Anti-Money Laundering

The following legislative and regulatory provisions constitute the AML regime in Zambia:

• The Prohibition and Prevention of Money Laundering Act (14/2001) (as amended by Act No.44 of 2010) is the primary act that deals with money-laundering activities and restrictions.
• The Anti-Terrorism Act (21/2007) and Anti-Terrorism and Proliferation Act No. 6 of 2018 deals with the restriction of terrorist activities in the jurisdiction.
• The Forfeiture of Proceeds of Crime Act (19/2010) provides for the circumstances and instances of the civil and criminal forfeiture and seizure of the proceeds of crime.
• The Financial Intelligence Centre Act (46/2010) (as amended by Act 4/2016) establishes the Financial Intelligence Centre and sets out the duties of both supervisory authorities and reporting entities.
• The Public Interest Disclosure (Protection of Whistle-blowers) Act (4/2010) provides a framework within which persons that make a public interest disclosure will be protected. Its objective is to provide for the disclosure of conduct that is adverse to the public interest in the public and private sectors.
• The Mutual Legal Assistance in Criminal Matters Act, 1993 provides for the implementation of treaties for mutual legal assistance in criminal matters.
• The Plea Negotiations and Agreements Act (20/2010) governs the plea negotiations that may be entered into by accused persons.
• The Anti-Corruption Commission Act (3/2012) deals with corrupt and provides for the establishment of the Anti-Corruption Commission, which is mandated to deal with corrupt activities.
• The Narcotic Drugs and Psychotropic Substances Act (35/2021) provides for the establishment and functions of the Drug Enforcement Commission. It also criminalises trafficking in drugs and the unlawful manufacture of drugs.
• The Non-Governmental Organisation Act (16/2009) as amended by Act No.23 of 2020 provides for the coordination and registration of non-governmental organisations, and for the maintenance of a register of local and international non-governmental organisations.
• The Penal Code Act (Chapter 87 of the Laws of Zambia) criminalises offences and sets out the applicable sentences.
• The National Prosecution Authority Act 2010 established the National Prosecution Authority as the primary authority for the administration of criminal justice in the jurisdiction.
• The Bank of Zambia Anti-Money Laundering and Combating the Financing of Terrorism or Proliferation Directives, 2017 apply to all financial institutions (reporting entities) in relation to the duties of officers in ensuring AML compliance.

These acts apply at the national level.

The following bilateral and multilateral instruments at an international level have effect in Zambia:

• the Financial Action Task Force (FATF) Recommendations, which set out 40 special recommendations on counter-terrorist financing (CFT). The recommendations articulate international standards for countries to adopt for AML/CFT purposes and incorporate in local legislation;
• the UN Single Convention on Narcotic Drugs 1961 (amended in 1972) (acceded to by Zambia);
• the UN Convention on Psychotropic Substances 1971 (acceded to by Zambia);
• the UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1981 (ratified by Zambia);
• the UN Convention against Transnational Organised Crime 2000 (ratified by Zambia);
• the UN Convention against Corruption (ratified by Zambia); and
• the UN Convention on Suppression of Terrorism.

At a regional level, the following multilateral and bilateral agreements have effect in Zambia:

• the Southern African Development Community (SADC) Protocol on Combating Illicit Drug Trafficking (ratified by Zambia);
• the SADC Protocol against Corruption (to which Zambia is a signatory); and
• the African Union Convention on Preventing and Combating Corruption (to which Zambia is a signatory).

Zambia is also a member of:

• the Eastern and Southern African Anti Money Laundering Group; and
• the African Heads on Narcotic Law Enforcement Agencies.

The following public sector bodies and authorities are responsible for enforcing AML laws:

