I am informed there are new Anti-Money Laundering regulations that have introduced very stringent reporting guidelines on banks. What are these and how can banks address this situation?Can you also enlighten us on the recent mortgage regulations? GO, Dar
It is true that in May the Ministry of Finance and Planning published the Anti-Money Laundering (Electronic Funds Transfer and Cash Transactions Reporting) Regulations, 2019 (Regulations) vide GN No 420.
The Regulations are made under section 29 of the Anti-Money Laundering Act. Under regulation 4, every electronic fund transfer must be accompanied with information required in the Second Schedule and every currency transaction shall contain information required in the First Schedule.
Information that will now be required includes transaction information, place of transaction, purpose of transaction, information on person conducting the transaction, nationality of such person, date of birth, occupation in addition to full particulars and address of the beneficiary person.
Under regulation 5 it is now mandatory for every Reporting Person, which includes banks, law firms, accountants amongst others to report to the Financial Intelligence Unit (FIU) (a) a currency transaction (cash withdrawals or deposits) involving Tanzanian Shillings or any foreign currency equivalent to USD 10,000 or more in the course of a single transaction (b) an Electronic Funds Transfer involving Tanzanian Shillings or any foreign currency equivalent to USD 1,000 or more in the course of a single transaction.
In addition, every attorney, notary or independent legal professional is now required to report currency transactions when assisting clients in preparing or executing transactions involving purchase or sale of property or commercial enterprises, management of funds, opening of bank accounts, buying or selling of business entities, amongst others.
Similar provisions apply to accountants or accounting firms who are now required to report currency transaction when engaging in receiving or paying of funds, purchasing or selling securities, real properties or business assets or entities, transferring funds or securities by any means, management of funds amongst others.
For banks, in essence you now have to report each and every electronic transfer of funds of more than USD 1000 (equivalent in TZS) to the FIU. You must also report each and every deposit or withdrawal of USD 10,000 (equivalent in TZS).
With the hundreds of thousands of transactions banks do every day, and considering the low thresholds, you will now have to report all these to the FIU in a prescribed format.
We agree it is a huge task and will put you under great compliance and administrative pressure. However, banks should have engaged and provided input to the Ministry of Finance before these Regulations came into force.
The current administration is open to such engagement and we are not sure if that was done. If this was done, and the Ministry proceeded notwithstanding, and if you feel the threshold is low and impossible to comply with, you may file a judicial review to challenge the Regulations if the Ministry or the Bank of Tanzania is unable to intervene.
Your lawyers can guide you further. On the mortgage regulations, in a bid to ensure proper regulation, monitoring and supervision of the monies obtained from a mortgage, the Ministry of Lands, Housing and Human Settlements Development has issued detailed procedures for administration and enforcement of section 120 of the Land Act Cap. 113 R.E 2002 vide the Land (Procedure for Mortgage of Land) Regulations 2019 (Mortgage Regulations) which came into force on 26 April 2019.
Regulation 4 of the Mortgage Regulations expands on the definition of undeveloped and underdeveloped land from that provided in the Land Act (as amended).
It considers land to be undeveloped if it is vacant, without unexhausted improvement in, on, under or over such land; or without any change of substantial nature in the use of the land.
However, where land is used for agricultural, pastoral or mixed agricultural and pastoral purposes, the land is considered to be undeveloped unless such land has not been used for cultivation or pasturage or mixed cultivation and pasturage, as the case may be, at any time for a period of twenty-four months.
On top of that, land is also considered to be underdeveloped even if it is fenced, hedged, leveled, ploughed, cleared, a cleared or partially cleared site of some former developments, or inadequately developed contrary to the conditions of Right of Occupancy.
Furthermore, the Mortgage Regulations have introduced Form No. 54H which is prescribed in the schedule specifically for declaring that the mortgage money shall be invested in Tanzania.
The Mortgage Regulations makes a submission of valuation report during the registration of mortgage as a mandatory requirement.
The said report is to be prepared by a Registered Valuer, approved by the Chief Valuer and to be submitted within twelve months from the date on which it is prepared.
Apart from the above, the mortgagor is now required to submit a report to the Commissioner within six months after the registration of a mortgage through Form No. 551.
This report shall state the manner in which the money secured from the mortgage has been utilized to develop the mortgaged land in addition to photographs depicting the current status of the development.
The Mortgage Regulations also make it an offence for any person who knowingly makes a false declaration or submits a report containing false information.
The punishment for such an offence is a fine not exceeding one million shillings or to imprisonment for a term not exceeding two years or to both.
Banks will now have to focus on complying with both these regulations, as severe penalties and even imprisonment can be imposed for not complying.
Whether such Regulations, that are made by Ministers and not the Parliament, can impose custodial sentences, is questionable and challengeable.
Judicial review is a remedy that is available and there are a number of regulations that have been reviewed by the High Court after being challenged by stakeholders.