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How to Get Off the FATF Grey List?

How to Get Off the FATF Grey List?

The Financial Action Task Force (FATF) has given Mozambique just two years to improve its framework to prevent and combat money laundering and terrorist financing, starting from 21 October 2022. If it fails, it will suffer blockages in international financial transactions. The fight, now, is with all weapons.

Under pressure, the Government has just created the Executive Committee for the Removal of Mozambique from the Grey List – which places the country among the most prone to crimes of money laundering and terrorism financing – led by academic Luís Cezerilo.

Last March, the FATF received Mozambique’s first progress report. Next May, ten recommendations out of a total of 93 submitted by the FATF last year are expected to be removed.

Although it may seem difficult, or even impossible, Mozambique maintains the hope of improving its score and of getting off the grey list, according to Luís Cezerilo, who talks of the advances made so far, and of what should be expected in terms of reforms in the 18 months that remain to “put the house in order”.

But, first, we must understand how Mozambique fails an evaluation that was made 12 years after having access to the recommendations?

What has it failed to do?

Luís Cezerilo admits that both in compliance and effectiveness, Mozambique had negative results and that everything that was done was not enough for the country to be considered compliant with the 40 FATF recommendations. “I usually use a metaphor to explain what happened: the FATF is not interested in the oranges, but in the orchard. This means that they have seen that we have institutions and legislation to prevent and combat money laundering and the financing of terrorism, but they want to understand, in fact, what the capacity of these institutions on the ground is”, explained the official.

He continued: “we were concerned about showing oranges and not the orchard and that is why, on 21 October 2022, Mozambique was placed on the grey list of the FATF. In this situation, we are considered as a moderate risk nation for money laundering and terrorist financing as the blacklist still exists.”

The FATF found only 11 deficiencies, but issued 96 recommendations for Mozambican institutions to work within two years to address them.

The normal tendency, according to the head of the Executive Committee for the Removal of Mozambique from the Grey List, would be to find justifications for why the country was placed on the grey list, and lose even more time, “but the Government of Mozambique has not acted in these terms.

There will be some occasional revisions of the law. We have a good law, but what the FATF and ESAAMLG want is for the legal office of the institutions to deal with matters of money laundering

This is how, on 06 December 2022, the Ministry of Economy and Finance presented to the Council of Ministers a strategy to remove Mozambique from the grey list. And on 22 December, the High Level Committee, led by the prime minister – and which includes the ministers of Economy and Finance, Justice, Interior, Industry and Trade, the governor of the Bank of Mozambique, the attorney general of the Republic and the president of the Supreme Court – met to analyse and approve the Plan for Removal from the Grey List, giving recommendations for the creation of an implementation strategy for the FATF plan,” he said.

It was in this context that the Minister of Economy and Finance took the lead in the strategy to reverse the situation. Timely, the ruler created an executive structure to tackle this process.

The Structure of the new ‘task force

The new task force comprises, in addition to the leadership of the Minister of Economy and Finance, a national coordinator (in this case, our interviewee, Luís Cezerilo), with three major areas or subsectors, namely the Technical Assistance and Coordination subsector, of which the technical assistance partners are part; the Multisectoral Working Group led by the Mozambique Financial Information Office (GiFim); and the private sector and civil society organisations.

“So the Executive Committee on Removing Mozambique from the Grey List looks at this situation holistically. Because we may have many institutions functional in preventing and combating money laundering and terrorist financing, but if two or three of them have deficiencies they will not pass the FATF. This means that we will be evaluated in an integrated manner”, explained the official.

In other words, the institutions should be working to show that there is articulation, from the National Criminal Investigation Service (SERNIC) to the courts, among other institutions that should convict or acquit the accused persons.

It is necessary to review the legislation

All the necessary and planned action may require some occasional revisions of the law. Luís Cezerilo believes that the country even has good legislation, but what the FATF and ESAAMLG (Eastern and Southern Africa Anti-Money Laundering Group) want is for the legal office of the institutions, such as the Inspectorate General of Gaming, to address matters of money laundering and financing of terrorism. So, the recommendation is that a revision be made to add this matter in the law.

But what can happen if the country fails to meet the goals imposed by the FATF within the two years granted?

