Namibia - Detailed assessment report : Anti-money laundering and combating the financing of terrorism

 70655 Mutual Evaluation/Detailed Assessment Report Anti Money Laundering and Combating the Financing of Terrorism Republic of Namibia MAIN REPORT August, 2007  FINAL The AML/CFT Assessment of Republic of Namibia has been undertaken by the World Bank under the FSAP. In line with agreed procedures for ESAAMLG Mutual Evaluations the Detailed AML/CFT Report and the Executive Summary were adopted by the Task Force of Senior Officials and the Council of Ministers in August 2007. ESAAMLG SECRETARIAT 2  FINAL The World Bank DETAILED ASSESSMENT REPORT ANTI-MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM Namibia AUGUST 24, 2007 3  FINAL A. PREFACE .................................................................................................................................................8 B. EXECUTIVE SUMMARY ...............................................................................................................................9 LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES ..........................................................................11 PREVENTIVE MEASURES – FINANCIAL INSTITUTIONS ...................................................................................12 PREVENTIVE MEASURES – DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS (DNFBPS)........13 LEGAL PERSONS AND ARRANGEMENTS AND NON-PROFIT ORGANIZATIONS ................................................13 NATIONAL AND INTERNATIONAL COOPERATION ..........................................................................................14 C. GENERAL ..............................................................................................................................................15 GENERAL INFORMATION ON NAMIBIA ..........................................................................................................15 GENERAL SITUATION OF MONEY LAUNDERING AND FINANCING OF TERRORISM .........................................16 OVERVIEW OF THE FINANCIAL SECTOR AND DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS (DNFBPS) ....................................................................................................................................................17 OVERVIEW OF COMMERCIAL LAWS AND MECHANISMS GOVERNING LEGAL PERSONS AND ARRANGEMENTS .18 OVERVIEW OF STRATEGY TO PREVENT MONEY LAUNDERING AND TERRORIST FINANCING............................19 a. AML/CFT Strategies and Priorities ..................................................................................................19 b. The Institutional framework for combating money laundering and terrorist financing .....................19 c. Approach concerning risk..................................................................................................................20 d. Progress since the last ESAAMLG mutual evaluation ......................................................................20 D. DETAILED ASSESSMENT ..............................................................................................................21 1. LEGAL SYSTEM AND RELATED INSTITUTIONAL MEASURES ................................................................21 1.1 Criminalization of Money Laundering (R.1 & 2) ..............................................................................21 1.2 Criminalization of terrorist financing (SR.II)....................................................................................24 1.3 Confiscation, freezing and seizing of proceeds of crime (R.3) ..........................................................27 1.4 Freezing of funds used for terrorist financing (SR.III)......................................................................31 1.5 The Financial Intelligence Unit and its functions (R.26, 30 & 32) ...................................................33 1.6 Law enforcement, prosecution and other competent authorities–the framework for the investigation and prosecution of offences, and for confiscation and freezing (R.27, 28, 30 & 32) ..............................36 1.7 Cash couriers (SR.IX)........................................................................................................................38 PREVENTIVE MEASURES–FINANCIAL INSTITUTIONS .....................................................................................40 2.1 Risk of money laundering or terrorist financing ...............................................................................40 2.2 Customer due diligence, including enhanced or reduced measures (R.5 to 8)..................................40 2.3 Third parties and introduced business (R.9) .....................................................................................48 2.4 Financial institution secrecy or confidentiality (R.4)........................................................................48 2.5 Record keeping and wire transfer rules (R.10 & SR.VII) ..................................................................49 2.6 Monitoring of transactions and relationships (R.11 & 21) ...............................................................51 