• Anti-Money Laundering and Combating Financial Terrorism Authority: This was established by Section 3 of the Prohibition and Prevention of Money Laundering Act (14/2001). It is a policymaking body with the power to prosecute individuals and companies for money laundering.
• National Task Force of Senior Officials: This was set up by the Cabinet Office to coordinate AML-CFT matters among stakeholders. It has the power to establish and improve existing policies on AML/CFT matters.
• Financial Intelligence Centre: Established by the Financial Intelligence Act, the centre has the power to investigate complaints and report to enforcement agencies such as the police, the Anti-Corruption Commission, and the Drug Enforcement Commission.
• Anti-Corruption Commission: Established by the Anti-Corruption Commission Act, this is a law enforcement body with the power to investigate and prosecute corruption offences.
• Zambia Police Service: This is a law enforcement body and receives instructions to charge accused natural and legal persons. It has the power to charge persons with criminal offences.
• Immigration Department: This is a law enforcement body which has the power to detect illegal immigrants.
• Zambia Security Intelligence Service: This is a law enforcement body with the powers of the Zambia Police Service.
• Drug Enforcement Commission: Established by the Drug Enforcement Commission Act, the commission has an AML Unit and has the power to investigate and prosecute drugs offences.
• National Prosecution Authority: This is the principal authority for all prosecutions and is a law enforcement body. It prosecutes charges on behalf of the police by virtue of Section 82 of the Criminal Procedure Code Act (Cap 88 of the Laws of Zambia).
• Zambia Revenue Authority: Established under the Zambia Revenue Authority Act, this is responsible for ensuring tax compliance. It is a law enforcement body with the powers to investigate and prosecute non-compliant persons.
• National Task Force on Anti-Money Laundering: This body is tasked with:
• • enhancing domestic cooperation; and
  • overseeing the adoption and implementation of international AML/CFT standards and the development of national AML/CFT standards strategies.
• Ministry of Foreign Affairs: This serves as the depository for international instruments to which Zambia accedes.
• Ministry of Justice and Ministry of Home Affairs: These ministries oversee the dispensation of justice and the enforcement of the relevant AML laws.
• Other: Any other institution designated by a minister by statutory instrument.

• Law Association of Zambia: Established by the Law Association of Zambia Act, this body regulates legal practitioners. It is responsible for ensuring that suspicious activities and transactions are reported to the Financial Intelligence Centre by legal practitioners in their legal capacity. The Prevention and Prohibition of Money Laundering Act provides that anyone that is involved in money-laundering activities will be guilty of an offence and will be liable upon conviction to a fine, imprisonment or both. This provision will thus apply to lawyers who engage in any money-laundering activities. They fall under the definition of ‘designated non-financial businesses and professions’.
• Zambia Chartered Institute of Accountants: Established by the Accountants Act, 2008, this body regulates accountants and is responsible for ensuring that suspicious activities and transactions are reported to the Financial Intelligence Centre. The Financial Intelligence Act does not establish accountants as reporting entities; they rather fall under the definition of ‘designated non-financial businesses and professions’. The Prevention and Prohibition of Money Laundering Act provides that anyone who is involved in money-laundering activities will be guilty of an offence and will be liable upon conviction to a fine, imprisonment or both. This provision will thus apply to lawyers that engage in any money laundering activities. However, where accountants work for financial Institutions, they are required to report offences.

The above bodies do not have AML/CFT powers per se. While legal practitioners, accountants, casinos and so on are not mandated to report, they must not participate in money-laundering activities.

Only the Bank of Zambia and the Registrar of Banks and Financial Institutions have issued guidelines for regulated institutions. There are no directives for designated non-financial businesses and professions to put in place appropriate risk management systems to determine whether a potential client, an existing client or a beneficial owner is a politically exposed person.

Financial services are regulated by the Bank of Zambia, which derives supervisory power from Article 213 of the Constitution of Zambia (Amendment Act 2/2016). It supervises reporting entities, such as financial institutions and non-bank financial institutions (eg, micro finance institutions; leasing companies). The Bank of Zambia also supervises the transactions of reporting entities.

The Financial Intelligence Centre Act establishes financial institutions as reporting entities. They are responsible for:

• identifying suspicious transactions and accounts;
• identifying the actual owners of accounts;
• compiling reports of transactions; and
• reporting suspicious transactions to the Financial Intelligence Centre.

In the past, Zambia:

• faced enforcement issues, due to the inadequate labour, training and resources of law enforcement agencies;
• did not have a financial intelligence unit that met international standards; and
• was placed under monitored jurisdiction (When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to increased monitoring) by the US Department of State in 2016 (International Narcotics Control Strategy Report).

Today, Zambia still faces enforcement issues (e.g., training, resources) and is still seeking to comply with all 40 special recommendations of the FATF. It has thus far been rated ‘effective’ for 11 areas/recommendations.

Reporting activities are conducted by reporting entities such as financial institutions and banks. Most reporting activities are conducted by financial institutions, as they are obliged to report under the Financial Intelligence Centre Act.

Lawyers, accountants and designated non-financial businesses and professions have no specific suspicious transaction reporting or suspicious activity report obligations.

