Last Updated 30/04/2013
CENTRAL AUTHORITY FOR REPORTING
Anti-Money Laundering Investigations Unit (AMLIU)
The AMLIU was established under Section 5 of the Prohibition and Prevention of Money Laundering Act No. 14 of 2001 (PPMLA) and is the Financial Intelligence Unit (FIU) in Zambia. The AMLIU is an entity within the Drug Enforcement Commission (“DEC”); therefore the Commissioner of the Drug Enforcement Commission (Commissioner) is also the head of the FIU. The governing body of the AMLIU is the Anti-Money Laundering Authority (AMLA).
The functions of the AMLIU as set forth in Section 6(1) of the PPMLA are as follows:
to collect, evaluate, process and investigate financial information including that from regulated institutions and Supervisory Authorities, relating to financial and other business transactions suspected to be part of money laundering for the purpose of preventing and suppressing money laundering offences;
to conduct investigations and prosecutions of money laundering offences;
to liaise with other law enforcement agencies in the conduct of investigations and prosecutions of money laundering offences;
to supervise the reporting requirements and other administrative obligations imposed on regulated institutions and Supervisory Authorities under the PPMLA;
to assist in developing training programs for use by regulated institutions and Supervisory Authorities in the implementation of the PPMLA; and
to cooperate with law enforcement agencies and institutions in other jurisdictions responsible for the investigation and prosecution of money laundering offences.
A regulated institution is an institution regulated by one of the Supervisory Authorities listed in section 2 of the PPMLA.
Supervisory Authorities include:
the Bank of Zambia;
the Registrar of Building Societies appointed under the Building and Financial Services Act;
the Registrar of Banks and Financial Institutions appointed under the Banking and Financial Services Act;
the Registrar of co-operatives appointed under the Cooperatives Societies Act;
the Registrar of Insurance appointed under the Insurance Act;
the Commissioner appointed under the Securities and Exchange Commission Act;
the Registrar of Companies appointed under the Companies Act;
the Commissioner of Lands;
the Investment Board under the Investment Act; or
the licensing authority under the Casino Act.
OTHER ANTI-MONEY LAUNDERING REGULATOR(S)
Anti-Money Laundering Authority (AMLA)
The AMLA was established under section 3 of the PPMLAand governs the AMLIU by providing general or specific policy directives to the Commissioner, who is required by statute to give effect to such directives. The AMLA is also responsible for advising the Minister of Home Affairs (Minister)on measures required to prevent and detect money laundering in Zambia.
The AMLA comprises of the following members that shall be appointed by the Minister:
the Attorney-General (who shall also be the chairman);
the Inspector-General of the Zambia Police Force;
the Commissioner of DEC;
the Director-General of the Anti-Corruption Commission;
the Governor of the Bank of Zambia;
the Commissioner-General of the Zambia Revenue Authority; and
two other persons as shall be appointed by the Minister of Home Affairs.
National Task Force on Anti-Money Laundering (NTFAML)
The NTFAML is chaired by the Secretary to the Treasury and is overseen and funded by the Ministry of Finance and National Planning. It consists of all the major stakeholders in Zambia. Its core tasks are:
To enhance domestic cooperation;
To oversee adoption and implementation of international Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) standards, and
Development of national AML/CFT strategies.
The NTFAML comprises of the following:
Ministry of Finance and National Planning
Ministry of Justice
Ministry of Home Affairs
Bank of Zambia
Zambia Revenue Authority
Ministry of Justice and Ministry of Home Affairs
These Ministries oversee the dispensation of justice and the enforcement of the relevant laws concerning money laundering.
Serves as the depository for international instruments that Zambia accedes to.
The Bank of Zambia is the Supervisory Authority for the purposes of PPMLA, of all registered financial institutions. The Bank issues AML and client due diligence (CDD) directives to assist financial institutions in complying with their AML regulations.
The following bodies are collaborating partners in the combating of money laundering and related offences:
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
The Law Association of Zambia (“LAZ”) is not specifically included as a Supervisory Authority under section 2 of the PPMLA or as a reporting institution. The definition of a Supervisory Authority, however, does provide for “any other authority which may be established by law as a Supervisory Authority” (section 2, PPMLA).