2.7 Suspicious transaction reports and other reporting (R.13-14, 19, 25 & SR.IV)................................52 2.8 Internal controls, compliance, audit and foreign branches (R.15 & 22)...........................................55 2.9 Shell banks (R.18)..............................................................................................................................57 2.10 The supervisory and oversight system–competent authorities and SROs: Role, functions, duties and powers (including sanctions) (R.17, 23, 29 & 30)...................................................................................58 2.11 Money or value transfer services (SR.VI)........................................................................................63 PREVENTIVE MEASURES–DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS............................64 3.1 Customer due diligence and record-keeping (R.12) (applying R. 5 to 10)........................................64 3.2 Suspicious transaction reporting (R.16) (applying R.13 & 14).........................................................67 3.3. Regulation, supervision and monitoring (R.17, 24-25) ....................................................................68 3.4 Other non-financial businesses and professions––Modern secure transaction techniques (R.20) ...70 LEGAL PERSONS AND ARRANGEMENTS & NONPROFIT ORGANIZATIONS ......................................................71 4.1 Legal Persons–Access to beneficial ownership and control information (R.33)...............................71 4.2 Legal Arrangements–Access to beneficial ownership and control information (R.34) .....................72 4.3 Nonprofit organizations (SR.VIII) .....................................................................................................73 NATIONAL AND INTERNATIONAL COOPERATION ..........................................................................................74 5.1 National cooperation and coordination (R.31) .................................................................................74 5.2 The Conventions and UN Special Resolutions (R.35 & SR.I)............................................................75 4  FINAL 5.3 Mutual Legal Assistance (R.32, 36-38, SR.V) ...................................................................................76 5.4 Extradition (R.32, 37 & 39, & SR.V).................................................................................................80 5.5 Other Forms of International Cooperation (R.32 & 40, & SR.V) .....................................................82 TABLE 2: RATINGS OF COMPLIANCE WITH FATF RECOMMENDATIONS .......................................83 TABLE 3: RECOMMENDED ACTION PLAN TO IMPROVE THE AML/CFT SYSTEM .........................90 AUTHORITIES’ RESPONSE TO THE ASSESSMENT.................................................................................99 ANNEX 1 – LIST OF MEETINGS CONDUCTED ......................................................................................100 ANNEX 2 - LIST OF LAWS, REGULATIONS AND OTHER MATERIAL RECEIVED..........................101 5  FINAL ACRONYMS ACA Anti-Corruption Act, 2003 ACC Anti-Corruption Commission AML Anti-Money Laundering AMLC Anti-Money Laundering Advisory Council AML/CFT Anti-Money Laundering/ Combating the Financing of Terrorism AUM Assets Under Management BIA Banking Institutions Act BID Determinations under the Banking Institutions Act BoN Bank of Namibia C Complaint CDD Customer Due Diligence CFT Combating the Financing of Terrorism CPA Criminal Procedure Act (1977 & 2004) DNFBPs Designated Non-Financial Businesses and Professions ESAAMLG Eastern and Southern African Anti-Money Laundering Group FATF Financial Action Task Force FI Bill Financial Intelligence Bill FIs Financial Institutions FIU Financial Intelligence Unit FSAP Financial Sector Assessment Program FT Financing of Terrorism GIPF Government Institution Pension Fund GoN Government of Namibia ICAN Institute of Chartered Accountants of Namibia ICCM International Co-operation in Criminal Matters Act, 2000 IEAN Institute of Estate Agents of Namibia KYC Know Your Customer LC Largely compliant LPA Legal Practitioners Act LSN Law Society of Namibia Merida Convention United Nations Convention Against Corruption (2003) ML Money Laundering MLA Mutual Legal Assistance MLAT Mutual Legal Assistance Treaty MoF Ministry of Finance MoJ Ministry of Justice MOU Memorandum of Understanding MVT Money or Value Transfer NAMCO Namibia Minerals Corporation 6  FINAL NAMFISA Namibia Financial Institutions Supervisory Authority NAMIBRE Namibian National Reinsurance Corporation NBFIs Non-bank Financial Institutions NC Non-compliant NPO Non-Profit Organizations NSX Namibia Stock Exchange Palermo Convention United Nations Convention Against Transnational Organized Crime (2000) PC Partially compliant PEPs Politically Exposed Persons POCA Prevention of Organized Crime Act, 2004 PS Permanent Secretary SACU Southern African Customs Union SADC Southern African Development Community SARPCCO Southern African Regional Police Chiefs Cooperation Organization SRO Self-regulatory Organization