This legal briefing outlines the highlights of the Anti-Money Laundering (Amendment) Regulations of 2019 (the Amendments) which came into force on 24 May 2019. The amendments have been incorporated into the Anti- Money Laundering Regulations of 2012 (the Regulations) and are read as one. Combatting money laundering and terrorist financing is undertaken by the Financial Intelligence Unit (the FIU) which is an extra-Ministerial Department under the Ministry of Finance.
Highlights of the Amendments
- Requirements on citizens and residents of Tanzania
- Requirements on local entities
- Requirement to carry out money laundering and terrorist financing risk assessment
- Enhanced due diligence and surrounding circumstances
- Where to use simplified customer due diligence measures
- Administrative sanctions
Requirements on citizens and residents of Tanzania
Reporting Persons including; banks and financial institutions, cash dealers, accountants, real estate dealers, dealers in precious stones, work of arts or metals, regulators, customs officers, attorneys, notaries and other independent legal professionals as well as auctioneers will require the following information from customers/clients prior to undertaking transactions:
- voters' registration card from a citizen;
- a residence permit and passport from a resident;
- information on nationality and occupation from resident and citizen;
- an introductory letter from ward secretary or a thumb print from those with no identity cards.
Requirements on local entities
Local entities are required to submit their board of director's resolution to a bank/financial institution in order to open and operate a bank account.
Requirement to carry out money laundering and terrorist financing risk assessment
Reporting Persons have been required to conduct due diligence to curb money laundering and terrorist financing. They shall monitor the type, purpose and size as well as regularity and geographical location of transactions. They are mandated to use different channels to assess the level of risk, thus the method will be determined on a case by case basis.
To carry out this task, Reporting Persons have to put in place adequate policies and controls which have to be reviewed and approved by the Reporting Persons' board of directors.
Enhanced due diligence and surrounding circumstances
There are times when Reporting Persons must apply enhanced due diligence, this will involve more stringent and ongoing monitoring. Enhanced due diligence is required when there is a high risk of money laundering and terrorist financing such as:
- in transactions conducted with a person in a high risk jurisdiction;
- in cases of false/stolen identity;
- where a transaction is complex and unusually large;
- where a transaction serves no apparent economic or legal purpose;
- in circumstances where the ultimate beneficiary cannot be determined;
- transactions involving private banking; and
- transactions involving anonymity.
To curb abuse and possible harassment, Reporting Persons will need to obtain additional information on the customer to find out the intended nature of business or source of funds and this may require reaching out to the customer/client management.
Where to use simplified customer due diligence measures
The Amendments permit Reporting Persons to apply simplified customer due diligence measures but only after making a determination that the business transaction presents a low degree of risk of money laundering and terrorist financing.
Additional administrative sanctions to be imposed
Whenever there is default, the FIU is responsible for ensuring compliance and achieves this by putting in place sanctions, among them being a fine not exceeding TZS 5 million and not less than TZS 1 million per day, from the date of the relevant transaction. Take note that the Regulations only provided for the maximum fine.
Main points to note:
- There are two types of due diligence measures; enhanced due diligence and simplified due diligence. The determining factor of whether to use one or the other is dependant on the degree of risk. However specific circumstances have been provided for each scenario and the extent of the application shall follow applicable guidelines made under Section 6(f) of the Act and issued by the FIU. The Amendments contain no guidelines, however, the Schedule to the Regulations which are made under Section 29 of the Act contain guidelines with regard to verification of customers' identities, Bank of Tanzania, banks or financial institutions, insurers, capital market and securities authority licensees and collective investment schemes.
- The Amendments make room for adjustment and permits Reporting Persons to make a shift from using enhanced due diligence to simplified due diligence or vice versa.