What is money laundering?
Money earned through criminal activities is said to be “dirty”. For
this reason, criminals whose main goal is to profit from their
criminal acts,
have to “cleanse” such money of its illicit origin. In order to enjoy
their ill-gotten gains, criminals commonly seek to disguise the
illegal source of their profits. Money laundering is the term
applied to the act of concealing the origins of such money and
releasing it undetected into legitimate business activities, the
purpose being to prevent it from being tracked and confiscated by
the government. Money laundering is most commonly associated with
criminal activities such as drug trafficking, corruption,
kidnapping, extortion, tax evasion, trafficking people and a
range of other criminal activities.
What is terrorism
financing?
Terrorist financing is the act of providing support to terrorists or
terrorist organisations to enable them to carry out terrorist acts.
Terrorists and terrorist groups also move funds to disguise their
source, purpose and destination. Terrorist financing includes the
financing of terrorist acts, terrorists and terrorist organisations.
Both money laundering and terrorism financing are serious crimes and
have serious adverse effects in attainment of any country's national
goals.
What is the link between money laundering
and terrorist financing?
Money laundering and terrorist financing are both serious
criminal offences. Secondary, the techniques used to launder money are
essentially the same as those employed to conceal the sources and
uses of terrorist funds.
| What are the effects of money laundering and
terrorist financing? |
| 1. |
Money laundering and terrorist financing
have significant effects in attainment of a country’s
national goals |
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Money laundering can distort business decisions, increase the
risk of bank failures, take control of economic policy away from the
Government and harm a country’s reputation and scare away honest
investors. |
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| 2. |
Erodes the integrity of the financial system and harms a
country’s reputation |
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Unchecked use of the financial system for money laundering and
terrorist financing has the potential of undermining individual
financial institutions’ integrity and ultimately that of the entire
financial system and hence lead to erosion of the International
confidence to invest in the country. |
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| 3. |
Threaten economic, political
and social stability |
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Through money laundering, organised crime can infiltrate
institutions, seize control of large sectors of the economy through
significant investment or through bribes to public officials and
this, in turn, may lead to control of the Government by criminals.
The economic and political influence of criminal organisations can
weaken the social fabric, collective ethical standards and
ultimately the democratic institutions of the society. |
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Why fight money
laundering and terrorist financing? |
| 1. |
Failure to prevent money
laundering allows criminal organizations to accumulate
considerable economic and financial power, which can
ultimately undermine national peace, security and stability. |
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| 2. |
Failure to combat money
laundering and terrorist financing facilitates corruption.
This can lead to the accumulation of economic and financial
power by unscrupulous people or criminal organisations and
therefore undermine governance, democratic systems and
public confidence in the financial and legal system. |
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| 3. |
Money laundering perpetrates crime since it enables criminal
activity that generates it to continue. The laundered funds provide
financial support for drug dealers, terrorists, arms dealers and
other criminals to operate and expand their criminal empires. This
threatens economic, social and political stability. |
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| 4. |
Money laundering and terrorist financing activities have
significant effects on the attainment of a country’s national goals;
if money laundering and terrorist financing are not fought
effectively, it means efforts being undertaken by the Government to
alleviate poverty and raise living standards will not succeed.
In recognition of the effects that money laundering and terrorist
financing can have in achieving national goals and cognizant of
international efforts in this important area, Tanzania is determined
and committed to combat money laundering and terrorist financing and
has joined the international community in fighting money laundering
and combating terrorist financing. The Government is committed to
the protection of the reputation of the financial sector and other
sectors by doing all that is possible to combat money laundering and
terrorist financing. |
What is Financial Intelligence Unit?
The Financial Intelligence Unit (FIU) in Tanzania was established
under section 4 of the Anti Money Laundering Act of 2006 to combat
money laundering and the financing of terrorism. The FIU
is responsible for receiving suspicious transaction reports from
reporting persons, in relation to suspected money laundering and
terrorist financing activities, analysing and disseminating
intelligence to appropriate law enforcement agencies for investigation and
further action.
The FIU is an integral part of Tanzania's efforts in the fight
against the global crimes of money laundering and terrorist
financing. Preventing organised crime and ensuring Tanzania's
security are responsibilities we all share.
