Chinese in Ftown leads in money laundering, says FIA

The Financial Intelligence Agency (FIA) has identified externalisation of funds as one of Botswana’s most urgent financial crimes, with Francistown as the epicenter and Chinese-owned businesses driving the trend.

According to the FIA’s January–June 2024 Trend Report, externalisation — the illicit or unethical outflow of capital from Botswana — accounted for just 3.1 percent of Suspicious Transaction Reports (STRs) but involved a significant P30.1 million. Francistown alone accounted for nearly 90 percent of these cases, primarily linked to Chinese-owned retail businesses. The typical pattern involves large local cash deposits followed by rapid wire transfers to suppliers in China.

The report noted a spike in these transactions in February, likely tied to foreign-owned businesses repatriating profits made during the festive season.

“In countries without exchange controls, such as Botswana, moving money out of the country is generally easy and unrestricted, provided the transactions are legal and comply with local regulations,” the agency said.

Beyond externalisation, the FIA analysed 606 STRs filed in the first half of 2024, up from 400 during the same period in 2023.

Illegal deposit taking was the most frequently reported crime, making up 66.5 percent of STRs (403 reports). This activity was concentrated in Gaborone and largely driven by youths aged 26 to 35, many operating forex investment scams promising high returns without proper licenses or trading strategies.

“Due to unemployment, illegal deposit taking is particularly common among youth in Gaborone and surrounding areas. The activity tends to peak midweek, suggesting it is treated as a form of employment,” the FIA observed.

Despite its prevalence, illegal deposit taking accounted for only P9.1 million in reported STR value, indicating small-scale but widespread schemes.

Tax evasion accounted for 10.8 percent of STRs but had the highest total value at nearly P78.6 million. Mostly perpetrated by men aged 36 to 45, particularly business owners using personal accounts to avoid tax scrutiny, these activities peaked in Gaborone, especially in June, likely due to the tax year-end.

“Most males in Gaborone evade taxes for financial gain, particularly in June,” the report said.

Fraud made up 8.7 percent of STRs, valued at P14 million, often involving pyramid schemes without legitimate products. Money laundering was the least reported at 0.7 percent but carried a P7.3 million value and was overwhelmingly linked to adult males (95.8 percent).

“The same age group is also more inclined to commit fraud,” the report noted.

Gaborone remained the primary hotspot for financial crimes, accounting for 54 percent of STRs, followed by Francistown (15 percent) and Mogoditshane (7.2 percent). The capital city led in tax evasion, fraud, illegal deposit taking, and money laundering cases.

More than 90 percent of STRs involved Batswana nationals, though Chinese and Zimbabwean nationals were responsible for the highest-value transactions, particularly in tax evasion and externalisation. Youths (26–35) and adults (36–45) formed the majority of suspects. Males accounted for 56 percent of STRs, females 34 percent, and companies 10 percent. Notably, women were disproportionately involved in illegal deposit taking (36.6 percent) compared to other financial crimes.

Banks remained the top reporters, submitting 95 percent of STRs, though the total reported value dropped from P282 million in early 2023 to P139.8 million in early 2024. Car dealerships raised concerns, generating over P2 million in STR value from just three reports, highlighting potential money laundering risks.

“Car dealerships remain vulnerable to money laundering and terrorist financing given the substantial STR value generated from a few reports,” the report said.

Most STRs were reported on Mondays and Fridays, reflecting financial wrap-ups and post-weekend transactions. June saw a peak in STR values, particularly for tax evasion and money laundering. Electronic Funds Transfers accounted for 88 percent of suspicious transactions, with Cash Transaction Reports making up the remaining 12 percent, especially in tax evasion and externalisation cases.

Looking ahead, the FIA warns these crimes are likely to increase.

“The five predicted offenses — tax evasion, externalisation, fraud, illegal deposit taking, and money laundering — will continue to grow given historical STR trends,” the report stated.

Despite ongoing public education efforts, the FIA believes economic pressures, rather than ignorance, fuel the persistence of these financial crimes.

“Although public education campaigns have been conducted by the agency and supervisory authorities, these crimes have not declined. This suggests economic factors, rather than lack of awareness, are driving the trend. Addressing this may require adjustments to economic policy,” the agency said.