Monograph 124: Money Laundering Experiences, Edited by Charles Goredema

This monograph not only examines recurrent trends in dealings with the proceeds of crime in East and Southern Africa. It goes further to probe the strengths and weaknesses of the critical agencies set up to check the abuse of the legitimate entry points to the economy in infusing such proceeds. The monograph comprises seven chapters.

An experienced financial services regulator, Joseph Munyoro considers the ubiquitous bureaux de change. In terms of numbers, bureaux have been the fastest growing sector in the Zambian financial services industry over the last decade. As at 31 August 2005, the Bank of Zambia had licensed 32 bureaux de change compared with 13 banks and nine leasing companies.

In every country in which they exist, bureaux are attractive to money launderers as they can be used to convert cash from a weak to a stronger currency. Relationships are casual and most bureaux are positioned in locations frequented by non-residents and, in many cases, far away from regulators. Many countries are conscious of the risks involved in permitting bureaux and have taken measures to minimise their abuse for laundering the proceeds of crime.

Chapter 1 presents an insight into the challenges that still exist in combating money laundering through bureaux de change despite the legal and institutional framework for the detection and prevention of money laundering. Joseph also makes recommendations for addressing the identified challenges.

The Financial Action Task Force (FATF), which was established in 1989 to give impetus to measures against money laundering and has since taken on additional responsibilities to co-ordinate initiatives against terrorist financing, has observed the role of real estate in laundering the proceeds of crime. The Financial Intelligence Centre in South Africa has also noted that house purchases may be used, either to cover the tracks of criminals by introducing intermediaries into the picture (in the case of bogus sales that are subsequently cancelled), or as a method to invest proceeds of crime. The resort by money launderers to real estate, which is relatively more tightly regulated and more likely to yield a paper trail for investigators, is ironic.

In Chapter 2 of this monograph Greg Salter critically examines the emerging picture regarding South Africa, to determine whether there is any basis for implicating the property market in money laundering typologies. Greg makes the interesting but probably controversial  observation that, notwithstanding the global furore about combating money laundering, the prime concerns about it are driven by the pre-occupation with the underlying criminal activity, such as theft of money or the evasion of tax, rather than the spending of the proceeds.

Emerging regimes against money laundering and the financing of terrorism place much store on financial intelligence units (FIUs) as repositories of information and co-ordinators of pro-active and re-active responses. FIUs have come to be considered as having a significant role in efforts to detect and combat money laundering and the financing of terrorism. This theme runs through recent international conventions such as the United Nations Convention Against Transnational Organised Crime, the United Nations Convention Against Corruption and the African Union Convention on Preventing and Combating Corruption and Related Activities.

Nomzi Gwintsa considers whether countries in East and Southern Africa are in a realistic position to establish effective financial intelligence units that will enhance their anti-money laundering and combating of terrorism efforts. Her chapter also debates whether compliance with international law necessarily requires these countries to put in place FIUs in the form and style that has come to be defined internationally.

Peter Warutere examines how Kenya’s strategic location as the gateway to East Africa and its well developed connections to the rest of the world exposes its economy to abuse, especially by corrupt elites. In addition, the growing links between drug trafficking, money laundering and international terrorism, and actual incidents, have positioned Kenya at the centre of territories that are vulnerable and susceptible to international terrorism. The 1998 bombing of the United States embassies in Nairobi, Kenya’s capital, and Dar es Salaam in Tanzania, were followed by the attacks on a tourist hotel and aeroplane in Mombasa. At the time of writing, Kenya was still without any laws dedicated to combating money laundering and the financing of terrorism and Peter examines the implications of this gap with the use of case studies.

Chapter 5 is written by Angela Itzikowitz. It critically looks at the implications of the demands of money laundering control on the duty of confidentiality that is regarded with so much reverence within the common law tradition, namely legal professional privilege. In broad terms, legal professional privilege protects from disclosure communications between attorneys and clients which are made in confidence for the purpose of enabling the client to obtain legal advice. Communications will thus be protected even if they are not connected with litigation. Angela considers first the common law attorney-client privilege, second, the reporting obligation in the context of the Financial Intelligence Centre Act 38 of 2001 and third, international initiatives dealing with attorneys in the context of anti-money laundering legislation. She concludes that legal professional privilege is not necessarily hostile to the compliance by lawyers with obligations to be diligent in their dealings with clients and to report suspicious transactions.

Annette Hübschle debates the efficacy of imposing measures against the funding of terrorism, premised on sophisticated financial systems, on economies that are under-developed, cash-dominated and under-banked. This subject is highly relevant to the region as well as to developing countries in general.

In Chapter 7, Charles Goredema tackles an issue about which it is difficult to appreciate why global consensus has been so elusive—the tracking and recovery of proceeds of economic crime. He analyses the formidable challenges that continue to impede the construction of successful crime proceeds recovery regimes within countries and between developing and developed countries. The advent of the UNCAC offers hope of a new approach in the manner in which the issues raised in this chapter are tackled.