ST Suspicious Transaction STR Suspicious Transaction Report UN United Nations UNSCR United Nations Security Council Resolution Vienna Convention United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) 7  FINAL A. PREFACE 1. An assessment of the anti-money laundering (AML) and combating the financing of terrorism (CFT) regime of Namibia was conducted based on the Forty Recommendations 2003 and the Nine Special Recommendations on Terrorist Financing 2001 of the Financial Action Task Force (FATF), and prepared using the AML/CFT Methodology 2004. The assessment considered the laws, regulations and other materials supplied by the authorities, and information obtained by the assessment team during its mission from October 24-November 3, 2005. During the mission, the assessment team met with officials and representatives of all relevant government agencies and the private sector. A list of the agencies met is set out in Annex 1 to the detailed assessment report. 2. The assessment was conducted by a team of assessors comprising World Bank staff and a consultant. The evaluation team was led by Isabelle Schoonwater, Financial Sector Specialist, with other members being Stuart Yikona, Financial Sector Specialist, Yonghuan Wang, Financial Sector Specialist and John McDowell, Consultant. The assessors reviewed the institutional framework, the relevant AML/CFT laws, regulations, guidelines, practices and other measures and systems in place to deter money laundering (ML) and the financing of terrorism (FT). In terms of institutions, the team covered both the financial institutions and Designated Non-Financial Businesses and Professions (DNFBP). The team also assessed the capacity, the implementation and the effectiveness of all measures and systems relating to AML and CFT in Namibia. 3. This report provides a summary of the AML/CFT measures in force in the Republic of Namibia on November 2, 2005 or shortly thereafter. It describes and analyzes those measures, sets out Namibia’s level of compliance with the FATF 40+9 Recommendations (see Table 2) and provides recommendations on how certain aspects of the system could be strengthened (see Table 3). The report was produced by the World Bank as part of the Financial Sector Assessment Program (FSAP) of the Republic of Namibia. It was also presented to the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG) and endorsed by this organization on its plenary meeting of August 22, 2007. 8  FINAL B. Executive Summary Introduction 4. This Report on the Observance of Standards and Codes for the FATF Forty recommendations (2003) on Anti-Money Laundering and the Nine Special Recommendations (2001 and 2004) on Terrorist Financing (FATF 40 + 9) was prepared by a team composed of staff and consultant of the World Bank, using the 2004 AML/CFT Methodology. 5. This Report provides a summary of the level of compliance with the FATF 40+9, and provides recommendations to improve compliance with the prevailing context of Namibia. The views expressed in this document are those of the assessment team and do not necessarily reflect the views of the Government of Namibia or the Boards of the International Monetary Fund (IMF) and the World Bank. Information and methodology used for the assessment 6. In preparing the detailed assessment, World Bank staff reviewed the institutional framework, the laws, regulations, guidelines and other requirements, and the regulatory and other systems in place to deter money laundering (ML) and the financing of terrorism (FT) through financial institutions and designated non-financial businesses and professions (DNFBPs), as well as examined the capacity, the implementation and the effectiveness of all these systems. This Report contains a summary of the AML/CFT measures in effect in Namibia on April 21, 2006. Main Findings 7. The Prevention of Organized Crime Act, which criminalizes money laundering, was passed in parliament in December 2004, but has not been put into effect by the Ministry of Justice. The Financial Intelligence Bill that will establish the Financial Intelligence Unit was tabled in parliament in February 2006.1 Given the absence of an AML/CFT framework, the Bank of Namibia (BoN) has exercised its powers under the Banking Institutions Act (BIA) to issue general anti-money laundering related determinations and circulars to address aspects of money laundering, but with limited success. Nevertheless, they fall short of compliance with the international standards and are not sufficient to ensure industry compliance. Meanwhile, all South African owned banks and larger insurance companies have adopted home office AML/CFT policies to some degree. 8. With respect to combating the financing of terrorism (FT), Namibia has neither criminalized FT nor provided for the legislative, regulatory framework and institutional mechanism for the freezing, seizing and confiscation of terrorism related funds pursuant to the UN Security Council Resolutions 1267 and 1373. General General Situation of Money Laundering and Financing of Terrorism 1 The Bill was only enacted into law as the Financial Intelligence Act, 2007 on July 5, 2007. However, for it to become operational it will have to be gazetted by the Ministry of Finance. Additionally, the authorities have taken administrative steps to begin setting up the FIU housed in the Bank of Namibia. 