Chapter 2: Political will and the implementation of anti-money laundering measures: the Zambian experience, 2004 to 2006

CHAPTER 2

Political will and the implementation of anti-money laundering measures: the Zambian experience, 2004 to 2006

 

Joseph Munyoro

 

Monograph No 132, May 2007

 

CONFRONTING THE PROCEEDS OF CRIME IN SOUTHERN AFRICA
An Introspection

 

Edited by
Charles Goredema

 

Introduction

 

This chapter examines the progress made in Zambia towards implementing measures to pre-empt money laundering, or to detect money laundering and enforce the law against those involved. It highlights the significant role of political will in determining the pace of implementing money laundering measures. It also considers areas requiring improvement in the anti-money laundering regulatory and institutional framework.

Money laundering prevention

Zambia is developing a national anti-money laundering strategy document.1  Although the anti-money laundering strategy has not up to now been developed to serve as a co-ordinating framework, the country started taking measures aimed at combating money laundering as early as the 1990s. The country’s legal framework for combating money laundering is encapsulated in the Prohibition and Prevention of Money Laundering Act 2001 (PPMLA), which was enacted in November 2001. The delay in developing the anti-money laundering law was caused by many factors, including lack of political will.2 The effect of the delay was that by the time the law was adopted it was already outdated. By that time, the Financial Action Task Force (FATF) Recommendations on which the law had been modelled were undergoing revision to incorporate important lessons learnt in tracking money laundering developments in the seven years since 1996.3  These included the increasingly sophisticated combinations of techniques that money launderers had started adopting, such as the use of front companies to disguise the true ownership and control of illegal proceeds, and an increased use of professionals to provide advice and assistance in laundering criminal funds.4 Such developments required countries to expand anti-money laundering measures so that they applied beyond the financial sector.

Customer due diligence

The PPMLA requires a regulated institution to keep customer identification records and business transaction records (which should include descriptions of the transactions sufficient to identify their purposes and methods of execution) for 10 years after the termination of the business transactions.5 The PPMLA also gives supervisory authorities the responsibility of issuing directives that provide detailed customer due diligence requirements.6 

As at 30 September 2006 the Bank of Zambia (BoZ) was the only supervisory authority that had issued the directives, which list documents that customers of regulated institutions must produce as proof of identity and specify the process for verifying customer names, addresses and the nature of their business. In the case of trusts, the directives require institutions to obtain additional information that would enable them to know and understand the beneficial owners.7 

The banking sector is of greater money laundering concern to supervisory authorities than the other sectors. This is because, historically, money laundering has been predominantly conducted through the banking sector since it is the backbone of the national payments system. Through its on-site inspection function, the BoZ periodically assesses the compliance of banks with the directives. Despite the attractiveness of large deposits associated with money laundering, the BoZ receives co-operation from banks in fighting money laundering. This is because the banks realise that association with money laundering presents them with a very high reputation risk and, since banking thrives on customer confidence, many banks realise that it is in their interests to fight money laundering.8 

Reporting obligations

Under the PPMLA, supervisory authorities and regulated institutions are required to report money laundering suspicions to the Anti-Money Laundering Investigations Unit (AMLIU).9 The BoZ directives provide examples of suspicious transactions and activities to guide institutions in identifying them for reporting to the AMLIU.10 

Table 1 shows that the number of suspicious transaction reports (STRs) received by the AMLIU from all regulated institutions between 2003 and 2005 was lower than the number of suspicious transactions identified by banks. This indicates that there was under-reporting of suspicious transactions by both banks and other regulated institutions. This is because financial institutions generally perceive the AMLIU as focused on investigating and prosecuting suspected money laundering cases and less on analysing the information and developing a knowledge base that would assist in the development of appropriate preventive measures. This perception is reinforced by cases where the AMLIU has prematurely frozen bank accounts. This has created reluctance by financial institutions to report suspicious transactions because it is not in the interest of financial institutions to have their customers unduly harassed.

