Zimbabwe is on the FATF List of Countries that have been identified as having strategic AML deficiencies
FATF Statement re AML Strategic Deficiencies: 25 February 2021
Since October 2019, when Zimbabwe made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime and address any related technical deficiencies, Zimbabwe has taken initial steps towards improving its AML/CFT regime, including by improving the country’s understanding of the key ML/TF risks. Zimbabwe should continue to work on implementing its action plan, including by: (1) implementing risk-based supervision for FIs and DNFBPs including through capacity building among the supervisory authority; (2) ensuring development of adequate risk mitigation measures among FIs and DNFBPs, including by applying proportionate and dissuasive sanctions to breaches; (3) creating mechanisms to ensure that competent authorities have access to timely and up-to-date beneficial ownership information; and (4) addressing remaining gaps in PF-related targeted financial sanction framework and demonstrating implementation.
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 Zimbabwe was undertaken in 2019. According to that Evaluation, Zimbabwe was deemed Compliant for 22 and Largely Compliant for 11 of the FATF 40 Recommendations. It was also deemed Highly Effective for 0 and Substantially Effective for 0 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.
US Department of State Money Laundering assessment (INCSR)
Zimbabwe was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR) but has not been included since. Key Findings from the last report are as follows: -
Zimbabwe is not a regional financial center, but it does face problems related to money laundering and corruption. Serious financial crime in Zimbabwe generally appears in the form of various violations of exchange control rules; underground banking; cross-border crime; organized syndicates, both domestic and international; non-transparency in diamond production receipts; and increased cooperation among criminal networks and links with legal business activity, resulting in corruption and bribery.
Regulatory and enforcement deficiencies in Zimbabwe’s AML/CFT regime expose the country to illicit finance risks, but there are no reliable data as to the actual extent of the problem. Commercial banks, building societies, moneylenders, insurance brokers, realtors, and lawyers in Zimbabwe are all vulnerable to exploitation by money launderers. Nearly all transactions in Zimbabwe are carried out with either the U.S. dollar or the South African rand.
The United States, Canada, Australia, and the EU have imposed targeted financial sanctions and travel restrictions on some political leaders and a limited number of private companies and state-owned enterprises for complicity in human rights abuses or for undermining democratic processes or institutions in Zimbabwe. Effective November 1, 2014, the EU lifted Article 96 restrictions, which previously limited EU development assistance to Zimbabwe. Currently, the EU maintains active restrictions against President Mugabe, Grace Mugabe, and Zimbabwe Defense Industries, and an arms embargo. The EU reviews its restrictions annually. Although the EU delisted the Zimbabwe Mining Development Corporation (ZMDC) and the Minerals Marketing Corporation of Zimbabwe (MMCZ) from its list of sanctioned entities in September 2013, the United States maintains sanctions on the ZMDC and MMCZ.
The EU and US have imposed an arms embargo together with a freeze on the assets of selective members of the Government of Zimbabwe and individuals associated with them.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 24
World Governance Indicator – Control of Corruption 10
Across all sectors, corruption is a very high risk for companies operating in Zimbabwe. Investors face both high-level corruption in the form of nepotism, patronage and abuse of power, as well as petty bribery and extortion. The Prevention of Corruption Act prohibits active and passive bribery, gifts and facilitation payments in the public and private sectors, but such practices are common. Companies can be held criminally liable. The maximum punishment for corruption offenses is 20 years' imprisonment, fines, or both, but the government enforces the law selectively, targeting mostly political opponents. For further information - GAN Integrity Business Anti-Corruption Portal
Zimbabwe's economy depends heavily on its mining and agriculture sectors. Following a decade of contraction from 1998 to 2008, the economy recorded real growth of more than 10% per year in the period 2010-13, before slowing to roughly 3% in 2014 due to poor harvests, low diamond revenues, and decreased investment. Lower mineral prices, infrastructure and regulatory deficiencies, a poor investment climate, a large public and external debt burden, and extremely high government wage expenses impede the country’s economic performance.
Until early 2009, the Reserve Bank of Zimbabwe (RBZ) routinely printed money to fund the budget deficit, causing hyperinflation. Dollarization in early 2009 - which allowed currencies such as the Botswana pula, the South Africa rand, and the US dollar to be used locally - ended hyperinflation and reduced inflation below 10% per year. The RBZ introduced bond coins denominated in 1, 5, 10, and 25 cent increments on a par with the US dollar in December 2014, more than five years after the Zimbabwe dollar was taken out of circulation. In January 2015, as part of the government’s effort to boost trade and attract foreign investment, the RBZ announced that the Chinese renmimbi, Indian rupee, Australian dollar, and Japanese yen would be accepted as legal tender in Zimbabwe.
Zimbabwe’s government entered a second Staff Monitored Program with the IMF in 2014 and undertook other measures to reengage with international financial institutions. Foreign and domestic investment continues to be hindered by the lack of clarity regarding the government’s Indigenization and Economic Empowerment Act. In 2015 the depreciation of the South African rand against the US dollar has led to deflation in Zimbabwe as prices for South African imports decline while the costs of domestic production in US dollars remains stable.
Agriculture - products:
tobacco, corn, cotton, wheat, coffee, sugarcane, peanuts; sheep, goats, pigs
mining (coal, gold, platinum, copper, nickel, tin, diamonds, clay, numerous metallic and nonmetallic ores), steel; wood products, cement, chemicals, fertilizer, clothing and footwear, foodstuffs, beverages
Exports - commodities:
platinum, cotton, tobacco, gold, ferroalloys, textiles/clothing
Exports - partners:
China 27.8%, Democratic Republic of the Congo 14%, Botswana 12.5%, South Africa 7.6% (2015)
Imports - commodities:
machinery and transport equipment, other manufactures, chemicals, fuels, food products
Imports - partners:
South Africa 48.1%, China 12.1%, India 5.2%, Zambia 4.6% (2015)
Investment Climate - US State Department
While the government of Zimbabwe has implemented a number of measures since 2009 designed to attract foreign direct investment (FDI), many of its macroeconomic policies, such as the indigenization and economic empowerment laws, are significant deterrents. The country’s commitment to the use of the multicurrency monetary regime, under which the U.S. dollar dominates most transactions, continues to stabilize and restore business confidence in the economy as it removes the exchange-rate risk associated with the use of domestic currencies.
In addition, Zimbabwe’s successful completion of the International Monetary Fund (IMF) fifteen-month Staff-Monitored Program (SMP) acted as a useful anchor for implementation of more sound macroeconomic policies. Zimbabwe also has a number of incentives designed to attract FDI, including tax breaks for new investment by foreign and domestic companies and allowing capital expenditures on new factories, machinery, and improvements to be fully tax deductible. The government also waives import taxes and surtaxes on capital equipment.
In spite of these positive developments, the country still needs to implement a comprehensive economic reform program designed to address the debt burden and attract foreign financial inflows at concessionary rates. In addition, corruption is rife and there is little protection of property rights, particularly with respect to agricultural land. The government routinely expropriates land without compensation. Moreover, the inconsistent application of “indigenization” regulations, which sets minimum ownership levels by black Zimbabweans of enterprises valued over $500,000 at 51 percent in most economic sectors, continues to discourage investment.
Zimbabwe’s arrears in payments to international financial institutions and high external debt overhang of over $10.7 billion complicate the situation by limiting the country’s ability to access official development assistance at concessional rates. Additionally, the country’s banks do not offer financing for periods longer than two years, with most financing available for 180 days or less. As a result of these negative factors, Zimbabwe generally ranks poorly in global comparisons of economic competitiveness.
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