|
THE UNIVERSITY OF THE WESTERN CAPE
FACULTY OF LAW
Rwanda's Responses to Money Laundering
Research Paper submitted in partial fulfilment of the
requirements for the
award of the LLM degree
Francis DUSABE
Student Number: 3469359
SUPERVISOR
Prof Lovell Fernandez
Date: 17 November 2014
ii
DECLARATION
I, Francis Dusabe, declare that
Rwanda's Responses to Money Laundering is my own
work, that it has not been submitted for any degree or examination in any other
University, and that all the sources used or quoted have been indicated and
acknowledged by complete references.
Signature:
Date:
Supervisor: Prof Lovell Fernandez
Signature:
Date:
iii
ABSTRACT
In 20 the years after the genocide that afflicted Rwanda, the
country has made
considerable progress towards developing human resources in the
public sector. It has kick-started its economy and improved sectors such as
public health and education. There is still a need to attract direct foreign
investment to boost the economy even further.
However, Rwanda needs to take precautionary measures to ensure
that it does not fall prey to economic criminality which will impede its
economic progress. The fact of the matter is that young transitional
democracies are prone to attract economic delinquents who take advantage of
loopholes in the law to advance their criminal goals. This is particularly so
in a country such as Rwanda, where the government has to prioritise other
pressing needs that must be addressed.
This paper assesses the extent to which Rwanda is prepared to
deal with the menace of money laundering, a threat that may well stunt its
ambitions to build a strong economy.
iv
ACKNOWLEDGEMENT
It is by the Grace and Love of God that today I can look back and
say `I made it'. This research paper is a fruit of combined efforts by people
whom I wish to acknowledge
My gratitude goes to DAAD for its financial support for my
studies, both in Cape Town and Berlin.
To my Supervisor, Prof Lovell Fernandez, for his patience,
valuable criticism and incisive guidance during the writing of this
dissertation.
To other Lecturers namely: Prof Werle, Prof Koen and Dr Moritz.
Their wisdom has contributed to making me a kind of person I have become
today.
To Jean and Windell, for their time and constructive advice on my
research paper.
To my family and friends, you are the reason why I strive to move
forward.
To all the above named persons who touched my life in different
ways and other persons whom I could not mention, God bless you.
Francis Dusabe
Cape Town, South Africa
v
LIST OF ACRONYMS
AML: Anti-money laundering.
FT: Financing of Terrorism.
ML: Money laundering.
FSRB: FATF Style Regional Body.
ESAAMLG: Eastern and Southern Africa Anti-Money
Laundering Group.
EAC: East African Community.
DRC: Democratic Republic of the Congo.
FATF: Financial Action Task Force.
UNGA: United Nations General Assembly.
Palermo Convention: United Nations Convention
against Transnational Organised Crime.
UNCAC: United Nations Convention against
Corruption.
FIU: Financial Investigation Unit
DNFBP: Designated Non-Financial Businesses and
Professions
USD: United States Dollars
NPPA: National Public Prosecution Authority
RNP: Rwanda National Police.
PEP: Politically Exposed Person
NPO: Non-profit Organisation
Rwf: Rwandan Francs
vi
TABLE OF CONTENTS
DECLARATION ii
ABSTRACT iii
ACKNOWLEDGEMENT iv
LIST OF ACRONYMS v
KEY WORDS x
CHAPTER ONE
GENERAL INFORMATION ABOUT RWANDA AND THE EXTENT OF
MONEY
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LAUNDERING
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1
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1.1
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Introduction
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1
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1.2
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The State of Money Laundering in Rwanda
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2
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1.3
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Country Facts
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5
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1.4
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An Overview of the Rwandan Legal System
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7
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1.5
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Rwanda in the Great Lakes
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7
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1.5.1 Regional Security
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7
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1.5.2 Who Benefits from the Minerals?
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9
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1.6
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The Overall Crime Situation in Rwanda
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10
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1.7
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Why Rwanda Needs Strong Anti-Money Laundering Laws
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12
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1.8
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Structure of the Study
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14
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vii
CHAPTER TWO
UNDERSTANDING MONEY LAUNDERING: CONCEPT AND LEGAL
FRAMEWORKS 15
2.1 Introduction 15
2.2 Understanding Money Laundering 16
2.3 International Instruments Meant to Fight Money Laundering
18
2.4 The Rwandan Anti-Money Laundering Legal Regime 22
2.5 Conclusion 25
CHAPTER THREE
ASSESSING THE EFFECTIVENESS OF ML RESPONSES IN RWANDA
26
3.1 Introduction 26
3.2 The Legal Responses 26
3.2.1 Scope of Criminalisation 26
3.2.2 Elements of the Crime of Money Laundering in Rwanda 28
3.2.3 Extra-Territorial Application of the AML Laws 29
3.2.4 Dealing with Criminal Proceeds 31
3.2.5 Identification and Protection of Property Subject to
Provisional Measures 34
3.2.6 The Fate of the Confiscated Property and the Protection of
Third Party Interests34
3.2.7 Cross Border Movement of Cash 35
3.2.8 Aligning Rwanda's Legal System to FATF Standards 36
3.3 Anti-Money Laundering Coordination and Institutional
Framework 38
3.3.1 The Financial Investigation Unit (FIU) 38
3.3.2 National Public Prosecutor Authority (NPPA) 40
3.3.3 Rwanda National Police (RNP): Economic and Financial
Unit 40
3.3.4 The Office of the Ombudsman 41
3.3.5 Revenue Service: Investigation Department 41
3.4 Preventive Measures 42
3.4.1 Preventive Measures in Financial institutions 42
3.4.2 Preventive Measures in Designated Non-Financial
Businesses and Professions 45
3.5 Customer Due Diligence (CDD) 48
3.6 Cooperation 49
3.6.1 Domestic Cooperation 49
3.6.2 International Cooperation 50
3.6.3 Mutual Legal Assistance 51
3.6.4 Membership in International and Regional Bodies 52
3.7 Impediments to Prosecution of Money Laundering In Rwanda
52
3.7.1 Overview 52
3.7.2 Stated Challenges in Prosecuting Money Laundering 53
3.7.3 Observed Challenges of Prosecuting Money laundering
54
viii
3.8 General Observations on the Effectiveness of ML Responses in
Rwanda 57
ix
CHAPTER FOUR
GENERAL CONCLUSION AND RECOMMENDATIONS. 60
4.1 General Conclusion 60
4.2 General Recommendations 61
4.2.1 Confronting the Enforcement Deficit 62
4.2.2 Restructuring the Leadership and Functioning of FIU 64
4.2.3 Refining Public Awareness and Cooperation in AMLMatters
65
BIBLIOGRAPHY 67
KEY WORDS
x
Money Laundering
Compliance
Cooperation
Due diligence
Rwanda
Criminalisation
FIU
Prosecution
Enforcement deficit
FATF 40 Recommendations
1
CHAPTER ONE
GENERAL INFORMATION ABOUT RWANDA AND THE EXTENT OF
MONEY LAUNDERING
1.1 Introduction
Throughout the world crime is an important social and economic
issue.1 For criminals, it is a source of their livelihood. Criminals
prefer to ply their trade in emerging economies, which are mainly found in
developing countries. Such young, burgeoning economies need foreign investment,
regardless of the source of the foreign capital.
However, the competition amongst developing democracies for
investments from abroad has also resulted in turning them into platforms where
the proceeds of economic crimes are laundered and then integrated lawfully in
the country of origin.
Countries undergoing political transition are favoured by money
launderers because of their proneness to corruption, fragile institutions of
governance, and manipulable economies.2 It is assumed that at least
between two and five percent of the global GDP is laundered every
year.3
1 See David L & McCrary J Crime, Punishment, and Myopia
(2005), available at
http://www.nber.org/papers/w11491.pdf
(accessed on 16 June 2015).
2 Santha V `Factors affecting money laundering: lesson for
developing countries'(2007) 10 (3) Journal of
Money Laundering Control
358.
3 See KPMG Global Anti-Money Laundering Survey (2014) 6,
available at
https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-anti-money-laundering-survey/Documents/global-anti-money-laundering-survey-v3.pdf
(accessed on 17 June 2014).
2
This chapter focuses on the facts and dimensions of money
laundering (ML) in Rwanda, this small country in the African Great Lakes
region, and explains why Rwanda requires strict anti-money laundering laws.
1.2 The State of Money Laundering in Rwanda
In Rwanda, money laundering constitutes one of the least
investigated risk areas. The dearth of research and literature on this crime
makes it hard to determine its extent in Rwanda. Every year persons are
prosecuted and punished for corruption, mismanagement of public funds and
embezzlement. What remains untouched are the proceeds emanating from these
crimes.
According the Rwandan law, money laundering (ML) is an offence
constituted by one or several acts4 aimed at disguising or
concealing wealth originating from crime. Rwanda has adopted an all crimes
approach, which means that any crime committed may give rise to money
laundering.5
In the Rwandan context, not all money that is laundered is aimed
at financing terrorism. Most of the money laundering cases involve people who
want to make their dirty money appear lawful. In principle, launderers do not
have to exceed a monetary threshold determined by the Financial Investigation
Unit (FIU) to be liable for ML,6 for small amounts of money may be
laundered and produce effects which may even be more harmful to the economy
than the few
4 Article 2 of the Law N°47/2008 of 09/09/2008 on Prevention
and Suppression of Money Laundering and
Financing of Terrorism (herein AML Law).
5 See Louis K `Identifying and Managing Low Money Laundering
Risk: Perspectives on FATF Risk Based
Guidance' (2009) 16 338.
6 Article 5 of the AML Law.
3
cases of rich people who launder large sums of money. However,
what happens in practice is another story, as discussed in chapter 3 of this
paper.
The risk of money laundering is high in the area of investment
where the government does what it is needed to attract foreign investors. Under
this facilitation package, the registration process is simplified and
expedited, and investors are given unrestricted rights to conduct profitable
business without being subjected to any bureaucratic hindrances. Investors are
further lured through tax exemptions and immigration incentives.7
The areas most at risk of attracting money launderers include the financial
institutions, the real estate sector, the hospitality industry and non-profit
organizations.
Undeniably, such government initiatives are commendable for their
positive results. For example, the facilitation of capital inflow through the
various incentives has increased foreign private investment by 4.1 percent from
2010 to 2011.8 However, given the vulnerability of its financial and
legal institutions, Rwanda stands the risk of being hit by financial criminals
who consider it a safe haven for their illegally acquired money. For example,
the ease of company incorporation is an attraction for those who want to use
companies as money laundering vehicles.9
7 This assumption is based on the dictates of article 42 of the
Constitution of the Republic of Rwanda which
states that: «Every foreigner legally residing in the
Republic of Rwanda shall enjoy all rights save those reserved for nationals as
determined under this Constitution and other laws».
8 See the foreign private investments in Rwanda 2011, available
at
http://www.rdb.rw/uploads/tx_sbdownloader/FOREIGN_PRIVATE_INVESTMENT_IN_RWANDA_2011.pdf
(accessed on 23 February 2014).
9 See Brett F The Art and Science of Money Laundering: Inside
the Commerce of Narcotic Traffickers (1998)
47.
4
More risky is the widespread use of internet and mobile banking,
which have been privatised and is run by local agents. The people running these
businesses are profit-motivated lay people with little regard for laws
requiring them to conduct due diligence when engaging in financial
transactions.10
Of concern is the fact that Rwanda's urge to liberalise and
expand its financial sector exceeds its capacity to ensure proper oversight of
businesses. This poses a great risk in that criminals around the world perceive
it as an opportunity to launder their money. This risk is associated with other
unresolved legal and policy issues regarding the criminalisation and
prosecution of money laundering cases.
In addition, Rwanda does not have a detailed anti-money
laundering (AML) implementation strategy. The directives issued to combat ML
come not from the government, but from the Financial Investigation Unit (FIU),
which has been put in charge of fighting money laundering and the financing of
terrorism.
Rwanda is also not yet a member of any Financial Action Task
Force-styled regional body (FSRB).11 Currently, it enjoys mere
observer status in the Eastern and Southern Africa Anti-Money Laundering Group.
For this reason, it has never undergone a mutual evaluation on the
implementation of the international AML standards. This paper is a snapshot of
a current state of affairs relating to AML in Rwanda.