 

Table 1: Suspicious transactions received by the AMLIU and those identified by some banks

 

                

        

The bias of the AMLIU towards investigation and prosecution is understandable because it is the principal agency that enforces the anti-money laundering law.14 Its functions include, among other things, collecting, evaluating, processing and investigating financial information received from supervisory authorities and regulated institutions and prosecuting money laundering offences.15 

The functions of the AMLIU make it appear to be a law enforcement financial intelligence unit. It is attached to the Drug Enforcement Commission (DEC) and the Commissioner of the DEC is also the Commissioner of the AMLIU. The terms and conditions of employment of the DEC also apply to the staff of the AMLIU. For all practical purposes, therefore, the AMLIU is just a unit within the DEC.16 This arrangement is not coincidental. It can be traced to the Narcotic Drugs and Psychotropic Substances Act that created the DEC. Historically, money laundering in Zambia was associated with drug trafficking. However, since there was no legislation against money laundering at that time, it was convenient to insert a provision to fight money laundering in the Narcotic Drugs and Psychotropic Substances Act (Mwenda 2005). As a law enforcement agency, the AMLIU has been able to respond rapidly to information that suggests money laundering.

Some of the weaknesses identified in the reporting requirements of the PPMLA are as follows:

• Section 13(1)(b) of the PPMLA requires a regulated institution to report to the AMLIU any business transaction that gives rise to reasonable suspicion that a money laundering offence has been, is being, or is about to be committed. This leaves the issue of reporting suspicious transactions open to the judgement of an individual and, consequently, depending on how vigilant that individual is, some money laundering transactions may pass without being reported. This situation therefore reduces the number of reportable transactions.
  
  

• Though it requires reporting to be made, the PPMLA does not specify any mandatory reporting threshold, whether the transaction is suspicious or not. Furthermore, the law does not specify any format in which reporting is to be made.
  
  

• The PPMLA does not prohibit the maintenance by regulated institutions of anonymous accounts or accounts in fictitious names as required by recommendation 5 of the FATF Recommendations.
  
  

• Section 14 of the PPMLA states that it is not an offence for any person to make any disclosure in compliance with the Act. This provision was intended to encourage reporting of information to the AMLIU. However, the law does not protect the person reporting against any civil liability that may arise if sued by the person reported. This absence of proactive protection makes whistle-blowers reluctant to report to the AMLIU, and consequently the unit receives fewer STRs than expected.

In order to address the weaknesses noted in the anti-money laundering legal and institutional framework, the Financial Sector Development Plan for Zambia put forward recommendations that supervisory authorities needed to implement.17 

Regulation and supervision

The PPMLA identifies supervisory authorities that have the responsibility of issuing anti-money laundering directives specific to institutions under their supervision.18 The list of supervisory authorities, though not exhaustive, specifically mentions the three financial sector regulators, namely the BoZ, the Pensions and Insurance Authority (PIA),19 and the Securities and Exchange Commission (SEC).20 A host of others are also mentioned, covering a wide range of regulated institutions. Those not specifically mentioned are broadly captured in a catch-all clause that “any other supervisory authority which may be established by law as a supervisory authority”.21 

Although the PPMLA places responsibility on supervisory authorities to issue directives to the regulated institutions, it does not provide guidance on the minimum the directives should contain.22 A statutory instrument that would be expected to provide this guidance, and which is provided for in the law, has not yet been issued. In addition, given that the PPMLA does not provide the AMLIU with any means of holding supervisory authorities accountable for implementing their anti-money laundering responsibilities, the result has been that, except for the BoZ, all the other supervisory authorities, including the SEC and the PIA, have not issued any anti-money laundering directives. The fact that two financial sector regulators have not issued anti-money laundering directives implies that a sizeable portion of the financial sector is still open to abuse by money launderers. This is because legislation on its own is inadequate to deal with sector-specific money laundering activities (Mwenda 2005).

Subsequent to the BoZ issuing the anti-money laundering directives in August 2004, it has complemented these directives by strengthening its on-site inspection processes through the development of special inspection procedures to combat money laundering and the financing of terrorism.

However, as indicated above, the AMLIU does not hold supervisory authorities accountable for implementing the PPMLA. As a result, the enforcement of the PPMLA is less than adequate as most of the supervisory authorities have not issued specific directives to the institutions they supervise. There are therefore no benchmarks by which to evaluate the compliance of regulated institutions. Only the BoZ has issued directives and it is also the only authority that has a mandate to carry out regular on-site inspections to ensure that the institutions it supervises are complying, not only with the Banking and Financial Services Act but also with other laws of Zambia, including the PPMLA.23 It is possible that suspicious activities that are not picked up by the BoZ during supervision go undetected.

