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Cablegate: 2005-2006 Tanzania's Incsr Part Ii: Financial

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 DAR ES SALAAM 002276

SIPDIS

"JUSTICE FOR OIA AND AFMLS
AND, TREASURY FOR FINCEN" AND "EB/ESC/TFS"

E.O. 12958: N/A
TAGS: EFIN KCRM KTFN PTER SNAR TZ
SUBJECT: 2005-2006 TANZANIA'S INCSR PART II: FINANCIAL
CRIMES AND MONEY LAUNDERING

REF: STATE 210691

1. SUMMARY: In 2005, the Government of Tanzania (GOT)
delayed building the legal foundation for an effective
anti-money laundering regime. While the anti-money
laundering (AML) bill was finalized and presented to the
Cabinet in May 2005, the Cabinet did not approve and table
the draft AML bill in Parliament for discussion. From May
2005 to date, progress has stalled as the national
Multi-disciplinary Committee on Anti-Money Laundering waits
for a new parliament - elected on December 14, 2005 and due
to open on December 30. The Committee remains optimistic
that the AML bill will be tabled in Parliament in February
2006 and would like to organize a seminar to sensitize the
newly elected Parliament to money laundering concerns. In
2005, the GOT reported no investigations, arrests or
prosecutions relating to anti-money laundering or terrorist
financing. Coupled with stalled progress on enacting needed
legislation, the capacity of Tanzania's law enforcement
remains limited in terms of combating money laundering and
other financial crimes. In 2005, several Tanzanian law
enforcement officers did participate in training programs on
combating terrorist financing and money laundering. END
SUMMARY.

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I. GENERAL ASSESSMENT:
------------------------

2. Tanzania is not considered an important regional
financial center or offshore financial center. Tanzania is,
however, vulnerable to money laundering because of the
weaknesses of its financial institutions and law enforcement
capabilities. A weak financial sector and an under-trained,
under-funded law enforcement apparatus make such crimes
difficult to track and prosecute. In 2005, according to both
the Ministry of Finance (MOF) and the Bank of Tanzania (BOT),
there were no reported cases of suspicious transactions or
arrests relating to money laundering.

3. Officials have noted that some real estate and used car
businesses are used for money laundering purposes and have
explained that tax evasion constitutes an important source of
funds for money laundering schemes. Government officials
have also cited the emerging casino industry as an area of
concern for money laundering. Money laundering is more
likely to occur in the informal non-bank financial sector, as
the formal sector is still relatively underdeveloped.

4. Funds laundered through Bureau de Changes and other front
companies through the practice of hawala pose concern,
especially on the less regulated island of Zanzibar.
Officials indicate that money laundering schemes in Zanzibar
generally take the form of foreign investment in the tourist
industry and bulk cash smuggling. The most likely sources of
illicit funds include Asia and the Middle East, and to a
lesser extent Europe. Such transactions rarely include
significant amounts of U.S. currency.

II. LEGAL FRAMEWORK
----------------------

5. The 1991 Proceeds of Crime Act criminalizes
narcotics-related money laundering. However, the Act does
not adequately define money laundering and has only been used
to prosecute corruption cases. The law obliges financial
institutions to maintain records of financial transactions
exceeding 100,000 shillings (approximately 90 USD) for a
period of 10 years. Financial institution employees are
legally protected from liability stemming from reporting
suspicious transactions and current law does not hold
financial institutions responsible if they are found to have
used laundered money.

6. If a bank or financial institution has reasonable grounds
to believe that a transaction relates to money laundering, it
may communicate this information to law enforcement under
guidance from the BOT, although such reporting is not
required by law. The BOT has issued regulations under
Circular Number 8 of the Proceeds of Crime Act, requiring
financial institutions to file suspicious transaction reports
(STRs), but this administrative requirement is not being
enforced and no mechanism exists for receiving and analyzing
the STRs.

7. In November 2002, Parliament approved the Prevention of
Terrorism Act, which the President signed into law on 14
December 2002. The Act criminalizes terrorist financing and
enables the government to seize assets associated with
terrorist groups. The Act also requires all financial
institutions to inform the government each quarter of whether
any of their assets or transactions may be associated with a
terrorist group. However, the implementing regulations for
the Act have not been finalized and the Act has never been
applied.

