BPOPF jittery over threats of blacklisting

• BPOPF offshore asset managers concerned, face sanctions • Pension fund would face disaster from blacklisting

BPOPF jittery over threats of blacklisting

Botswana Public Officers Pension Fund (BPOPF) will struggle to secure credible asset managers, owing to reported anti money laundering deficiencies, the fund’s Principal Officer Boitumelo Molefe said this week. Molefe revealed that BPOPF’s current foreign asset managers are facing pressure from regulators who outlaw dealings with blacklisted countries. Botswana has been grey-listed, one stop from being blacklisted and has the year to clean up its financial sector.

Molefe fears that both grey-listing and the more serious blacklisting have the potential to affect its offshore investments and the members suffering financial loss.

Although Molefe was quick to point out that the government is working with the relevant authorities to rectify the current situation, she is equally alive to the threat of the country being blacklisted. The Business Weekly & Review in its lastweek edition reported that Botswana has been grey-scaled and given the deadline of January 2020 to have put in place laws aimed at curbing money laundering or face a complete blacklist. Being “grey-scaled” means that Botswana has been given a final warning to comply, failing which it will be blacklisted.

BPOPF has over P65 billion in assets under management (AUM). According to BPOPF’s investment structure, 65 percent of that money, the equivalent of over P42 billion, is held by foreign asset managers. Last week, The Business Weekly & Review reported that foreign asset managers holding billions of Pula in pension funds as well as foreign reserves invested offshore were in the process of returning the money back to Botswana.

However this week, Molefe said BPOPF’s foreign investments in developed and emerging markets have not been returned yet because the country has been given twelve months to rectify the situation.

She added that there are certainly concerns from “our offshore asset managers regarding the AML/CFT status of our country and they are anxious that the situation is rectified as they also face sanctions from their regulators if they deal with clients from blacklisted jurisdictions”. In fact, Molefe said if the country were to decline to black-listed status, “we would most certainly find it difficult and almost impossible to find credible asset managers to deal with.”

The Business Weekly & Review’s past edition revealed that the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), an inter-governmental organisation that is a Financial Action Task Force (FATF) Style Regional Body (FSRB), published a report in 2017 titled “Anti-Money Laundering and Terrorist Financing Measures Botswana,” which revealed that authorities in this country were ill-equipped when it came to money laundering and did not have the capacity nor skills to tackle it, making Botswana a paradise for money laundering syndicates.

According to the report FATF develops and promotes policies to protect the global financial system against money-laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CTF) standards. According to the ESAAMLG, Botswana’s Anti-Money Laundering and Counter Terrorism Financing regime is not yet developed, with competent authorities still in the process of trying to understand their responsibilities and building capacity to deal with Money Laundering and Terrorism Financing.

The ESAAMLG says the framework of money laundering legal in Botswana has major deficiencies arising from limited scope of predicate offences and absence of essential elements of the offence of money laundering. It further says there is inconsistency between the minimum threshold of a serious offence as defined in the Proceeds and Instruments of Crime Act and the penalty provisions set out for most of the offences, which do not fall under the threshold and thus disqualifying them from being categorised as predicate offences for ML purposes. In general, Botswana has a sound legal framework on confiscation of proceeds of crime. However, there is very limited implementation of the provisions mostly because more attention is being given to investigation and prosecution of predicate offences.  The terrorism financing legal framework in Botswana is reported to have major deficiencies arising mainly from non-criminalisation of individual terrorists, and the penalty is not proportionate and does not cover legal persons. “Competent authorities responsible for investigating and prosecuting terrorism financing have different levels of understanding of the offences and risks. The authorities have not determined which Non-Profit Organisations (NPOs) in Botswana could be vulnerable to terrorism financing risk and the kind of measures to take to mitigate such risks. Further, the authorities have not carried out any awareness to this sector on its possible exposure to risks,” said the ESAAMLG report.

There is, however, doubt that Botswana could achieve all these by 2020 because both the legal framework and the right human resources are yet to be put in place. The fear is that Botswana could become a paradise for ‘dirty money,’ hence reputable international financial institutions want to cut ties with the country because they do not want any association with ‘black money’.