A cabinet meeting chaired by President Paul Kagame on Friday, August 15, 2020 approved the structure of the newly created Financial Intelligence Centre.

The new centre will strengthen Rwanda’s capacity to prevent, combat, and criminalize money laundering and terror financing.

Criminals make large amounts of money through illegal activities, such as drug trafficking or terrorist funding with the money appearing to have come from a legitimate source.

Money launderers deploy smart techniques and pass through complex sequences of banking transfers or commercial transactions, which cannot be easily detected or traced.

Some of that money is laundered inside the country or sent abroad, according to the information from the National Public Prosecutor Authority (NPPA).

"When we say money laundering, we include financial crimes such as embezzlement, corruption, and tax evasion,” a source from NPPA said.

The same source, who preferred anonymity lamented the difficulty in getting information where cross-border crimes are involved.

Rwanda has, for the past five years, sent requests to countries like Nigeria, Uganda, Poland, the USA, Spain, Central Africa Republic, and Canada to recover the money they think belongs to the country.

Only two requests have been responded to, according to NPPA, reflecting the reluctance of some states to cooperate.

Most of those requests have been made through diplomatic channels, whose success is determined by the political will of the country.

With the new centre, the work will be simplified since it will work with other centres that are obliged by international standards to cooperate with other centres to prevent money laundering.

The law

Last week, the cabinet meeting approved the Prime Minister’s order determining the organizational structure, salaries, and fringe benefits of employees of the new centre.

The independent body will replace a similar body that was operating under the National Bank of Rwanda.

The law establishing the centre was passed in January this year, and the target to review the previous law was aimed at meeting international standards, according to Bernard Nsengiyumva who is in charge of Policy and Regulation at the central bank.

Rwanda reviewed the law to meet the Financial Action Task Force recommendations, which are international standards to prevent, combat, and criminalize money laundering and terrorist financing.

"Preventing money laundering means that we have to make sure that all financial transactions that happen in our financial system are legal,” Nsengiyumva told The New Times.

The global standard requires countries to establish a financial intelligence centre that is independent, autonomous with the necessary skills to achieve its mission of collection, analysis, and dissemination of suspicious transactions.

The presence of the centre means that banks, micro-finance institutions, and all credit providers, telecom companies, capital markets, insurance companies, and even auditors and sellers of precious metals will now submit suspicious transaction reports to the centre.

Such reports were previously sent to the central bank, but Nsengiyumva said, put the bank in a conflicting role.

That is because, he added, the central bank also deals with clients who deposit money. "There was a conflict of interest to have the FIC under the central bank, while the bank was itself a reporting agency.”

Key role

The centre will have the power to monitor transactions within financial institutions deemed as suspicious. They will also have access to electronic data and information from bank servers.

The law also gives the Centre the power to request for the monitoring or intercepting of communication, authentic and private documents related to financial transactions.

It will also be in a position to provide or exchange information with a financial intelligence authority from another country, in case they have the same obligation of professional secrecy.

Countries with weak government institutions and poor border controls are usually exposed to cross-border crimes.

Of 125 countries assessed by Basel Institute this year (PDF) and whose report was released in April, Mozambique has the highest risk of money laundering and terrorist financing.

There are currently four money laundering cases in Rwandan courts, according to Nsengiyumva. But the figures are probably modest, as most financial crimes are not detected or reported.

Africa generally has the second-highest overall risk of money laundering and scores below average across all categories, similar to South Asia.

A comprehensive and coordinated set of reforms is required to reduce the region’s risk levels and increase its attractiveness for investors, according to Basel’s analysis.

Rwanda’s move to establish the Financial Intelligence Centre is designed to increase confidence in the country’s financial system as it seeks to position itself as a financial hub.

"Institutional investors like the African Development Bank and pension funds look at decent jurisdictions with strong legal frameworks and tend to invest in them,” Adelit Nsabimana, a financial expert noted.

Nsabimana, who is also the Technical Advisor at the Rwanda Finance Ltd, indicated that such investors are pulling out from countries that have become tax havens.

The centre, which will be overseen by the Ministry of Finance and Economic Planning, could attract such investors.

Efforts to understand the opening of the centre were futile, but following the cabinet approval of the governance structure, the Ministry will now embark on the hiring process.