Dodgy elites' flashy car hunting spots under fire

Zimbabwe's anti-money laundering watchdog has intensified oversight of the country's vehicle dealership sector amid growing concerns that luxury car sales are being used to launder illicit funds and conceal unexplained wealth.

The Financial Intelligence Unit (FIU) announced this week that vehicle dealerships have been designated a high-risk sector and will now be subject to stricter anti-money laundering (AML) obligations, including customer due diligence, suspicious transaction reporting and enhanced regulatory supervision.

FIU director-general Oliver Chiperesa said the move reflects increasing concerns that the motor vehicle trade has become one of Zimbabwe's most significant channels for illicit financial flows (IFFs).

"The government has made car dealerships a designated sector which is now required to implement anti-money laundering obligations, and is now being supervised by the FIU to ensure they implement legal and regulatory measures such as undertaking customer due diligence, reporting suspicious transactions and submitting other regulatory data that help the FIU and law enforcement agencies to identify any illicit proceeds that are channelled through the sector," Chiperesa said.

He noted that while the global standards set by the Financial Action Task Force do not specifically require car dealerships to be regulated for anti-money laundering purposes, Zimbabwe has taken the initiative because of the unique risks posed by the sector.

"The Financial Action Task Force international standards on Anti-Money Laundering do not require car dealerships to be regulated for anti-money laundering purposes, but Zimbabwe has taken the self-initiative to do so in recognition of the money laundering risk the sector poses in the country's context," he said.

The latest intervention follows findings contained in Zimbabwe's National Risk Assessment, which identified vehicle dealerships as the only sector ranked as high-risk across all major indicators measuring money laundering exposure, vulnerability and threat.

Authorities believe the combination of high-value assets, large cash transactions and limited regulatory oversight has created fertile ground for laundering proceeds derived from criminal activity.

The concerns mirror developments elsewhere in the region. Recent investigations in South Africa, including a raid by the Special Investigating Unit on Omar Motor Den in Mpumalanga, highlighted how luxury vehicles can be used to conceal proceeds linked to corruption and procurement fraud.

The FIU's concerns were first highlighted in the Reserve Bank of Zimbabwe 2024 Financial Stability Report, which pointed to significant illicit financial flows beyond traditional areas such as gold and diamond smuggling.

Regulators now believe large-scale money laundering operations are increasingly exploiting sectors such as real estate and vehicle trading.

According to the FIU, Zimbabwe generated an estimated US$6.15 billion in illicit proceeds between 2019 and 2023, equivalent to roughly US$1.2 billion annually.

Chiperesa stressed that the figures are estimates derived from internationally recognised risk-assessment methodologies and are intended to identify areas of greatest vulnerability.

"This was an estimate as part of the country's money laundering risk assessment. The assessment was done using the World Bank Risk Assessment Tool, which uses available data on crime statistics, actual and estimated, to assess what is being lost through various criminal activities," he said.

"The value is not in their mathematical correctness, but rather helps the country and the relevant state agencies to identify the areas of greatest risks where the most leakages are occurring and to take necessary intervention measures."

Investigators found that approximately 95 percent of sampled vehicle dealers conducted transactions almost entirely in cash, while some operators were reportedly trading without licences or effective regulatory oversight.

"It is not just lawyers handling cash on behalf of clients, real estate agencies and car dealers as well. Zimbabwe is still a predominantly cash economy where some high-value transactions are being settled in cash," Chiperesa said.

The FIU believes the rapid growth of Zimbabwe's vehicle market may have further increased opportunities for financial crime.

Official data shows the country's vehicle fleet expanded by approximately 25 percent between 2019 and 2023, increasing from about 1.23 million vehicles to 1.6 million.

Authorities fear that criminals may be using vehicle purchases as a mechanism to convert illicit proceeds into seemingly legitimate assets.

According to the National Risk Assessment, the largest sources of illicit proceeds remain smuggling, illegal gold trading, corruption and fraud.

However, Chiperesa said intervention measures introduced by government and law enforcement agencies have already begun reducing leakages in some high-risk sectors.

"Our Money Laundering National Risk Assessment Report, covering data for the period 2019-2023, showed that smuggling, illegal trade in gold, corruption and fraud are the financial crimes contributing the highest in terms of illicit proceeds," he said.

"The government and various relevant state agencies, informed by the risk assessment, have already put in place various intervention measures at policy and operational level, which we are confident have been successful in reducing the leakages."

The latest crackdown forms part of Zimbabwe's broader efforts to strengthen its anti-money laundering framework, improve financial transparency and protect the economy from the damaging effects of illicit financial flows.