Criminals loot billions from Namibia

Namibia loses an average of N$4,6 billion annually as a result of money laundering, bribery and tax evasion through illicit financial flows (IFFs), according to a report by the think tank Global Financial Integrity.

This is as the Bank of Namibia (BoN) announced the successful conclusion of a pilot project focused on defining, estimating, and sharing data regarding IFFs from Namibia.

“A report to this effect will soon be tabled before Cabinet, and once approved, the calculations of estimated IFFs in Namibia will be disclosed,” BoN spokesperson Kazembire Zemburuka said.

A report from Global Financial Integrity released last year shows between 2009 and 2018, IFFs originating from Namibia reached a staggering N$46,9 billion, with an average annual outflow of N$4,6 billion a year.

In 2013, Namibia held the 14th position in Africa and 65th globally in IFFs, with an average of N$17,7 billion per year and a cumulative total of N$177,7 billion from 2004 to 2013.

BoN’s pilot project also calculated potential losses suffered by public finances, including uncollected value added tax, customs duties, and corporate taxes, as a result of illicit outflows.

“As an outcome of this project, and following approval by the minister of finance and public enterprises, BoN has now established a temporary IFFs national project office to administer and execute the remaining project tasks under SDG 16.4.1 and monitor the implementation National Action Plan recommendations to tackle IFFs,” Kazembire said.

Currently, the country finds itself in the crosshairs of increased scrutiny from the Financial Action Task Force (Faft), as a result of identified weaknesses in the country’s efforts to combat money laundering and the financing of terrorism.

These deficiencies raise the alarming possibility of Namibia being financially sanctioned by the FATF, a move that could have severe repercussions.

Namibia is expected to comply with the United Nations Convention on Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation. The country was given 12 months to comply by October 2023, or risk being greylisted by the FATF.

BoN has also issued a cautionary note, highlighting that being financially sanctioned would trigger adverse effects on foreign direct investment, capital flows and an escalation in compliance costs.

In response, members of the executive have tabled urgent bills in the National Assembly that need to be passed to avoid these financial sanctions.

These include the police amendment bill, the criminal procedure amendment bill, the prevention of organised crime bill, the extradition amendment bill and the international cooperation in criminal matters amendment bill.

Others are the companies amendment bill, the close corporation amendment bill, the virtual assets bill and the prevention and combating of terrorist and proliferation activities amendment bill.

Parliament is also expected to consider the payment system management bill, which was expected for tabling, while the banking institutions bill and trust bill were with legal drafters for proofreading.

In September 2022, Namibia underwent its second peer review, a mutual evaluation by the Eastern and Southern African Anti-Money Laundering Group and the FATF, which found the country needed to strengthen its laws to fully comply with the United Nations Convention on Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation.

TIGHTER CONTROL

Popular Democratic Movement (PDM) leader McHenry Venaani has raised concern around the importance of preventing the diversion of profits into low-tax jurisdictions, saying Namibia’s financial health is at risk.

“The budget deficit widens, public debt grows, and Namibia becomes increasingly vulnerable to external shocks. This incessant bleeding of resources causes investments to dwindle, job creation to slow, and economic growth to decline, leaving a devastating impact on our economy,” Venaani said.

He called for stricter compliance and regulation mechanisms.

“There needs to be tighter control over cross-border transactions,” Venaani said.

Venaani advocates transparency in international tax cooperation. He said multinational corporations should publicly report their earnings, as outlined in the Organisation for Economic Cooperation and Development’s Base Erosion and Profit Shifting initiative.
Venaani said Namibia should consider leveraging modern technologies for greater tax transparency, detection of financial anomalies and to create an environment that discourages financial crimes through stricter legislation and heavier penalties.

“I believe in the power of deterrents and insist that the punishment should mirror the severity of the offence,” Venaani said.

Independent researcher Josef Sheehama called for the country to fix its financial instruments. He said being financially sanctioned will have negative consequences, making it more costly and cumbersome to do business, particularly across borders.

“Quite aside from the economic cost though, the greylisting is a sharp reminder that we are behind the curve on implementing the reforms we have promised on fighting crime, corruption and money laundering,” Sheehama said.

He said the Fishrot corruption scandal placed Namibia under the spotlight for money laundering and financial crimes.

“Due to the Fishrot scandal, Namibia is now under scrutiny by the International Cooperation Review Group due to some deficiencies in its domestic anti-money laundering regime,” Sheehama said.

Meanwhile, according to estimates by the United Nations Economic Commission for Africa, more than US$84 billion is lost in IFFs from Africa each year.

Corporations and government officials, both local and international, were identified as the main channels for the leakages that result in a significant portion of Africa’s wealth being smuggled out of the continent each year, which makes it especially hard to crack down on illegal practices.