FIA report focuses on offenses reported since 2021
Corruption has surfaced as the chief predicate offense impacting Botswana’s development finance institutions, representing P174.68 million, or roughly 87 percent, of identified criminal proceeds in recent years.
These insights come from a report released by the Financial Intelligence Agency (FIA), titled “Seeing the Cracks: Understanding Money Laundering, Terrorism Financing & Proliferation Financing Risks to Secure Development Finance.”
The report examines the risks of money laundering, terrorism financing, and proliferation financing within the Citizen Entrepreneurial Development Agency (CEDA) and Botswana Development Corporation (BDC), focusing on offenses reported since 2021.
According to the Money Laundering Threat Assessment, 37 predicate offenses were documented during the review period, generating proceeds totaling approximately P185.1 million. Corruption alone accounted for P174.68 million, making it by far the largest source of criminal proceeds identified.
Other offenses included conflict of interest involving P263,000, obtaining by false pretenses amounting to P5.2 million, and abuse of public office totaling P110.9 million. The assessment also flagged a P50 million money laundering case.
The report warns that high-value corruption cases and governance weaknesses erode the integrity of development finance institutions, creating systemic vulnerabilities.
It notes that financial products, particularly loans, have become appealing vehicles for criminals seeking to launder illicit proceeds. Fraud and tax evasion were also identified as risks, though they were considered less significant compared with corruption.
Cross-border financial flows emerged as another money laundering concern, especially for BDC, given its substantial international transactions and high-risk clientele.
At CEDA, procurement processes were found to expose the institution to trade-based money laundering and fraudulent procurement risks.
The assessment highlights the absence of formal information-sharing protocols between development finance institutions and law enforcement agencies as a factor weakening collective risk management.
It also points to a slow adoption of parallel investigations into money laundering, which limits efforts to pursue criminal proceeds alongside the underlying offenses.
On customer due diligence, the FIA observed that while Botswana’s national identity and beneficial ownership systems are robust, development finance institutions’ lack of direct access to these systems weakens verification processes and leaves them vulnerable to identity fraud.
The report identifies beneficial ownership concealment and fronting as vulnerabilities that could allow illicit actors to misuse development finance institutions.
The FIA expressed concern over the largely manual operations within these institutions, noting that they create inefficiencies and gaps in monitoring, detecting, and reporting suspicious transactions.
Third-party payments without sufficient supplier due diligence were also found to expose the institutions to trade-based money laundering and procurement fraud risks.
Supervisory limitations, including inadequate resources and a reliance on remedial plans rather than sanctions, were cited as reducing deterrence and weakening supervision effectiveness.
The report notes that existing frameworks lack independence, with irregular audits and limited resources undermining their impact. The heavy dependence on manual processes further exposes institutions in overseeing suspicious activities.
“Misconduct and outdated training materials weaken institutional resilience and compliance,” the report states.
It further emphasizes that the lack of direct access to the national identity verification system leaves development finance institutions vulnerable to identity fraud.
“DFIs’ financial size, high-risk client base, and CEDA’s acceptance of unrestricted cash transactions amplify exposure,” the report adds.
Significant credit losses from non-performing loans reveal governance and operational weaknesses. Moreover, the absence of independently appointed senior management and boards further undermines checks and balances.
The report’s working group included officials from the FIA, Directorate of Corruption and Economic Crimes (DCEC), Botswana Unified Revenue Service (BURS), Companies and Intellectual Property Authority (CIPA), Directorate of Intelligence and Security (DIS), Botswana Police Services (BPS), BDC, and CEDA.