SOUTH AFRICA SHINES FATF SPOTLIGHT ON DEVELOPING

UNCLAS SECTION 01 OF 02 PRETORIA 001299

SIPDIS

SENSITIVE
SIPDIS

EB/ESC/TFS (DBROWN),S/CT (GNOVIS),INL/C, IO/PHO, TREASRUY
(ICRUM),AF/S (MTABLER-STONE),INL/AAE (EROESS)

E.O. 12958: N/A
TAGS: EFIN KFTN PTER ETTC PREL PGOV KCRM PINR SF
SUBJECT: SOUTH AFRICA SHINES FATF SPOTLIGHT ON DEVELOPING
COUNTRIES AND CORRUPTION

REF: 05 PRETORIA 2671 (NOTAL)

(U) This cable is Sensitive But Unclassified. Not for
Internet distribution.


1. (SBU) Summary. The Eastern and Southern Africa Anti-Money
Laundering Group (ESAAMLG) demonstrated its commitment to
Anti-Money Laundering/Counter Financing of Terrorism
(AML/CFT) as observers during the February Financial Action
Task Force (FATF) meetings in Cape Town. South Africa, as
the current chair of the global AML/CFT organization, invited
ESAAMLG to focus the FATF's attention on developing country
challenges in fighting financial crimes. South Africa also
emphasized the need to explore AML/CFT links to corruption
and criticized the FATF's "Western-dominated" decision making
process. South Africa plans to put corruption issues high on
ESAAMLG's agenda for its next meeting. End Summary.

Eastern and Southern African AML/CFT Commitment
-------------- --


2. (SBU) During the first ever Financial Action Task Force
(FATF) Plenary held in Africa, the Eastern and Southern
Africa Anti-Money Laundering Group (ESAAMLG) expressed its
commitment to Anti-Money Laundering/Counter Financing of
Terrorism (AML/CFT). South Africa, as the current chair of
the global AML/CFT organization, invited the fourteen ESAAMLG
members to observe the February 12-17 meetings in Cape Town
in efforts to strengthen ESAAMLG ties to the international
AML/CFT community. The Zambian Deputy Minister of Finance,
Kapambwe Simbao, stressed in his remarks that anti-money
laundering and terrorism finance were global problems, as
illustrated by the bombings of U.S. embassies in Kenya and
Tanzania, and the recent arrests of suspected terrorists in
Zambia. Simbao made an appeal to FATF-member countries for
capacity-building assistance in strengthening ESAAMLG's
AML/CFT regimes.

SAG Criticizes Western Dominance
--------------


3. (SBU) Throughout the week, the South African Government
(SAG) criticized developed countries for dominating the FATF
and elaborated on developing country challenges in complying
with FATF standards. In his brief remarks to the plenary,
Finance Minister Trevor Manuel encouraged the FATF to work
outside the "comfort zone" of current membership and think
about the challenges facing developing countries. He stated
that many FATF standards were onerous for countries with
cash-based economies. Kader Asmal, South Africa's FATF
President, echoed Manuel's comments in his closing address,
urging members to find a balance between the slowest and
fastest countries when it came to complying with FATF
standards. Asmal decried the "northern-dominated" process
and beckoned for extreme sensitivity for "southern"
countries. In a disjointed dinner address to the FATF, South
African Reserve Bank (SARB) Governor Tito Mboweni continued
in the same vein when he expressed his displeasure with the
fact that Western Union's headquarters were allowed to
continue operations in "some large Western country" (i.e.,
the United States) after the company's operations in South
Africa had to be shut down because of illegal activity. He
went on to say that if this situation were reversed, South
Africa would have been expected to shut down the company's
headquarters.

Daunting Challenges for Developing Countries
--------------


4. (SBU) The SAG and ESAAMLG used the FATF meeting to
highlight the AML/CFT challenges that face developing
countries. SARB Governor Mboweni spoke of South Africa's
competing challenges in addition to financial crimes,
including poverty, HIV/AIDS, housing backlogs, crime, and
building a black business class. A Kenyan presenter, Mrs.
Dorcas Odour, listed the challenges facing her country in
terms of ethnic biases, border disputes, cash-based
transactions, alternative remittance systems, lack of proper
ID cards, and the competing demands of resources (e.g.,
hunger, AIDS). Mr. Dev Bikoo from Mauritius noted that many
developing countries lacked the political will to move
forward with AML/CFT efforts.


5. (SBU) Murray Michell, Director of South Africa's Financial

PRETORIA 00001299 002 OF 002


Intelligence Centre (FIC),gave a more detailed presentation
on the challenges that ESAAMLG faces in complying with the
FATF standards. Michell specifically focused on FATF Special
Recommendation IX dealing with measures to track cash
movement across borders. He stated that each of the ESAAMLG
countries, while at different stages of development, faced
many similar challenges, such as a large number of cash-based
transactions and informal banking systems. Michell also
emphasized that most member countries had porous borders
monitored by immigration and law enforcement agencies that
were understaffed, poorly trained, and deprived of
information technology. Moreover, many countries lacked
proper legislation to prosecute AML/CFT crimes. Even where
there was the political will to strengthen AML/CFT regimes,
countries had to make critical budget choices involving such
development and health challenges as alleviating poverty and
combating the spread HIV/AIDS.

A South African View of ESAAMLG
--------------


6. (SBU) Michell highlighted what in his view ESAAMLG had
accomplished and contemplated its future role. He said that
ESAAMLG had improved cooperation among the Southern African
Customs Union (SACU) and Interpol. ESAAMLG had also
established the Southern Africa Regional Police Chiefs
Cooperation Organisation (SARPCO) and had increased the
presence of border police in the region. Michell questioned,
however, whether developing countries should implement all
40 9 FATF standards at once. Perhaps it was more realistic
for them to focus on priority areas first and phase-in
compliance later. He also wondered whether there were enough
sustainable resources available for ESAAMLG countries to
attain and maintain FATF membership. Michell noted that
ESAAMLG was building a strategy this year to assess the
technical assistance needs of its member countries, and that
this could be a guide for donor countries.

Corruption Link to AML/CFT
--------------


7. (SBU) Since becoming FATF President in July 2005, Asmal
has linked AML/CFT to corruption (reftel). Asmal bolstered
this theme in February by authoring an article in a major
South African business newspaper that focused attention on
the close ties between money laundering and rampant
corruption. During the FATF, Asmal publicly linked the
terrorist bombings in Kenya and Tanzania to high levels of
corruption there. Asmal's main argument, as presented by FIC
Director Michell, is that good governance must be established
before a country can fight financial crimes. Michell
concluded that if governance and corruption issues were not
addressed, then all AML/CFT assistance efforts would be for
naught. For this reason, he explained, the SAG was pushing
to have corruption issues high on the agenda at the next
ESAAMLG meeting.
TEITELBAUM