their mandate is to investigate and compile reports on suspicious financial transactions, and submit their findings to bodies such as the Anti- Corruption Commission, Drug Enforcement Commission and the Zambia Police’s fraud and anti-money laundering units.

And Center for Trade Policy and Development executive director Isaac Mwaipopo said security wings needed to urgently act on the findings of the FIC report.

“Zambia is currently negotiating a bailout package from the IMF to help address the current fiscal and economic challenges. But these are development paths the nation would have avoided if adequate measures had been taken to curb illicit financial flows,” said Mwaipopo.

To ensure that a boom in casino business makes meaningful contribution to the growth of the Zambian economy, Government must strengthen measures to regulate the sector while maximising business revenues and minimising any negative effects.

World over, casinos are the main stay of economies in jurisdictions such as Macau, the US state of Nevada and many others. So Zambia should establish strong regulations to oversee gaming and gambling operations while instituting a resilient monitoring system designed to ensure casinos are operating to these mandated guidelines.

This story was produced by News Diggers. It was written as part of Wealth of Nations, a pan-African media skills development programme run by the Thomson Reuters Foundation in partnership with the Institute for the Advancement of Journalism. More information atwww.wealth-of-nations.org

         

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