Financial Intelligence Centre – Has it got law mandate to disseminate reports to public?

26/06/2019

Introduction

Once again, there is some misconception by a certain section of our society that the Report published by the Eastern and Southern African Money Laundering Group (ESAAMLG) to the effect that law enforcement agencies in Zambia rely on facts passed to them by the Financial Intelligence Centre (FIC) to prosecute money laundering cases has exposed Zambia's law enforcement agencies. This is a misplaced argument in relation to the current public discourse on whether the FIC has, based on the law that creates the institution, the mandate to publish what it calls Trends Reports - a report which covers matters that have been referred to, and may be under active investigation by Law Enforcement Agencies. This article scans the lawful mandate of the FIC to publish statistical reports to the public vis-à-vis its mandate.

Understanding the FIC and its mandate

From the outset, it is important to make it clear that both Government and those against the release of the Trends Reports have been very clear that FIC was constituted to complement and support the work of the Law Enforcement Agencies such as Drug Enforcement Commission (DEC) and the Anti-Corruption Commission (ACC), generally referred to as the "investigative wings". Like other intelligence agencies, FIC is an important intelligence gathering wing of the Government.

The question is whether FIC, as created by Zambia's statutory law, has the mandate to release what are known as Trends Reports in their current format. This questions requires an understanding of the laws governing these intelligence entities.

The FIC is a member of the: so-called Egmont Group, the informal international association of FIUs. World over, although FIU's share the same core functions of receiving, analysing, and disseminating financial information to local law-enforcement agencies and foreign FIUs to combat money laundering and related activities, they differ in many ways.

The 2004 publication by the International Monetary Fund and World Bank dubbed "Financial Intelligence Units: An Overview," provides some insightful data for citizens who seek to understand an entity like our FIC. From the outset, it is clear that, in general, an FIU is a central national agency responsible for receiving, analysing, and transmitting disclosures on suspicious transactions to the competent authorities.

Although Zambia saw the need to respond to the calls of the international community in establishing our FIC, our lawmakers had to make a decision as to the functions and the modalities of the operations our FIC which is based on Zambia's own crime-fighting policy objectives, resources, and priorities but most importantly, they deliberately harmonised the responsibilities of the FIC with those of DEC, ACC, Zambia Police and other existing agencies involved in the fight against financial crime, including law enforcement and supervisory agencies and policy-setting government bodies.

Both the World Bank and IMF recognised in their report that the FIU must only be given the means to successfully pursue these objectives, for which it will become accountable but also that care is always taken not to give the FIU more responsibilities than it can cope with, given its expected resources. The Report stated the following: "Overlapping functions should be avoided to the extent possible, and to the extent such overlap is unavoidable, coordination mechanisms should be established to minimize conflicts and maximize cooperation between the concerned agencies."

Little wonder then, that law enforcement agencies in Zambia, who have the primary mandate of investigating money laundering and financial crimes, would receive the reports from FIC but those reports are never treated as conclusive, in terms of the allegations of money laundering or financial crimes. No one must therefore be surprised with what the Drug Enforcement Commissioner, Ms. Alita Mbahwe, said about the FIC reports:

"...the intelligence reports disseminated [by FIC] to law enforcement agencies such as the Drug Enforcement Commission sometimes turn out to be false on enquiry leading to closure of cases, a situation which is always misconstrued as inaction by investigative wings."

DEC and other law enforcement agencies do confirm, therefore, that FIC submits or disseminates intelligence reports to them, as required by law, but they have gone a step further to state that "sometimes" these intelligence reports "turn out to be false on enquiry leading to closure of cases, a situation which is always misconstrued as inaction by investigative wings." This information has not been disputed by FIC because their duty ends at disseminating these intelligence reports to law enforcement agencies for these agencies to investigate each and every allegation. However, not every investigation: will result in prosecution, because in some cases, the so-called evidence, upon further in-depth inquiry, is found to be unrelated to criminal activity as suspected. That is the whole purpose of referring such "suspicious financial activities" for further detailed investigation by law enforcement agencies which are in fact equipped to make such further inquiries and investigations.

Zambia's Financial Intelligence Centre falls into the category of what the IMF/World Bank refers to as an administrative-type FIU. The other types of the FIUs are the law-enforcement-type FIU, the judicial- or prosecutorial-type FIU, and the "mixed" or "hybrid" FIU.