In Zambia there is a growing recognition that, as a result of increased vigilance against money laundering in the banking sector, money launderers have been moving away from this sector and are progressively using non-bank financial institutions and designated non-financial businesses and professions to launder the proceeds of their crimes. Appropriate anti-money laundering measures should therefore be targeted at non-bank financial institutions and designated non-financial businesses and professions. In this regard, the other financial sector regulators need to follow the example of the BoZ and implement appropriate anti-money laundering measures for their respective sub-sectors.

The non-bank financial institutions that are under the supervision of the BoZ but which the BoZ has hitherto not regulated are the money transmission service providers.24 As at 30 September 2006, there were three companies that provided money transmission services. These were the Zambia Postal Services Corporation (a statutory corporation) and two private international corporations, Western Union Money Transfers and MoneyGram International Money Transfers. It is generally recognised that money laundering is a major risk that these institutions bring to the financial sector. Since the BoZ has not yet licensed these institutions, its anti-money laundering directives are not applicable to them. However, the two private corporations have implemented their own internal anti-money laundering measures, which require the identification of both the sender and recipient of the funds and place a maximum limit on the amount that can be sent and received in a day.25 

The BoZ has recognised the need to regulate providers of money transmission services and has drafted a Payments Systems Bill, in terms of which these institutions will be regulated when it is eventually enacted.

In the case of designated non-financial businesses and professions, it is lawyers, accountants and real estate agents that require the attention of supervisory authorities. The relevant supervisory authorities recognised by the PPMLA are the Law Association of Zambia (LAZ) and the Zambia Institute of Chartered Accountants (ZICA). These are the statutory bodies established to regulate the conduct of lawyers and accountants respectively. However, there is no supervisory authority to regulate the conduct of real estate agents. Even though an organisation of real estate agents exists, it is a loose association that has not had any meaningful impact on the conduct of real estate agents, who largely operate without any regulation or formal code of conduct.

Zambia’s experience with money laundering involving real estate suggests that some professions should be appropriately supervised. A press release on 10 June 2005 by the Task Force on Corruption26 indicated that a good proportion of state resources allegedly plundered by high-ranking government officials was invested in real estate. At various stages the money laundering processes involved lawyers, accountants and real estate agents. If these professions continue operating without being held accountable for implementing anti-money laundering measures by their respective supervisory authorities, money laundering through them will continue unabated. Interviews conducted with both the ZICA and the LAZ indicated that they have not issued any anti-money laundering directives or guidelines for their members. This is partly because of the absence of any accountability mechanism between the AMLIU and the supervisory authorities and partly because both the ZICA and the LAZ have not realised the urgent need to implement anti-money laundering measures in their respective areas of supervision.

In order to address some of these shortcomings in the near future, the AMLIU has proposed amendments to the PPMLA that include some of the 2003 revisions to the FATF Recommendations, such as the need for specific measures targeted at designated non-financial businesses and professions.

However, for as long as the law does not give the AMLIU powers to hold supervisory authorities accountable for implementing anti-money laundering measures in their respective areas of responsibility, there will be minimal or no progress in fighting money laundering outside the financial sector supervised by the BoZ. This will effectively negate the anti-money laundering efforts made, and measures implemented, by the BoZ. This is because money laundering, like water, flows more to areas where it is less regulated.

Sanctions for non-compliance

The PPMLA criminalises money laundering and provides for the investigation and prosecution of money laundering offences and the punishment of individuals and institutions found guilty.

This Act places responsibility on both the supervisory authority and the regulated institutions to report to the AMLIU any information that gives them reasonable grounds to believe that a money laundering offence has been, is being, or is about to be committed.27 An officer of a supervisory authority who obstructs an investigation commenced by the AMLIU is liable, upon conviction, to a fine not exceeding 100,000 penalty units (the equivalent of US$4,334.45)28 or to imprisonment for a term not exceeding five years or to both. For a regulated institution and any of its officers who fail to report money laundering suspicions, the penalty on conviction is 200,000 penalty units (the equivalent of US$8,668.89) for the institution and 112,000 penalty units (the equivalent of US$4,854.58) and imprisonment for a term not exceeding three years for the officer.