9  FINAL 9. Criminal activities have a regional as well as domestic dimension to them. However, with respect to the regional dimension law enforcement authorities advise that Namibia is mainly used as a transit point. 10. Those with a regional dimension relate to falsification of identity documents or illegally obtained identity documents as well as customs forms with false information, including falsified invoices; theft of motor vehicles mainly from South Africa and brought into Namibia to be resold again on the market. Criminal syndicates are believed by the Namibia law enforcement agencies to operate this organized activity using Namibia as a transit point to support operations in South Africa, Angola and international networks transiting through Dubai. 11. There seem to be a clear route for hard drugs that come from South America and Asia into Southern Africa. Some of the hard drugs destined for Europe from these regions come through South Africa for re-routing to the European region and sometimes to Canada. Some of the drugs are routed to South Africa through Luanda and Dar Es Salaam. Namibia is more a transit country than a consumption one, except at a low level for ecstasy and cocaine, and is not a production zone. There have been seizures of cocaine at the Namibian International Airport, which was being smuggled from Brazil and destined for Angola. West African syndicates have been identified in some cases as coordinating part of these activities. 12. On the domestic front the real estate sector is a concern. Possible fraudulent investments in game resorts and lodges were identified by law enforcement agents as vehicles for money laundering patterns. Furthermore, there are various informal activities in some small businesses like shebeens, such as gambling and remittances which are vulnerable to abuse by money launderers. 13. With respect to the diamond industry, despite a strict legal and enforcement framework, authorities advised that there are diamonds or precious stones smuggling activities at a small scale. 14. The authorities assess that there is a low risk of terrorist activity occurring within Namibia particularly with the ending of civil war in Angola. Overview of the Financial Sector and Designated Non-Financial Businesses and Professions (DNFBPs) 15. Namibia has one of the most highly developed financial systems in Africa. The system consists of four private commercial banks, about 30 insurance companies, 500 pension funds, a stock exchange, a number of asset management and unit trust management companies, several specialized lending institutions, and a large number and variety of micro-lending institutions. Most of these institutions are private with strong ownership links to South African institutions. 16. The DNFBP sector includes accountants, lawyers, real estate agents and casinos but does not cover dealers in precious stones and metals as accountable institutions. There are approximately 14 accounting firms operating in Namibia. With respect to lawyers, there are currently 88 private law firms in Namibia; 390 licensed practitioners out of which 190 are in private practice. About 70% of the law firms are sole practitioners. 17. Namibia is one of the leading producers of diamonds in the world, with the diamond industry contributing significantly to the GDP. A number of diamond companies operate in Namibia. The market leaders are Namdeb Diamond Corporation (Pty) Ltd, a joint venture between the Namibian Government and De Beers of South Africa; and Namibia Minerals Corporation (NAMCO), in which the Namibian government holds some shares. There are numerous other smaller operators holding mining licenses that authorize them to carry out mining operations. Namibia being a signatory to and participant in the 10  FINAL Kimberly Certification Process of rough diamonds has ensured that the security of the diamonds is of international standards. 18. There are currently four casinos in Namibia with a total of 600 machines. They are all in hotels as under the existing regulatory regime casinos can only be operated in a rated hotel with specified rooms. In this regard, for Windhoek the capital city, the required rating is a 4 star with at least 100 rooms, while hotels outside Windhoek require a 3 star rating with at least 50 rooms. There are licensed by the Casino Board under the Ministry of Environment and Tourism. Nevertheless, informal and then unmonitored gambling activities have been described by our counterparts. A new regulation for casinos and gambling activities that would have a larger coverage is currently being drafted by the Board. Legal System and Related Institutional Measures 19. Criminalization of money laundering is dealt with in the Prevention of Organized Crime Act, 2004 (POCA) passed by parliament in December 2004. It will be the primary legislation that criminalizes money laundering. When the POCA comes into effect, money laundering will be criminalized under Chapter 3 of the POCA. The offence of ML is defined in a manner which is generally consistent with the Vienna and Palermo Conventions although Namibia has not ratified the Vienna Convention. Namibia adopts a list and threshold approach to define the predicate offences, which includes any offence punishable by more than 12 months. The authorities advise that the offence of ML as currently provided in POCA applies to persons who commit a predicate offence and can be prosecuted for laundering of one’s own illicit funds. There are penal and financial sanctions available for the ML offence, which are applicable to both natural and legal persons and proportionate and dissuasive. 