US embassy cable - 05GABORONE461

UNCLAS SECTION 01 OF 03 GABORONE 000461 
 
SIPDIS 
 
SENSITIVE 
 
AF/S FOR DIFFILY 
 
E.O. 12958: N/A 
TAGS: PREL, PTER, EFIN, KTFN, BC, Counter-Terrorism 
SUBJECT: BOTSWANA ANXIOUS FOR AML-CTF ASSISTANCE 
 
REF A 04 STATE 263287 
REF B 04 GABORONE 1790 
 
1. (U)  SUMMARY:  A bilateral technical assistance program 
with Botswana could quickly and significantly improve its 
anti-money laundering and counter-terrorism finance (AML- 
CTF) regime, a March 20-25 visit by advisors from US 
Treasury's Office of Technical Assistance (Enforcement) 
revealed.  Meetings with local officials and private sector 
stakeholders indicated a high level of interest in 
improving Botswana's legal framework, institutional 
arrangements, and enforcement capacity.  While some 
preliminary tools exist, such as suspicious transaction 
reporting requirements and an embryonic financial 
intelligence unit, GOB officials recognize that major 
reforms are necessary if Botswana is to develop its 
financial services sector and prevent organized criminal 
groups and terrorists from exploiting its open economy. 
Such a program would advance US interests in promoting 
trade and investment with Botswana as well as combating 
terrorism and Mission Botswana looks forward to working 
with OTA to implement this assistance.  END SUMMARY. 
 
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BACKGROUND 
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2. (U)  In response to a request from Botswana's Ministry 
of Finance and Development Planning (Refs A and B), the 
Treasury Department's Office of Technical Assistance 
(Enforcement) sent Regional Advisor for Africa and the 
Middle East Jerry Rowe and Senior Advisors Howard Allen and 
Bill Gilligan to Botswana March 20-25, 2005.  Mr. Rowe and 
company met with stakeholders in government agencies, 
parastatals and in the private sector to gauge the current 
status of AML-CTF institutions and activities in Botswana 
and explore the possibilities of initiating a technical 
assistance program.  Their interlocutors uniformly 
expressed the urgent need for such assistance and a desire 
to cooperate toward that end. 
 
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CURRENT LAWS OUTDATED, INCOMPLETE 
--------------------------------- 
 
3. (U)  Officials at the Attorney General's Chambers and 
Bank of Botswana depicted the country's legal framework 
regarding money laundering as outdated and incomplete.  The 
Attorney General's Chambers has started the process of 
reviewing relevant laws.  A working group meets every six 
weeks to discuss deficiencies in existing legislation and 
identify benchmarks in laws from other countries.  A 
consultant from the Institute for Security Studies, a South 
African think tank, plans to undertake a thorough 
assessment of Botswana's AML legislation later this year. 
Some of the weaknesses of current laws include the absence 
of threshold reporting and suspicious transaction report 
requirements for non-bank financial institutions.  The 
Deputy Attorney General for Prosecutions repeatedly 
stressed the need for a civil asset forfeiture bill that 
would allow for the seizure of assets during an 
investigation, as opposed to only after a conviction, and 
for the forfeiture of assets if an accused is tried but 
acquitted on a technicality.  She observed that "pressure 
is mounting" for a counter-terrorism bill.  The Attorney 
General's Chambers also hoped for a consultant on drafting 
legislation against transnational organized crime, pursuant 
to certain international obligations, which could bear on 
the issue of money laundering. 
 
4. (SBU)  According to the Secretary for Financial Affairs 
in the Ministry of Finance and Development Planning, the 
National Assembly is likely to consider legislation on the 
regulation of non-bank financial institutions (NBFIs) later 
this year.  The draft bill would establish an autonomous 
body for this purpose but questions remained about how 
authority to regulate NBFIs would be reapportioned among 
the Ministry of Trade and Industry, Ministry of Finance and 
Development Planning, and Bank of Botswana.  The resolution 
of these questions could delay its appearance before 
parliament. 
 
5. (U)  Most government ministries lack in-house legal 
expertise, meaning that the drafting process involves 
extensive give and take with the Attorney General's 
Chambers.  Due to limited staffing at that agency, efforts 
to update laws hit a bottleneck.  Focused advice drawing on 
international standards, best practices, and model laws 
could ease the burden on the Attorney General's Chambers 
and substantially accelerate the drafting process for AML- 
CTF legislation. 
 
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INSTITUTIONAL ARRANGEMENTS INADEQUATE 
------------------------------------- 
 
6. (U)  Botswana has no financial intelligence unit.  The 
Directorate on Corruption and Economic Crime (DCEC), 
established in 1994, was assigned the secondary 
responsibility of investigating cases of money laundering 
in 2002.  Banks have filed approximately 100 suspicious 
transaction reports with the DCEC since then.  The DCEC's 
Intelligence Directorate analyses these inputs.  A three- 
person sub-group within its Investigations Directorate 
investigates cases involving money laundering or terrorism 
finance.  To date, this group's efforts have yielded three 
cases that are currently before the courts.  Mr. Tymon 
Katlholo, Director of the DCEC, expressed the need to 
establish a full-fledged financial intelligence unit.  He 
did not insist that it reside within the DCEC but observed 
that setting up a separate organization would be costly. 
 