Other preventive measures

The AMLIU also plays another role in money laundering prevention by assisting supervisory authorities and regulated institutions with training and developing anti-money laundering training programmes. Since its establishment, the AMLIU has carried out a number of initiatives through radio and television programmes, training workshops and other publicity campaigns to sensitise the public to the wider dangers of money laundering, (Munyoro 2006).

Enforcement of anti-money laundering laws

The anti-money laundering legal framework comprises the PPMLA, the Narcotic Drugs and Psychotropic Substances Act, the Penal Code and the Anti-Corruption Commission Act.

Criminalisation of money laundering and predicate activities

The PPMLA criminalises money laundering and provides for prosecution of money laundering offences and the punishment of individuals and institutions found guilty.29 

The PPMLA is silent on the predicate crimes that give rise to money laundering. It does not list any predicate crimes but adopts an ‘all crimes’ approach to the scope of money laundering, defining money laundering in relation to the proceeds of illegal activity (Mwenda 2005). Illegal activity is defined as any activity carried out anywhere and at any time that is recognised as a crime in Zambia.30 Most are activities criminalised in the Penal Code, the Narcotic Drugs and Psychotropic Substances Act, and the Anti-Corruption Commission Act.

Zambia generally has adequate laws necessary for the fight against money laundering and its predicate offences. However, adequate laws are not sufficient in themselves. Experience gained in the country between 1996 and 2006 shows that political will is equally important, albeit with its own limitations. Political will tends to be fickle because of the transience of the administrative tenure of politicians. This means, therefore, that politicians will embrace the fight against money laundering as long as it enhances their chances of winning an election. Similarly, they will abandon the fight if they believe that sticking with it is not in their interest, regardless of whether it is in the public interest. The case study below highlights the limitations of political will.

In order to ensure that money laundering and associated predicate crimes such as corruption are confronted on a sustained basis, it is therefore important that civil society and the press, among other stakeholders, get involved in holding governments accountable for the nature and pace of progress. Such a system presupposes the existence of a free press, freedom of expression and a democratic system of governance.

Furthermore, in order to ensure that politicians remain engaged, anti-corruption and anti-money laundering should become political election campaign issues, with political parties being pressurised to clarify their positions on these socio-economic vices.

Case study: the limitations of political will31

 

 

 

Investigation of money laundering and predicate activities

The AMLIU is the leading agency for implementing the anti-money laundering law, as it is responsible for carrying out investigations and prosecution of money laundering offences and co-ordinating with other law enforcement agencies.32

Over the three years to 2006, the AMLIU has improved its law enforcement capacity by training investigative and prosecutorial staff. This has resulted in more than a threefold increase in the number of cases prosecuted between 2004 and 2006, as can be seen in Table 2.

 

                                          
However, the AMLIU has not been able quickly enough to replace members of staff lost through resignations, dismissals and death. This has had the effect of constraining its law enforcement capacity.

In addition to carrying out successful prosecutions that resulted in the proceeds of crime being forfeited to the state, the AMLIU also prevented the loss of government resources by blocking fraudulent payments to companies that did not supply goods or services and yet were claiming payments from the government. The payments blocked were an equivalent of about US$6,438,019.43 in 2005 and US$2,364,823.47 in 2004 (Saboi 2006).

The majority of cases investigated by the AMLIU involved fraudulent supplies of goods and services to the government, which resulted in the government losing substantial amounts of money. Money laundering cases leading to the loss of government funds typically involve, at some point, the corrupting of a government official who, in turn, ignores the fraud or facilitates it in some way. The next case study illustrates this. Corruption is one of the significant predicate crimes of money laundering in Zambia.

Case study: corruption and money laundering (Saboi 2006)35 

 

 

Although Zambia has an Anti-Corruption Commission (ACC), which was established in 1980, its efforts have been largely successful in lower-level corruption cases. At various stages it was either prevented from investigating senior government officials or there was an absence of political will to fight corruption. Corruption is believed to have become widespread during the tenure of Zambia’s second republican president. Despite being nominally free from the direction or control of any person or authority in the performance of its duties,36 in practice, the ACC was subjected to political interference. This is largely because between 1996 and 2002 senior government officials, including the then President, were involved in alleged corrupt practices themselves. This is why Mr Levy Patrick Mwanawasa, after becoming President, took an immediate step to address the problem of corruption by constituting a Task Force on Corruption in 2002 to investigate corrupt practices that had allegedly occurred during the previous administration (Mwanawasa 2004).

