FATF AML Deficiency List
Non - Compliance with FATF 40 + 9 Recommendations
Weakness in Government Legislation to combat Money Laundering
Corruption Index (Transparency International & W.G.I.)
Botswana is on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement - 25 June 2021
In October 2018, Botswana made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime. At its June 2021 plenary, the FATF has made the initial determination that Botswana has substantially completed its action plan and warrants an on-site assessment to verify that the implementation of Botswana’s AML/CFT reforms has begun and is being sustained, and that the necessary political commitment remains in place to sustain implementation in the future. Botswana has made the following key reforms, including by: (1) developing a comprehensive national AML/CFT strategy and policy informed by national risk assessment results; (2) developing risk-based supervision and monitoring programmes; and (3) improving the dissemination and use of financial intelligence by the FIU and others to identify and investigate ML cases. The FATF will continue to monitor the COVID-19 situation and conduct an on-site visit at the earliest possible date.
Compliance with FATF Recommendations
The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Botswana was undertaken in 2020. According to that Evaluation, Botswana was deemed Compliant for 6 and Largely Compliant for 16 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 0 of the Effectiveness & Technical Compliance ratings.
US Department of State Money Laundering assessment (INCSR)
Botswana was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Botswana aspires to be a regional financial center under its national Economic Diversification Drive strategy. Although money laundering in Botswana is not primarily related to narcotics, there has been an increase in drug trafficking in recent years, as well as in the sophistication and level of organization of cross-border crime. The presence of organized criminal groups continues to grow as does the trade in second-hand cars, which present certain risks related to money laundering. Fraud perpetrated against large organizations, e.g., banks or government departments, typically with the collusion of an employee, continues, and money laundering prosecutions have centered on these types of criminal activity. Law enforcement officials report an upsurge of cigarette smuggling in 2015. Botswana is a cash-based society and has an insufficient framework for addressing money laundering and terrorism financing.
Botswana supplies many of the world’s diamonds. The stringent institutional framework for the mining and processing of diamonds affords limited opportunity for organized diamond smuggling. The smuggling that does occur is not believed to be linked to terrorism financing or the laundering of criminal proceeds. The DeBeers’ diamond trading facility relocated from London to Gaborone in 2013, and the Government of Botswana continues to pursue expansion of its downstream diamond manufacturing. The growth of this industry presents an increased risk of money laundering and illicit financing activity.
Botswana operates the International Financial Service Center (IFSC), an organization authorizing entities to provide offshore financial services. IFSC-accredited companies provide a range of financial services, including fund management, banking, international insurance, and intermediary services. Those services must be provided to clients outside Botswana and in currencies other than the pula. The supervisory standards applied to domestic financial service providers are also applicable to IFSC-authorized entities. Shell companies and anonymous directors are prohibited.
The Botswana Authorities believe there is a low risk of terrorist activity in the country, but they remain concerned about the potential for terrorists to focus on Botswana as a soft target.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 60
World Governance Indicator – Control of Corruption 75
Corruption is a moderate risk in Botswana. The country is considered to be the least corrupt country on the African continent, and petty corruption is not a risk for businesses. Nevertheless, nepotism and patronage pervade the government sector, which makes corruption a very high risk for public tenders. The Penal Code and the Corruption and Economic Crime Act criminalize active and passive bribery in the public and private sector. The maximum penalties include imprisonment for up to ten years, or a fine of BWP 500,000, or both, and corporations as well as individuals can be held liable. For further information - GAN Integrity Business Anti-Corruption Portal
Botswana has maintained one of the world's highest economic growth rates since independence in 1966. Diamond mining has fueled much of the expansion and currently accounts for one quarter of GDP, approximately 85% of export earnings, and about one-third of the government's revenues. Tourism is the secondary earner of foreign exchange and many Batswana engage in subsistence farming and cattle raising. Through fiscal discipline and sound management, Botswana transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of $17,700 in 2015. Two major investment services rank Botswana as the best credit risk in Africa.
Botswana's economy is highly correlated with global economic trends because of its heavy reliance on a single luxury export. According to official government statistics, unemployment is 19.5%, but unofficial estimates run much higher. De Beers, a major international diamond company, signed a 10-year deal with Botswana in 2012 and moved its rough stone sorting and trading division from London to Gaborone in 2013. The move was geared to support the development of Botswana's nascent downstream diamond industry.
