In the context of the recent inclusion of Mozambique in the group of countries on the Grey List approved by Financial Action Task Force (FATF) - an intergovernmental body which aims to develop and promote national and international policies to combat money laundering and the financing of terrorism - it should be noted that in July 2022 the new Law on Prevention and Combating Money Laundering and Financing of Terrorism (Law no. 11/2022) was approved and subsequently, in November 2022, its Implementation Strategy (Resolution no. 45/2022) was approved.

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This law establishes a new legal regime setting forth prevention and repression measures, in relation to the use of the financial system and entities (with a greater focus on non-financial ones), with the purpose of money laundering, terrorism financing and financing of the proliferation of weapons of mass destruction.

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Its Strategy, on the other hand, aims to raise awareness among the country's public and private institutions and the general public about the risks of money laundering (ML), financing of terrorism (TF) and financing the proliferation (PF) of weapons of mass destruction as well as to mitigate the ML/FT/FP risks to which the Mozambican financial and non-financial system are exposed, as well as to strengthen the regulatory framework and the application of an effective risk-based approach.

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This strategy comes as a result of the completion of the National BC/FT Risk Assessment (NRA) of the Republic of Mozambique in November 2021, which had the technical support of the World Bank, and involved national sectors from both the public and private sectors in order to identify the threats and vulnerabilities of the country, in order to design policies and action plans aimed at mitigating the risks identified.

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Importantly to state that unlike the previous ML and TF Prevention and Combat Law, the new Law provides for a National Risk Assessment to be carried out and to be updated periodically, with a frequency adapted to the evolution of risks or on a five-yearly basis.

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1. Recipients of the Law 

This law applies to financial institutions and non-financial entities, as long as their head offices are based on the national territory, as well as to their branches, agencies, subsidiaries or any other form of representation, and other institutions susceptible of committing acts of money laundering, financing terrorism and financing the proliferation of weapons of mass destruction.

 

2. Vulnerable sectors

In the context of evaluation the NRA highlighted the real estate, car sales, metals and gems sales and non-profit organisations sectors as particularly more exposed to ML/TF.

The car sales sector has a very high level of vulnerability. In second place are the real estate, migration, flora, fauna, mineral resources, customs, NGOs and Non-Financial Designated Activities and Professions (NDFPAs) sectors with high vulnerability, thus, there is a need for special attention in supporting the implementation of risk mitigation measures through raising awareness on their vulnerabilities.

 

3. Main changes of Law no. 11/2022

Law no. 11/2022 brought major changes, of which we can highlight:

1. The typification as criminal conduct of the financing of the proliferation of weapons of mass destruction, in its article 9, establishing that commits this crime "whoever by any means, directly or indirectly, provides, gathers, collects or holds, manages funds or assets of any kind, as well as products or rights that can be transformed into funds, with the intention of being used or has knowledge that they can be used totally or partially in the financing of the proliferation of weapons of mass destruction";

2.  The broadening and reclassification of the range of obliged entities, which now includes not only financial institutions and non-financial entities with registered offices in national territory, as well as the respective forms of representation, and other institutions likely to commit the crimes covered by the Law;

3. It also amends the crimes preceding the crimes of money laundering, financing of terrorism and financing of the proliferation of weapons of mass destruction (previously called "related crimes").

 

4. Strategic Objectives for Preventing and Combating BC/FT/FP

In order to achieve its objective, the Strategy believes that the following five strategic objectives need to be met:

1. Updating the legal framework for preventing and combating ML/TF/PF;

2. Strengthening the understanding of the country's exposure to the risks of ML/TF/PF as well as the mechanisms of national coordination and international cooperation;

3. Strengthening the prevention, detection, investigation, prosecution and adjudication of ML/TF/PF crimes and the measures related to the forfeiture of proceeds and profits resulting from the commission of crimes;

4. Strengthening compliance with respect to preventing and combating ML/TF/PF and the supervision and oversight of obliged entities;

5. Enhancing transparency measures regarding natural, legal and unincorporated persons, as well as mitigating the risks of economic operations and financial transactions;

6. Alteration of the foreseen offences and sanctioning measures, with the consequent increase of fines, which can now rise to ten million Meticais if the offender is a legal person, and of the accessory measures that can be applied.

 

5. Expected results

In view of its objectives, the Strategy expects the following results:

1. Legal and regulatory framework in technical compliance with international CBC/CFT standards (FATF - Financial Action Task Force Recommendations), which will enable national authorities to effectively tackle ML/TF crimes and their preceding offences, including the appropriate application of provisional and asset forfeiture measures;

2.  Policies and institutional coordination and cooperation networks, as well as public-private partnerships, that will enable national actors to effectively address risks;

3. Capacity building of authorities to effectively identify CML/TF/FP threats in the country and investigate, on a regular basis, detected cases;

4.  Ensuring that actors in the most vulnerable financial and non-financial sectors understand the ML/TF/PF risks to which they are exposed and that the regulatory and supervisory authorities apply adequate risk mitigation measures to prevent and detect ML/TF/PF operations;

5. Implementation of appropriate transparent measures to identify and trace economic transactions, identify the beneficial owners of legal entities and other legal structures and ensure that the non-profit sector is not misused for terrorist financing.

 

6. Entry into force of the legal acts

The Law No. 11/2022 is already in force, so it is recommended that obliged entities take into account these changes and adapt their procedures in accordance with the law under penalty of sanctions.

Resolution No. 43/2022 of 21 October which approves the Strategy to Prevent and Combat Money Laundering, Terrorist Financing and Financing of the Proliferation of Weapons of Mass Destruction - 2023-2027, states that the Strategy shall enter into force on the date of its publication, therefore it came into force on 21 October 2022.