The impact of the first episode of “The Gold Mafia” Al Jazeera Documentary on Zimbabwe in relation to FATF and ESAAMLG guidelines
On the 23 rd of March 2023, the Al Jazeera released the 1st part (“The Laundry Service”) of their 4-part documentary on Zimbabwe called, “The Gold Mafia.”
The released part has exposed Zimbabwe’s role in the international gold trade, implicating high-ranking government officials and institutions such as Fidelity Printers and by extension the Reserve Bank of Zimbabwe (RBZ) in money laundering activities.
This short article will examine the potential consequences of these revelations in relation to the guidelines set forth by the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).
The FATF and ESAAMLG Guidelines
The Financial Action Task Force (FATF) is an intergovernmental organization founded in 1989 by the G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) to combat money laundering and later expanded its mandate to address terrorism financing and other related threats to the international financial system.
The FATF operates as a policy-making body, developing and promoting international standards to prevent money laundering, terrorism financing, and the financing of the proliferation of weapons of mass destruction.
The main objectives of the FATF include:
❖ Setting standards: The FATF establishes international standards, known as the “FATF Recommendations,” which provide a comprehensive framework of measures that countries should implement to combat money laundering, terrorism financing, and the financing of proliferation. These recommendations are regularly updated to ensure their continued relevance and effectiveness.
❖ Monitoring implementation: The FATF monitors its members’ progress in implementing the recommendations through a process of mutual evaluations. These evaluations assess the effectiveness of a country’s anti-money laundering (AML) and counterterrorism financing (CTF) measures and identify areas for improvement.
❖ Identifying high-risk jurisdictions: The FATF identifies jurisdictions with strategic deficiencies in their AML/CTF regimes and works with them to address these issues. The organization maintains a public list of such jurisdictions, commonly known as the “FATF Grey list’.
The Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) is a regional body that plays a crucial role in combating money laundering, terrorist financing, and other financial crimes in Eastern and Southern Africa.
Established in 1999, ESAAMLG is one of the several regional groups affiliated with the Financial Action Task Force (FATF), an intergovernmental organization that sets global standards for anti-money laundering (AML) and countering the financing of terrorism (CFT).
The main objectives of ESAAMLG include:
❖ Promoting the adoption and implementation of FATF Recommendations, which are a comprehensive set of international standards for AML and CFT, in member countries.
❖ Strengthening the capacity of member countries to prevent, detect, and prosecute financial crimes, through technical assistance and training programs.
❖ Facilitating cooperation and coordination among member countries, as well as with other regional and international organizations, in the fight against money laundering and terrorist financing.
❖ Assessing the compliance of member countries with the FATF Recommendations through mutual evaluation processes and encouraging them to address identified deficiencies.
❖ Raising awareness about the risks and vulnerabilities associated with money laundering and terrorist financing in the region and promoting the development of effective policies and best practices to mitigate these risks.
Zimbabwe’s Reputation and Financial Standing
“The Laundry Service” documentary episode has put Zimbabwe’s reputation and financial standing under scrutiny, as it suggests a lack of transparency, accountability, and cooperation among key institutions and individuals in the country. In this context, the potential ramifications of these revelations in relation to the FATF guidelines can be significant.
❖ Strained International Relations: Given the global nature of money laundering and its detrimental effects on the financial system, countries are expected to adhere to FATF guidelines and cooperate with each other to combat such illicit activities. The documentary’s findings may cast doubt on Zimbabwe’s commitment to these principles, straining its relationships with other nations and international organizations.
❖ Potential Blacklisting: In the event that Zimbabwe is found to be non-compliant with FATF guidelines or unwilling to take adequate steps to address the issues raised by the documentary, it could be placed on FATF’s list of high-risk jurisdictions. This would result in enhanced due diligence and countermeasures by other countries, making it more difficult for Zimbabwe to access international financial markets and attract foreign investment.
❖ Impact on the Gold Sector: The gold industry plays a critical role in Zimbabwe’s economy. The revelations in “The Gold Mafia” documentary could lead to increased scrutiny of the sector, resulting in stricter regulations and oversight. This may cause legitimate businesses to face additional compliance costs, while illicit activities could be disrupted or driven further underground. In the long run, this could potentially affect gold production levels, foreign exchange earnings, and overall economic growth.
❖ Loss of Investor Confidence: The allegations presented in the documentary may deter foreign investors from engaging with Zimbabwe’s financial sector, as they could perceive the country as a high-risk environment for money laundering and other illicit activities. This lack of investor confidence could lead to reduced foreign direct investment, impacting the country’s economic development and job creation opportunities.
