Botswana law firms which knowingly or unknowingly assist criminals to launder money or finance terrorism and proliferation by providing them with advice or acting as their financial intermediaries have been warned that they will be penalised with fines of P20 million.
The Financial Intelligence Agency (FIA) and the Law Society of Botswana (LSB) are clamping down on law firms that “cleanse” money from criminals by putting it into their client accounts.
According to a document that the two organisations compiled to guide attorneys on how to put anti-money laundering (AML) measures in place, criminals now use services provided by Designated Non-Financial Businesses and Professionals (DNFBPs) to introduce illicit funds into the financial system.
FIA and LSB say DNFBPs such as attorneys are referred to as “gatekeepers” because they wittingly or unwittingly assist criminals to launder money or finance terrorism and proliferation by providing them with advice or acting as their financial intermediaries. Such attorneys have an important role in Botswana’s anti-money laundering, counter-financing of terrorism and counter-financing of proliferation (AML/CFT/CFP) regime.
In that regard, FIA and LSB say an attorney as defined in the Legal Practitioners Act is designated as a specified party under schedule I of the Financial Intelligence Act 2019. “The Act places certain obligations on Attorneys to put measures in place to prevent their services from being used by a person to commit or to facilitate the commission of a financial offence,” the LSB and FIA report says.
FIA and LSB warn that failure to implement the AML/CFT/CFT measures will mean the law firm remains at risk of facilitating money laundering/terrorist financing/proliferation financing offences. According to the report, penalties for non-compliance are a fine not exceeding P20 million, suspension or revocation of practising licence or both while failure to report an STR (suspicious or unusual transaction report) will result in the law firm being fined P5 million.
Failure to conduct a risk assessment will result in the law firm being fined P1 million, failure to implement compliance programs will attract P1 million while failure to conduct customer due diligence will see a law firm being fined P1 million.
The reports says three main reasons Attorneys are exposed to misuse by criminals involved in financial offences are: a) engaging a lawyer adds respectability and an appearance of legitimacy to any activity being undertaken – criminals concerned about their activities appearing illegitimate will seek the involvement of a lawyer as a “stamp of approval” for certain activities.
“The services that lawyers provide, e.g. setting up companies and trusts, or carrying out conveyancing procedures, are methods that criminals can use to facilitate money laundering. c) Use of client trust accounts means that they are capable, even unwittingly, of “cleansing” money by simply putting it into their client account.”
The report advises law firms to always establish whether a prospective customer is a Prominent Influential Person (PIP) or whether the beneficial owner of a prospective customer is a PIP. “Where established to be PIP, the law firm shall obtain senior management approval before establishing the business relationship; take reasonable measures to establish the source of wealth and source of funds of the prospective customer,” the LSB and FIA report says.
The two organisations call on the law firms to conduct enhanced ongoing monitoring of business relationships. Lawyers are also reminded that as part of accountable institutions, they shall not establish or maintain a business relationship with a terrorist or member of a terrorist group declared under Section 12 of the Counter-Terrorism Act, unless the specified party or accountable institutions have been authorised by the National Counter-Terrorism Committee.
“Law Firms are required to monitor complex, unusual transactions, business relationships formed in a high risk jurisdiction and transactions for high risk businesses, screen customers against FATF high risk lists, national designations of terrorists in terms of Section 12 of the Counter-Terrorism Act as well as the United Nations Sanctions list,” says the LSB and FIA report. Law firms are warned that an STR (suspicious or unusual transaction report) must be reported to FIA immediately or within 5 working days from date suspicion arose, where immediate reporting is not possible.
“An Attorney must report suspicion relating to the following activities: buying and selling of real estate, managing client money, securities or assets, management of bank savings or securities accounts, organisation of contributions for the creation, operation or management of companies,” the report says. Attorney are also urged to report suspicions relating to creation, operation or management of legal persons or for arrangements, trusts and the buying and selling of shares.
“To facilitate compliance with this obligation, a law firm must; document the reporting process and procedure; establish and document suspicious transaction red flag indicators for the business,” they warned attorneys. The two organisations also called on attorneys to monitor and update these red flag indicators on a regular basis in order to keep up to date on the changing ML/TF/PF risks and train employees on the STR procedure and how to identify suspicious transactions associated with the firm.