While the provisions of the PPMLA do not specifically cover LAZ as a Supervisory Authority, they do apply to lawyers in their personal capacity.
The PPMLA provides that any person that engages in anti-money laundering activities shall be guilty of an offence and shall be liable, upon conviction to a fine or imprisonment or to both. This provision would therefore be applicable to lawyers that engage in any anti money laundering activities.
The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) Mutual Evaluation Report on Zambia published in August 2008 (ESAAMLG Report) revealed that confusion exists, even amongst officials at LAZ, over whether lawyers are considered Designated Non-Financial Businesses and Professions (DNFBPs) for the purposes of the PPMLA.
LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.
The above mentioned anti money laundering statutes are applicable to lawyers in their personal capacity.
Zambian laws are read together as one, so far as they are not inconsistent with each other. The abovementioned list is not exhaustive with respect to criminal investigations and prosecutions of AML/CFT.
ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?
The provisions of local laws regarding Anti-Money Laundering are applicable to any person and this would in our opinion include any visiting lawyers. A visiting lawyer that breaches any of the provisions of the Anti-Money Laundering laws would therefore be subject to the provisions of the laws breached.
LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.
There are no AML guidelines currently in place for lawyers.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
Lawyers in Zambia are regulated by LAZ, a regulatory body established by the Law Association of Zambia Act. Membership of the LAZ is mandatory for all lawyers admitted to practice in Zambia.
The disciplinary functions of LAZ are undertaken by the Disciplinary Committee, a body established under the provisions of the Legal Practitioners Act. The Disciplinary Committee serves as a body ensuring compliance of lawyers with the provisions of the Legal Practitioners Act. These provisions relate to the conduct of lawyers in their practice as well the relations of a lawyer and their clients.
The provisions of Law Association of Zambia Act do not address AML/CFT issues. The ESAAMLG Report revealed that the LAZ is unsure of its role/mandate with respect to guidance on AML/CFT matters.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.
Client Due Diligence
Lawyers are under no obligation to:
Conduct client due diligence with respect to either identity or address of the client;
Keep client records;
Have knowledge of either the source of funds or verify any such information;
Conduct a background check on clients while handling purchase of real estate transactions (however, on the basis of practice, lawyers handling purchase of real estate do have the obligation to check that real estate subject of the purchase is registered in the name of the person who is selling it); and
Conduct background checks on the existence of a company and its directors before commencing a transaction (however on the basis of practice, lawyers would be obliged to conduct a background check on the existence of a company and its directors before commencing a transaction).
(lawyers conduct background checks at their own discretion).
ESAAMLG observers noted that conducting KYC procedures on clients is not a standard industry practice within the legal profession and varies widely from firm to firm.
There are no specific record keeping requirements for lawyers within the AML/CFT framework, except for the following general provisions:
For maintenance of financial records, lawyers are obliged to:
Maintain client (trust) accounts as well as other administrative accounts; and
Send a statement of accounts giving the breakdown of the costs incurred by the client and the refund of the balance from the trust account, if any, to the client.
Lawyers do not have any obligation to:
Keep financial or any other records of the client once the lawyer is no longer engaged by the client;
Section 13(1) (a) of the PPMLA requires casinos or other regulated institutions to keep an identification record and a business transaction record for a period of 10 years after termination of such business transaction. There are no such requirements for other DNFBPs.
DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?
Client due diligence are normally conducted by lawyers at their own discretion. The approach therefore adopted by lawyers would also vary from firm to firm
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS? ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS? ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS? ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS? ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?
No. There are no specific guidelines for DNFBPs on obligations while dealing with PEPs.
The ESAAMLG Report found that
Only the Bank of Zambia, Registrar of Banks and Financial Institutions have provided guidelines to regulated institutions. There are no directives for DNFBPs to put in place appropriate risk management systems to determine whether a potential client, an existing client or the beneficial owner is a PEP.
DNFBPs are not required to seek approval of senior management before establishing business relationships with PEPs or to verify their source of funds.
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
There are no specific simplified due diligence measures for certain types of clients. However, kindlynote that a lawyer can at their own initiative and expense undertake a due diligence exercise of its clients. This will usually be the case where the client is involved in a complex and big transaction.
ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.
WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?