7. (SBU)  A number of other interlocutors expressed concern 
about the performance of the DCEC as an interim FIU.  Mr. 
O. Mabusa, Director of Banking Supervision at the Bank of 
Botswana, described the DCEC's primary focus on combating 
corruption as "baggage" limiting its effectiveness in 
fighting money laundering.  Representatives of private 
banks complained that they struggled to get feedback from 
the DCEC in response to their suspicious transaction 
reports and have lost business due to "inept" handling of 
such reports.  One executive from a commercial bank 
indicated that names of designated individuals/entities 
listed under UN resolutions 1267 and 1373 were not always 
circulated to financial institutions. 
 
8. (SBU)  Despite the existence of a national interagency 
committee on AML-CTF, the absence of a legally and 
technically competent focal point for AML-CTF activities 
has also complicated inter-agency cooperation.  During a 
half-day seminar conducted by the Advisors, a 
representative of the Ministry of Foreign Affairs cited 
problems in the flow of information within the GOB and 
among stakeholders in general.  Officials at the Botswana 
Unified Revenue Service, asserted that the role of Customs 
in combating money laundering has been "steadily eroded". 
The Acting Commissioner of BURS hoped that any assistance 
package would reaffirm the importance of a prominent role 
for Customs officials in this process. 
 
9. (SBU)  Concerned about lack of effective implementation 
of current AML-CTF laws and regulations, the Bankers 
Association reached out to the GOB.  It established a forum 
with the Commissioner of Police on the subject and met with 
the Attorney General's Chambers.  The Association has been 
frustrated, however, by a reluctance within the GOB, 
particularly law enforcement, to work too closely with 
partners in the private sector.  Targeted coaching on the 
value and vitality of interaction and information sharing 
with a broadly delineated group of interested parties could 
help the GOB tap into a well of existing resources ready to 
address money laundering and terrorism finance. 
 
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CAPACITY BUILDING NEEDED 
------------------------ 
 
10. (SBU)  Every interlocutor welcomed assistance from OTA 
and inquired about possibilities for providing training in 
one form or another.  Executives at the Botswana Stock 
Exchange (BSE), for example, complained about the inability 
of the Ministry of Finance and Development Planning to 
discharge its legal responsibilities as regulator of non- 
bank financial institutions.  The BSE, they said, performs 
some regulatory functions for the Ministry, such as vetting 
brokers, because the Ministry lacks capacity.  Dr. Matome, 
CEO of the BSE, feared that this situation created a window 
of opportunity for criminals to launder money via 
securities and other financial services firms.  Although he 
noted that discussion is underway about establishing an 
autonomous regulator for NFBIs, he envisioned a two to 
three year time frame (vice the Secretary of Finance's 
hopeful projection of later this year).  Consequently, Dr. 
Matome requested assistance in training for his colleagues 
at BSE and at the Ministry without waiting for a new 
regulatory body to emerge. 
 
11. (SBU)  The Acting Commissioner of BURS requested 
training in investigative techniques for the Customs 
Department.  Representatives of the Attorney General's 
Chambers requested the same for its prosecutors as well as 
assistance in raising awareness of this issue among 
legislators.  Mr. Katlholo, Director of the DCEC, confessed 
that his organization already received more data than it 
can analyze and that it could use help in managing its flow 
of information.  A number of stakeholders expressed the 
need to enhance the capacity of the DCEC to investigate 
suspicions of money laundering and terrorist finance. 
 
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PERCEIVED VULNERABILITY 
----------------------- 
 
12. (SBU)  Contacts described the following factors as 
contributing to Botswana's vulnerability to money 
launderers and terrorists: 
 
- the absence of effective monitoring and regulation of 
NBFIs; 
 
- the burgeoning drug trade in South Africa, which has a 
more advanced AML-CTF regime, potentially making Botswana a 
n inviting locale for laundering illicit proceeds; 
 
- a large number of microlenders/loan sharks whose 
operations are largely unregulated; and 
 
- the efforts of the International Financial Services 
Center to promote Botswana as a destination for investors 
in the financial services sector. 
 
They had also observed a number of suspicious patterns, 
such as building societies making loans to construct 
shopping malls that are then paid off in one or two years 
or the receipt of large cash deposits by owners of small 
retail shops which are immediately repatriated to China. 
Concern about such activities and the threat they pose to 
the diversification of Botswana's economy contributed to 
the sense of urgency expressed by our interlocutors. 
 
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COMMENT: WHEN DO WE START? 
-------------------------- 
 
13. (SBU)  Following a half-day seminar by the OTA 
Advisors, which elicited probing questions and discussion 
from over thirty assembled stakeholders, Deputy Attorney 
General for Prosecutions confided to PolOff "we don't 
realize how much we need this [assistance]".  In the 
Advisors' final meeting, the Secretary for Financial 
Affairs in the Ministry of Finance and Development Planning 
pushed for the early inauguration of an assistance program 
and for the location of a residential advisor in Botswana. 
These exchanges captured the spirit of enthusiasm that 
infused the conversations the Advisors had with the 
representatives of government, parastatal and private 
sector institutions.  Whether in the drafting of up-to-date 
and comprehensive AML-CTF legislation, setting up a full- 
fledged FIU, or developing the human resources to enforce 
the laws, Botswana needs OTA's assistance.  The GOB has the 
will to address this issue, as evidenced by preliminary 
steps taken in that direction.  This suggests that an 
assistance program could have a significant impact in a 
short period of time.  Mission Botswana looks forward to 
working with OTA to put this program into place. 
 
HUGGINS