I understand that in response to the changing nature of money laundering and terrorism financing as well as the limitations inherent in the existing regulatory approach, the Government of Tanzania, in May this year, issued new anti-money laundering regulations on electronic funds transfer and cash transaction reporting to step up its fight against money laundering and the financing of terrorist activities.
Grateful if you could kindly provide a brief synopsis of the key provisions of the regulations and their likely impact. Thanks. Ayesha.
With the aim of improving the success of these efforts to counteract money laundering and terrorist financing, the Tanzanian Government indeed issued the Anti-Money Laundering (Electronic Funds Transfer and Cash Transactions Reporting) Regulations, 2019 under Government Notice No. 420 of 2019 on 24 May this year.
The Regulations are applicable to Mainland Tanzania and entail new tougher reporting guidelines and mandatory formats and periods of reporting. Below is a brief summary of the key provisions of these Regulations.
Every domestic or international electronic funds transfer (EFT) or currency transaction (i.e. cash deposit, withdrawal, exchange, payment or receipt) must be accompanied with the information specified in the first and second schedule of the Regulations and this includes transaction and accounting information; full particulars of the person conducting the transaction and of the person on whose behalf the transaction is conducted; and the full name, address and account number of the beneficiary person (Regulation 4).
Regulation 5 makes it mandatory for ‘reporting persons’ (defined under section of the Anti-Money Laundering Act, Cap 423 to include, inter alia, banks, accountants, regulators, attorneys and notaries) to report to the Financial Intelligence Unit (FIU) any currency transaction in Tanzanian Shillings or foreign currency that is equivalent to $10,000 or more, in the course of a single transaction.
This reporting requirement extends to an EFT encompassing Tanzanian Shillings or foreign currency that is equivalent to $1,000 or more, also in the course of a single transaction.
The exchange rate for the purpose of determining if a reporting person should report a transaction or not is to be determined in accordance with the ruling official conversion rate of the Bank of Tanzania.
Further to that every attorney, notary or independent legal professional must report currency transactions when assisting clients in preparing or executing purchase or sale transactions respecting property or commercial enterprises; managing funds; opening bank accounts; creating trusts, partnerships or other legal entities; and buying or selling of business entities (Regulation 6).
Similar provisions apply to accountants or accounting firms when, on behalf of any person or entity, they receive or pay funds; purchase or sell securities, shares, real properties or business assets or entities; transfer funds or securities by any means; manage funds; and give instructions in respect of any of these activities (Regulation 7).
It is useful to note that the reporting requirements apply to all sole practitioners, partners or employed attorneys or accountants when they participate in the named activities on behalf of their respective employer firms.
Under Regulation 9, reporting persons who transfer funds on behalf of their clients must keep all information collected from the clients for a minimum period of 10 years.
Such persons must report—electronically or as otherwise required by the FIU—the relevant EFT or currency transaction to the FIU within 5 working days.
The FIU or the regulator (such as, the Bank of Tanzania, the Capital Markets and Securities Authority, the Insurance Supervisory Department, and the Gaming Board) may, after giving written notice to a reporting person who fails to comply with the Regulations, impose administrative sanctions on the person.
The sanctions include a warning or caution not to repeat the default; a reprimand; a directive to take remedial action or to make specific arrangements to remedy the default; restriction or suspension of certain business activities; a maximum daily fine of Tanzanian Shillings 5,000,000 for each day the default was committed; or suspending or removing from office any non-compliant member of staff.
Impact on reporting persons
Due to the Anti-Money Laundering (Electronic Funds Transfer and Cash Transactions Reporting) Regulations, 2019, there are increased new tough requirements on reporting persons.
If you consider the multitude of transactions that banks facilitate every day, and the low reporting thresholds of $1,000 (EFT) and $10,000 (cash deposit or withdrawal), the Regulations will put bankers, attorneys, accountants and other reporting persons under immense pressure, from both compliance and administrative standpoints. Quintessentially, all reporting persons should ensure that they have measures in place to train staff, update policies and procedures, implement new controls, and undertake any remediation work.
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DISCLAIMER: The purpose of this weekly Q&A column with Isidora & Company Advocates is intended to educate the public on Tanzanian law matters, and is not a substitute for the role of your legal counsel. For any legal issue you face, you are strongly encouraged to contact your legal counsel.