10 Mobile money services are provided by private individuals,
overridden by the urge to benefit, whose
ability to assess to risks of money laundering is reduced.
11 See the Transparency International Corruption Perceptions
Index 2013, available at
http://www.knowyourcountry.com/rwanda1111.html
(accessed on 24 February 2014).
5
Given the loopholes sketched above, it is essential to establish
whether Rwanda's AML law and regulations are effective at all, especially when
compared to the international AML benchmarks.
1.3 Country Facts
Rwanda is a developing country populated by 11 million people,
90% of whom are engaged in agriculture.12 The 1994 genocide has
shaken its economy, impoverished its population and has affected the country's
ability to attract private and foreign investment. The government has aimed to
uplift the social and economic wellbeing of Rwandans by introducing reforms
such as decentralisation, the creation of competent public institutions and
strengthening the private sector. However, the country lacks enough people with
technical skills. The private sector is also hamstrung by relatively high
energy and transport costs.
Rwanda has a raft of regulations and reforms to improve the
general business and investment climate, which has improved the country's
competitiveness internationally.13 Rwanda's economy relies mainly on
the services sector, which accounted for 48% of the National GDP in
2012.14 Other sources of revenue are agriculture, tourism, mineral
exports, communications, as well as transport. Rwanda has also liberalized its
international trade policy by promoting the free movement of people and capital
throughout the East African Community (EAC).15
12 See the World Fact Book, available on
https://www.cia.gov/library/publications/the-world-
factbook/geos/rw.html (accessed on 16 June 2014).
13 See the World Economic Forum's Global Competitiveness
Report 2012/13, available at
http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf
(accessed on 19 February 2013).
14 See the GDP Fiscal year estimates 2012-2013, available at
http://statistics.gov.rw/gdp-national-accout-
fiscal-year-201213
(accessed on 26 March 2014).
15 See the regulation 5 of the EAC Common Market Protocol on the
Free Movement of the People, available
at
http://www.eac.int/commonmarket/movement-of-persons.html
(accessed on 16 June 2014).
6
More progress is discernible in the information and
telecommunication (ICT) sector. The internet has contributed to improvements in
sectors such as governance, service delivery, communications and banking.
Automated teller machines (ATM) and electronic payment facilities have enhanced
the conducting of online financial transactions. However, apart from a few
provisions in the Penal code and a collection of different regulations on ICT,
there are, for example, no specific laws or regulations to combat cyber money
laundering.
Rwanda's economy relies heavily on donor funds. As much as 48
percent of its annual budget consists of foreign aid. Foreign commitment to
support Rwanda is based on its reputation as an effective user of foreign
aid.16 However, this strong partnership with foreign countries
deteriorated in 2012 as a result of allegations that Rwanda was supporting
the Mouvement Mars 23 (M23) militias,17 the then rebel
group which was fighting against the government of the Democratic Republic of
Congo (DRC). This led some countries to withdraw aid to Rwanda, an act which
caused a shortfall of US$230 million (equivalent to 3 percent of its GDP) per
year. More efforts to restore economic stability were undertaken, and at the
time of writing, the country is regaining its economic stability.
Against this background, it is clear that the economy of Rwanda
is still in its infancy. It needs huge investments and partnerships for it to
be self-sustainable. However, the legal framework to suppress the risks of ML
and FT is feeble.
16 Effective use of aid by Rwanda was announced in the 2012 Busan
Fourth High level forum on aid
effectiveness. The press release is available at
http://www.oecd.org/dac/effectiveness/Busan%20partnership.pdf.
(accessed on 24 February 2014).
17 See the UN Group of Expert report on Rwanda's support to M23
militias, available at
http://www.securitycouncilreport.org/atf/cf/%7B65BFCF9B-6D27-4E9C-8CD3-CF6E4FF96FF9%7D/s_2012_843.pdf
(accessed on 26 February2014).
7
1.4 An Overview of the Rwandan Legal System
The courts in Rwanda are classified into two categories: the
ordinary courts consisting of five organs, namely, the Supreme Court, High
Courts, Intermediate Courts, Primary Courts, and the specialised courts, which
include Military Courts and Commercial Courts. The Judiciary is headed by a
Chief Justice who is assisted by a Deputy Chief Justice.
Rwanda has a mixed legal system, which means its law has both
Civil and Common Law features. The Constitution is the highest law of the land,
followed, in order of supremacy, by international instruments binding the
country, organic Laws, ordinary laws and promulgated decrees. This ranking
takes precedence in cases where legal provisions contradict each other.
1.5 Rwanda in the Great Lakes
1.5.1 Regional Security
The importance of regional security to Rwanda derives from the
suspicion that Rwanda's current, relative economic wellbeing stems from its
exploitation of the neighbouring DRC's mineral resources. These proceeds coming
from regional conflicts, which are frowned upon internationally, are laundered
through development projects in other neighbouring countries.18
In fact, its involvement in DRC conflict dates back to 1995,
when Rwanda contributed to the overthrow of the then President Mobutu Sese
Seko, based on the fact that the latter was
18 See Watson Institute for International Studies Colonialism
in the Congo: Conquest, Conflict, and
Commerce (2005), available at
http://projects.ecfs.org/eastwest/Readings/CongoSim.pdf
(accessed on 20 October2014).
8
harbouring the Force Democratique pour la Liberation du
Rwanda (FDLR),19 a Rwandan rebel group operating in the
Democratic Republic of Congo which, according to the Rwandan government, is
composed of perpetrators of the 1994 Rwandan genocide.20
Rwanda is said to have aided many militia groups in the
eastern part of the DRC in order annihilate its main guerrilla opponent, the
FDLR. In the effort to end this war, various regional initiatives were
launched, such as the deployment of the Foreign Intervention Brigade
(FIB),21 the main purpose of which was to neutralise all the rebel
groups operating in the DRC.
Towards the end of 2013, the FIB managed to overrun and disarm
some of the main rebel groups which, according to many security analysts, has
resulted in the removal the buffer zone that protected Rwanda from FDLR
attacks, thus creating tension between Rwanda, on the one hand, and Tanzania
and South Africa,22 on the other. Rwanda is accusing the other two
of providing logistics, military bases, intelligence, and evacuation services
for the FDLR.23
19 Carole C `Southern Africa: A new Congo in a new region'
(1998) Vol 13 No. 3 South African Report,
available at
http://www.africafiles.org/printableversion.asp?id=3797
(accessed on 16 July 2014).
20 Richard M `FDLR: From architects of genocide to Congo rebels'
The Citizen 13 November 2013 3, available
at
http://www.thecitizen.co.tz/magazine/political-reforms/FDLR--From-architects-of-genocide-to-Congo-rebels-/-/1843776/2071452/-/13xleh6/-/index.html
(accessed on 17 July 2014).
21 The Foreign Intervention Brigade is composed of troops from
South Africa, Malawi and Tanzania.
22 Machira P `Tanzania-Rwanda relations may worsen - MPs' IPP
Media 31 May 2014, available at
http://www.ippmedia.com/frontend/?l=68415
(accessed on 17 July 2014). See also Gabriel G `Rwanda
activist murder 'linked to DRC' conflict' BBC News Africa 27 March
2014, available at
http://www.bbc.com/news/world-africa-26762930
(accessed on 17 July 2014).
23 Shyaka K `Unholly Alliance: MONUSCO together with the Foreign
Intervention Brigade (FIB) work with the
FDLR and the Congolese army, FARDC' Rwanda Focus 29
July 2013, available at
http://focus.rw/wp/2013/07/unholy-alliance/
(accessed on 5 July 2014).
9
1.5.2 Who Benefits from the Minerals?
The DRC has always accused Rwanda of exchanging military support
for minerals mined by rebel groups.24 Rwanda, in reply, has always
denied having any economic interest in the Eastern DRC, stating that it has a
proper, professional mineral certification process.25
Regardless of the veracity of Rwanda's response to the DRC
accusation, there is no denying the fact that the DRC government has lost
control of its eastern territories in which armed rebel groups flourish and
proliferate because of their unlawful exploitation of the mineral resources,
something they do with impunity.26 Some of the rebel groups are not
even involved in the conflict.27
24 Daniel R. `Mineral smuggling in Central Africa: The case of
Rwanda, Uganda and perpetual violence in the
DRC' Consultancy Africa Intelligence 18 February 2013,
available at
http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=1222:mineral-smuggling-in-central-africa-the-case-of-rwanda-uganda-and-perpetual-violence-in-the-drc-&catid=57:africa-watch-discussion-papers&Itemid=263
(accessed on 22 July 2014).
25 Editor `A lasting solution will come by addressing the real
issues of governance' The East African 15
December 2012, available
at
http://www.theeastafrican.co.ke/news/Address-governance-issues-for-lasting-solution/-/2558/1644690/-/swxrrlz/-/index.html
(accessed on 22 July 2014).
26 Channel Research, Joint Evaluation of Conflict Prevention
and Peace-Building in the Democratic Republic of
Congo (2010) 8, available at
http://www.channelresearch.com/wp-content/uploads/2010-04-Policy-Report-light.pdf
(accessed on 15 September 2014).
27 Andrews A and Nyambura G `Addressing the `conflict minerals'
crisis
In the Great lakes Region' (2012) Policy Brief No. 35 I55
3, available at
http://www.issafrica.org/uploads/No35GreatLakes.pdf
(accessed on 5 July 2014).
10
1.6 The Overall Crime Situation in Rwanda
Generally, Rwanda has a low to moderate incidence of
crime,28 but this does not discount the fact that the occurrence of
the following serious crimes worries the law enforcement authorities:
a. Human Trafficking: Many people are
trafficked either from or through Rwanda annually to Asian and European
countries.29 Among the victims are girls under the age of 18 who are
trafficked for purposes of labour and sexual exploitation.30
b. Corruption: Rwanda is one of the least
corrupt countries in the region and on the African continent as a
whole.31 This progress against corruption has been made possible
through a firm political will to fight corruption through the enactment of
deterrent policies and laws.32 The government has acted against
corruption, for it is regarded as a major barrier to the economic and social
development of the nation.33 The government has introduced codes of
conduct and has imposed accountability measures for politically
28 See the Rwanda 2013 Crime and Safety Report, available at
https://www.osac.gov/pages/ContentReportDetails.aspx?cid=14038
(accessed on 16 September 2014).
29 United States Department of State, Trafficking in Persons
Report -Rwanda (2013), available at:
http://www.refworld.org/docid/51c2f39359.html
(accessed on 18 March 2014).
30 See the United States Department of State Trafficking in
Persons Report -Rwanda (2013), available at:
http://www.refworld.org/docid/51c2f39359.html
(accessed on 18 March2014).
31 Transparency International Global Corruption Barometer
(2013), available at
http://www.transparencia.org.es/BAROMETRO_GLOBAL/Bar%C3%B3metro_Global_2013/Global_Corrupt
ion_Barometer_2013.pdf accessed on 24 February 2014) and the East African
Bribery Index (EABI) 2012, available at
http://tikenya.org/index.php/more-links/publications/corruption-surveys/east-africa-bribery-index
(accessed on 28 February 2014).
32 See the Rwanda National Anti-Corruption Policy, available
at
http://www.ombudsman.gov.rw/Documents/pdf/POLICY%20final%20after%20cabinet.pdf
(accessed on 27 February 2014).
33 Rwanda Governance Board Rwanda's Anti-Graft Drive:
Assessing global indexes' Findings on Transparency
and corruption
(2013), available at:
http://www.rgb.rw/fileadmin/user_upload/pdf/Corruption_analysis.pdf
(accessed on 24 February 2014).
11
exposed persons (PEPs). As a result, a significant number of PEPs
and civil servants have been prosecuted and others were requested to resign
from their positions, following allegations of corruption.34
c. Cybercrimes: Cases of robbery of automatic
teller machines (ATMs) and system hacking were recorded in 2013 due to the
fragility of the e-banking system. The weaknesses so far identified include the
lack of a specific anti-cybercrime law, uneven legal standards regulating
information and community technology and a weak criminal justice system when it
comes to prosecuting cybercrime, especially because of the difficulty of
adducing evidence with regard to this brand of crime.35
d. Terrorism: Grenade attacks have taken place
since 2009 and have targeted busy markets and transit hubs in towns. These acts
have been imputed to the Force Démocratique pour la
Libération du Rwanda (FDLR), a Rwandan rebel group operating in the
Eastern Democratic Republic of Congo.36
e. Embezzlement of Public Funds: In the last
seven years, 765 senior government officials have been fired and have faced
prosecution for alleged acts of embezzlement, and
34 Boris B `Rwanda gets tough on corruption' The Telegraph
07 December 2009 6, available at
http://www.telegraph.co.uk/expat/expatnews/6752425/Rwanda-gets-tough-on-corruption.html
(accessed on 27 March 2014).