There are no specific Suspicious Transaction Reporting (STR) obligations for lawyers. Section 14 of the PPMLA however provides that it shall not be unlawful for any person to make any disclosure in compliance with the Act. A lawyer can therefore use this provision to make a disclosure though they are not mandated to do so. Sections 12(1), 12 (4) and 13(1) (b) of the PPMLA impose reporting obligations on Supervisory Authorities and regulated institutions to make STRs to the AMLIU.
The ESAAMLG Report revealed that DNFBP institutions like the LAZ were not aware of the existence of the AMLIU, its functions or whether they were under an obligation to report any STRs to the AMLIU..
DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?
Currently, there are no guidelines for lawyers for determining which transactions would be covered by legal privilege.The ESAAMLG Report found that due to the ambiguity of whether the LAZ is considered a Supervisory Authority, it has become difficult to reconcile legal privilege with respect to the reporting of suspicious transactions by lawyers.
With respect to confidentiality, the Legal Practitioners Act (the “LPA”) provides that a practitioner shall preserve the confidentially of the clients’ affairs and shall not without the prior consent of the client or as permitted by law reveal the information which has been entrusted to the practitioner in confidence.
A lawyer can therefore report a suspicious transactions if required by the provisions of the law or in the unlikely event, where the client consents to the client lawyer reporting a suspicious transaction.
DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?
There are no specific provisions for indemnity for lawyers. However, Section 14 of the PPMLA provides for a general immunity to any party for making any disclosures in compliance with the PPMLA.
ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?
Where a suspicious transaction report has been filed, a lawyer would be obliged not to proceed with providing the legal advice or the transaction and withdraw from acting on behalf of their client.
It must also be pointed out that in the event that a lawyer withdraws from acting on behalf of their client, the LPA places an obligation on the lawyer to explain to the client the reasons for withdrawing from acting on behalf of the client.
IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.
The PPMLA does not provide for any specific provisions prohibiting DNFBPs, their directors, officers and employees from disclosing that a STR or related information is being reported or provided to AMLIU. The Act prohibits any officer from a Supervisory Authority from obstructing any investigation into anti money laundering. In the event that an officer from a Supervisory Authority is found to have obstructed an investigation into anti money laundering, that officer shall be guilty of an offence and shall be liable on conviction to a fine of ZMW 18, 000 or to imprisonment for a term not exceeding five years or to both.
In addition to the foregoing, an institution that is regulated by a Supervisory Authority is legally prohibited from obstructing any investigations into money laundering that may be instituted by AMLIU.
DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.
The following would restrict a lawyer from accepting a new client:
where accepting a new client would result in conflict of interest with the lawyers existing clients;
if the lawyer accepting the new client lacks sufficient experience or competence to handle the matter;
having regard to the other professional commitments of lawyer, the lawyer will be unable to do or will not have adequate time and opportunity to prepare that which the lawyer is required to do; and
the matter is one in which the lawyer has reason to believe that he/she is likely to be a witness.
ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.
DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
Mr Mosho, a Lusaka lawyer, allegedly laundered a sum of more than K 1.5 billion. Mosho was charged on thirty eight counts of money laundering in a Magistrate’s court. He has pleaded not guilty and has been granted cash bail of K 50 million. His case had been adjourned until 30 November 2012. On 30 November 2012, the matter came up for continued trial, with the prosecution presenting its case and calling its witnesses. The matter was, however, adjourned at the instance of the prosecution and came up for continued trial on 24 April 2013. This matter is ongoing as a continued trial.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) OR A FATF-STYLE REGIONAL BODY CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Zambia is a member of ESAAMLG, which itself is an associate member of the Financial Action Task Force (FATF). The ESAAMLG, World Bank and their stakeholders in Zambia conducted an assessment of the AML/CFT regime of Zambia in October 2007 The results of that assessment were published in the ESAAMLG Report in August 2008.
The ESAAMLG Report assessed the AML/CFT regime in Zambia in and its level of compliance with the FATF Recommendations. Generally Zambia has been rated Non-Complaint or Partially Complaint with most of the FATF Recommendations.
