This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 DAR ES SALAAM 002276 
 
SIPDIS 
 
"JUSTICE FOR OIA AND AFMLS 
AND, TREASURY FOR FINCEN" AND "EB/ESC/TFS" 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KTFN PTER SNAR TZ
SUBJECT: 2005-2006 TANZANIA'S INCSR PART II: FINANCIAL 
CRIMES AND MONEY LAUNDERING 
 
REF: STATE 210691 
 
¶1. SUMMARY:  In 2005, the Government of Tanzania (GOT) 
delayed building the legal foundation for an effective 
anti-money laundering regime.  While the anti-money 
laundering (AML) bill was finalized and presented to the 
Cabinet in May 2005, the Cabinet did not approve and table 
the draft AML bill in Parliament for discussion.  From May 
2005 to date, progress has stalled as the national 
Multi-disciplinary Committee on Anti-Money Laundering waits 
for a new parliament - elected on December 14, 2005 and due 
to open on December 30.  The Committee remains optimistic 
that the AML bill will be tabled in Parliament in February 
2006 and would like to organize a seminar to sensitize the 
newly elected Parliament to money laundering concerns.  In 
2005, the GOT reported no investigations, arrests or 
prosecutions relating to anti-money laundering or terrorist 
financing.  Coupled with stalled progress on enacting needed 
legislation, the capacity of Tanzania's law enforcement 
remains limited in terms of combating money laundering and 
other financial crimes.  In 2005, several Tanzanian law 
enforcement officers did participate in training programs on 
combating terrorist financing and money laundering. END 
SUMMARY. 
 
 
¶I.  GENERAL ASSESSMENT: 
------------------------ 
 
¶2.  Tanzania is not considered an important regional 
financial center or offshore financial center.  Tanzania is, 
however, vulnerable to money laundering because of the 
weaknesses of its financial institutions and law enforcement 
capabilities.  A weak financial sector and an under-trained, 
under-funded law enforcement apparatus make such crimes 
difficult to track and prosecute.  In 2005, according to both 
the Ministry of Finance (MOF) and the Bank of Tanzania (BOT), 
there were no reported cases of suspicious transactions or 
arrests relating to money laundering. 
 
¶3.  Officials have noted that some real estate and used car 
businesses are used for money laundering purposes and have 
explained that tax evasion constitutes an important source of 
funds for money laundering schemes.  Government officials 
have also cited the emerging casino industry as an area of 
concern for money laundering.  Money laundering is more 
likely to occur in the informal non-bank financial sector, as 
the formal sector is still relatively underdeveloped. 
 
¶4.  Funds laundered through Bureau de Changes and other front 
companies through the practice of hawala pose concern, 
especially on the less regulated island of Zanzibar. 
Officials indicate that money laundering schemes in Zanzibar 
generally take the form of foreign investment in the tourist 
industry and bulk cash smuggling.  The most likely sources of 
illicit funds include Asia and the Middle East, and to a 
lesser extent Europe.  Such transactions rarely include 
significant amounts of U.S. currency. 
 
II. LEGAL FRAMEWORK 
---------------------- 
 
¶5.  The 1991 Proceeds of Crime Act criminalizes 
narcotics-related money laundering.  However, the Act does 
not adequately define money laundering and has only been used 
to prosecute corruption cases.  The law obliges financial 
institutions to maintain records of financial transactions 
exceeding 100,000 shillings (approximately 90 USD) for a 
period of 10 years.  Financial institution employees are 
legally protected from liability stemming from reporting 
suspicious transactions and current law does not hold 
financial institutions responsible if they are found to have 
used laundered money. 
 
¶6.  If a bank or financial institution has reasonable grounds 
to believe that a transaction relates to money laundering, it 
may communicate this information to law enforcement under 
guidance from the BOT, although such reporting is not 
required by law.  The BOT has issued regulations under 
Circular Number 8 of the Proceeds of Crime Act, requiring 
financial institutions to file suspicious transaction reports 
(STRs), but this administrative requirement is not being 
enforced and no mechanism exists for receiving and analyzing 
the STRs. 
 
¶7.  In November 2002, Parliament approved the Prevention of 
Terrorism Act, which the President signed into law on 14 
December 2002.  The Act criminalizes terrorist financing and 
enables the government to seize assets associated with 
terrorist groups.  The Act also requires all financial 
institutions to inform the government each quarter of whether 
any of their assets or transactions may be associated with a 
terrorist group.  However, the implementing regulations for 
the Act have not been finalized and the Act has never been 
applied. 
 