35 Patrick M and Maureen O Workshop Report on Effective
Cybercrime Legislation in Eastern Africa (2013),
available at
http://www.coe.int/t/dghl/cooperation/economiccrime/Source/Cybercrime/Octopus2013/2571_EastAfri
ca_WS_Report.pdf (accessed on 16 June 2014).
36 See the US Department of State Country Reports on
Terrorism 2012 (2013), available at
http://www.state.gov/j/ct/rls/crt/2012/209979.html
(accessed on 16 June 2014).
12
abuse of power.37 The Office of the Prosecutor is yet
to sue 281 more squanderers of public resources over different embezzlement
cases involving 833 million Rwandan francs (Rwf).38
f. Mismanagement of Public Funds: Mismanagement
of public funds has taken place mostly in the public works and energy sectors.
The Parliamentary Public Accounts Committee (PAC) has summoned
the supervising public authorities repeatedly to explain the reasons behind the
poor management. The root cause remains the lack of concrete governmental
strategies and measures to fight graft and to arrest, try and punish the
culprits.
1.7 Why Rwanda Needs Strong Anti-Money Laundering
Laws
1.7.1 Operational Reasons
Given Rwanda's fragile economy and its dependence on foreign aid,
it needs strong AML/CFT laws and regulations to enhance the integrity of its
financial sector in order to be regarded internationally as a reliable and
predictable country with which to do business.39
37 Twizeyimana F `765 senior officials convicted over
embezzlement in the last 7 years' Igihe Newspaper 25
October 2014, available at
http://www.igihe.com/amakuru/u-rwanda/article/abayobozi-765-bahamijwe-kurigisa
(accessed on 27 October 2014).
38 Musoni E `Gov't to drag nearly 300 to Court over Embezzlement'
The New Times 16 September 2014 6.
39 International Monetary Fund Money Laundering and Financing
of Terrorism: a multi-donor Trust Fund
(2009) 2, available at
http://www.imf.org/external/np/otm/2009/anti-money.pdf
(accessed on 16 June 2014).
13
1.7.2 Reputational Reasons
A clean record and financial reputation are requisite ingredients
for a country to grow and prosper. A country that does not have impeccable and
honest financial institutions, equipped with anti-money laundering and
anti-terrorist financing measures, is likely to fall prey to these crimes, thus
making it a risky destination for foreign investments.40 In other
words, whenever a country is suspected of acting contrary to international
standards, its reputation is affected adversely, causing an overall decline in
trust and openness. For instance, refusal to comply may lead to loss of
profitable business as well as financial problems through withdrawal of funds
and termination of development partnerships. Since Rwanda depends hugely on
foreign aid and investments, it is in its best interests to have strong AML
mechanisms in place and to be serious about implementing them.
1.7.3 Regional Integration Reasons
Among the benefits attached to being a member of the East African
Community (EAC)41 is the right of citizens of this community of
states to move and to settle freely in each of the member states.42
Therefore, strong AML laws are required to strengthen the state's capacity to
respond to any ML risk that may be associated with the free movement of people
and capital. When ordinary people cross borders, so, too, do criminals who
explore opportunities to commit crimes.
40 International Federation of Accountants Anti-Money
Laundering 2nd Ed (2004) 13, available at
https://www.ifac.org/sites/default/files/publications/files/anti-money-laundering-2n.pdf
(accessed on 13 October 2014).
41 The Member states of the East African Community are Rwanda,
Burundi, Uganda Kenya and Tanzania.
42 Article 1-6 of the East African Community Free Movement of
Person Regulations, adopted in Moshi on 20
June 2009.
14
It is worth mentioning that the domestic laws of the EAC member
states have not yet been harmonised. Apart from the cooperation framework
signed amongst them, very little has been done so far by member states to enact
congruent laws to curb cross-border criminality.
1.7.4 Regional Security Reasons
The African great lakes region has been characterised by
conflicts of all sorts. The most affected is the Democratic Republic of Congo
whose natural resources are not only the cause of the ongoing war, but also an
impediment to its ending.43 It is believed that a group of
profiteering states would never wish to see the end of this war. Rwanda should
therefore have strong AML laws to curb the cross-border movement of minerals,
the proceeds from the sales of which may be used to fuel interstate
conflict.
1.8 Structure of the Study
The remainder of this research paper is organised as follows:
Chapter two deals with the definition of ML and the international legal
instruments to combat it. Chapter three focuses on Rwanda's
attempts to fight ML and the impediments encountered in doing so. Chapter Four
concludes the paper with a set of recommendations.
43 Montague D and Berriga F `The Business of War in the
Democratic Republic of Congo: Who
Benefits?'(2001) World Policy Institute 3,
available at
http://www.worldpolicy.org/projects/arms/news/dollarsandsense.html
(accessed on 5 May 2014).
15
CHAPTER TWO
UNDERSTANDING MONEY LAUNDERING: CONCEPT AND LEGAL
FRAMEWORKS
2.1 Introduction
Money laundering is a transnational concern that necessitates
joint measures for its prevention detection and its eradication.44
Different initiatives aimed at combating money Laundering have been launched at
both regional and international level. These include model legal frameworks and
the adoption of AML standards.
Model laws have been drafted by international specialised
agencies and were proposed to states for their consideration. The aim of these
propositions is to implement at the domestic level effective, uniform,
preventative and retaliatory measures in respect of combating ML.45
In addition to the existing international legal instruments, international
organisations such as the United Nations (UN), the Group of Seven (the G7), the
International Monetary Fund (IMF) and the World Bank (WB) have prevailed on
countries to enact measures that give effect to the Financial Action Task
Force's anti-money laundering recommendations, the implementation of which at
national level is measured through regular peer reviews.46
44 Brett F The Art and Science of Money Laundering: Inside
the commerce of narcotic traffickers (1998) 177.
45 Alexander K `The international anti-money laundering regime:
the role of The Financial Action Task Force'
(2001) 4 3 Journal of Money Laundering Control 217.
46 Santha V `Factors affecting money laundering: lesson for
developing countries' (2007) 10 3 Journal of
Money Laundering Control
361.
16
Despite Rwanda's partial enactment of the international AML
standards and the criminalisation of ML, its AML measures are not comprehensive
enough to eliminate fully the risks of ML as compared to other compliant
states.
This Chapter looks into how money laundering is conceived under
Rwandan law.
2.2 Understanding Money Laundering
Money Laundering is the process of cleansing the money
originating from crime and making it appear lawful.47 It enables the
transformation of illegally obtained money into legitimate funds. In other
words, ML aims to make dirty money look lawful48 so that it can be
used without fear of its being linked to its criminal source, which would
render it confiscatable by the law enforcement authorities.49
Rwanda, like many other countries, has opted to define ML in a
way consistent with the 1988 United Nations Convention against Illicit Traffic
in Narcotic Drugs and Psychotropic Substances. Rwanda undertook an ostensive
definition of ML where the following are described as acts of ML: the
acquisition, possession or use of property, knowing that, at the time of
receipt, such property was derived from an offence.50
47 United States General Accounting Office Report to
Congressional Requesters on Combating Money
Laundering: Opportunities Exist to Improve the National
Strategy (2003) 7, available at
http://www.gao.gov/assets/240/239956.pdf
(accessed on 10 June 2014).
48 Reuter P and Edwin T Chasing Dirty Money: The Fight
against Money Laundering (2004) 1.
49 Naylor R T `Predators, Parasites or Free Market Pioneers:
Reflections on the Nature and Analysis of Profit
Driven Crime' in Margaret B (ed) Critical Reflections on
Transnational Organised Crime, Money Laundering and Corruption (2005)
36.
50 Article 3(c) of the UN Convention against Illicit Traffic in
Narcotic Drugs and Psychotropic Substances,
adopted on 20 December 1988.
17
Its definition is also broadened to cover the conversion, the
transfer and the concealment of property originating from crime, to ensure that
any gain or use of gains linked to crime is criminalised. This would obviate
the potential risk of proceeds of crime being used to finance other crimes,
such as terrorism, for example.51
Technically, money laundering consists of three phases, namely:
placement, layering and integration.52
a. Placement or placing53 is the
depositing of dirty funds in financial institutions or the conversion of cash
into negotiable, redeemable or saleable instruments. Being a first step towards
legalisation, this step is the most difficult of all because financial
institutions must verify the origin of the money and have a duty to report to
the competent authority when the amount of money deposited gives rise to
suspicion.54 However, launderers opt to channel their cash into an
operating business or to convert it into negotiable instruments, such as
cashier's cheques, money orders, or traveller's cheques through a third
person.55
b. Layering consists in transferring the
ill-gotten money through a series of accounts in an attempt to hide the funds'
true origins.56 This could involve transferring the money through
banks in different countries before it is integrated into the normal
economy.
51 European Union Committee of the House of Lords Money
Laundering and the Financing of Terrorism
Report 2009 (2010) 3.
52 Reuter P and Edwin T `Chasing Dirty Money: The Fight against
Money Laundering' (2004) 25.
53 Georgeta M `Judicial Aspects on Money Laundering` (2007)
Agora international Journal for Juridical
Science Vol 2 154, available at
www.juridicaljournal.univagora.ro/download/pdf/61.pdf
(accessed on 1 June 2014).
54 Hinterseer K Criminal Finance: The Political Economy of
Money Laundering in a Comparative Legal Context
(2002) 15.
55 Jonathan T Money Laundering Prevention: Deterring,
Detecting, and Resolving Financial Fraud (2011) 8.
56 Jonathan T (2011) 9.
18
This phase may involve the buying of goods which are then
resold on the open market. The idea here is to separate the funds as far as
possible from the crime, thus making it difficult to trace the money back to
its source.57
c. Integration refers to the stage at which the
layered money is legitimately integrated into the lawful financial system to
make it appear as having a legal provenance. At this stage it is difficult to
say whether the money is clean or dirty.
Given the new developments in technology, criminals do not always
need to follow this three-step process to launder the proceeds of
crime.58 They might even combine the first two phases depending on
how vigilant the banks are. An example of where placement and layering take
place at the same time is where the criminal receives payments for business
deals that never took place. Another example of combining layering and
integration is the under-the-table cash transaction which enables launderers to
simulate a transaction that, in fact, does not take place.59
2.3 International Instruments Meant to Fight Money
Laundering
There is no dedicated anti-money laundering convention. However,
the notion is embedded in a number of international instruments aimed at
combating money laundering and the financing of terrorism. They are the
following:
57 Hasmet S `Money Laundering and Abuse of the Financial System'
(2013) International Journal of Business
and Management Studies 293.
58 Stessens G Money Laundering: A New International Law
Enforcement Model (2003) 68; Reuter P and
Edwin T (2004) 25.
59 Donato M, Elod T and Brigitte U Black Finance: the Economy
of Money Laundering (2007) 104.
19
2.3.1 The United Nations Convention against the Illicit
Traffic in Narcotic Drugs and Psychotropic Substances (1988)
This convention criminalises the illegal trade in narcotics, but
does so in a way that mirrors the essential steps of the money laundering
process. In its preamble, it calls on States Parties to eliminate criminal
incentives by depriving persons engaged in illicit traffic of the proceeds of
their criminal activities.
Over time, its ambit has been extended to cover other crimes
which trigger money laundering, the so-called predicate offences. Rwanda
ratified it in 2002.
