The US enacts further sanctions in Zimbabwe, the Philippines steps up its AML efforts and the EU Commission is establishing a new level of supervision.

We share our financial regulatory highlights from the week of 16 March 2020.

The US Sanctions Zimbabwean Officials

The US government announced late last week, on March 11, that it was bringing sanctions against two Zimbabwean officials for allegedly committing human rights violations. Zimbabwe’s ambassador to Tanzania, Anselem Sanyatwe, and its state security minister, Owen Ncube, are accused of ordering the country’s military to attack protesters and political opponents in the days following the country’s elections in 2018.

The attacks allegedly perpetrated by the two officials involved abducting and beating those identified as supporting the opposition to the ruling party, the Zimbabwe African National Union-Patriotic Front. Soldiers fired live rounds, allegedly on Anselem Sanyatwe’s command, in order to break up the crowds protesting the election results — an action that left six dead. A period of intense unrest has followed, with additional protests breaking out throughout the country due to high fuel costs and widespread food insecurity.

OFAC’s decision comes a year after the US State Department confirmed it would not allow Sanyatwe or Ncube to enter the US for the same alleged violations. The announcement also comes on the heels of the US government’s decision earlier this month to extend sanctions it had brought against the former president’s administration in 2003. While the presidency has changed hands, political power has not, and the US asserts that human rights abuses have continued.

Zimbabwe’s government has called the decision to extend those sanctions  “baffling,” and at a rally held last Saturday, Zimbabwe’s defense minister, Oppah Muchinguri, asserted his belief that the highly contagious coronavirus pandemic that the world is currently grappling with was “the work of God punishing countries who imposed sanctions on us.”

Contrary to the position of Zimbabwe’s current government, though, there’s little evidence the sanctions have had a widespread negative effect on the country as a whole, as they only target specific individuals and entities. While Zimbabwe’s economy is in dire straits, it seems largely an issue of the Zimbabwean government’s own making.

How the Philippines Plans to Crush Bulk-Cash Smuggling

The House of Representatives of the Philippines filed a bill on Monday, March 9, aimed at curbing bulk-cash smuggling. The proposed Anti-Bulk Cash Smuggling Act of 2020, would impose reporting requirements and demand prior clearance for those transporting PHP500,000 or more in cash or using other monetary instruments. If passed, those caught violating the requirements could face several years in prison. Government employees who facilitate smuggling would be prosecuted, fined and may face prison time as well.

The legislation comes just a few days after the country’s Department of Finance announced that from mid-2019 to the present, two Chinese organized crime syndicates, “Rodriguez” and “Chinese,” have smuggled into the country $200 million and $168 million, respectively. Further, a total of approximately $180 million was brought into the Philippines from China just from December to February. Much of this cash has been brought in through couriers, who make trips to and from China a few times a week and avoid proper inspection at the airport with the help of corrupt police or military escorts.

This influx has invited greater scrutiny of the Philippines’ money laundering controls in general. Last week, on March 11, Cezar Consing, the president of the Banker’s Association of the Philippines, an organization of 45 member banks, warned that the country would be at risk of being singled out for its lax money laundering controls on the world stage — a step that may mean limited access to the global financial system — if this wasn’t addressed effectively.

The warning isn’t without merit either. The Asia/Pacific Group on Money Laundering (APG) conducted its mutual evaluation of the Philippines and published its findings in October 2019 and found “a number of deficiencies in the Philippines’ AML and counter-terrorism regime” that will need to be addressed in order to avoid being placed on FATF’s grey- or blacklist in the future. Whether the Philippines can follow through with implementing effective measures remains to be seen, but this bill could be a step in the right direction.

Will EPPO Take Control of EU AML?

EU nations have faced an unprecedented number of scandals in recent years. Danske Bank, Swedbank, Deutsche Bank and Nordea have all been at the center of various front-page money laundering stories.

To show strength on the issue, the EU Commission is planning to implement a new level of oversight. Last year an internal investigation revealed that the Member States were failing to appropriately apply AML rules with equal rigor. Applications of standards were misinterpreted or misapplied, FIUs were unable to work together coherently and cooperation became near-impossible.

The new reforms are currently being presented to the Commission and are expected to be implemented by 2023. With 5AMLD having just come into force in January and with 6AMLD expected to come into effect in December 2020, many are sure to be concerned as to when the EU plans to let its regulatory environment settle and prove its efficacy.

Considering that a key issue is multiple interpretations of regulations, it will be interesting to see how the EU Commission plans to prevent that from happening with the continuing slew of regulatory change. The European Banking Authority (EBA) has faced a great deal of scrutiny and criticism due to the numerous AML scandals.

It’s likely that a new EU body will be assigned oversight, an action supported by MEP Markus Ferber, the European Public Prosecutor’s Office (EPPO) is set to be created in November 2020 and is a frontrunner to take AML powers away from the EBA. The new body will be headed up by celebrated Romanian anti-corruption prosecutor, Laura Codruţa Kövesi.

If oversight is assigned to EPPO then the EBA will be able to focus solely on stress testing the financial systems of Member States, allowing for more targeted actions. It would also mean AML supervision could be with a body with a direct mandate to enact penalties and fines.


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