❖ Effects on Local Financial Institutions: Zimbabwean financial institutions could face increased regulatory scrutiny and reputational risk due to the alleged involvement of Fidelity Printers and (by extension) the Reserve Bank of Zimbabwe (RBZ) in money laundering activities. This may result in higher compliance costs and reduced access to international financial services, such as correspondent banking relationships, which are crucial for trade financing and remittances.
❖ Internal Political Ramifications: The documentary’s allegations against high-ranking government officials and institutions may lead to internal political turmoil in Zimbabwe. Calls for investigations, resignations, or even prosecution of implicated individuals could result in political instability, which may have ripple effects on the country’s financial standing and overall socio-economic conditions.
What should the Zimbabwean Government do?
In response to the first episode of the “Gold Mafia” documentary, the Zimbabwean government should take several steps to address the concerns raised and demonstrate its commitment to combating money laundering and illicit financial activities in the gold sector. These steps include:
❖ Launching an Independent Investigation: The government should initiate an independent, transparent, and comprehensive investigation into the allegations presented in the documentary. This investigation should involve both domestic and international experts to ensure credibility and impartiality.
❖ Holding Implicated Individuals Accountable: If the investigation confirms the involvement of government officials or institutions in money laundering activities, the government should take appropriate legal action against the implicated individuals, including prosecution and the implementation of necessary sanctions.
❖ Strengthening the Regulatory Framework: The government should review and strengthen its existing anti-money laundering (AML) and counter-terrorist financing (CTF) regulations to align with FATF guidelines. This includes enhancing the capacity of relevant authorities to detect, investigate, and prosecute money laundering cases.
❖ Enhancing Transparency and Oversight: To foster greater transparency and accountability, the government should implement robust oversight mechanisms in the gold sector, including regular audits and reporting requirements for gold dealers, refineries, and other relevant entities.
❖ Enhanced Regulatory Measures: The Zimbabwe’s government may introduce new or strengthen existing anti-money laundering (AML) and counter-terrorist financing (CTF) regulations. While these measures are essential for addressing illicit financial activities, they may also impose additional compliance burdens on businesses, potentially affecting the ease of doing business in the country.
What should the Citizens’ Coalition for Change (CCC) do?
In response to the first episode of the “Gold Mafia” documentary, the Zimbabwean main opposition party CCC should take several steps to ensure that the allegations are thoroughly investigated and addressed. These steps include:
❖ Calling for an Independent Investigation: CCC should join forces in demanding a transparent, independent, and comprehensive investigation into the allegations presented in the documentary. They should emphasize the importance of involving both domestic and international experts to ensure credibility and impartiality.
❖ Advocating for Accountability and Transparency: CCC should use their platforms to highlight the importance of holding implicated individuals accountable and promoting transparency within the gold sector. They should also push for reforms that strengthen anti-money laundering (AML) and counter-terrorist financing (CTF) regulations in line with FATF guidelines.
❖ Engaging in Constructive Dialogue: CCC should engage in constructive dialogue with the government and other stakeholders to collaboratively address the issues raised in the documentary. This includes participating in parliamentary debates, public forums, and other discussions focused on enhancing the country’s AML/CTF framework.
❖ Raising Public Awareness: CCC should organize public awareness campaigns, town hall meetings, and utilize social media platforms to inform citizens about the allegations presented in the documentary and their implications. By raising public awareness, they can foster a greater understanding of the importance of combating money laundering and illicit financial activities in the gold sector.
In conclusion, Al Jazeera’s ground-breaking first episode of the documentary “The Gold Mafia” has shed light on the dark underbelly of Zimbabwe’s gold trade, implicating both government officials and key institutions such as Fidelity Printers and (by extension) the Reserve Bank of Zimbabwe.
This exposé has not only drawn attention to the country’s involvement in money laundering but also highlighted its noncompliance with the guidelines and recommendations set forth by international organizations such as the Financial Action Task Force (FATF) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).
The revelation of these illicit activities could have significant repercussions for Zimbabwe, as it may face increased scrutiny from FATF and ESAAMLG. This scrutiny could potentially lead to the country being blacklisted or facing other punitive measures, which would make it difficult for Zimbabwe to access international financial markets and attract foreign investments.
Furthermore, the documentary’s findings may strain Zimbabwe’s diplomatic relations with other countries, which could result in decreased bilateral and multilateral cooperation.
Ultimately, the first episode of “The Gold Mafia” documentary serves as a wake-up call for the Zimbabwean government to urgently address the issues surrounding its gold industry and to adopt stringent anti-money laundering and counter-terrorist financing measures in line with FATF and ESAAMLG guidelines.
Failure to take swift action could lead to lasting economic and diplomatic consequences, exacerbating the already precarious state of the country’s economic affairs.
Dr Henry Munashe Jaji is an Australian based Zimbabwean economist who writes in his own capacity.