Since 2002 the political will against corruption and money laundering has increased. At the highest levels of political office, corruption is now recognised not only as a crime that retards economic development but also as a recipe for civil unrest and political disharmony (Mwanawasa 2004). In 2002 the President commissioned a governance baseline survey to measure corruption perceptions in Zambia (Mwanawasa 2004). The government used the survey report to start developing a national corruption prevention policy and strategy. The drafting of this policy document involved wide consultations with a cross section of stakeholders. This anti-corruption policy document is expected to provide guidance and strategies for dealing with corruption, whose effects have been extremely harsh on poor people (Mwape 2006).

Owing to the increased political will to fight corruption, the ACC has been operating noticeably without political interference since 2002. As a result, it has been able to attract, recruit and train more prosecutorial staff. This, in turn, has led to an increase in the number of cases prosecuted, as shown in Table 3.

 

Table 3: Overview of the law enforcement capacity of the Anti-Corruption Commission

 

 

Money laundering in Zambia is increasingly becoming the reverse side of corruption. There is therefore a need to synchronise the national anti-money laundering strategy with the national corruption prevention strategy. Both documents must also be integrated in the fifth national development plan in order for the anti-money laundering and anti corruption programmes to be included among national priorities and for them to receive adequate attention and funding for implementation.

Prosecution and punishment

The prosecution of money laundering and predicate crimes has been slow. The formation of the Task Force on Corruption had raised public expectations that the prosecution process would be faster since a dedicated investigation and prosecution team had been assembled.

Three years after the establishment of the task force, the public started losing hope that it would live up to their expectations. Court processes were protracted because of many adjournments. There was a growing public conviction that the creation of the task force had simply been a political manoeuvre by the President to shore up public support for himself and that he did not intend to see the alleged corrupt senior officials convicted. Voices calling for the dissolution of the task force started multiplying. This compelled the chairperson of the Task Force on Corruption to issue a public statement to counteract this growing public perception. He outlined the progress the task force was making in tracing and seizing property connected to the plunder of national resources, and also appealed to the public to be patient as the task force’s job was complex, risky and time consuming.38 Some of the typical delays in disposing of cases handled by the task force are illustrated in the case study below.

Although some of the delays in completing the prosecutions are justifiable, it cannot be denied that the lack of adequate training of investigation and prosecutorial staff is a significant factor.

 

Case study: the abuse of office by Samuel Bwalya Musonda39

 

 

Tracing and confiscating the proceeds of crime

Whatever the nature of predicate crime, if the ultimate objective is economic benefit, the law enforcement authorities can succeed in reducing the motivation for engaging in such crimes by putting in place mechanisms for tracing and recovering the proceeds. Zambia pursues both civil and criminal forfeiture of property associated with money laundering.

Section 15 of the PPMLA provides for the civil seizure of property suspected of having been derived or acquired from the proceeds of crime.40 If the seized property is not claimed or if there is no prosecution that has been instituted under any written law, such property is liable to be forfeited to the state. This can be done by the Commissioner of the DEC applying to the court for forfeiture. The commissioner is required to give public notice indicating that the property seized is liable to be forfeited to the state if not claimed within three months.41 Civil seizure ensures that suspected money launderers are promptly deprived of the use of illegitimate gains while the court process, which normally takes long, is under way.

If it is impractical for the AMLIU to seize the property before conviction, then once the suspect has been convicted of a money laundering offence, any property which was derived from the proceeds of crime becomes liable to forfeiture by the court.42

Consistent with the principle of depriving criminals of economic benefits derived from their illegal activities, the Anti-Corruption Commission Act allows the Director-General of the ACC to direct any person not to dispose of property suspected to be connected to corruption.43 In addition, any money, property or thing of any description, which was the subject of corruption investigations and was recovered by the ACC, vests in the state if it is not claimed within three months of the commissioner giving public notice of possible forfeiture.44

The Narcotic Drugs and Psychotropic Substances Act also provides for the seizure of property used in or derived from a drug trafficking offence.45 

The AMLIU will thus seize property connected to any crime, while the specialised agencies such as the ACC and the DEC only deal with property acquired from corrupt practices and drug trafficking respectively.