Following the 2008 global recession Botswana’s economy recovered in 2010. However, the Government of Botswana estimates the economy grew by only 1% in 2015. This was primarily due to the downturn in the global diamond market; water and power shortages also played a role. In October 2015 President Ian KHAMA announced a stimulus plan to boost the economy through projects in agricultural production, construction, manufacturing, and tourism development. In 2016, Botswana entered its fourth year of drought, detrimental to Botswana’s small, but vital agriculture sector.
The prevalence of HIV/AIDS is second highest in the world and threatens the country's impressive economic gains.
Agriculture - products:
livestock, sorghum, maize, millet, beans, sunflowers, groundnuts
diamonds, copper, nickel, salt, soda ash, potash, coal, iron ore, silver; livestock processing; textiles
Exports - commodities:
diamonds, copper, nickel, soda ash, meat, textiles
Imports - commodities:
foodstuffs, machinery, electrical goods, transport equipment, textiles, fuel and petroleum products, wood and paper products, metal and metal products
Investment Climate - US State Department
Botswana is a land-locked country located in Southern Africa. Botswana has historically enjoyed high economic growth rates and its export-driven economy is highly correlated with global economic trends. Development has been driven mainly by revenue from the diamond industry, which has enabled Botswana to provide infrastructure and social services. In 2015, however, Botswana’s economy grew by only an estimated 1% and inflation remained at the bottom end of the central bank’s 3 to 6% spectrum. Lower than predicted economic growth was a result of reduced diamond sales. According to the Government of Botswana (GOB), investments within Botswana totaled $5.5 billion in 2013. Botswana is classified as an upper middle income country by the World Bank based on its per capita income of $7,240.
The World Bank ranked Botswana 72 out of 189 economies in the category of Ease of Doing Business in 2016. Government procurement is a major economic driver and the GOB has a $4.8 billion budget for the 2016/17 fiscal year. It plans to implement major water, electricity, transportation, and telecommunications infrastructure projects. Economists have noted Botswana’s considerable investment potential in mining, mineral processing, energy, cattle, tourism, and financial services sectors. The GOB has launched initiatives to promote foreign investment to diversify its economy beyond diamond mining. It created the Botswana Investment and Trade Centre (BITC) to assist foreign investors, offers low tax rates, and abolished foreign exchange controls. The GOB’s topline economic goals are to diversify the economy, create employment, and transfer skills to Botswana citizens. GOB entities, including BITC, use these criteria in determining whether to provide assistance to foreign investors.
Botswana is a stable, democratic country with an independent judiciary system. It maintains a sound macroeconomic environment, fiscal discipline, a well-capitalized banking system, and a crawling peg exchange rate system. Moody’s and S&P rate Botswana’s sovereign debt as A2 and A-, respectively. Botswana has minimal labor strife. It is a member state to both the ICSID convention and the 1958 New York convention. Corruption in Botswana remains less pervasive than in other parts of Africa; nevertheless, foreign and national companies have commented on increasing tender-related corruption.
The Ministry of Investment, Trade and Industry (MITI) is working to develop a consolidated legal framework that clarifies the protections and incentives afforded to investors as recommended by the 2014 OECD Investment Policy Review. The GOB has also recognized the need to address bureaucratic hurdles in order to facilitate investment. In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas in the country including two Gaborone area SEZs (multi-use, diamond processing, and financial services); two Selibe-Phikwe SEZs (mineral processing and horticulture); and additional SEZs in Lobatse (beef, leather, biogas); Palapye (energy); Pandamatenga (agriculture); and Francistown (mining and logistics). In 2015, the GOB also announced a business reform roadmap designed to improve GOB services for businesses, streamline business-related procedures, and remove bureaucratic impediments based on World Bank recommendations.
Foreign and local business managers noted increasing difficulty obtaining work permits for foreign skilled workers and managers in 2015. They assess this, combined with local skills deficits and constrained labor productivity, to be the foremost business constraints in Botswana. Electricity and water service shortages also pose a challenge, most notably with severe water shortages in Gaborone, the country’s capital and manufacturing center. Limitations on foreign participation in the market exist and institutionalized preferences of procuring goods and services from local sources are increasing in Botswana. Local preferences arise from numerous sources. Most recent additions include a program MITI introduced in 2015 to give locally-based small companies a 15% preferential price margin in GOB procurement, with mid-sized companies receiving a 10% margin, and large companies 5%. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range of consultancy services. In 2014 the GOB and the Chamber of Mines created a committee to oversee the purchase of mining supplies with a 10% preference towards those produced locally. By law 35 service sectors are restricted to Botswana citizens. MITI has historically granted exceptions for large foreign-owned chain stores but in 2015 two new applications for this exception were reportedly denied.
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