As an administrative-type FIU, Zambia's Financial Intelligence Centre, is an autonomous body but with a reporting line to the Minister of Finance. The main rationale for such an arrangement was to establish a "buffer" between the financial sector and the law-enforcement authorities (DEC, ACC, ZP) in charge of financial crime investigations and prosecutions.

Usually, financial institutions are faced with problematic transactions but do not have hard evidence that those receiving or sending money in sums of over US$5,000 are involved in criminal activity or in criminal organizations, therefore the financial institutions may be reluctant to disclose such transactions directly to a law-enforcement agency, out of a concern that their suspicion may become an accusation that could be based on a wrong interpretation of facts. Such doubtful transactions are disseminated to the FIC as suspicious financial activities. The role of the FIC is then to substantiate the suspicion and send the case to law enforcement agencies in charge of criminal investigations and prosecutions only if the suspicion is substantiated.

Because Zambia's FIC is established outside the law-enforcement system, its powers are limited to receipt, analysis, and dissemination of suspicious transaction to law enforcement agencies, and has not been given investigative or prosecutorial powers. Similarly, the powers of the FIU to disclose the information contained in transaction reports - in whatever form - as narrowly defined, are limited to disclosure to law enforcement agencies only for purposes of preserving the confidential character of the information provided to FIC by financial institutions.

In short, Zambia's FIC acts as an interface between the financial institutions, on the one hand, and law enforcement authorities on the other hand, thus avoiding the creation of direct institutional links between these institutions and law enforcement agencies while bringing disclosures to the attention of law-enforcement agencies.

In other countries where FIU's are established the law will expressly provide for the functions of the FIU to publish statistical data on money laundering and inform the public about money-laundering and other financial issues, but the Zambian law has narrowly defined the FIC's mandate to "educate the public and reporting entities of their obligations and inform them of measures to detect, prevent and deter money laundering and financing of terrorism or proliferation." There is no mandate for the FIC in Zambia to publish even statistical data on money laundering and other financial crimes, let alone the sources and types of transactions which have been reported to FIC.

The justification provided by the FIC to release the Trends Report, as quoted in their statement on their website was that "the Trends Report on AML/CFT is intended to increase public awareness and understanding of Zambia's AML/CFT regime. It provides a synopsis of suspicious financial transactions analysed and related financial crimes identified by the FIC during the year."

A perusal of the FIC Act, 2010 and the Financial Intelligence Centre (Amendment) Act No. 4 of 2016, shows that there is no such mandate conferred upon the FIC by our laws in Zambia except that of educating the public and reporting entities of their obligations and inform them of measures to detect, prevent and deter money laundering and financing of terrorism or proliferation. The claim by FIC officials that they required by law to publish their so-called Trends Report, lacks any basis whatsoever, in the enabling law, and the question to show which part of the Act gives the FIC the authority to publish such raw data to the public has always been dodged by those who believes they have the mandate to do so.

CONCLUSION

The Zambia Financial Intelligence Centre, as can be seen above, is a very key government agency in receiving, analysing, and transmitting disclosures on suspicious transactions to law enforcement agencies who are the only competent authorities to determine whether there has been any money laundering and other financial crimes on the part of the information supplied by financial institutions. The mandate to disseminate substantiated information which the FIC receives from the bank is narrowly defined as dissemination to law enforcement agencies; dissemination to the public is not provided for or included.

As long as the FIC fails to categorically point at the law that allows them to publish their data on money laundering, the FIC should strictly abide by its statutory mandate of educating the public about money-laundering issues and reporting entities of their obligations and inform them of measures to detect, prevent and deter money laundering and financing of terrorism or proliferation. That is what the law states expressly and leaves no room for unjustified extensions thought up by the FIC itself.

It is clear that a reading of the enabling law, the FIC Act, leaves no room for the current debate as to whether the FIC can, or should, make public the information it disseminates to the law enforcement agencies, even in redacted form, that is without mentioning names of persons or institutions.

The FIC has no lawful mandate whatsoever to publish the intelligence assessment or information which they substantiate from financial institutions because such information is still raw data for onward transmission to the investigative agencies which are then required to investigate. To release a "substantiated suspicious report" in our environment is like throwing a duck to water or lighting a match stick in a room full of open drums of petrol.


Source: https://www.lusakatimes.com/2019/06/25/financial-intelligence-centre-has-it-got-law-mandate-to-disseminate-reports-to-public/