As indicated above, the PPMLA provides for the co-ordination of forfeiture by recognising that where a prosecution has not been instituted under any written law, the AMLIU will take the lead in effecting forfeiture. If a prosecution has been initiated by another law enforcement agency, the AMLIU would leave the forfeiture to be dealt with by that agency. In some instances the AMLIU conducts joint prosecutions with other agencies so as to improve the chances of a speedy seizure of the proceeds of crimes.

This means, therefore, that the AMLIU, the ACC, the DEC and the Zambia Police Service can effect seizure and deal with eventual forfeiture of the proceeds of crime. As the AMLIU is responsible for the enforcement of anti-money laundering law, it is ideally placed to co-ordinate the recovery of any proceeds of crime. However, there is a need to review the PPMLA, the Penal Code, the Narcotic Drugs and Psychotropic Substances Act and the Anti-Corruption Commission Act so that all the anti-money laundering provisions in these pieces of legislation are harmonised to facilitate easy co-ordination among the law enforcement agencies.

In practice, the level of co-ordination between the AMLIU and the other law enforcement agencies is hampered by difficulties in inter-agency communication. The task force type of law enforcement provides a model for integrating disparate agencies, and could resolve some of the recurring problems.

Measures to foster transnational co-operation

The efforts Zambia has made to foster transnational co-operation in its anti-money laundering activities have been influenced by its membership of regional and international bodies.

Awareness of global trends

The Zambian government has taken steps to ratify a number of United Nations (UN) conventions that have a bearing on the fight against money laundering. These conventions have provided a foundation for the development of domestic laws aimed at addressing money laundering challenges.

In May 1993 Zambia ratified the 1988 UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. This was an important step as at the time the most prevalent predicate crime associated with money laundering was drug trafficking. The ratification culminated in the adoption in 1993 of the Narcotic Drugs and Psychotropic Substances Act, which first criminalised money laundering. However, the Act narrowly defined money laundering as the proceeds of drug trafficking.46

In view of the threat posed by terrorism and the realisation that terrorists disguise the sources of their finances, Zambia has ratified the International Convention for the Suppression of the Financing of Terrorism (1999). However, this convention has not yet been translated into a domestic law.

In 1996 the International Monetary Fund (IMF) and the World Bank adopted the anti-money laundering recommendations of the FATF as the international standards for combating money laundering and terrorist financing.47 Their technical assistance missions to Zambia have therefore often included assessments of how Zambia is implementing the FATF Recommendations. Generally, the IMF and World Bank have provided various forms of technical assistance aimed at raising the anti-money laundering regime in Zambia to international standards.

International co-operation

Zambia is a member of the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG) which is a FATF-style regional body whose members have agreed to adopt and implement the FATF Recommendations; to apply anti-money laundering measures to all serious crimes; and to implement any other measures contained in multilateral agreements and initiatives to which they subscribe for the prevention and control of the laundering of the proceeds of all serious crimes. As a condition of membership, ESAAMLG members are obliged to participate in a peer review process called ‘mutual evaluations’. Through this process, ESAAMLG members assess each other against the FATF standards, and develop plans to enhance each member’s compliance.

Zambia has not yet been subjected to the ESAAMLG peer review process. The country offered to be reviewed in 2004 but the review has not yet taken place. ESAAMLG has scheduled the review for the second half of 2007. However, the country is lagging behind in the implementation of the first strategic objective of ESAAMLG, which requires member countries to have developed national anti-money laundering strategies by July 2006. An anti-money laundering task force to lead efforts in co-ordinating national anti-money laundering efforts was created in October 2005 after Zambia assumed the presidency of ESAAMLG in August 2005. By the end of June 2006 the task force had drafted a national anti-money laundering strategy document, which outlined priority anti-money laundering measures to be implemented. Once the government approves it, the anti-money laundering strategy document will serve as the basis for monitoring and evaluating progress in implementing anti-money laundering measures across different sectors of the national economy.