¶8.  Since 1998, the Government of Tanzania has been working 
with the U.S. Treasury to develop an effective anti-money 
laundering regime.  From 2003-2005, the GOT developed a draft 
AML law to build a foundation for addressing money laundering 
issues.  Provisions of the AML legislation include 
alternative remittance systems such as hawala and also 
provide for the creation of a financial intelligence unit 
(FIU) that would collect mandatory suspicious transaction 
reporting from banks and financial institutions.  The AML 
legislation would empower the FIU to share information with 
other FIUs and foreign law enforcement agencies. 
 
¶9.  In 2005, the GOT delayed tabling and passing the AML 
legislation in Parliament.  The national Multi-disciplinary 
Committee, established through the Eastern and Southern 
African Anti-Money Laundering Group (ESAAMLAG), finalized the 
draft AML bill from January - May 2005, gaining additional 
stakeholder input.  In May 2005, the Committee presented the 
AML legislation to the Cabinet for approval.  According to 
officials from the MOF and the BOT, the Cabinet did not 
approve and send the AML bill to Parliament due to time 
constraints and focus on the 2005 national elections. 
Representatives from the Multi-disciplinary Committee remain 
hopeful that the legislation will be tabled in Parliament as 
early as February 2006. 
 
¶10. In international fora, the GOT ratified the United 
Nations Convention on Transnational Organized Crime (also 
known as the Palermo Convention), in 2005.  The GOT had 
signed the Convention in 2000 but delayed ratification due to 
concerns from the Ministry of Home Affairs, which currently 
has the lead on investigating financial crimes. Tanzania is 
also a party to the UN International Convention for the 
Suppression of the Financing of Terrorism, the UN Convention 
against Corruption and the UN International Convention 
against Illicit Traffic in Narcotic Drugs and Psychotropic 
substances. 
 
III. FINANCIAL SECTOR 
----------------------- 
 
¶11. The Bank of Tanzania has the central role in terms of 
supervising banks and financial institutions for compliance 
with anti-money laundering and counter-terrorist financing 
laws and regulations.  There is no statutory threshold for 
large currency transactions.  If the institution has 
reasonable grounds to believe that a transaction relates to 
money laundering, the institution should report this 
information according to Circular Number 8 but there is not 
mechanism in place to enforce reporting. 
 
¶12.  Money laundering  controls are not currently applied to 
non-banking financial institutions, such as cash couriers, 
casinos, Bureau de Changes etc.  The draft AML bill includes 
the expansion of money laundering controls to cover such 
institutions.  Currently, the BOT supervises Bureau de 
Changes through annual audits and inspections while the 
National Gaming Authority supervises casinos and other types 
of games involving large sums of money including lotto. 
There are no legal requirements for non-bank financial 
institutions to report suspicious transactions. 
 
¶13.  There are currently no cross border currency reporting 
requirements, including those that apply to cash couriers. 
The Proceeds of Crime Act does characterize cash smuggling as 
a "predicate offense."  The draft AML bill includes 
strengthened provisions to criminalize cash smuggling in and 
out of Tanzania. 
 
IV. United Nations 1267 COMPLIANCE 
---------------------------------- 
 
¶15.  The BOT consistently circulates the names of individuals 
and entities that have been included on the UNSCR 1267 
Sanctions Committee's list to its financial institutions for 
searches of affiliated property and assets.  To date, no 
assets have been frozen under this provision although in 
2004, the GOT did take action against one charitable 
organization on the list by closing its offices and deporting 
its foreign directors.  It remains unclear whether Tanzania 
has the investigative capacity to identify and seize related 
assets. 
 
¶V. Regional/International Cooperation 
-------------------------------------- 
 
¶16.  The GOT has cooperated the USG in investigating and 
combating terrorism, consistently exchanging counterterrorism 
information with U.S. authorities.  There are no specific 
laws in place allowing exchange of records with the United 
States on narcotics and narcotics related money laundering. 
As noted above, Tanzania is party to those international 
conventions related to money laundering and terrorist 
financing. 
 
¶17.  Regionally, Tanzania is a member of ESAAMLAG, which was 
founded in 1999.  Since its inception, Tanzania has played a 
leading role in the operation of this FATF-style regional 
body, detailing personnel to the ESAAMLAG Secretariat and 
providing donated office space in Dar es Salaam for the 
ESAAMLAG headquarters.  In 2005 Charles Lenga Lenga, 
ESAAMLAG's current Executive Secretary of Tanzania, decided 
to step down.  ESAAMLAG is now seeking a suitable candidate 
for Lenga Lenga's replacement in January 2006. 
DELLY