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Legal and Institutional Framework |
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The Anti Money Laundering Act, 2006 prohibits legal and natural
persons from
engaging in transactions which involve the proceeds of crime, or
from assisting others to do so. It also requires reporting persons
to: |
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1. |
identify their customers
before entering into a business relationship or carrying out
any transaction or series of transactions. This includes:
i) obtaining customer personal data and
validating it against independent sources
ii) obtaining customer business profile and validating
it against independent sources
iii) recording both, personal and business data and updating
it from time to time
iv) recording regular business transactions |
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2. |
establish and maintain
customer records in all transactions, and |
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3. |
report suspicious transactions to the FIU. |
Reporting persons must report suspicious transactions - It is the
Law.
Why is reporting important?
The world has changed. Globalisation and, increase in crime and
terrorism has forced countries to join together in an effort to
control the scourge. With new legislation and international
cooperation, authorities are now hitting criminals where it hurts -
in the wallet.
Licensees under the Bank of Tanzania (BOT), licensed brokers,
dealers and investment advisors under the Capital Markets and
Securities Authority, insurers under the Insurance Supervisory
Authority and casinos under the Gaming Board and many others are
required to file a Suspicious Transaction Reports (STR) with the FIU
when there are reasonable grounds to suspect that a transaction is
related to money laundering or a terrorist financing offence.
| Who must report suspicious transactions? |
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The law identifies the following organisations and their employees
as reporting persons who must report suspicious transactions to the
FIU: |
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1. |
Banks and
financial institutions |
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2. |
Accountants,
real estate agents, dealers in precious stones, works of art
or metals |
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3. |
Regulators |
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4. |
Customs
officers |
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5. |
Attorneys,
notaries and other independent legal professionals when
assisting clients in preparing or executing transactions
involving, for example, the purchase or sale of real
property or commercial enterprises or the management of
funds, securities or other assets which belong to a client |
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6. |
Auctioneers |
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7. |
Cash dealers, Cash dealers include the following: |
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i) Insurers, intermediary insurance brokers, securities dealers or
brokers
ii) Dealers in gold bullion or traveller's cheques
iii) Operators of a gaming activity
iv) Trustees/managers of collective
investment schemes
v) Operators of bureaux de change. |
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What information must be reported? |
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As a reporting person, you will need certain information to complete
a suspicious transaction report (STR). This includes information
about you as the reporting person, details about the person
conducting the transaction and the transaction itself. If your
suspicion was raised due to a series of transactions, you need to
include information on each transaction with the report (you can
attach supporting documentation to the STR). There are also other regulatory requirements pertaining to reporting
persons:- |
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1. |
Client
identification |
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2. |
Record keeping |
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3. |
Internal
reporting procedures |
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4. |
Employee
training, and |
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5. |
The
implementation of a compliance regime. |
When must an STR be filed?
Once you have reasonable grounds to suspect a transaction is related
to money laundering or terrorist financing, you must file a
Suspicious Transaction Report with the FIU.
Identifying Suspicious Transactions
Suspicious transactions are financial transactions which you, as a
reporting person, have reasonable grounds to suspect are related to
a money laundering or terrorist financing activity regardless of the
amount of money involved. You are in the best position to know what is
normal for your customer's business and therefore what is suspicious. It is
important to remember that behaviour is suspicious, not people. It
is also possible that many factors, and not just one, may lead you
to the conclusion that there are reasonable grounds to suspect a
transaction is related to money laundering or terrorist financing.
| Submitting Suspicious Transaction Reports |
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STR forms will be available online on the website of the Financial
Intelligence Unit (http://www.fiu.go.tz). The STR form allows you to
tell the FIU why you have suspicions about a specific transaction or
transactions. You should provide as much detail as possible and
include documentary proof where available. Your explanation may
include: |
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1. |
Indicators that you
observed during the transaction |
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2. |
Information about the
person who requested the transaction, including any known
alternate names, aliases or associates |
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3. |
The purpose of the
transaction and method in which it was conducted |
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4. |
Information as to why this
is suspicious behaviour given the kind of business your
customer is in, and |
If you include more than
one transaction in the report, please indicate how they are
connected or attach any supporting documentation. |
Tipping Off
Any person or body corporate who knowing that a suspicious
transaction may be
disclosed to the FIU, alerts or warns another person is guilty of an
offence of tipping off and on conviction will be liable to a fine or imprisonment.
Overriding Secrecy
Any secrecy or other restriction which may impede the disclosure of
information regarding money laundering or terrorist financing is
overridden by the Anti Money Laundering law.
Trade Based Money Laundering
Trade-based money laundering is the process of disguising the
proceeds of crime and moving value through the use of trade
transactions, in an attempt to legitimise their illicit origins. In
practice, this can be achieved through the misrepresentation of the
price, quantity or quality of imports or exports.
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