For Cezerilo, right from the start, Mozambique would suffer reputational damage, as it would be considered an unsafe country in the international financial system, to the extent that it allows illicit money to be introduced into the system, making it licit. “We could have restrictions on the use of international payment systems. Citizens quickly feel this situation because their credit card stops working in other countries, with all the inconvenience this can represent. The consequences are more drastic. There would be political and economic sanctions, as in the case of North Korea and Myanmar which are not countries in the international financial system”, he exemplified.

What work has already been done to put the country on the right track?

“In mid-March we submitted our first report to the FATF. And on 29 May of this year, the FATF will meet in the Council of Ministers to analyse a document submitted by the Mozambican Government, and which results from a contestation for the fact that we did not agree with ten of the 93 recommendations that were made to us following the 2021 assessment,” said Luís Cezerilo.

According to Cezerilo, Mozambique was relatively badly evaluated “because our situation is not like that. Now, the ESAAMLG has already considered that the ten points submitted had in fact been badly assessed, and if the Council of Ministers of the FATF agrees with the position of those working on the ground, Mozambique may quickly improve its score. Added to this report, which has even been presented to the public, there is the hope that we will not already come off the grey list, but we will have given a sign of serious political commitment about the engagement of the Government and other State institutions in this process. We have the expectation that they can tell us that they have taken good note of our work”, he assured.

Mozambique is now in the grey list of the FATF, which indicates the vulnerability of the system for financing terrorism, which is one of the current concerns of the country.

Meanwhile, time is passing for the conclusion of the two years and the Executive Committee for the Removal of Mozambique from the Grey List understands that the FATF is aware that there are immediate actions and others of structural nature in this process.

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That is, “the immediate results are those that are reflected in our report.For example, conducting workshops, trainings and occasional revision of a law. Now, setting up a system of interconnectivity that links the Police, the Attorney General and the courts takes time. I’m talking about the demand for resources – such as equipment and software -, which we already have, for its implementation,” he explained.

Meanwhile, the report sent by the Mozambican authorities confirms that the realisation of this work has already begun, so now the country is training staff and testing the equipment for the implementation of the system.

“One of the things that is intended with interconnectivity is that on the day that a sentence passes final and conclusive sentence, it immediately enters the criminal record of the citizen concerned, and the FATF is aware that this will not be done from today to today,” said Luís Cezerilo.

What the FATF wants to change

In common parlance, the FATF wants to know who owns the property or the money circulating in the markets. For example, in case there is a company that is a Public Limited Company and the owner is not known, the FATF is concerned to know who is the person possibly hiding.

It is a work that is under the aegis of the Ministry of Justice, Constitutional and Religious Affairs. And it is also to uncover these kinds of situations that the law will be reviewed. “What I can say is that they want to know who the ultimate owner ‘of the thing’ is. Because we may have someone who is there as a ‘cover’, while there is someone else behind. So we have to uncover the invisible face in business, particularly in the real estate sector,” he revealed.

The FATF is also concerned about the crimes of kidnapping and drug trafficking, so it demands convincing information about the protagonists and their accountability.

In terms of legislation, once again, Mozambique is doing well. What is missing is its enforcement. But, in relation to kidnapping and drug trafficking, these are crimes that precede those of money laundering.

When there is a suspect of these crimes, what should be done is an investigation aimed at seizing and recovering the assets for the State. This is what the FATF wants. Basically, that there should be prioritisation of these processes in the courts. For this reason, both at the Supreme Court and at the Attorney General’s Office there was training for magistrates with the aim of raising awareness about matters related to money laundering crimes and the need to prioritize them in the investigation and trial processes so that, in this collaborative work, they can help Mozambique to come off the FATF Grey List.

Articulation with the Bank of Mozambique

The Bank of Mozambique, as the supervisor of the financial system, works with banks to identify suspicious transactions. For example, an individual who claims to be a water seller, but has five thousand meticais in his bank account, and suddenly starts depositing five million meticais, means that he should be investigated.

In other words, the Bank of Mozambique has the power of analysis and reporting so that it can know what is happening. So it not only informs, but also acts when it detects irregularities in the operation of a particular bank or financial institution, mainly through the application of fines corresponding to the infraction.


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