Mozambique ranks 146th out of 198 countries on Transparency International’s 2019 Corruption Perception Index,1 indicating that corruption is perceived to be a major challenge in the country. It similarly ranks near the top of the Basel Institute’s Anti Money Laundering Index 2020, indicating a high risk of money laundering and terrorist financing.2 The 2018 Mo Ibrahim Index also ranked Mozambique amongst the top three countries it measures with the highest deterioration of transparency and accountability since 2015, when major corruption scandals broke out.3 The sub-indicator ‘Sanctions for Abuse of Office’ was ranked lowest, due to a lack of compliance and selective application of corruption sanctions in the public sector.4
The Eastern and Southern Africa Anti-Money Laundering Group mutual evaluation report identifies a range of deficiencies, including in investigation, prosecution, and conviction on money laundering and anti-terrorism financing, including low capacity and lack of operational independence of law enforcement agencies.5
Financial intelligence suffers from under-reporting and poor quality of filed reports. In 2016, only 536 Suspicious Transaction Reports (STRs) were received, most of them of poor quality, not allowing any actionable follow-up by law enforcement and intelligence agencies.6 STR data and other AML indicators have been inconsistent in recent years. Vulnerabilities to corruption in particular come from a lack of adequate supervision of Designated Non-Financial Businesses and Professions (DNFBPs), a lack of enforceable requirements for financial institutions to identify Politically Exposed Persons (PEPs), a lack of transparency of the beneficial ownership of corporate vehicles registered in Mozambique, and insufficient mutual legal assistance and asset forfeiture legislation.7
Domestic provisions for corruption sanctions exist but are applied rather selectively. For example, annual asset declarations are compulsory for some public officials and their families holding assets and debt positions within or outside of Mozambique. There have however been no significant charges for breaches.8
Domestic CSOs working on governance issues have relative operational freedom but face administrative obstacles, threats and, in limited incidences, violence. CIVICUS ranks the civil society space as ‘obstructed’,9 while Freedom House ranks Mozambique as ‘partly free’.10
Despite a number of challenges, Mozambique has made some progress in recent years in developing a legal and institutional anti-corruption framework, especially regarding asset recovery. The Central Office for Fighting Corruption/ Gabinete Central de Combate à Corrupção (GCCC), has been reformed and newly established within the Office of the Attorney General (Procuradoria-Geral da República, PGR) to investigate corruption-related crimes. Other essential institutions tackling money laundering, asset recovery and financial crimes are the Ministry of State Administration and Public Service, the Central Ethics Commission, the Financial Intelligence Unit of Mozambique (GIFiM), and the Central Bank of Mozambique. The GCCC has bilateral cooperation agreements with counterparts from the UK, several Portuguese-speaking countries, and neighbouring countries. Mozambique has been a member of the Asset Recovery Inter-Agency Network of Southern Africa (ARINSA) since 2017. Mozambique has also engaged the support of the International Centre for Asset Recovery (ICAR) since 2018 to develop their work on asset recovery, with the Attorney General pushing for support for a new Asset Recovery Bill in May 2020.11
Asset recovery in Mozambique
The Hidden Debts case is the major asset recovery case in Mozambique. It involves a concealed US$2 billion loan from the UK branches of the Swiss Bank Credit Suisse and the Russian Bank VTB Capital to partially state-owned companies in Mozambique, which received a state guarantee on the loan. Of this loan, US$850 million was provided to Empressa Moçambica de Atum, US$622 million to ProIndicus and €535 million to Mozambique Asset Management. Confusion and dispute exists regarding the original purpose of the loans, but what later became clear was that the larger part of it was earmarked for maritime security. However and despite legislative requirements, parliament was not informed of these loans, with details only becoming public following a statement from Mozambique authorities that they were unable to service their debts.12 Further, it appears that the three companies were only established shortly before the banks provided the loans and that they all had the same CEO, at the time a senior officer in the security services.13 The GDP of Mozambique was US$11 billion in 2016, meaning that the loan represented a substantial amount of money for the country.14
Failures that have been identified with the loan process include the lack of parliamentary oversights that should have prevented the government from guaranteeing the loan unilaterally and in secret and the role of the banks with respect to their due diligence checks.15
In November 2016, an audit of the loans was undertaken by the risk assessment firm Kroll, which also sought to make sense of what had taken place. According to their report:
- Approximately US$500 million remained unaccounted for by their auditors. This amount was alleged to have been included in the State budget and/or used to buy military equipment, but Kroll was unable to corroborate this.