Mutual assistance processes

Recognising the international dimensions of money laundering and, therefore, the need for international co-operation in tackling it, Zambia ratified the UN Convention Against Transnational Organised Crime and its protocols in 2005.

The Mutual Legal Assistance in Criminal Matters Act facilitates legal assistance in criminal matters involving other countries. However, this is a law in need of revision in order to broaden the scope of permissible assistance. Currently, legal assistance in criminal matters can only be provided to countries that have signed a treaty with Zambia. In addition, the Act does not provide Zambia with comprehensive powers to request assistance from other countries and it also does not provide for a mechanism to facilitate the bilateral and multilateral sharing of proceeds of crime and assets forfeited as a result of co-operative efforts.

Transnational structures to trace and confiscate the proceeds of crime

Zambia has ratified a number of important conventions and protocols that provide mechanisms for the identification, tracing, freezing and confiscation of the proceeds of crime involving other countries. These include:

• the Southern African Development Community (SADC) Protocol on Combating Illicit Drug Trafficking;
  
  

• the SADC Protocol against Corruption; and
  
  

• the African Union Convention on Preventing and Combating Corruption.

Zambia still has to ratify the UN Convention Against Corruption that came into force at the end of 2005. Ratification of these conventions and protocols is an important first step. However, there is a need for Zambia to demonstrate further commitment to the application of these conventions and protocols by translating them into domestic laws and regulations.

Conclusion

Over the last five years, since Zambia enacted the PPMLA in 2001, progress in the implementation of anti-money laundering measures has been ambivalent. Supervisory authorities for a number of the vulnerable sectors have not yet issued anti-money laundering directives. Given that money laundering as an evolving crime always seeks out cracks in the supervisory and regulatory regime, there is a need for supervisory authorities such as the ZICA, the LAZ, the PIA and the SEC to implement anti-money laundering measures in their respective areas of responsibility. If this does not happen, combating money laundering could become elusive. The AMLIU can still play a significant role in re-energising implementation activities by assuming a more aggressive posture towards supervisory authorities that have not yet discharged their responsibilities under the PPMLA.

 

With a national anti-money laundering task force established in 2005 and a draft anti-money laundering strategy document soon to be finalised, there are fair prospects that the tempo of implementing anti-money laundering measures will again increase. However, this will greatly depend on the continued existence of political will and the awareness by citizens of their democratic right to hold the government accountable for combating money laundering and its various predicate crimes.

Notes

1. As at 30 September 2006 the draft Country Strategy Paper on Anti-Money Laundering and the Combating of Financing of Terrorism was due to be discussed by the Anti-Money Laundering Authority.
   
   

2. It is believed that the government delayed the enactment of the PPMLA because of self-interest by influential high-ranking government officials in the administration of Dr Frederick Chiluba who at the time were involved in alleged laundering of funds corruptly obtained from the state. In 2002 the government of Mr Levy Mwanawasa brought charges against a host of former government officials, including the former President, the Director of the Zambia Intelligence and State Security Service, the former Minister of Finance, defence chiefs and their collaborators in the financial system. However, as the PPMLA was passed towards the end of Dr Chiluba’s second and last term as President after the alleged offences had been committed, the accused have not been charged with any money laundering offences as the law cannot be applied retrospectively.
   
   

3. The Financial Action Task Force Forty Recommendations on Money Laundering, 2003.
   
   

4. Ibid.
   
   

5. PPMLA, section 13.
   
   

6. Ibid, section 12(4).
   
   

7. BoZ Anti-Money Laundering Directives, directives 7–9.
   
   

8. In 2002 the Boz closed down the United Bank of Zambia after it emerged that the latter was unable to meet its financial obligations as they fell due. This was because other banks had severed their commercial relationships with it and most of the bank’s depositors had started withdrawing their funds when they became aware that four of the bank’s directors had been arrested for alleged involvement in money laundering.
   
   

9. PPMLA, sections 12 and 13.
   
   

10. BoZ Anti-Money Laundering Directives, directive 11.
    
    

11. The figures for 2006 are as at 30 June 2006.
    
    

12. The numbers of STRs were obtained from the AMLIU on 27 October 2006.
    
    

13. The numbers of suspicious transactions identified are based on 11 banks, out of the 13 operating in Zambia, that responded to the questionnaire.
    