2.3.2 The United Nation Convention against Corruption
(2003)
This convention, which Rwanda ratified in 2006, considers the
crime of ML as part of corruption offences due to their close
connection.60 In addition, its Article 14 mentions specifically the
measures that States Parties to the Convention should adopt to combat money
laundering, including:
- instituting a comprehensive domestic regulatory and
supervisory regime for financial institutions;61
- implementing measures for cross border monitoring of cash and
other negotiable instruments;62
- managing electronic fund transfers, including remittances;
and
60 Article 23 of UNCAC.
61 Article 14(1)(a) of UNCAC.
62 Article 14(1)(b) of UNCAC.
20
- applying various supranational anti-money laundering
guidelines to combat money laundering.63
2.3.3 The United Nation Convention against Transnational
Organised Crime
The United Nations Convention against Transnational Organised
Crimes (the Palermo Convention) which Rwanda ratified in 2003 also provides for
the need to establish anti-money laundering measures. Its Article 7 provides
for measures needed to:
- deter and detect all forms of money laundering through the
strengthening of domestic legal regimes;
- ensure the capacity and the readiness of the law enforcement
authorities dedicated to combating money-laundering; and
- cooperate against money laundering at the regional and
international level.
Both UNCAC and the Palermo Convention have broadened the scope of
the AML regime to cover all the proceeds of other serious crimes.64
Whereas both Conventions urge states to enact laws applicable to banks and
other financial institutions, they also call for the establishment of Financial
Intelligence Units (FIUs).
2.3.4 International Convention for the Suppression of the
Financing of Terrorism (2002)
This convention requires states to take measures to protect their
financial systems from being misused by persons planning or engaged in
terrorist activities. Rwanda ratified it in 2002.
63 Article 14(1)(c) of UNCAC.
64 Initially, only proceeds of illicit Traffic in Narcotic Drugs
and Psychotropic Substances were criminalized
into the context of money laundering.
21
In its preamble, this Convention exhorts states to adopt measures
to prevent and counteract movements of funds suspected of being intended for
terrorist purposes without impeding in any way the freedom of legitimate
capital movements and to intensify the exchange of information concerning
international movements of such funds.
Following the terrorist attacks in the United States on 11
September 2001, the UN member states agreed that there was a link between
terrorism, transnational organised crime, the international drug trade and
money-laundering.65 States were therefore urged to ratify the
international conventions regulating these crimes and to implement their
provisions.66
These practical steps include a wide array of measures relating
to strengthening state capacity to counter ML and a better coordination of
states' efforts regionally and internationally.
2.3.5 Financial Action Task Force Standards (The FATF 40
Recommendations )
The FATF was created in April 1989 during a G7 Summit in Paris,
and was mandated to design policies and procedures at both state and
international level to curtail the increasing incidence of money
laundering.67 In 1990, the FATF issued a set of 40 Recommendations
to improve the AML regime at national level and to enhance regional and
international cooperation in the fight against money laundering.
65 Schott P `Reference Guide to Anti-Money Laundering and
Combating the Financing of Terrorism:
Supplement on special Recommendation IX' (2006) 2 ed11.
See also Sollier J (2007} 39.
66 See SC/RES/1373 (2001) of 28 September 2001, available at
http://unispal.un.org/UNISPAL.NSF/0/392A001F254B4B9085256B4B00708233
(accessed on 15 June 2014).
67 Laurel S `An Introduction to the Financial Action Task Force
and its 2008 Lawyer Guidance' (2010) Journal
of the Professional Lawyer
6.
22
These recommendations were subsequently improved in 1996, 2001,
2003 and 2012, with new additions to the requirements relating to the
conducting of customer due diligence, the seizing and freezing of the proceeds
of crime, and establishing identities of the beneficial owners of companies and
trusts.68
In October 2001, the FATF's mandate was extended to the financing
of terrorism. This resulted in the FATF issuing a further nine so-called
Special Recommendations to give effect to the UN Convention for the Suppression
of the Financing of Terrorism.
Likewise, more was done by the UN in response to the threat posed
by international terrorism. For instance, the United Nations Security Council
(UNSC) Resolution 1617 of 2005 and the United Nations Global Counter-Terrorism
Strategy adopted through the United Nations General Assembly (UNGA) in 2006,
have played a significant role in alerting states to the importance of
implementing the FATF recommendations.
2.4 The Rwandan Anti-Money Laundering Legal
Regime
The concept of money laundering is relatively new in Rwanda. No
case relating to money laundering has yet been prosecuted or even investigated
by any one of the competent authorities. However, Rwanda has adopted a few
proactive measures against money laundering.
68 Johnson J and Desmond L `Money laundering: has the Financial
Action Task Force made a
difference?'(2002) 10 Journal of Financial Crimes 7.
23
In this study, the Rwandan AML legal regime is divided into two
categories. In the first category are the core AML enactments, namely the Penal
Code, the AML Law and the Presidential Order establishing the Financial
Intelligence Unit (FIU). In the second category are other laws which impact
indirectly on countering money laundering.
2.4.1 The Core AML Laws
2.4.1.1 Law No 47/2008 on the Prevention and Penalising
the Crime of Money Laundering and the Financing of Terrorism
This law provides for a descriptive definition of money
laundering by clarifying particular acts which may constitute a crime of money
laundering under Rwandan law. It further regulates the supervision of the
Financial Institutions (FI) and Designated Non-Financial Businesses and
Professions (DNFBPs) to enhance transparency and openness in their operations.
It also contains provisions on international cooperation in the fight against
money laundering.
According to this law, the predicate offences committed outside
Rwanda are punishable in Rwanda as well.
2.4.1.2 The Organic Law No 01/2012/OL of 2 May 2012
establishing the Penal Code.
Rwanda's Penal Code was enacted in 2012. It stipulates various
offences, including money laundering, and the penalties they carry. The Penal
Code adopts the definition of money laundering as contained in the 1988 Vienna
Convention, with some adaptions. It makes ML punishable by a term of between
five and seven years' imprisonment and a fine of two to five
24
times the value of the amount of the laundered.69 The
Penal Code also provides for the permanent confiscation of proceed of crimes,
not merely as a punishment, but also as a preventive measure.70
2.4.1.3 Presidential Order No 119/01 of 9 December
2011 on the Financial Investigation Unit
This order establishes the form, function and purpose of the
FIU, the biggest role player in the implementation of Rwanda's anti-money
laundering regime.
2.4.2 Other Laws with an Indirect Contribution to the
Fight against Money Laundering
In addition to the above-mentioned core AML laws, other laws
contributing indirectly to the fight against ML in Rwanda are:
1. Law No 04/2013 of 8 February 2013 relating to access to
information;
2. Law No 86/2013 of 11 September 2013 establishing the general
statutes for public service;
3. Law No 35/2012 of 19 September 2012 relating to the
protection of whistleblowers;
4. Law No 18/2010 of 12 May 2010 relating to electronic
messages, electronic signatures and electronic transactions;
5. Law No 23/2003 of 07 August 2003 related to the prevention
and the punishment of corruption and related offences; and
6. Law No 60/2013 of 22 August 2013 regulating the
interception of communications.
69 Article 654 of the Penal Code of Rwanda.
70 Article 651 of the Penal Code of Rwanda.
Although the above-mentioned laws regulate different subject
matter, they are an important addition to the Rwandan AML regime because of
their importance to the investigation and prosecution of money laundering.
2.5 Conclusion
Rwanda has demonstrated its commitment to stamping out money
laundering by enacting a number of laws. However, there is room for
improvement, especially in so far as it concerns the need to harmonize the laws
and to strive for more coherent regional approaches to the problem. However,
some procedural issues regarding the extra-territorial application of Rwandan
AML law and the extent to which Rwanda can proceed with their prosecution
remain a controversial issue amongst lawyers.
25
The next chapter assesses the effectiveness of the
above-mentioned laws in practice.
26
CHAPTER THREE
ASSESSING THE EFFECTIVENESS OF ML RESPONSES IN
RWANDA
3.1 Introduction
Montesquieu's famous 1748 treatise on political theory has laid a
legal basis for laws being considered as pillars for policy implementation at
all levels of government.71 Institutions are therefore considered as
vehicles by means of which policy ideals are put into effect.72 As
for the fight against money laundering, laws and institutions play a critical
part, for without institutions which apply them, the laws would be
useless.73
This chapter examines the effectiveness of the legal and
institutional responses adopted by Rwanda in the fight against money
laundering. Furthermore, it measures these laws and practices against the FATF
recommendations of 2012.
3.2 The Legal Responses 3.2.1 Scope of
Criminalisation
Rwanda has a bifurcated approach when it comes to combating money
laundering. The one is an all-crimes approach, meaning that all crimes are
predicate crimes for money laundering; the other is a list approach, by which
is meant that only the listed crimes are understood to trigger
71 Montesquieu C The Spirit of Laws: Cambridge Texts in the
History of Political Thought (1989) 8.
72 Kent W and Bert R (eds.) Do Institutions Matter?
Government Capabilities in the United States and Abroad
(1993) 17.
73 Linda C The Ombudsman, Good Governance, and the
International Human Rights System (2004) 85.
27
the money laundering cycle. The Penal Code adopts the all-crimes
approach whereas the list approach is provided for in other enactments.
Thus, the existence of a dual approach in Rwanda to criminalise
money laundering has made the prosecution of this crime difficult in practice,
as lawyers and law enforcers are at loggerheads when it comes to the
prosecution of the crime of money laundering.74
The supporters of the all-crimes approach base their arguments on
the constitutional hierarchy of norms, according to which the Penal Code is
considered to supersede contradictory clauses in other laws, including the
Anti-Money Laundering Law.75 The advocates of the list approach
challenge the above argument, stating that Article 5 of the AML Law, which
lists the predicate offences for money laundering, is not mentioned anywhere in
the Penal Code as being reviewed or repealed, submitting that this omission may
be construed to mean that the article still stands and that its criminalising
scope remains valid and applicable.
Each of the approaches has its strengths and weaknesses. The list
approach is commended by experts in criminal law for being both specific and
strategic,76 but is criticised for its disregard of the serious
offences such as the financing of terrorism, fraud, piracy, and counterfeiting
of currency.77 While the all-crimes approach is praised for its
capacity to curb ML in a broader sense than the list approach, it is criticised
for overreaching its purview and diverging from the overall effort to fight
ML.
74 Hitimana J `Rwanda to be assessed on its compliance with
global standards of Anti-Money Laundering
and combating the financing of terrorism' (2012) 23 Le
Banquier de la BNR 12.
75 Article 93 of the Constitution of the Republic of Rwanda as
amended to date.
76 Humphrey M `Fighting money laundering: The challenges in
Africa' (2007) I55 2, available at
http://www.issafrica.org/uploads/Paper152.pdf
(accessed on 8 October 2014).
77 Article 5 of the AML Law.
28
In brief, the discrepancy in content, and the resultant dilemma
as to which approach to adopt, are traceable to the mistakes made when the
Penal Code was drafted. As a result, the implementers of the law are now at a
loss as to how to combine the two approaches in
practice. This quandary presents criminals with a golden
opportunity to escape the clutches of the law and to go unpunished.
3.2.2 Elements of the Crime of Money Laundering in
Rwanda
Under Rwandan law, an individual may be liable for money
laundering upon the commission of the following acts:
a. Direct commission: This means the
conversion, transfer or handling of property derived from crime, the
concealment or disguise of the true nature, origin, location, disposition,
donation and rights with respect to or ownership of property;
b. Indirect commission: Here the material
element of the crime is constituted in the acquisition, possession or use of
property derived from crimes; and
c. Other supplementary forms of liability: This
refers to association with a group, meaning attempting, aiding or abetting,
inciting, facilitating, counseling and disregard for cross border cash
declaration procedures.78
The only mental element required to establish individual guilt,
and thus to ground a conviction on a charge of money laundering, is the
accused's knowledge of the unlawfulness of the conduct. This form of mens
rea is construed strictly by the court and other forms of intent, such
78 Non respect of cross border declarations of cash was included
in other supplementary forms of ML
liability as incrimination by implication. It is implied that a
person who crosses the border without declaring cash exceeding the declarable
threshold, commits a crime of ML.
29
as suspicion or reasonable foreseeability, are not considered. In
other words, only actual knowledge suffices to establish the mental element of
the crime of money laundering.
This limitation of culpability to the perpetrator's active
knowledge contravenes the provisions contained in international instruments
such as UNCAC, the Palermo Convention and the Vienna Convention, all of which
provide that other objective factual circumstances may reflect the knowledge,
intent and purpose of the perpetrator.
