5/14/2024

MONEY LAUNDERING What is Money Laundering ?

❖Meaning of Money Laundering The word “money” includes bank notes, currency
notes, bank drafts, cheques and other orders, warrants
❖Methods/techniques employed in or requests for the payment of money. According to
money laundering. Section 4 of Penal Code [CAP. 16 R.E. 2022]
The word “Laundry” literally means “cleaning
❖Legal Control of Money Metaphorically, Money Laundering refers to “Cleaning
Laundering in Tanzania on Money”
❖The role of Banks in Fighting Money Laundering refers to a financial transaction or
Money Laundering. scheme that aims to conceal the identity, source and
destination of illicitly obtained money.

Basic Three step in Money

Laundering
Dfn based on the law There are three stages involved in money
According to section 3 of The Anti-Money laundering; placement, layering and integration.
Laundering Act [CAP. 423 R.E 2019], money Placement –This is the movement of cash from
laundering” means engagement of a person or its source. On occasion the source can be easily
persons, direct or indirectly in conversion, transfer, disguised or misrepresented.
concealment, disguising, use or acquisition of
money or property known to be of illicit origin and The process of placement can be carried out through
in which such engagement intends to avoid the many processes including:
legal consequence of such action and includes Asset Purchase – The purchase of assets with cash is a
offences referred in section 12 classic money laundering method. The major purpose is
to change the form of the proceeds from conspicuous
bulk cash to some equally valuable but less conspicuous
form.

Cont…,
Currency Smuggling – This is the physical illegal movement of currency
and monetary instruments out of a country.
Layering
Layering – The purpose of this stage is to make it more
Bank Complicity – This is when a financial institution, such as banks, is difficult to detect and uncover a laundering activity. It is meant
owned or controlled by unscrupulous individuals suspected of conniving to make the trailing of illegal proceeds difficult for the law
with drug dealers and other organised crime groups. This makes the enforcement agencies. The known methods are:
process easy for launderers.
Cash converted into Monetary Instruments – Once the
Currency Exchanges – In a number of transitional economies the placement is successful within the financial system by way of a
liberalization of foreign exchange markets provides room for currency bank or financial institution, the proceeds can then be
movements and as such laundering schemes can benefit from such converted into monetary instruments. This involves the use of
policies.
banker’s drafts and money orders.
Material assets bought with cash then sold – Assets that are
Blending of Funds – The best place to hide cash is with a lot of other bought through illicit funds can be resold locally or abroad and
cash. Therefore, financial institutions may be vehicles for laundering. in such a case the assets become more difficult to trace and
The alternative is to use the money from illicit activities to set up front thus seize.
companies. This enables the funds from illicit activities to be obscured
in legal transactions.

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Intergration Cont...…,
Integration – This is the movement of previously laundered Foreign Bank Complicity – Money laundering using known foreign banks
money into the economy mainly through the banking system and represents a higher order of sophistication and presents a very difficult
thus such monies appear to be normal business earnings. This is target for law enforcement. The willing assistance of the foreign banks is
dissimilar to layering, for in the integration process detection and
identification of laundered funds is provided through informants. frequently protected against law enforcement scrutiny.
The known methods used are: This is not only through criminals, but also by banking laws and
Property Dealing – The sale of property to integrate laundered regulations of other sovereign countries.
money back into the economy is a common practice amongst
criminals. For instance, many criminal groups use shell companies False Import/Export Invoices – The use of false invoices by
to buy property; hence proceeds from the sale would be import/export companies has proven to be a very effective way of
considered legitimate. integrating illicit proceeds back into the economy. This involves the
Front Companies and False Loans – Front companies that are overvaluation of entry documents to justify the funds later deposited in
incorporated in countries with corporate secrecy laws, in which companies. This enables the funds from illicit activities to be obscured
criminals lend themselves their own laundered proceeds in an in legal transactions.
apparently legitimate transaction.

Laws Governing Money

Laundering In Tanzania Cont…
THE ANTI-MONEY LAUNDERING ACT [CAP. 423 R.E 2019] Since The Anti Money Laundering Act, 2006 prohibits legal and natural
persons from engaging in transactions which involve the proceeds of crime,
An Act to make better provisions for prevention and prohibition of or from assisting others to do so. It also requires reporting persons to:
money laundering, to provide for the disclosure of information on 1.identify their customers before entering into a business relationship or
money laundering, to establish a Financial Intelligence Unit and the carrying out any transaction or series of transactions. This includes:
National Multi-Disciplinary Committee on Anti-Money Laundering and ❑Obtaining customer personal data and validating it against independent
to provide for matters connected thereto. sources

The Penal Code [CAP. 16 R.E. 2022] ❑ obtaining customer business profile and validating it against independent
sources
The Bank of Tanzania Act 2006 ❑recording both, personal and business data and updating it from time to
time
THE ELECTRONIC MONEY REGULATIONS, 2015
❑recording regular business transactions
2 Establish and maintain customer records in all transactions, and 3.report
suspicious transactions to the FIU

Why is reporting important? Who must report suspicious

transactions?
The world has changed. Globalisation and, increase in crime and The law identifies the following organizations and their employees as reporting
terrorism has forced countries to join together in an effort to control persons who must report suspicious transactions to the FIU:
the scourge. With new legislation and international cooperation,
authorities are now hitting criminals where it hurts. 1.Banks and financial institutions

Licensees under the Bank of Tanzania (BOT), licensed brokers, dealers 2.Accountants, real estate agents, dealers in precious stones, works of art or metals
and investment advisors under the Capital Markets and Securities 3.Regulators
Authority, insurers under the Insurance Supervisory Authority and
4.Customs officers.
casinos under the Gaming Board and many others are required to file a
Suspicious Transaction Reports (STR) with the FIU when there are 5. Attorneys, notaries and other independent legal professionals when assisting
reasonable grounds to suspect that a transaction is related to money clients in preparing or executing transactions involving, for example, the purchase
laundering or a terrorist financing offence or sale of real property or commercial enterprises or the management of funds,
securities or other assets which belong to a client
6.Auctioneers

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What information must be

Cont… reported?
7.Cash dealers, Cash dealers include the As a reporting person, you will need certain information to complete a
following: suspicious transaction report (STR). This includes information about you
as the reporting person, details about the person conducting the
i) Insurers, intermediary insurance brokers, transaction and the transaction itself. If your suspicion was raised due
securities dealers or brokers. to a series of transactions, you need to include information on each
transaction with the report (you can attach supporting documentation
ii) Dealers in gold bullion or traveller's to the STR).
cheques.
iii) Operators of a gaming activity There are also other regulatory requirements pertaining to reporting
persons:-
iv) Trustees/managers of collective investment
schemes
v) Operators of bureaux de change .

The role of Banks in fighting Money

Cont…, laundering (Anti Money Laundering)
1.Client identification
2.Record keeping
3.Internal reporting procedures
4.Employee training, and
5.The implementation of a compliance regime.

Cont….,