    

14. PPMLA, section 5.
    
    

15. Ibid, section 6.
    
    

16. Drug Enforcement Commission 2004 Annual Report, p. 3.
    
    

17. The Financial Sector Development Plan is available from .
    
    

18. PPMLA, section 12.
    
    

19. The Pensions and Insurance Authority supervises pension funds and insurance companies, including insurance brokers and loss adjusters.
    
    

20. The Securities and Exchange Commission supervises capital market participants such as stockbrokers, stock dealers and investment advisers.
    
    

21. PPMLA, section 2.
    
    

22. Ibid, section 12.
    
    

23. Banking and Financial Services Act, section 78.
    
    

24. Section 2 of the Banking and Financial Services Act recognises a money transmission service as a financial service.
    
    

25. The maximum amounts of money a person can send and receive through Western Union Money Transfer per day are the equivalent of US$1,000 and US$5,000 respectively. The corresponding limits for MoneyGram are US$5,000 and US$10,000. However, Zambia Postal Services does not have any limits as it conducts only in-country money transfers.
    
    

26. The Task Force on Corruption was created in 2002 to investigate suspected cases involving high-ranking government officials in the administration of Dr Frederick Chiluba who are alleged to have corruptly obtained and laundered funds of the Zambian government, estimated to be worth around US$400 million. See also .
    
    

27. PPMLA, sections 12 and 13.
    
    

28. A penalty unit is equivalent to ZMK180 and the exchange rate was K4,152.78/US$ on 30 September 2006.
    
    

29. PPMLA, sections 7–11.
    
    

30. Ibid, section 2.
    
    

31. The material in the case study is partly based on the court proceedings in the case of The People v Kashiwa Bulaya. As at 30 September 2006, the case was still before the court.
    
    

32. Prohibition and Prevention of Money Laundering Act, section 6.
    
    

33. The figures for 2006 are as at 30 June 2006.
    
    

34. The reduction in the number of employees was largely due to resignations and dismissals.
    
    

35. See also Bellwood Clinic Limited v Drug Enforcement Commissioner and Attorney General, Appeal No. 169/99.
    
    

36. The Anti-Corruption Commission Act, 1996, section 5.
    
    

37. The figures for 2006 are as at 30 June 2006.
    
    

38. Press statement by the chairman of the Task Force on Corruption, released on 10 June 2005.
    
    

39. See the People v Samuel Bwalya Musonda, SSP/99/2004.
    
    

40. Property is defined in section 2 of the PPMLA as including “money and all other property, real or personal, movable or immovable including things in action and other intangible or incorporeal property wherever situated and includes any interest in such property.”
    
    

41. PPMLA, section 18.
    
    

42. Ibid, section 17.
    
    

43. Anti-Corruption Commission Act, Section 24.
    
    

44. Corrupt Practices (Disposal of Recovered Property) Regulations, 1986.
    
    

45. Narcotic Drugs and Psychotropic Substances Act, 1993, sections 31–49.
    
    

46. Ibid, section 22.
    
    

47. The Financial Action Task Force Forty Recommendations became the internationally accepted anti-money laundering standard in 1996 after having been endorsed by more than 130 countries.

References

Munyoro, J. 2006. Challenges of combating money laundering in bureaux de change. In C. Goredema, (ed) Money laundering experiences. ISS monograph 124. Cape Town: Institute for Security Studies.

Mwanawasa, L. 2004. speech at the launch of the National Governance Baseline Survey Report. Available from: [cited 19 August 2006].

Mwape, L. 2006. Speech at a consultative workshop for members of parliament on the draft national corruption policy and strategy for Zambia. Reported in the Post newspaper, 13 June.

Mwenda, K.K. 2005. Anti-money laundering law and practice: Lessons from Zambia. Lusaka: UNZA Press.

Saboi, L. 2006. The extent of money laundering, illegal money, drugs and corruption in Zambia – the role of the drug enforcement commission in the fight against these vices. Unpublished paper presented at a workshop on Corporate Fraud and Money Laundering (organised by the British Council and the Association of Chartered Certified Accountants), Lusaka, 31 May.