3.2.3 Extra-Territorial Application of the AML
Laws
Establishing the capacity of Rwandan laws to be applied to cases
beyond its borders is very important for understanding Rwanda's ability to
participate in the international fight against crime, its capacity to supervise
the conduct of its nationals in foreign states, and its capacity to manage
money laundering crimes perpetrated by foreign companies registered in
Rwanda.
The Rwandan Penal Code has listed crimes over which Rwanda can
exercise universal jurisdiction.79 Money laundering is one of them,
and is prosecutable in Rwanda even if the predicate offence, or the original
act from which the proceeds to be laundered is derived, is committed on the
territory of a foreign state. 80 However, new trends in
transnational crime, which are a feature of today's global economy, have
rendered this law ineffective.
79 According to article 16 of the Penal Code, Rwanda has
jurisdiction over the following crimes regardless of
who commits them and where they were committed: terrorism;
hostage-taking; piracy; drug trafficking; illicit manufacturing and trafficking
in arms; money laundering; cross-border theft of vehicles with the
intent of selling them abroad; information and communication technology related
offences; trafficking in human beings especially children; slavery; torture;
cruel, inhuman or degrading treatment; genocide, crimes against humanity, war
crimes; genocide denial or revisionism and any form of participation in these
crimes.
80 Article 652 Par 1 of the Penal Code of Rwanda.
30
Take, for example, acts committed outside Rwanda which do not
constitute an offence in the foreign country, but which would be a predicate
offence if committed in Rwanda. The law is not clear as to whether these acts
may give rise to money laundering. This lack of clarity on the extraterritorial
application of Rwandan law has affected many individuals, including nationals
who do not know the fate of their wealth acquired from countries with weak or
non-existent AML regulations.
Another scenario would be that of predicate offences for money
laundering which commence in Rwanda and are completed in foreign countries.
This transnational execution of the crime becomes problematic because of the
lack of specific skills in Rwanda not only to detect such crimes but also
because the country lacks the people skilled enough to negotiate successful
mutual legal assistance with the requested state.
Also, there are acts constituting secondary participation in
transnational money laundering crimes, where the principal act is not
criminalised in the foreign state. This becomes a problem as Rwanda does not
have firm strategies to establish liability for participation in economic
crimes, including corruption and money laundering.
The above scenarios are deserving of attention simply because of
the likelihood of their occurring, especially given the fact that Rwanda is in
the process of opening itself more and more to foreign
investments.81
81 Rwanda National Bank Foreign Private Investment in Rwanda
(2011) 4, available at
http://www.bnr.rw/uploads/media/Foreign_private_Investment_in_Rwanda_2011_Booklet_.pdf
(accessed on 7 September 2014).
31
The cause for worry here is that the blind extraterritorial
application of Rwandan law may lead to abuse, all the more so given the absence
of guidelines which prosecutors could apply when dealing with predicate
offences committed abroad. Applying an all-crimes approach to such a scenario
would be unfair and may lead to unintended consequences, such as denying
Rwandans who live abroad the incentive to return to their home country for fear
that their property may be confiscated as the proceeds of crimes.
3.2.4 Dealing with Criminal Proceeds
Rwandan law provides on ways to deal with property originating
from crime or being used to commit a crime. These measures are used as means to
intercept, delay or mitigate the consequence of criminal activities. In Rwanda,
the law has provided different ways in which the state can deal with the
property suspected to originate from crime. These include confiscation,
freezing and seizure.
3.2.4.1 Confiscation
Under Rwandan law, confiscation and forfeiture may be used
interchangeably. In the Penal Code, confiscation targets objects used in the
commission of a crime and its proceeds. It may be applied as an additional
measure to the main penalty so that other objects belonging to the convicted
person are withheld or forfeited.82
82 Article 51 of the Penal Code of Rwanda.
32
The AML Law defines confiscation as a permanent deprivation of
property by a definitive decision of a competent tribunal, which transfers to
the state the ownership of this property and any related title to such
property.83 It concerns:
a. the objects of the offence, including revenues and other
benefits which derived from it, regardless of who the owner might be, unless it
is proved that the property was acquired in good faith;
b. The property belonging directly or indirectly to a person
convicted of money laundering or to his/her spouse and his/her children, unless
they are able to prove that their property has a lawful provenance.
84
The proceeds of a crime may be confiscated as long as they are
proven to originate from a crime. The confiscation may be executed even when
the perpetrator of the predicate offence cannot be charged before the law,
either because he/she is not known, or because it is legally impossible to
prosecute him/her.85 Moreover, the Penal Code provides for the
possibility to confiscate funds and property of equivalent value when the
assets to be confiscated cannot be located or produced.86
3.2.4.2 Freezing
Under Rwandan law «freezing» is defined as a measure
consisting of a temporary delay in the execution of a transaction, the
prohibition or restriction of the transfer, the conversion,
83 Article 2 Par 3 of the AML Law.
84 Article 57 Par 1 of the AML Law.
85 Article 58 of the AML Law.
86 Article 51 Par 3 of the Penal Code of Rwanda.
33
transformation or movement of property on the basis of a decision
or a directive issued by a competent authority.87
Freezing takes place in cases related to the financing of
terrorism. Due to the urgency and gravity of cases that necessitate freezing,
an ex parte order is not required because the FIU is invested with
powers to take relevant action in the interests of national security. These
powers are exercisable within a 48-hour period, after which the matter must be
referred to the National Public Prosecution Agency (NPPA).
Where the FIU does freeze the assets, it must inform the relevant
financial institution involved in transferring the funds about the
circumstances leading to the freezing of the funds. The NPPA may, subject to
obtaining a court order, extend the freezing period to seven days in order to
conduct further investigations.88
3.2.4.3 Seizure
According to the Rwandan code of criminal procedure, seizure may
effected by law enforcement authorities in order to use the seized objects as
incriminating or exculpating evidence.89 Seizure can be applied as a
penalty in addition to the main sentence when the seized property is directly
connected to the crime.90
87 Article 25 of the AML Law.
88 Article 25 Par 3 of the AML Law.
89 Article 30 of the Code of Criminal Procedure of Rwanda.
90 Article 386 and 257 of the Penal Code of Rwanda.
34
If the proceeds of the crime cannot be raised from the properties
of the suspects, the NPPA or the competent court may seize other assets which
the suspects possess, which are equivalent in value to the alleged proceeds of
the offences.91
3.2.5 Identification and Protection of Property Subject
to Provisional Measures
The FIU is empowered with investigative powers which it uses
during the identification of property subject to provisional measures. It
exercises these powers by virtue of its being a department of the Rwandan
National Police. However, these powers are not used optimally in money
laundering cases.
Once assets are identified, the Law Enforcement Authority
proceeds with their seizure, confiscation or freezing. Confiscated property
becomes State property and any financial transaction carried out thereafter
with respect to such property is null and void.92
3.2.6 The Fate of the Confiscated Property and the
Protection of Third Party Interests
The State may use the proceeds from confiscated property to fund
crime prevention projects.93 However, the State must not disregard
interests of bona fide third parties in respect of the confiscated
property. In case the prosecuted person is acquitted after judicial review, the
state must make restitution for the confiscated assets in cash.94
91 Article 56 of the AML Law.
92 Article 60 of the AML Law.
93 Article 61 Par 1 of the AML Law.
94 Article 61 Par 2 of the AML Law.
35
Bona fide third party interests are also protected in
cases of null and void transactions relating to the confiscated property, but
only if the owner can prove that the property was acquired in good
faith.95
3.2.7 Cross Border Movement of Cash
Rwanda is surrounded by four countries, namely, Uganda, Tanzania,
Burundi and the Democratic Republic of the Congo (DRC), and has 17 official
entry points, some of which are not operational.96 Whoever passes
through any of the functioning entry points must declare whatever cash he or
she has on him which exceeds the declarable threshold. But this does not apply
to people in possession of withdrawal slips issued by banks. Whoever fails to
make such a declaration is considered to have committed the offence of money
laundering.97
Even though everyone has a legal obligation to declare cash at
the border post, other official practices undermine this requirement. For
instance, Rwanda has entered into an agreement with Uganda and Kenya, in terms
of which their citizens may move freely in the territory of each signatory
country with the use a national identity card.
This measure has relaxed the level of control over citizens
moving across the borders of these three countries. This concession has made it
easy for people crossing the borders with sums of
95 Article 57 Par 2 of the AML Law.
96 See the list of Rwandan official border posts at
http://www.migration.gov.rw/index.php?id=214
(accessed
on 27 August 2014).
97 Article 7 of the AML Law.
36
money above the declarable threshold to escape
controls,98 a golden opportunity for money launderers.
3.2.8 Aligning Rwanda's Legal System to FATF
Standards
The Rwandan legal system complies partly with the FATF
recommendations. Its extended scope of the criminalisation of money laundering
is a reflection of FATF Recommendation 3, which requires states to criminalise
all serious offences, with a view to widening the range of predicate offences
for ML.
Moreover, the FIU's power to stay any suspicious transaction
without a court order is a strategic stride for the FIU to do a better job. It
is in accordance with FATF Recommendation 29, which requires states to give
FIUs the enforcement information and powers required to undertake their
functions properly.
However, there are some drawbacks that need to be mentioned:
First, the only recognised mental element under Rwandan law is
knowledge in the strict sense. This is due to the fact that the dynamic
interpretation of criminal laws is strictly prohibited, and courts are not
allowed to base their judgments on analogy. Restricting the mental element to
knowledge contravenes FATF Recommendation 3, which requires states to ensure
that the
98 Kimenyi F `With cross-border trade prioritized, EAC
integration process gets accelerated' The New Times
21 March 2014 3; Jean-Guy A and Gerald A Informal Cross
Border Trade in Africa: Implications and Policy Recommendations (2012) 3
Africa Economic Brief 8.
37
intent and knowledge in money laundering cases may be inferred
from objective factual circumstances.99
Second, there is a risk that the FIU could abuse its powers to
confiscate, seize or freeze suspicious assets to the detriment of third parties
who have a good faith interest in the matter which, in turn, would undermine
FATF Recommendation 6 which require that countries should adopt measures to
enable their competent authorities to confiscate property laundered, without
prejudicing the rights of bona fide third parties.
Another deficiency relates to cross border cash declaration
requirements. The rules on declarations of cash above the declarable limit have
yet to be put into effect. Even though travellers are temporarily being
requested to declare amounts of money exceeding 10 000 USD, there are no
published directives on how to inform the public about their duty to declare
this amount.
What is more, the exemption provided for people with bank
withdrawal slips undermines the purpose of the declaration. In other words,
this exemption does not fully eliminate other risks such as the financing of
terrorist groups operating outside the country. This exemption not only limits
the effectiveness of the declaration system, but also impedes the ability of
the FIU to exercise its powers to request and to obtain further information
about the intended use of the money abroad.
Moreover, the sanction for people who do not declare their wealth
at the border is too stringent and not proportionate to the offence. In fact,
the undeclared cash of those citizens
99 Article 4 of the Penal Code of Rwanda.
38
who cross the border may not necessarily be for a laundering
purpose, for there might be other, not necessarily illegal reasons, such as
ignorance of the law or pressing family exigencies which cause people to cross
borders with forbidden sums of money.
Additionally, most of the border posts are poorly staffed and
lack the proper infrastructure to facilitate cash declarations, and where such
infrastructure exists, it does not equate to the risk at stake.
The above-mentioned weaknesses undercut Rwanda's efforts to avert
the threat posed to regional economies by transnational money laundering.
3.3 Anti-Money Laundering Coordination and Institutional
Framework
3.3.1 The Financial Investigation Unit (FIU)
The FIU was created to implement and coordinate national efforts
to fight money laundering and the financing of terrorism.100 Its
main duties are to collect, analyse and disseminate information related to
potential money laundering or terrorist financing activities. It is also
authorised to conduct investigations based on the information it
acquires.101
This unit is a law enforcement-type of FIU,102
entrusted with the powers to coordinate the implementation of the laws relating
to the prevention and punishment of the crime of money laundering and the
financing of terrorism. The FIU consists of police officers and a few
civilians
100 Article 20 of the AML Law.
101 Article 5 of the Presidential Order No 27/01 of 30 May 2011
Determining the Organization, Functioning
and Mission of the Financial Investigation Unit (herein after FIU
Presidential Order).
