The Bank of Zambia says money launderers are very sophisticated and in many cases, law enforcement agencies have to catch up to their new techniques.
And the Bank of Zambia says every year, two to five per cent of the global GDP, which is in the range of US$800 million to about US$2 trillion, is laundered globally.
Speaking at the launch of the 2018 FIC trends report, BoZ Deputy Bank of Zambia Governor in charge of Operations Dr Bwalya Ng’andu appreciated the work of the Financial Intelligence Centre, saying the publication of the annual report helped all stakeholders to keep up with the latest tricks criminals were using to launder their money.
“Let me observe that money launderers are increasingly becoming sophisticated and the techniques and methods they use to launder proceeds of crime evolve. Just as the law enforcement agencies try to catch up with them, they find better ways. In fact, to some extent, the law enforcement agencies are playing catching up games because they (money launderers) are in business also to make money and they try to run ahead of those that are chasing them,’ Dr Ng’andu said.
“It is for this reason that the Bank of Zambia wishes to acknowledge and commend the work being done by the financial intelligence centre in publishing the annual trends report which provides various stakeholders with insights into the new techniques and methods criminals are adopting to cover their tracks. These insights assist us to further refine the tools that we can use to combat this vice. The Trends report provides us with information that can help us to adjust our strategies in combatting this scourge. This launch is part of our collective efforts, all of us together to keep pace with the evolving financial crimes landscape by adopting relevant measures to strengthen controls in relation to the crime of terrorism, the crime of corruption and all other financial related crimes.”
He highlighted some of the challenges Zambia had in effectively fighting financial crimes.
“While Zambia has in place appropriate legal, regulatory, institutional and operational frameworks to combat money laundering, a lot more still needs to be done in order to protect our economy and the financial system from abuse by criminals. Some of the deficiencies…included weakness in implementing a risk based approach to AML/CFT in the country, weaknesses in retaining ultimate beneficial ownership information which is a crucial pillar in an effective AML/CFT system, weak supervision of designated known professional businesses at market entry and poor management system of AML/CFT statistics and lastly, weak implementation of United Nationals Security Council resolutions,” he said.
And Dr Ng’andu said millions of United States dollars were laundered globally on an annual basis.
“The estimates by the United Nations office on drugs and crimes suggests that about two to five per cent of global GDP, which is in the region of US$800 million to about US$2 trillion in current US dollar price is laundered every year. That is the extent of the amount that is laundered every year globally. That is a lot of money,” he said.
He highlighted some of the effects money laundering had on the economy.
“The threat that money laundering and terrorist financing present has become very complicated because it is unfortunately riding on the very same platform that is responsible for the advancement that we are witnessing in the financial sector and that is the financial information technology in communication. So it is intertwined with genuine business and so it is becoming very difficult to fight. Money laundering cases distortions in the economy by making it difficult for businesses to compete with companies that are being financed from proceeds of crime. They have an advantage over genuine businesses because companies financed by proceeds of crime can price their products and services below production costs and therefore provide unfair competition to companies that finance their operations through the normal financing channels. In most cases, these companies can subsidize their products and are not necessarily interested in promoting efficiency and growth and are rather more interested in cleaning their illicit funds. So genuine businesses can be priced out of business with a negative effect on the economy in the long term,” said Dr Ng’andu.
“Laundered funds passing through the financial system has the potential to destabilize the financial services of the providers as well as damage the integrity of the financial system and cause reputation loss for the financial system. This may result in the loss of public confidence and trust in the financial system and when that happens, people tend to stay away from the financial system and it has a long term negative impact on the growth of the economy. Large flows of funds into and out of the country can also have a negative impact on the exchange rate and results in higher inflation and Marco economic instability.”