Reporting entities are regulated by their respective supervisory authorities. Financial institutions must:

• conduct suspicious transaction reporting and submit suspicious activity reports on AML/CFT activities to the Financial Intelligence Centre; and
• require owners, account holders and so on to explain the source of funds or changes in the source of funds.

As a matter of policy, some financial institutions do not open accounts for certain businesses, or for companies and individuals from certain countries.

Financial institutions derive the powers to monitor transactions from Bank of Zambia directives, their internal policies and the law. The main such power is the power to require an explanation as to the source of funds.

The Financial Intelligence Centre acts as Zambia’s financial intelligence unit.

It is aligned with Financial Action Task Force Recommendation 20 and was established in 2019 under the Financial Intelligence Centre Act (46/2010) (as amended in 2016).

It is mandated:

• to receive, request, analyse and disseminate the disclosure of information on AML/CFT and serious offences; and
• to conduct inquiries on behalf of foreign designated authorities and notify them of outcomes.

The Financial Intelligence Centre works with international bodies such as:

• the FATF, which is an intergovernmental body that develops and promotes financial policies; and
• the Eastern and Southern African Anti Money Laundering Group, of which Zambia is a founder member.

The Financial Intelligence Centre Act mandates financial institutions (reporting entities) to require from client’s details such as directors, shareholders, address account holders, beneficial owners and foreign companies.

They are also required under the AML/CFT directives to maintain private registers which are not available for public use.

Private corporate registers may also be maintained by companies.

Public bodies must keep registers which are to be administered by the controlling or chief executive officer. These registers must list all gifts offered or received by the public body, as required under the Anti-Corruption Commission Act.

The registers of financial institutions are privately held by those financial institutions.

Registers maintained under the Bank of Zambia’s AML/CFT directives are shared only with the supervisory authorities and the Financial Intelligence Centre.

Yes, both individuals and companies can be prosecuted:

• Individuals can be prosecuted under:
• • the Anti-Corruption Commission Act;
  • the Drug Enforcement Commission Act;
  • the Penal Code Act;
  • the Forfeiture of Proceeds of Crime Act; and
  • other AML laws.
• Companies can be prosecuted under:
• • the Forfeiture of Proceeds of Crime Act; and
  • the Anti-Corruption Commission Act for corrupt transactions, commercial crimes; and
  • other AML laws.

Yes. Foreign companies established in Zambia can be prosecuted under statutes such as the Forfeiture of Proceeds of Crime Act.

Foreign companies are monitored closely by financial institutions.

Yes. The Financial Intelligence Centre Act forbids financial institutions and other bodies from entering into transactions with local and foreign financial institutions that have shell companies.

For instance, Section 2 of the Financial Intelligence Centre Act covers property both inside and outside the jurisdiction and covers a broad spectrum of institutions.

In addition, laws such as the Anti-Corruption Commission Act extend their application to include offences committed within or outside the jurisdiction.

The Financial Intelligence Centre Act sets out certain restrictions, such as:

• restrictions on the opening of fictitious or anonymous accounts;
• restrictions on entering into or continuing business relations with companies that fail to properly identify and provide adequate information on their operations or existence; and
• a prohibition on the establishment and operation of shell companies, applicable to both banks and financial institutions.

Yes. The following requirements apply in relation to cross-border transactions:

• Under the Financial Intelligence Centre Act, financial institutions (or reporting entities) must identify or collect adequate information on cross-border transactions; and
• Compliance officers and reporting entities must report suspicious transactions to the supervisory authorities, which report to the Financial Intelligence Centre.

Yes. The Forfeiture of Proceeds of Crime Act provides that the laundering of the proceeds of foreign crimes is an offence.

AML offences include:

• participation in organised criminal groups and racketeering;
• participation in terrorism and terrorist financing;
• trafficking in human beings and migrant smuggling;
• sexual exploitation and sexual exploitation of children;
• illicit trafficking in narcotic drugs and psychotropic substances;
• illicit arms trafficking;
• illicit trafficking in stolen and other goods;
• corruption and bribery;
• fraud;
• counterfeiting and piracy of products;
• environmental crimes;
• murder and grievous bodily injury;
• kidnapping, illegal restraint and hostage taking;
• robbery and theft;
• smuggling;
• extortion;
• forgery; and
• insider trading and market misconduct.

Defences exist for certain offences and are codified in local law.

Predicate offences are defined by local law. Essentially, these are money-laundering related illegal and criminal activities.

Tax evasion is a predicate offence.