102 International Monetary Fund Financial Intelligence Units:
An Overview (2004) 13.
39
recruited on the basis of their exceptional knowledge in the area
of money laundering.103 The FIU's s head office is at the Rwandan
National Police head office in Kigali.104
The FIU, unfortunately, has the following shortcomings:
First, the FIU's operational independence is compromised by the
fact that it operates under the National Police authority. Its director is
appointed by the head of appointments in the Rwandan National
Police.105 There are no clear guidelines for the nomination and
dismissal of the director of the FIU. The fact that the FIU's organisational
structure is determined by the Rwandan National Police Council106
undermines its operational independence.
Second, the fact that some of the FIU's staff are not appointed
on a permanent basis, coupled with the lack of a clearly defined policy to
retain staff, affects the unit's sustainability and capacity and also
constitutes a risk to the confidentiality of the information that FIU has at
its disposal.
Finally, the absence of an independent budget for the unit's
operational costs, as well as its dependence on working guidelines received
from above, affects its operational independence as this involves unnecessary
bureaucracy during the process of requisitioning resources to carry out its
work.
Operationally, the FIU's ability to exchange information with its
stakeholders should be based on trust, a key ingredient for its effectiveness.
However, in practice, the Rwandan FIU's
103 Article 24 of the FIU Presidential Order.
104 Article 3 of the FIU Presidential Order.
105 Article 22 of the FIU Presidential Order.
106 Article 21 of the FIU Presidential Order.
40
closeness to the National Police has the effect of discouraging
reporting entities from disclosing information to the FIU out of fear that the
information might come into the hands of the police who, in turn, could use it
to investigate any other matter. In fact, the FIU's police officers are more
involved in ordinary policing duties than in gathering and analysing
intelligence on economic criminality. Quite apart from this, the officers are
not trained to work as FIU officials.
3.3.2 National Public Prosecutor Authority
(NPPA)
The NPPA has its main office in Kigali and has district offices
in other areas. It is headed by the Prosecutor General, who is assisted by his
deputy and six Public Prosecutors with national competence.
The NPPA has a specific department in charge of economic and
financial crimes.107 This department is mandated to investigate and
to prosecute money laundering cases. However, in all its time of existence, it
has not managed to investigate and prosecute a single case of money
laundering.
3.3.3 Rwanda National Police (RNP): Economic and
Financial Unit
The National Police has a twin department to the FIU which deals
with other financial crime cases such as corruption, embezzlement, financial
fraud and bankruptcy. At the time of writing, this department has investigated
only one case similar to a money laundering case which the prosecutor declined
to prosecute for lack of sufficient evidence.
107 See the NPPA organizational structure at
http://nppa.gov.rw/our-services/at-nppa-branches/ibyaha-
bimunga-ubukungu-bwigihugu/?L=1 (accessed on 29 August 2014).
41
3.3.4 The Office of the Ombudsman
The Office of the Ombudsman was established by Article 182 of the
Constitution. It is mandated to reinforce good governance in public and private
institutions.108 In addition to its many other functions, this
office is invested with various powers, including the powers of judicial
police,109 powers to request administrative sanctions,110
prosecutorial powers,111 bailiff's powers,112 and the
power to request judicial review.113 This office plays an important
role in the fight against money laundering given its being a line institution
in charge of anti-corruption and transparency, in general.
3.3.5 Revenue Service: Investigation
Department
Another key player in the fight against the laundering of money
associated with tax offences is the Rwandan Revenue Authority (RRA), which also
conducts investigations. Consisting of police officers, it has judicial powers
to investigate tax cases and it cooperates with other customs agents regionally
and internationally. Like other Rwandan law enforcement authorities, it has not
yet investigated any money laundering case within its jurisdiction.
108 Gatera A and Ngilinshuti V Strengthening Good Governance
in Rwanda: The Experience of the Office of the
Ombudsman 9.
109 Article 11 of Law No. 76/2013 of 11 September 2013
determining the mission, powers, organisation and
functioning of the Office of the Ombudsman (herein the Ombudsman
Law).
110 Article 9 of the Ombudsman Law.
111 Article 13 of the Ombudsman Law.
112 Article 16 of the Ombudsman Law.
113 Article 15 of the Ombudsman Law.
42
3.4 Preventive Measures
3.4.1 Preventive Measures in Financial
institutions
AML preventive measures in financial institutions are provided
for in both the AML law and the Bank Law of 2008. Whereas the AML Law sets out
preventive measures in general terms, the Bank Law contains specific
regulations for banks in relation to combating money laundering. They relate to
the prohibition of fictitious financial banks and anonymous accounts; customer
identification; identification of owners; monitoring of suspicious
transactions; record keeping; and how to deal with politically exposed persons
(PEPs).
3.4.1.1 Prohibition of Fictitious Banks and Anonymous
Accounts
Generally, financial institutions intending to operate in Rwanda
are required to be physically present in the country.114 In
addition, they are obligated to cooperate with judicial authorities and the FIU
by furnishing them with accurate information regarding their management,
representation, and beneficial owners.115 This measure aims to
enhance safety in the financial system and to prevent it from being abused for
criminal purposes.
For this reason, financial institutions are strictly prohibited
from opening or maintaining anonymous accounts, or accounts with fictitious or
incorrect names.116 Financial institutions are also proscribed from
establishing business relationships with institutions with no physical presence
in their home country, or banks suspected of operating
anonymously.117
114 Article 9 Par 1 of the AML Law.
115 Article 9 Par 3 of the AML Law.
116 Article 9 Par 4 of the AML Law.
117 Article 9 Par 2 of the AML Law.
43
3.4.1.2 Customer Identification
In Rwanda, reporting entities, including financial institutions
must identify their customers prior to and during business relationships. They
are required to identify and profile customers who execute occasional
transactions exceeding the threshold set by the FIU, or those who conduct
suspicious transactions such as the receipt of electronic transfers without
originator information.118
The customer identification process requires Rwandan citizens to
identify themselves with their national identity card or passport, and legal
persons must show their registration certificate and list of
shareholders.119 Individuals acting on behalf of others are required
to submit their power of attorney documents, as well as their national identity
cards.120
3.4.1.3 Beneficial Ownership
According the AML Law, the reporting entities are required to
identify the real owner of the business that is being conducted. In the case of
transactions, financial institutions are required to establish by all means
other unmentioned beneficiaries on behalf of whom the client is acting. In case
of a persistent doubt, a reporting entity has to consider it as a reportable
suspicious transaction, and take adequate steps to inform the
FIU.121
118 Article 10 Par 1 of the AML Law.
119 Article 10 Par 2 of the AML Law.
120 Article 10 Par 3 of the AML Law.
121 Article 14 of the AML Law.
44
3.4.1.4 Monitoring of Suspicious Transactions
The reporting entities are required to monitor certain suspicious
transactions. More specifically, they are required to pay special attention to
all strange transactions or exceptionally large transactions which are
apparently unjustifiable. Such transactions must be thoroughly examined, and
once their origin and purpose are established, the findings must be reported to
the FIU.122 Moreover, special attention is devoted to business
relationships and transactions entered into with persons resident in or
originating from countries known to have lax anti-money laundering
laws.123
3.4.1.5 Record Keeping
Reporting entities are required to keep records of transactions
involving their customers or clients for at least 10 years, starting from the
date the business relationship was terminated in the case of a regular
customer, or the day on which the transaction was concluded in the case of an
occasional customer.124 This period applies equally to both domestic
and international transactions.125
The requirement to keep records is also imposed on members of
designated professions, such as lawyers. They are required to maintain account
books and business correspondence for at
122 Article 15 Par 1 of the AML Law.
123 Article 15 Par 2 of the AML Law.
124 Article 17 Par 1 of the AML Law.
125 Article 17 Par 2 of the AML Law.
45
least 10 years after the end of the business
relationship.126 Stored records are exchanged solely upon the
authorisation of the FIU.127
3.4.1.6 Dealing with PEPs
In the process of dealing with PEPs, reporting entities must
apply normal due diligence. They have to ensure that appropriate risk
management systems exist for establishing whether the customer is a political
leader, and they are duty bound to take reasonable measures to ascertain the
source of the PEP's wealth. Before establishing a business relationship with
such a person, the employee dealing with the case must first obtain the
approval of the employer and must undertake to conduct regular monitoring of
the business relationship with such a client.128
3.4.2 Preventive Measures in Designated Non-Financial
Businesses and Professions
Designated Non-Financial Businesses and Professions are other
business sectors exposed to the risk of being used as conduits by money
launderers. They, too, are legally required to apply measures aimed at
combating money laundering and the financing of terrorism. They include lawyers
in private practice, auditors and accountants, real estate agents, traders in
objects of value such as precious metals, casinos, lottery agencies, and gaming
halls. All these businesses are implicitly included as reporting entities which
are subject to AML requirements by virtue of their owners and managers being
individually subjected to AML requirements.129
126 Article 17 Par 3 of the AML Law.
127 Article 17 Par 4 of the AML Law.
128 Article 16 of the AML Law.
129 Article 3 of the AML Law.
46
Like other reporting entities, DNFBPs are supervised by the FIU
in matters relating to compliance with all AML/CFT obligations.130
However, the FIU's lack of powers to impose sanctions on DNFBPs is
problematic.
3.4.2.1 Lawyers
Lawyers in private practice are subjected to AML reporting
requirements when they represent or assist their clients.131
However, they are not obliged to submit a suspicious transaction report to the
FIU if this obligation would override legal professional
privilege.132
Lawyers are required to uphold professional secrecy in all their
dealings with clients or with other lawyers on behalf of a
client.133 In exceptional circumstances, when a lawyer is required
to do so, he/she may convey the confidential information only to the ethics
committee of the lawyers' association.134
Breach of professional secrecy is otherwise punishable by the
Penal Code with two months' to three years' imprisonment and/or a maximum fine
of 50 000 Rwandan francs. In addition, someone found guilty of such an offence
may be barred from holding public office for a period of up to 10
years.135
130 Article 13 of the FIU Presidential Order.
131 See article 3 Par 3 of the AML Law. It provides a list of
activities where lawyers are required to abide by
AML requirements.
132 Article 8 Par 2 of the AML Law.
133 Article 54 Par 1 of the Rwandan Bar Law.
134 Article 54 of the Rwandan Bar Law.
135 Article 214 of the Penal Code of Rwanda.
47
Given the constraints placed on lawyers with regard to divulging
information they receive from clients, they will, in practice, be reluctant to
divulge information to the FIU, especially because of the danger that the
information could be used for purposes for which it was not intended.
3.4.2.2 Legal Persons and Non-Profit
Organisations
Legal persons may be either companies or cooperatives. Companies
are registered by the Rwandan Development Board while cooperatives are
registered under the Rwanda Cooperative Agency. Whereas cooperatives deal
mainly with the rural population, companies deal also with international
investors, whom they welcome, but amongst whom might also be money launderers
pretending to be honourable business people or entrepreneurs.
As pointed out above, the Rwandan government has devised a range
of incentives to attract foreign businesses to the country. Amongst these is
the speedy registration of companies, which can take place in just six
hours.136 Once the registration certificate is issued, it serves as
a conclusive evidence that the company is lawfully incorporated,137
which also means that the holder of the certificate may open a bank account
without further ado.
Rwandan non-profit organisations (NPOs) are divided into three
categories, namely national non-governmental organisations, international
non-governmental organisations, and the religious-based organisations. Each
category of NPO is governed by its specific enabling law. However, Rwanda does
not have full control over the financial operations of NPOs, as they
136 Rwanda Development Board RDB Client Charter (2013)
3, available at
http://www.rdb.rw/fileadmin/user_upload/Documents/Docs/RDB_Client_Service_Charter_01.pdf
(accessed on 3 September 2014).
137 Article 17 of the Company Law.
48
enjoy administrative and financial autonomy.138 It is
a matter of concern that this financial freedom could be abused by launderers
who could very well regard it as an opportunity to dodge what they consider to
be invasive and unnecessary state interventions.
3.5 Customer Due Diligence (CDD)
The obligation placed upon reporting entities to apply CDD is
imposed by Article 10 of the AML Law. It applies equally to all reporting
entities and requires all reporting entities, including financial institutions
and DNFBPs, to identify the customer before establishing any business
relationship or whenever the customer executes an occasional transaction
exceeding the threshold amount set by the FIU.