- There is a suspected inconsistency of approximately US$713 million between the cost of equipment purchased for maritime security and the costs that should be incurred according to an independent expert.
- An undisclosed bank account held by the firm Empressa Moçambica de Atum and a payment to Credit Suisse of US$51 million needed more explanation.16
The Hidden-Debt scandal was a defining moment for the anti-corruption effort. The government, development partners and some CSOs turned their attention to asset recovery in contrast to corruption investigations. Reforms included the passage of the 2019 Mutual Legal Assistance Law, which empowers the Minister of Justice to decide on extradition requests and coordinate asset recovery efforts through a dedicated office for asset recovery. The legislation assigns the judiciary to extradite people sought by other countries’ justice authorities for being suspected of having committed crimes.17
Progress on the case has so far been slow however. The Attorney General indicted 18 people in late 2018 “on charges of abuse of power, abuse of trust, swindling and money laundering”18 and, in 2019, the former Head of Intelligence, the son of the past President Guebuza, along with four others, were arrested.19 In a separate, US indictment, three Credit Suisse employees in London, including the Managing Director and two other senior bank staff, the former Mozambican Finance Minister Manuel Chang, the head of economic intelligence at the government’s state intelligence and security service António do Rosário, Teofilo Nhangumele from the Office of the President of Mozambique, Lebanese national Jean Boustani, and Najib Allam were charged as lead conspirators.20
The tracing of the stolen assets has been exceptionally difficult, due to limited cooperation amongst implicated parties and only a fraction of the assets from the hidden-debt scandal has so far been traced. Only fifteen buildings and six luxury cars allegedly bought with fraudulent money have been seized and 31 bank accounts frozen.21 Switzerland has recently opened up a criminal probe into ‘persons unknown’ in the Credit Suisse and the VTB over their role, based on the Mutual Legal Assistance request sent by Mozambique.22 The government, along with civil society, argue that the loans are ‘odious’ and should not be repaid under any circumstances as they were clearly obtained through a corrupt intent.23
Despite the efforts of the government to boost anti-corruption institutions, the legal framework, the capacity to locate and repatriate assets within Mozambique and in foreign jurisdictions, and despite significant technical and financial assistance from international partners in recent years, the initiative has not yet yielded substantial results. Civil society has been increasingly well organised in advocating for investigations into the Hidden-Debt case, in particularly to trace at least some of the stolen assets. Together with international partners, the have supported the government through the establishment of legal and institutional tools to recover stolen assets.24
International Institutional Engagement
Mozambique has been a member of the Asset Recovery Inter-Agency Network of Southern Africa (ARINSA) since 2017. This network is a regional informal network that seeks to exchange information, as well as best practice, on asset forfeiture, confiscation and money laundering in Southern Africa.25
Mozambique is also a member of Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which is a regional body implementing the FATF Forty Recommendations.
- Transparency International, Corruption Perceptions Index 2019, https://www.transparency.org/en/cpi# [accessed 22 October 2020].
- Basel Institute, Anti-Money Laundering Index 2020, https://baselgovernance.org/basel-aml-index [accessed 22 October 2020].
- Hanlon, J. (2016) Hoping ’something will turn up’, CADTM, retrieved from: http://www.cadtm.org/Hoping-something-will-turn-up
- MIF (2019) AGENDAS 2063 & 2030: IS AFRICA ON TRACK ?, p.46, Mo Inbrahim Index 2018, http://iiag.online/ [accessed 22 October 2020].