With respect to applicability of Recommendations to DNFBPs, Zambia was rated:
Recommendation 12 (Client Due Diligence): Non-Complaint
Recommendation 16 (Suspicious Transaction Reporting): Non-Complaint
Recommendation 24, 25 (Regulation, Supervision, Monitoring and Sanctions): Non-Complaint
Recommendation 20 (Other Non-Financial Business and Professions and Modern and Secure Techniques of Money Management): Non-Complaint
The ESAAMLG Report observed the drawbacks with respect to the AMLIU and its functioning are (summarised):
The AMLIU does not have sufficient operational independence or autonomy.
The AMLIU does not serve as a national centre for receiving, analysing and disseminating disclosures for STRs and other relevant information concerning money laundering as required under the Egmont Group definition of a FIU.
The AMLIU does not provide guidelines with respect to the manner of reporting, specification of reporting forms or procedures to be followed by the Reporting Entities.
The AMLIU does not have the capacity to carry out its functions.
There has been no effort on part of the AMLIU to educate or train DNFBPs with respect to AML/CFT mechanisms.
Some general observations made by the ESAAMLG Report are:
DNFBPs are not regulated, and there is a general sense of confusion prevalent with respect to the applicability as well as the scope of applicability of the general AML/CFT regulatory framework.
Even though the PPMLA was enacted after the enactment of the Law Association of Zambia Act, which created the LAZ, the PPMLA failed to recognise LAZ as a Supervisory Authority.
With respect to DNFBPs, the PPMLA does not provide for any internal procedures, policies or controls for preventing Money Laundering/Financing of Terrorism (ML/FT), or methods for communicating these procedures and policies to their employees.
The ESAAMLG Report has made the following recommendations for improving the AML/CFT regime in Zambia:
The scope of the PPLMA should be expanded to include DNFBPs.
Develop and implement aggressive awareness raising campaigns in the non-banking financial services sector, DNFBP sector and for the general public. The ESAAMLG has suggested including this as part of the AMLIU’s action plan.
For ensuring effective implementation of AML/CFT framework, Zambia should provide relevant training and enhanced technical capacity to the law enforcement agencies, public prosecutors and the judiciary.
The status of the LAZ as a Supervisory Authority needs to be defined properly.
TheLAZ should design guidelines in the following areas for lawyers to comply with the AML/CFT regulatory framework:
Know Your Client (KYC) measures;
Measures for accepting new clients;
Verifying sources of funds brought in by clients;
Keeping a client’s records for a reasonable time after the client’s case has been finalised;
Reporting of STRs without necessarily compromising lawyer/client privilege;
Conducting identity checks on clients and verification of such information;
Checking transactions performed by third parties and verification of the identity and authority of such third parties;
Paying special attention to unusual and complex transactions which have no apparent or visible economic or lawful purpose.
ThePPMLA does not define the term ‘suspicious transaction’. An indirect reference to ‘suspicious transaction’ has been made in Section 13(1) (b) of PPMLA.
Monitor compliance on STR reporting by all DNFBPs.
Current situation of AML/CFT framework in Zambia:
Based on the recommendations made by the ESAAMLG Report, the Government of Zambia issued the Country Strategy Paper on Combating Money Laundering and Financing of Terrorism 2010-2012 in April 2010.
The objectives of this paper are:
To review the pieces of legislation relating to AML/CFT so as to bring them up to par with international standards;
To establish an FIU that meets the Egmont Group standards; and
To develop AML/CFT regulations and guidelines so that Regulated Institutions can effectively implement AML/CFT requirements.
Appendix 1 of this paper sets out the implementation plan, which provides for review of its legislation, including the PPMLA.
The paper acknowledges lack of provisions on DNFBPs, including lawyers, in the PPMLA, as a weakness of the current regime
Information contributed by:
ESAAMLG Mutual Evaluation Report for Zambia
Accessed on 05 December 2012
‘Zambia: Lawyer Sues State Over Seized Accounts’, Times of Zambia (February 18, 2012)
Delphine Zulu, ‘Zambia: Lusaka Lawyer Mosho in Court for Theft by Agent, Money Laundering’, Times of Zambia (November 13, 2012)
‘DEC Investigates Zambia’s Biggest Fraud Case: US $10 million (K50 billion) stolen through the Lusaka Stock Exchange’, Tumfweko: Zambian News and Entertainment (December 13, 2012)
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