All reporting entities are further obliged to pay attention to
all complex or unusual patterns of transactions with no clear purpose. They
must examine the background of or circumstances attending such transactions and
must report their findings to the FIU.139
However, the laws and directives governing the application of the
risk-based approach to customer due diligence do not distinguish between the
following forms of customer due diligence: enhanced due diligence (EDD); normal
due diligence (NDD); and simplified due diligence (SDD). The application of the
risk-based approach is left to the discretion of reporting entities, which may
disregard their obligation to apply it, simply because of the high premium they
place on making maximum profits.
138 Article 10 of the Law Governing National Nongovernmental
Organisation; Article 3 of Law Governing
International Nongovernmental Organisation; Article 7 of the
Law on Religious-Based Organisations.
139 Article 15 of the AML Law.
49
Another problem regarding the application of CDD is the rising
criminal use of new technology. The non-face-to-face business relationships
pose a potential money laundering risk, as launderers transacting small amounts
may go undetected. It is of special concern in Rwanda due to the lack of
strategies to deal with cyber laundering.
3.6 Cooperation
As stated above, cooperation is essential for the effective
combating of ML, given its transnational character.140 In this
context, Rwanda has developed two channels of cooperation: domestic cooperation
and international cooperation.
3.6.1 Domestic Cooperation
Although the Rwandan AML Law does not openly provide for domestic
cooperation, the diversity of representatives in the advisory board of the FIU
is considered to be an adequate domestic forum to ensure some level of domestic
cooperation, even though it is not the board's main task to do
this.141
Some degree of cooperation does take place amongst individual
institutions and organisations. In addition, some forms of cooperation have
been observed between individual institutions. The strong ties between the FIU
and other institutions such as the National Bank, the prosecution service, the
revenue services and all reporting entities have helped it to forge common
approaches in combating ML. Some form of cooperation exists between non-profit
organisations and their regulator, namely the Rwanda Governance Board.
140 Stessens G (2000) 252.
141 Article 19 of the FIU Presidential Order.
50
However, in the business sector, the level of cooperation is
still low, given the existing risk of that businesses may be used for
laundering purposes.
3.6.2 International Cooperation
Rwanda understands the need for international cooperation in the
fight against transnational organised crime, including money laundering. It is
in this context that it cooperates with other states in matters relating to the
exchange of information, investigation and the implementation of provisional
measures, all of which it does through the channel of bilateral and
multilateral cooperation agreements.142
However, there are instances where Rwanda may refuse cooperation,
mostly in cases where cooperation is likely to prejudice public order, national
security or the fundamental principles of the Constitution of the Republic of
Rwanda.143
Thus, Rwanda may decline a request for cooperation for several
reasons: if the matter involved is not considered as a crime in Rwanda, if the
requesting authority does not have competence to do so under the law of the
requesting state, if the case has been disposed of by the
Rwandan criminal justice system, if the requested measures are
not accepted or applicable in Rwanda, if the person affected had not been
legally represented, or if the prosecution is based on sex, religion,
nationality or is politically motivated.144
142 Article 28 of the AML Law.
143 Article 30 of the AML Law.
144 Article 30 of the AML Law.
51
3.6.3 Mutual Legal Assistance
Mutual Legal Assistance (MLA) is part of the package of
international cooperation to support the prosecution and punishment of
individuals suspected of money laundering.145 As part of its
international obligations, Rwanda provides MLA in specific areas, upon the
necessary requirements being fulfilled.
Concerning the scope of assistance, Rwanda cooperates in matters
relating to the collection of evidence, exchange of judicial documents,
facilitation of on-site visits during case preparation, requests for the
implementation of provisional measures,146 the recovery of
assets,147 and any other matter that would help the requesting state
bring suspected money launderers to the courts to be put on trial.
In terms of requirements set out by the AML Law for successful
MLA, the request should be clear and concise and should not only relate to the
agreed upon cooperation148 but should also abide by the transmission
procedure.149 Once the request is accepted and processed, Rwanda
requires that the content be treated in confidence,150 and parties
to the MLA process are prohibited from using bits of evidence for purposes
other than the purpose for which the
145 Stessens G (2000) 254.
146 Article 33 of the AML Law.
147 Article 40 of the AML Law.
148 Article 42 of the AML Law.
149 Article 41 of the AML Law. Generally, the Requests for MLA
are transmitted through diplomatic channels.
In urgent cases, however, a request may be communicated through
INTERPOL or directly by the foreign authorities to the judicial authorities in
Rwanda, either by mail, or any other faster means of communication.
150 Article 45 of the AML law.
evidence was provided.151 Finally, the expenses
incurred in the execution of a MLA process are borne by the requesting state,
unless agreed otherwise.
3.6.4 Membership in International and Regional
Bodies
International and regional bodies can together serve as a forum
for effective cooperation in the fight against the ever increasing and
widespread crime of money laundering. In this context, it is vital for Rwanda
to join other countries in this fight and be able to enjoy membership benefits
ranging from the exchange of best practices to regular peer reviews. At
present, Rwanda is not affiliated to any such organisation. The Rwandan FIU is
not even a member of the Egmont Group, the international organisation that
co-ordinates the work of financial intelligence units around the world. Thus
far, Rwanda enjoys only observer status at meetings of the Eastern and Southern
Africa Anti-Money Laundering Group (ESSAMLG).
3.7 Impediments to Prosecution of Money Laundering In
Rwanda
3.7.1 Overview
The prosecution of money laundering is considerably more
difficult than other economic crimes due to its organised nature, its use of
sophisticated techniques and the ability of criminals to engage the services of
professional advisors such as lawyers and accountants. In addition to its
difficulty, it is impeded by lack of people with the required skills to deal
with the complexity and sophistication of money laundering in Rwanda.
52
151 Article 46 of the AML Law.
53
This section discusses practical impediments to the prosecution
of money laundering cases in Rwanda as submitted by the NPPA (herein stated
challenges) , on one hand, and the apparent shortcomings observed in the
prosecution system as a whole by the outsider (herein the observed challenges)
on the other hand.
3.7.2 Stated Challenges in Prosecuting Money
Laundering
The following challenges were advanced by the NPPA, as hindering
its efforts to effectively prosecute the crime of money
laundering:
3.7.2.1 Absence of Precedence
The Rwandan NPPA has been pretexting absence of a precedent case
to kick-start the process. However, the genuineness of this reason is
questionable, given the fact that there will never be a prosecution
specifically aimed at paving the way for further prosecutions of money
laundering.
Admittedly, a case may enhance experience and pave the way for
the rest of the prosecutors to apply the AML legal framework. However, the
absence of precedent ML case is nothing other than a scapegoat behind which
prosecutors are hiding their incompetence in matters of ML.
They should understand that prosecution is a key tool without
which all AML mechanisms may be in vain. Its absence is a signal to the
launderers that the domestic structures are not ready and able, and thus a
motivation for them to continue their criminal acts.
54
In brief, as long as launderers are not successfully prosecuted
for their criminal deeds or are allowed to live off the profit of their illegal
activities, the work of the FIU and other law enforcement authorities involved
in AML shall continue to be considered insignificant.
3.7.2.2 Lack of Resources
Another major challenge not only to the prosecution of money
laundering in Rwanda is its entailed costs. In fact, Rwanda faces resource
constraints in many sectors and AML costs competes with many other more
pressing public issues that need funding. The resources needed are meant to
cover all operational costs such as the costs to establish necessary
infrastructure and skills development.
3.7.3 Observed Challenges of Prosecuting Money
laundering
The following challenges are observed from an outsider
perspective as impeding the effective prosecution of the crime of money
laundering:
3.7.3.1 Legal Impediments
The legal impediments to prosecute money laundering in Rwanda are
primarily based on the lack of clarity about the criminalisation approach to
adopt. As a result of this confusion, many cases which would give rise to money
laundering go unchecked.
In addition, there is an ongoing debate over the criminalisation
of self-laundering152 as a separate prosecutable offence. In fact,
Rwandan judges have expressed their concerns stating
152 Self-laundering is a criminal state where the offender who
commits a predicate offence `deals with' the
proceeds of offending himself or herself.
55
that criminalising self-laundering is a violation of the ne
bis in idem principle. According to them, the laundering of proceeds, when
done by the author of the predicate offence, should be inclusive in the
predicate offence itself. For this reason, they require a specific intent
(dolus specialis) to launder or conceal the proceeds,153 a
requirement which is inconsistent with the provisions of the Palermo Convention
of 2002. The difficulty in proving the special intent as required by the court
constitutes an impediment to the prosecution of money laundering.
3.7.3.2 Lack of Skilled Staff, Equipment and Technical
Capacity
As already noted, the fight against ML requires far more than
just the creation of enabling legislation and the setting up of the necessary
implementation structures. It is also important to build the capacity of
agencies so that they understand the content and scope of application of the
legislation, how the mechanisms in place should work, and the role that each
institution should play in AML.
In Rwanda, ML is a new area of law where lack of qualified human
resources is particularly severe.154 First, the lack of
investigation skills in this area results in cases being rejected on grounds of
insufficient evidence.155 Second, the deficient knowledge of AML
legislation on the
153 Durrieu R Rethinking Money Laundering & Financing of
Terrorism in International Law: Towards a New
Global Legal Order (2013) 243.
154 Alessandra F and Pedro P `Using money laundering
investigations to fight corruption in developing
countries Domestic
obstacles and strategies to overcome them'(2012) U4 Issue 10,
available at
file:///C:/Documents%20and%20Settings/user/My%20Documents/Downloads/copy%20of%20impedimen
ts%20and%20concl.pdf (accessed on 7 October 2014).
155 CIGI, Rwanda: Security Rector reform (2012) 4,
available at
http://www.ssrresourcecentre.org/wpcontent/uploads/2010/04/Country-Profile-Rwanda-April-7.pdf
(accessed on 10 October 2014).
56
side of prosecutors and judges prevents them from making better
use of the opportunities provided by this law.156
Investigators and prosecutors focus more on the predicate offence
where they typically consider criminal proceeds as evidence to prove the
occurrence of predicate offence and not a specific case of money laundering.
The problematic shortage of skills within the FIU is in some part
caused by the structure and nature of the work where staff are subjected to
frequent transfers,157 an act which not only affects the human
resource development of the FIU, but also its operations.158
3.7.3.3 Lack of Familiarity with AML Laws in the
Reporting Entities
Reporting entities do not have same understanding of their role
in the implementation of the AML Law. Many of them believe that it is solely a
FIU duty to implement the law by collecting necessary intelligence which it
uses as evidence in court, while others, mostly the foreign banks, are still
following guidelines from their countries of origin.159 Being
profit-minded, especially when the transaction involves big money, reporting
entities opt to turn a blind eye to their obligations, which results into
obstructing the necessary cooperation for effective prosecution of money
laundering cases.160
156 US Department of States International Narcotics Control
Strategy Report on Rwanda (2014) 6, available at
http://www.state.gov/j/inl/rls/nrcrpt/2014/supplemental/227996.html
(accessed on 15 October 2014).
157 Articles 23 and 25 of the Presidential Order establishing a
specific statute for Police Personnel
158 Gwintsa N `Challenges of establishing financial intelligence
units' in Goredema C (ed) Money Laundering
Experiences: A Survey (2006) 61.
159 Agutamba K `Loopholes for Money Laundering exposed' The
Rwanda Focus 1 October 2012. Available at
http://focus.rw/wp/2012/10/loopholes-for-money-laundering-exposed/
(accessed on 11 October 2014).
160 Agutamba K (2012) 3.
57
3.7.3.4 The Indirect Effect of ML Prosecutions on
Business Opportunities
Even though the intent of a country may not be to shield
international criminals from prosecution, it is important to understand that a
poor country like Rwanda may hesitate to enforce fully AML frameworks including
prosecution, mostly when it is established that such a move would have an
indirect effect on the national economy, such as loss of business, employment
and tax opportunities. It is provided that such state's interests, vested in
suspicious businesses, may influence its implementation of the AML system. In
other words, a state cannot prioritise the prosecutions of conduct which, in
reality, is a driving force for its economy.161
3.8 General Observations on the Effectiveness of ML
Responses in Rwanda
The Rwandan AML Law appears to be comprehensive and packaged to
deal with the threats of Money laundering. Its areas of strengths include the
criminalisation of ML and international cooperation where strategic aspects are
well captured, including a wide range of MLA as required by main international
legal instruments such as article 18 of the Palermo Convention of 2000 and
article 46 of UNCAC.