20. Namibia has not criminalized FT and none of the provisions of the POCA cover FT. Moreover, Namibia has signed but not ratified the UN International Convention for the Suppression of the Financing of Terrorism. There is an Anti-Terrorism Activities Bill with no time frame as to when it will be tabled before parliament for debate and passage. The Bill does not however, provide for liability for legal persons which are used to facilitate terrorist financing or terrorist activities. Furthermore, there is no legislative, regulatory or institutional framework for freezing and seizing terrorist funds or other assets of persons. 21. The legal provisions for the identification, tracing and evaluating property subject to confiscation, seizing and freezing, confiscation and forfeiture of property are provided for in the POCA and are comprehensive. Under the POCA, confiscation refers to a criminal based process dependent on the conviction of an accused person, while forfeiture refers to a civil based process regardless of whether an accused person is prosecuted. However, in the absence of the coming into effect of the POCA, the legal framework for the confiscation, freezing and seizing of the proceeds of crime are governed by the Criminal Procedure Act, 1977 and soon by the Criminal Procedure Act, 2004 which will replace the 1977 statute. 22. There is no Financial Intelligence Unit in Namibia. The version of the Financial Intelligence Bill provided to the assessors confers on the BoN the power to perform the functions of an FIU in Section 5. The interpretative note related to FATF Recommendation 26 requires independence of the FIU. It is not clear how this will be addressed in a department within the BoN. Financing of terrorism does not come within the scope of the BoN’s jurisdiction. Otherwise, as defined in the current draft the functions and powers are consistent with the international standards. 23. Currently, the Ministry of Finance (MoF), the Ministry of Justice (MoJ) and the BoN are the lead institutions responsible for developing the AML/CFT policy, legislation, and agenda and will oversee its implementation. The Ministry of Justice championed the POCA and is responsible for preparing the regulations which will bring this Act into operation. The Ministry of Finance is sponsoring the Financial 11  FINAL Intelligence Bill and will be responsible for tabling it before parliament. With regard to the BoN, the authorities have made a decision to house the Financial Intelligence Unit in the BoN. 24. The Prosecutor General, the Namibian Police and the Namibia Revenue Authority under the Customs and Excise Department will be involved in conducting money laundering investigations. However, in discussions with these agencies it was evident that these agencies suffer from both human and logistical constraints and require training in conducting financial crime investigations. 25. The Customs and Excise Act, 1998 (Customs Act) establishes a declaration and disclosure framework for the physical transportation of all goods including cash or other monetary instruments which is imported or exported out of Namibia. In Namibia, the authorities advise that the reason why cash has to be declared or disclosed if requested to do so by a customs officer is not only that this is required under existing Exchange Control regulations, but under the Customs Act, money in whatever form is deemed to be goods for customs declaration purposes. The declaration or disclosure is required of all persons regardless of country of citizenship. There is no threshold amount that is prescribed when bringing in currency into Namibia. On the other hand, there is a threshold amount of N$160,000 for individuals and N$750 million for corporate entities for taking currency out of Namibia. 26. Mechanisms for the collection of AML/CFT related statistics have not been developed due to the lack of implementation of the POCA. Preventive Measures – Financial Institutions 27. Absent an appropriate AML/CFT framework, the BoN has exercised its powers under the Banking Institutions Act, 1998 (BIA) to issue general anti-money laundering related Determinations and Circulars to address aspects of money laundering until such time as the POCA is brought into effect or the Anti-Terrorism Activities Bill and Financial Intelligence Bill are enacted and brought into effect. In this regard, the BoN issued in June 1998, Determinations on Money Laundering and “Know Your Customer Policy