By Karischa Schmidt,

Compliance Officer at Old Mutual Group.

When Namibia was included on the Grey List by the Financial Action Task Force (FATF) at the beginning of 2024, much of the country’s focus shifted towards the financial sectors—both banking and non-banking—as well as regulatory agencies and legal structures.

As we keep a close watch on these developments, it's hard not to question whether our focus might be too narrow. Although the concerns raised during the Grey Listing process didn’t specifically address this issue, another significant threat remains hidden within our economy: Trade-Based Money Laundering (TBML). This is an African challenge and potentially a worldwide concern, yet for a nation such as Namibia—serving as a key trading and transit point for the area—it represents a substantial hazard that simply can't be overlooked.

The danger of TBML lies in its ability to remain inconspicuous. Contrary to the common portrayal of illicit funds being transported as bulky cash-filled sacks, TBML typically appears entirely legitimate. Criminals utilize forged documents, inaccurately valued products, phantom enterprises, and bogus trading paths to clean their ill-gotten gains via standard importing and exporting channels. This process occurs at border checkpoints, with shipping firms, and through clearance intermediaries, all cloaked in documentation that initially seems impeccable.

That’s the scary part.

Namibia holds a significant position within the regional trading system. Thanks to our ports, transportation routes such as the Walvis Bay Corridor, and links with countries like Botswana, Zambia, Angola, and South Africa, we naturally serve as an essential hub for international trade. Typically, this would be something we could take pride in.

Nevertheless, this also implies we are susceptible. Should those concerned fail to closely monitor both the physical items and their associated finances moving through our networks, we could inadvertently turn into a hub formoney laundering originating acrossSouthern Africa.

Although TBML isn’t one of the factors leading to Namibia’s greylisting, this incident ought to act as a wakeup call regarding the substantial threats posed by a globally interconnected economy and advanced financial crimes. Conventional anti-money laundering measures like client verification, alerting authorities about dubious transactions, and surveillance at banking levels aren't readily applicable to trade activities. Currently, the customs framework and the financial sector function independently from each other, and it is within this divide that TBML flourishes.

This challenge is particularly intricate within the Southern African Development Community (SADC). Despite significant advantages derived from intra-regional trading, it cannot be overlooked that variations in customs and anti-money laundering regulations across member states result in vulnerabilities. These discrepancies allow criminals to take advantage of lenient policies in one nation to transfer funds or merchandise into another state with more stringent measures, often through legitimate commercial activities. Currently, SADC lacks both the necessary inter-country cooperation and instantaneous information exchange mechanisms required to counter this problem effectively.

In a realistic yet fictional situation, an enterprise based in Zambia aims to transfer illegal monies. They could potentially inflate charges for equipment sourced from a Namibian vendor and then channel the excess amount via standard banking procedures. Alternatively, a gem dealer operating in Angola may report less than actual worth for goods passing through Walvis Bay, thereby siphoning off capital covertly without alerting authorities. Such tactics represent genuine concerns since these aren’t merely theoretical constructs; instead, they occur frequently beneath regulatory radar within regions similar to our own.

To be fair, Namibia has taken some important legislative steps. One of the more recent developments includes a change in regulation that disallows Structured Market Access (SMA) trading, a mechanism that allowed for indirect offshore investments and was increasingly viewed as a weak point for money movement and ownership opacity.

While the SMA model was not directly tied to trade, its dismantling does reflect a growing awareness of financial structures that can be abused. The change has disrupted parts of the capital market, but it was necessary. The long-term goal is to tighten financial oversight and ensure full transparency in ownership, investment, and money movement.

Furthermore, we cannot ignore the role of the private sector. Freight forwarders, customs brokers, warehousing companies, these are the boots on the ground. They are in quite a unique position to spot red flags before any regulator does. However, do they know what to look for? Are they trained? Are they legally required to report suspicious activity? In many cases, the answer is no. That needs to change.

We ought to increase our investment in technology as well. Several nations have started employing sophisticated analytics, AI, and blockchain to monitor trade movements, validate invoices, and identify irregular trading activities. Namibia does not necessarily need to create everything from scratch; however, updating our systems is essential. By incorporating these technologies into entities such as the Namibia Revenue Agency (NamRA) and the Financial Intelligence Centre (FIC), we would significantly enhance our capability to spot TBML before it escalates into a major national threat.

Ultimately, trade-based money laundering isn't merely a fiscal offense; it also poses significant economic and administrative challenges. This activity siphons off tax income, disrupts market values, contaminates resources, and jeopardizes honest enterprises. Failure to take action could lead not only to financial seclusion but also to eroding the trading frameworks we've diligently constructed.

Hence, this situation shouldn’t induce alarm; instead, it calls for preparedness. Although the Grey List didn’t explicitly mention TBML, ignoring these signals would be unwise. This presents an essential opportunity—not only to rectify the identified issues but also to delve further into resolving the unseen problems before they turn into major headlines.