8. Since 1998, the Government of Tanzania has been working
with the U.S. Treasury to develop an effective anti-money
laundering regime. From 2003-2005, the GOT developed a draft
AML law to build a foundation for addressing money laundering
issues. Provisions of the AML legislation include
alternative remittance systems such as hawala and also
provide for the creation of a financial intelligence unit
(FIU) that would collect mandatory suspicious transaction
reporting from banks and financial institutions. The AML
legislation would empower the FIU to share information with
other FIUs and foreign law enforcement agencies.

9. In 2005, the GOT delayed tabling and passing the AML
legislation in Parliament. The national Multi-disciplinary
Committee, established through the Eastern and Southern
African Anti-Money Laundering Group (ESAAMLAG), finalized the
draft AML bill from January - May 2005, gaining additional
stakeholder input. In May 2005, the Committee presented the
AML legislation to the Cabinet for approval. According to
officials from the MOF and the BOT, the Cabinet did not
approve and send the AML bill to Parliament due to time
constraints and focus on the 2005 national elections.
Representatives from the Multi-disciplinary Committee remain
hopeful that the legislation will be tabled in Parliament as
early as February 2006.

10. In international fora, the GOT ratified the United
Nations Convention on Transnational Organized Crime (also
known as the Palermo Convention), in 2005. The GOT had
signed the Convention in 2000 but delayed ratification due to
concerns from the Ministry of Home Affairs, which currently
has the lead on investigating financial crimes. Tanzania is
also a party to the UN International Convention for the
Suppression of the Financing of Terrorism, the UN Convention
against Corruption and the UN International Convention
against Illicit Traffic in Narcotic Drugs and Psychotropic
substances.

III. FINANCIAL SECTOR
-----------------------

11. The Bank of Tanzania has the central role in terms of
supervising banks and financial institutions for compliance
with anti-money laundering and counter-terrorist financing
laws and regulations. There is no statutory threshold for
large currency transactions. If the institution has
reasonable grounds to believe that a transaction relates to
money laundering, the institution should report this
information according to Circular Number 8 but there is not
mechanism in place to enforce reporting.

12. Money laundering controls are not currently applied to
non-banking financial institutions, such as cash couriers,
casinos, Bureau de Changes etc. The draft AML bill includes
the expansion of money laundering controls to cover such
institutions. Currently, the BOT supervises Bureau de
Changes through annual audits and inspections while the
National Gaming Authority supervises casinos and other types
of games involving large sums of money including lotto.
There are no legal requirements for non-bank financial
institutions to report suspicious transactions.

13. There are currently no cross border currency reporting
requirements, including those that apply to cash couriers.
The Proceeds of Crime Act does characterize cash smuggling as
a "predicate offense." The draft AML bill includes
strengthened provisions to criminalize cash smuggling in and
out of Tanzania.

IV. United Nations 1267 COMPLIANCE
----------------------------------

15. The BOT consistently circulates the names of individuals
and entities that have been included on the UNSCR 1267
Sanctions Committee's list to its financial institutions for
searches of affiliated property and assets. To date, no
assets have been frozen under this provision although in
2004, the GOT did take action against one charitable
organization on the list by closing its offices and deporting
its foreign directors. It remains unclear whether Tanzania
has the investigative capacity to identify and seize related
assets.

V. Regional/International Cooperation
--------------------------------------

16. The GOT has cooperated the USG in investigating and
combating terrorism, consistently exchanging counterterrorism
information with U.S. authorities. There are no specific
laws in place allowing exchange of records with the United
States on narcotics and narcotics related money laundering.
As noted above, Tanzania is party to those international
conventions related to money laundering and terrorist
financing.

17. Regionally, Tanzania is a member of ESAAMLAG, which was
founded in 1999. Since its inception, Tanzania has played a
leading role in the operation of this FATF-style regional
body, detailing personnel to the ESAAMLAG Secretariat and
providing donated office space in Dar es Salaam for the
ESAAMLAG headquarters. In 2005 Charles Lenga Lenga,
ESAAMLAG's current Executive Secretary of Tanzania, decided
to step down. ESAAMLAG is now seeking a suitable candidate
for Lenga Lenga's replacement in January 2006.
DELLY

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