Other predicate offences in Zambia include corruption, theft, fraud and drug trafficking.

• Failure to disclose, tipping off and obstructing investigations are offences under the Prevention and Prohibition of Money Laundering Act; and
• Failure to do certain actions (e.g., failure to disclose) will subject officers and reporting entities to heavy penalties.

Yes. There are certain restrictions or thresholds that limit the activities of reporting entities. For instance, for certain financial institutions (reporting entities):

• transaction values for individuals are restricted to amounts of up to $20,000; and
• transaction values for companies are restricted to amounts of up to $20,000.

For non-bank financial institutions, such as bureaux de change, the transaction amounts are quite vague.

No. An AML compliance programme is not mandatory, but it is encouraged.

Most financial institutions and companies are moving towards establishing an AML compliance programme or a department that serves this purpose.

Money-laundering reporting officers, compliance officers and other legal officers in financial institutions must:

• monitor transactions/accounts; and
• have sufficient regulatory and legal knowledge.

Financial institutions must observe the following due diligence requirements with regard to both business and business partners:

• Transactions involving high-risk officials – that is, politically exposed persons under the Financial Intelligence Centre Act (Sections 2 is the interpretation section and 19) – are expected to be monitored (enhanced due diligence).
• Under Section 16 of the Financial Intelligence Centre Act, there is a requirement for financial institutions to identify and verify customer information.
• Know your customer requirements require that specific information be retained in relation to large transactions.

Under the Financial Intelligence Centre Act, financial institutions (reporting entities) must:

• determine the beneficial owners of businesses (i.e., the real owner of a business or the party that operates the business); and
• identify certain persons (e.g., directors, shareholders and members of the company).

These requirements are particularly stringent for foreign companies.

According to the Financial Intelligence Centre Act, all books and records involving customers must be made available to the Financial Intelligence Centre.

The Cyber Security and Cyber Crimes Act 2021 provides that private citizens have no right to be notified by either a law enforcement officer or a service provider that they are being investigated. The act further provides that cyber inspectors can access and inspect operations or equipment forming part of an information system if there is reasonable cause to believe that it has been used in connection with any offence.

A company that implements an AML programme should mitigate the risk of AML violations by:

• keeping up to date with the law and regulations;
• training risk and compliance or money-laundering officers on relevant AML legislation;
• ensuring that all due diligence requirements are satisfied; and
• maintaining private registers of clients or gifts. Public bodies must maintain a public register of any gifts offered or received.

Yes. Financial institutions (reporting entities) must report potential and actual AML violations.

However, designated non-financial businesses and professionals are not obliged to do so. Parties that are found to be involved in AML violations (e.g., casinos, betting companies, firms) will be found guilty of an offence.

According to the Prohibition and Prevention of Money Laundering Act, a failure to report results in exposure to penalties – for example, for financial institutions and compliance officers.

No. While encouraged, the establishment of an AML programme is not mandatory, so the absence of such a programme is not a violation.

The applicable regulatory and legal provisions are silent on whether any leniency programme is available for AML violations.

The regulatory and legal provisions are silent on whether the existence of an AML compliance programme is a defence to AML violations.

However, certain regulatory and legal provisions set out statutory defences. In such circumstances, the statutory defence is the only valid defence.

Certain defences are codified under the law.

For instance, in the Anti-corruption Commission Act, a valid defence to bribery or other offences set out under the act is that gratification received or offered involved entertainment or a casual gift.

Yes. The Plea Negotiations and Agreements Act 2010 provides that accused persons can enter into plea negotiations. The act does not state whether this applies to legal persons. However, it can be implied that the definition of a ‘person’ in Zambia extends to legal persons.

In certain instances, according to the Plea Negotiations and Agreements Act 2010, a prosecutor can enter into plea negotiations with accused persons, provided that they undertake to enter guilty pleas.

However, the courts are not bound by plea agreements and can reject them where:

• a plea agreement would be contrary to public interest and policy;
• the plea negotiation does not reflect the facts; or
• no admission is made by the accused person.

It is not possible for reporting entities, such as financial institutions, to enter into plea negotiations; they simply report and are penalised for failure to do so.

Yes, penalties such as the following can be imposed:

• fines;
• penalties, calculated in fee units; and
• for criminal offences, imprisonment upon conviction.

The applicable penalties are determined based on the severity of the offence and the provisions of the law.

Yes, funds, property and proceeds can be subject to freezing or confiscation.