In addition, it has provided for the principle of dual
criminality to protect ML fugitives from unjust punishment and the principle of
speciality to ensure that a person can be prosecuted only for the charges on
which they were extradited and that evidence obtained through
161 Castle A and Joanne L `Money laundering and corruption in the
Asia Pacific' (1999) International Centre for
Criminal Law Reform and Criminal Justice Policy 8,
available at
http://www.icclr.law.ubc.ca/Publications/Reports/Paper4.PDF
(accessed on 24 August 2014).
58
international cooperation may not be used for purposes and
proceedings other than those for which the cooperation was requested.
The third positive aspect covered in the AML law is the
consideration of the principle of aut dedere aut judicare to ensure
that the criminals will not escape justice and find safe haven on the basis of
nationality.
However, the existence of a well packaged law on anti-money
laundering did not remove the challenges observed in practice. In fact, this
law was brought in as a «legal transplant», far from being
self-executing. Even the financial investigation unit, which would coordinate
the implementation of this law, came into force three years following the
enabling act.162
The delay in operationalising the AML Law has led to an
understanding that the adoption of an AML Law in Rwanda was not based on a
social problem necessitating a legal solution, but rather was an international
requirement which local authorities knew very little about. Lack of knowledge
and ownership has created reduced enforcement efforts which have led to
significant discrepancies between the legal theories as they appear in the AML
Law and the operational reality on the ground.
As an illustration of this situation, the AML Law has provided
for a fund to support activities relating to crime prevention. This fund is
supposed to use confiscated proceeds of crime as its operational funds. But, as
of the time of writing, this fund has not been established and it remains a
question as to how confiscated proceeds of crime are managed.
162 The FIU Presidential Order came into force in 2011, whereas
the enabling law had been adopted in 2008.
Even after noticing the need to have an AML mechanism in place,
authorities were hindered by the existence of two approaches regarding the
criminalisation of money laundering. The confusion over the applicable
approach, coupled with other practical challenges, has led the law enforcement
authorities to become increasingly reluctant to investigate money laundering as
a specific scheme compared to the predicate offence.
Moreover, the law only recognises a single mental element, the
knowledge of unlawfulness. This flies in the face of the 1989 Vienna Convention
and UNCAC of 2003, which provide that knowledge, intent or purpose, may be
inferred from other objective factual circumstances.163
The law has basic shortcomings regarding its provisional measures
compared to the FATF recommendations. The difference is not only in the legal
wording of the text, but also in regard to the civil procedure itself. The full
implementation of AML laws remains a worry, as Rwanda lacks qualified and
well-trained officials to deal with the crime of money laundering.
It is therefore the author's view that Rwanda is not doing enough
to help fight money laundering both locally and at the transnational level.
However, the existing political will to do more offers a glimmer of hope.
59
163 Article 28 of UNCAC and Article 3(3) of the Vienna
Convention.
60
CHAPTER FOUR
GENERAL CONCLUSION AND RECOMMENDATIONS.
4.1 General Conclusion
The purpose of this paper was to assess the effectiveness of ML
responses adopted by Rwanda by measuring them against international AML
frameworks such as the FATF recommendations of 2012.
As already demonstrated in Chapters One and Two, Rwanda ranks
among the poorest countries on the globe. Its main strategy to fight poverty is
to position itself as an investment-friendly nation. However, this hospitality
and enthusiasm to do business may present a golden opportunity for criminals
who intend to launder their money through different investment schemes in
Rwanda.
While money laundering is globally perceived as an operational
risk affecting the foundations of national development,164 it has an
additional negative effect on Rwanda as it poses a threat to the state's
reputation, which is key for its development.
In this paper, Rwanda's legal and institutional frameworks were
evaluated to see if really Rwanda can stand the ever-growing transnational
threat of money laundering.
164 Goredema C `Tracing Proceeds of Crime in Southern Africa:
Challenges and Milestones' in Goredema C
(ed) Money Laundering Experiences: A Survey (2006)
121.
61
In Chapter Three, it was submitted that laws enacted aspired to
meet almost all international standards. However, lack of consensus on the
applicable approach to criminalise money laundering and the judicial disregard
of ML as a stand-alone offence have emerged as practical challenges in the
implementation of the AML law.
Interestingly, the current Government has shown a strong
political will to combat all forms of criminality. It has given due
consideration to the fact that development achievements so far recorded may be
tarnished by opportunistic criminals, who may use the infrastructures in place
as vehicles for money laundering.
This work has also attempted to sketch some of the impediments to
the prosecution of crimes of money laundering in Rwanda.
In the effort to establish whether Rwanda as a developing country
can meet AML requirements that are placed on it given its limited resources,
capacity and expertise, this research has provided practical and realistic
recommendations for a more effective AML framework.
4.2 General Recommendations
As above mentioned, the effectiveness of Rwandan AML framework
requires three main responses, namely, tackling the enforcement deficit,
restructuring the leadership and the functioning of the FIU and, finally,
refining public awareness and cooperation in matters relating to money
laundering.
62
4.2.1 Confronting the Enforcement Deficit
One of the most contentious and enduring problems in the fight
against money laundering is the existing gap between the text of the law and
the practice. It is a gap that has made it difficult to prosecute money
laundering cases. Not a single case has been successfully prosecuted so far,
despite a multitude of economic crime cases being lodged every year. The
following suggestions are submitted to close this gap.
4.2.1.1 The Necessity to Eliminate All Identified Legal
Deficiencies
One of the means to combat the enforcement deficit is to
eliminate all identified legal deficiencies which may render the implementation
of the Rwanda's AML regime ineffective. In particular, the Penal Code and AML
Law should be harmonised in order to have a consistent approach to
criminalising ML.
Second, enforcement mechanisms should be put in place to improve
the level of compliance. This includes the active application of preventive
measures and the provision of a wide range of proportional and effective
sanctions for those who fail to comply with the AML laws. In this context, the
FIU should be given the power to impose sanctions such as fines and provisional
closures.165
165 Such measures may allow the FIU to aggressively act against
non-bank financial services and the DNFBP
sectors, and improve the level of compliance with AML/CFT
requirements.
63
4.2.1.2 The Need for a Comprehensive Implementation
Strategy
It has been submitted that the FIU's poor strategic
implementation of the AML regime is linked to the lack of predetermined
objectives with clear performance indicators. In fact, even the FIU action plan
is not reflected in the general RNP strategic plan of 2009-2013.166
The FIU should therefore cooperate with other relevant stakeholders in
developing a comprehensive implementation strategy indicating Rwanda's
strategic responses to ML risks.
4.2.1.3 The Need to Expand Skilled Human Resources and
Technical Capacity
Rwanda is advised to allocate resources to strengthen knowledge
and skills for individuals working in the AML sector, such as the FIU members,
regulators, public prosecutors, the judiciary and the law enforcement, and to
provide them with adequate equipment such as computer software, vehicles and
surveillance equipment to enable them to perform their AML functions
effectively.
Where possible, some of these efforts should be extended to staff
of private sector institutions with reporting obligations, especially in
sectors most vulnerable to ML. Despite budget constraints, many of these needs
may be solved through strategic cooperation with other states, or through funds
collected from the confiscated criminal proceeds, as indicated in the AML
Law.167
166 Rwanda National Police Strategic Plan 2009-2013.
167 Article 61 of the AML Law.
64
4.2.2 Restructuring the Leadership and Functioning of
FIU
As mentioned above, the FIU is overburdened by its many duties
which an institution established to do the work it is supposed to do can
ill-afford. It is for this reason that the following suggestions are made to
make the Rwandan FIU more effective, and thus professional.
4.2.2.1 The Necessity to Delegate Powers
The FIU is advised to focus on a coordination role and delegate
some of its other policing duties to the ordinary law enforcement agencies. In
fact, conducting additional investigations concurrently with other police units
could jeopardise the confidentiality of the information being investigated and
lead to the tipping off of the reported persons before they are apprehended.
4.2.2.2 The Need to Revisit the Appointment Procedure of
the Head of FIU
Special provisions relating to the appointment and dismissal of
the head of the FIU need to be established so that the discretion given to the
National Police Authority to appoint or dismiss personnel may not affect the
autonomy of the FIU. It is recommended that the appointment of the head of the
FIU be done through a process that upholds his or her autonomy in a more
65
formalised and solemn way168 in order to create a
sense of responsibility, acceptability, and respect on the part of the
reporting entities.
4.2.2.3 Independence of the FIU
As above discussed, the Rwandan FIU is not completely independent
as it is attached to the National Police. Tied to this is the issue of
independence from political influence or abuse in the carrying out of its
duties.169 With respect to Recommendation 26 of the FATF, it is
therefore recommended that the Rwandan FIU be given some level of autonomy to
ensure that confidentiality is imposed around all information it receives. This
will enable it to gain the trust of reporting authorities.
4.2.3 Refining Public Awareness and Cooperation in AML
Matters
The fight against money laundering cannot be won without
effective domestic and international cooperation. Domestically, Rwanda is
encouraged to establish a mechanism for public awareness of the crimes of money
laundering through the involvement of the media and all other actors who may
play a crucial role in fostering public discussion on money laundering and its
negative impact.
Rwanda is further advised to take a step towards becoming a
member of ESAAMLG and the Egmont Group for their importance in building
operational ties, including regular mutual evaluation and exchange of
information and expertise.
168 International Monetary Fund and World Bank Financial
Intelligence Units: An Overview (2004) 9, available
at
http://www.justice.gov.il/NR/rdonlyres/3DA825-5A9F-46-94-6199EEDB20FA/7885/FIUHandbook_English.pdf
(accessed on 5 September 2014).
169 Gwintsa N (2006) 50.
66
In sum, the recommendations cited above are meant to address
different sorts of deficiencies observed in the Rwanda's responses to money
laundering. The author of this research ends with the optimism that once the
above recommendations are implemented, the AML regime will become strong enough
to pre-empt and respond to AML threats.
67
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78
3. Other Online Sources.
· Central Intelligence Agency World Fact Book
2013, available at
https://www.cia.gov/library/publications/the-world-factbook/fields/2196.html
(accessed on 25 March 2014).
· The GDP Fiscal year estimates 2012-2013, available at
http://statistics.gov.rw/gdp-national-accout-fiscal-year-201213
(accessed on 26 March 2014).
· EAC Common Market Protocol on the Free movement of the
people, available at <
http://www.eac.int/commonmarket/movement-of-persons.html>
(accessed on 16 June 2014).
· Rwanda's Peace-keeping Mission, available at <
http://rwandaun.org/site/un-peacekeeping/>
(accessed on 17 July 2014).
· Rwanda Development Board RDB Client Charter
(2013), available at
http://www.rdb.rw/fileadmin/user_upload/Documents/Docs/RDB_Client_Service_Chart
er_01.pdf (accessed on 3 September 2014).
· The National Public Procurement Authority organizational
structure, available at
http://nppa.gov.rw/our-services/at-nppa-branches/ibyaha-bimunga-ubukungu-bwigihugu/?L=1
(accessed on 29 August 2014).
· Rwanda National Bank Foreign Private Investment in
Rwanda (2011) 4, available at
http://www.bnr.rw/uploads/media/Foreign_private_Investment_in_Rwanda_2011_Boo
klet_.pdf (accessed on 7 September 2014).
79
? Watson institute for international studies Colonialism in
the Congo: Conquest, Conflict, and Commerce (2005), available at <
http://projects.ecfs.org/eastwest/Readings/CongoSim.pdf>
(accessed on 20 October 2014).
? Center for Security Governance Country Security Sector
Snapshot: Rwanda, available at
http://www.ssrresourcecentre.org/countries/rwanda/
(accessed on 4 September 2014).
? Rwanda National Police Strategic Plan 2009-2013, available
at
<
http://www.police.gov.rw/uploads/tx_download/Strategic_Plan_version_10.pdf>
(accessed on 21 October 2014).
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