Botswana’s banking sector has once again come under scrutiny after a company director allegedly siphoned at least P93 million to offshore accounts in what investigators believe is a sophisticated tax evasion and money laundering scheme.
Details emerging from the Money Laundering/Terrorist Financing National Risk Assessment Report which was released last week by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) shows how the country’s financial system is being exploited to externalise illicit funds.
According to the report, ‘most suspected predicate offences proceeds are ultimately channelled through the banking sector, making it the primary channel for money laundering exposure.’ The case in question centres on a company director accused of under-declaring income and diverting vast sums of untaxed company turnover into personal accounts abroad over a ten-year period.
Investigators allege that the director used multiple methods to siphon funds, including routing project payments directly into personal accounts instead of company accounts, withdrawing large sums before tax obligations were met and physically smuggling cash out of Botswana.
The NBFIRA assessment reveals that tax crimes pose a medium-high money laundering threat, with proceeds significantly outweighing those from other offences. Between 2020 and 2024 alone, under-declaration of income accounted for over P1.58 billion, forming the bulk of the P1.7 billion linked to tax-related offences.
The report says the director at the centre of the case allegedly externalised close to P98 million, while about P85 million in undeclared turnover was traced to personal accounts in foreign jurisdictions between 2010 and 2020.
The financial fallout has been severe. Tax authorities raised assessments exceeding P206 million for income tax and over P95 million for VAT against the company, while the director faces an additional P56 million in personal tax liabilities.
To avoid being taxed, the money was siphoned from the company through paying company projects directly into personal accounts rather than company accounts and reporting project payments as sales.
According to the report, ‘Huge sums of money from company projects paid in cash to the director and kept at the company premises and his residential place and eventually smuggled out of the country by his friends.’
The report also states that ‘A tax investigation was also carried out on the director. A total tax assessment of P56,000,000.00 was raised on the director’s personal taxes. Money laundering investigations are ongoing.’ It added that ‘The money that was seized during the raid was deposited towards the reduction of income tax and personal tax liabilities. Further collection efforts on the case are still ongoing.’
The NBFIRA report further notes that perpetrators of such crimes are ‘diverse,’ ranging from company executives and shareholders to professional service providers such as bankers, tax consultants and clearing agents.
The value and scale of proceeds generated from tax crimes were significantly higher than those from other offences, thereby contributing substantially to the overall risk. The risk is impacted by the associated loss of government revenue and the externalization of funds to foreign jurisdictions. Some of the methods used to move funds includes the use of trade-based money laundering, the exploitation of transfer pricing leading to profit shifting and treaty shopping, and the manipulation of thin-capitalization rules which resulted in further base erosion.