In certain instances – especially those specified in the Forfeiture of Proceeds of Crimes Act –these actions cannot be taken without a criminal conviction.

However, the Prevention and Prohibition of Money Laundering Act provides that in other cases, assets can be seized without a criminal conviction if an officer has reasonable grounds to believe that the property or its proceeds are the proceeds of money laundering.

None; criminal offences ordinarily have no limitations under the law.

Fines are imposed in certain instances, depending on the severity of the circumstances.

Penalties are imposed only under certain legal and regulatory provisions – for example, for failure to report a suspicious transaction.

Investigations are conducted by the relevant law enforcement bodies.

The law enforcement bodies collect and evaluate financial information on the suspected proceeds of crime received from the supervisory authorities.

They then investigate and prosecute, while liaising with other law enforcement agencies.

Essentially, what determines the availability of alternatives to prosecution are the applicable legal and regulatory provisions.

They are quite common, as most investigations do not end in conviction.

Financial institutions, companies and non-bank financial institutions are usually fined and penalised, ordinarily upon conviction.

There is nothing under the law that would lead an increase in the use of such alternatives.

No. There are no private enforcement actions in Zambia. Only the government has enforcement powers through certain bodies.

No types of relief are available, as private enforcement is not possible in Zambia.

There are no such decisions to be appealed, as no private enforcement agencies can conduct private enforcement actions in Zambia.

Cyber law is quite new in Zambia and takes the form of the Cyber Security and Cyber Crimes Act, 2021.

Among other things, the act criminalises:

• the use of devices for illegal activities; and
• the protection of persons against cybercrime.

Companies must:

• be aware that the cyber regime in Zambia is very new;
• understand that mobile money exchanges are not safe in Zambia; and
• establish best practices and strict online processes for their transactions.

No. Crypto-asset activity is quite new in Zambia and as yet, cryptocurrencies are not legal tender in Zambia. This is the position of the Bank of Zambia.

As a result, the use of any cryptocurrencies is at the owners’ risk, as the law does not regulate such transactions.

The current AML enforcement trends are as follows:

• Cryptocurrency activity is developing, and companies and individuals are now selling cryptocurrencies in Zambia.
• The Ministry of Finance recently launched a Financial Sector Development Policy, which supports technology-enabled financial service delivery models such as:
• • online-based financial services;
  • agent banking;
  • mobile financial services;
  • ATM use; and
  • point of sale facilities.

The following proposed legislative reforms will also lead to new developments:

• The Penal Code Act will be amended to extend to money-laundering activities; and
• The Bank of Zambia is in the process of concluding research in the area of cryptocurrencies, which may lead to a proposed act on cryptocurrency crimes.

Yes. The Zambian regime has been evaluated by the Financial Action Task Force (FATF), which provides annual reports on the assessment and evaluation of money laundering activities.

The latest of these is the FATF’s mutual evaluation report for 2022.

Yes. Zambia is currently:

• compliant with 11 FATF recommendations;
• largely compliant with 17 FATF recommendations;
• partially compliant with 17 FATF Recommendations; and
• non-compliant with one FATF recommendation.

Noteworthy technology developments in Zambia include:

• individuals and companies paying for gaming using cryptocurrency;
• individuals and companies paying for different gaming activities using digital assets;
• the growing use of blockchain in Zambia, primarily in money-laundering activities; and
• a reluctance on the part of most banks and financial institutions to engage in business with betting companies, casinos and users of crypto assets, due to the difficulties of tracing cryptocurrencies in Zambia.

Our top tips are as follows:

• Maintain up-to-date knowledge of the law and regulation, including proposed legislation;
• Continually monitor clients’ suspicious transactions and activities;
• Submit suspicious transaction reports and suspicious activity reports on an ongoing basis;
• Avoid mobile money exchanges, which are unsafe in Zambia; and
• Avoid unsafe crypto currency exchanges.

• Threats:
• • Cryptocurrency, which is the biggest threat, has ruined several transactions and made it difficult to trace money-laundering activities.
  • Money laundering often occurs through trade-based mechanisms to raise, launder and move funds through commerce in either illicit or illicit goods (e.g., under-invoicing, false invoicing or over-invoicing).
• Trends:
• • Many transactions occurred through trade-based mechanisms.
  • Many transactions were effected using cryptocurrencies.

Yes. They are publicly available online and in English, which is the official language as provided in the Constitution of Zambia (Amendment) Act (2/2016).