- ESAAMLG (2018) First Round Mutual Evaluation – Post Evaluation Progress Report of Mozambique on Anti-Money Laundering and Counter-Terrorism Financing Measures, Johannesburg,
- UNODC (2020) Country Review Report of Mozambique, retrieved from: https://www.unodc.org/documents/treaties/UNCAC/CountryVisitFinalReports/2019_02_26_Mozambique_Final_Country_Report.pdf, p.13
- IMF (2019) DIAGNOSTIC REPORT ON TRANSPARENCY, GOVERNANCE AND CORRUPTION, retrieved from: file:///C:/Users/Vaclav/Downloads/1MOZEA2019004%20(2).pdf, p.12
- CIVICUS (2018) CIVICUS Monitor, retrieved from: https://monitor.civicus.org/country/mozambique/
- FH (2019) Freedom House Data, retrieved from: https://freedomhouse.org/countries/freedom-world/scores
- Basel Institute / International Centre for Asset Recovery, A milestone in Mozambique’s journey to more effective recovery of stolen assets, 26 May 2020, https://baselgovernance.org/news/milestone-mozambiques-journey-more-effective-recovery-stolen-assets [accessed 22 October 2020].
- Constanze Blum, Transnational Organized Crime in Southern Africa and Mozambique, FES Peace and Security Series, Friedrich Ebert Stiftung, 2016, p- 18-20.
- International Monetary Fund, Republic of Mozambique: Selected Issues, March 2018, pp.20-21.
- World Bank Data: Mozambique, https://data.worldbank.org/country/mozambique [accessed 10 April 2018].
- Constanze Blum, Transnational Organized Crime in Southern Africa and Mozambique, FES Peace and Security Series, Friedrich Ebert Stiftung, 2016, pp.19-20.
- Kroll, Independent audit related to loans contracted by ProIndicus S.A., EMATUM S.A. and Mozambique Asset Management S.A., 23 June 2017, https://www.open.ac.uk/technology/mozambique/sites/www.open.ac.uk.technology.mozambique/files/files/2017-06-23_Project%20Montague%20-%20Independent%20Audit%20Executive%20Summary%20English%20(REDACTED%20FOR%20PUBLISHING).pdf, Joseph Hanlon, Kroll full report 3: Kroll points fingers at Finance Ministry, Credit Suisse & Palomar – Hanlon, Club of Mozambique 10 September 2017, http://clubofmozambique.com/news/kroll-full-report-3-kroll-points-fingers-at-finance-ministry-credit-suisse-palomar-hanlon/ [accessed 2 May 2018], Jubilee Debt Campaign, 100 UK MPs criticise Mozambique secret lenders ahead of debt talks in London, 19 March 2018, https://jubileedebt.org.uk/press-release/100-uk-mps-criticise-mozambique-secret-lenders-ahead-of-debt-talks-in-london [accessed 10 May 2018].
- Frey, A. (2019) Mozambique: Parliament approves judicial cooperation law, including extradition; Club of Mozambique, Maputo
- Ibid, p.15
- DOJ (2019) Press release: Three Former Mozambican Government Officials and Five Business Executives Indicted in Alleged $2 Billion Fraud and Money Laundering Scheme That Victimized U.S. Investors, retrieved from: https://www.justice.gov/usao-edny/pr/three-former-mozambican-government-officials-and-five-business-executives-indicted
- Kroll https://www.dropbox.com/s/52a7vtokihb1ev1/Kroll_Mozambique_$2bn.pdf?dl=0
- Winters, H; Millers, H. (2020) Credit Suisse Mozambique Loans in Focus as Swiss Begin Probe, Bloomberg. Retrieved from: https://www.bloomberg.com/news/articles/2020-06-05/credit-suisse-s-mozambique-loans-in-focus-as-swiss-begin-probe
- Messick, R; Hanlon, J. and Menete, F. (2019) Recovery of Assets, CIP, Maputo
- See Messick, R; Hanlon, J. and Menete, F. (2019) Recovery of Assets, CIP, Maputo. There will also be a forthcoming report on the assessment of the Hidden-Debt-Scandal to the economy later in 2020.