Circular No. 01/EFI/2023, of October 27 – Fraud Mitigation Measures Regarding False Investment or Donation Project Financing Proposals

___ Banco de Moçambique (Central Bank of Mozambique) ___ Administração

FINANCIAL STABILITY DEPARTMENT CIRCULAR NO. 01/EFI/2023

Maputo, October 27, 2023

SUBJECT: FRAUD MITIGATION MEASURES REGARDING PROPOSALS FOR FALSE INVESTMENT OR DONATION PROJECT FINANCING

The Central Bank of Mozambique has closely monitored with concern the proliferation in the domestic market of entities proposing false financing for investment or donation projects, under the pretext of economic and commercial solutions, support to the Government of Mozambique, including in humanitarian causes aimed at poverty eradication, public debt repayment, and increasing reserve volumes.

Given the need to establish measures and procedures aimed at preventing and mitigating fraud arising from the interaction of resident entities with false financiers of investment or donation projects, the Central Bank of Mozambique, exercising its powers under paragraph 2 of Article 11 of Law No. 28/2022, dated December 29 – Foreign Exchange Act, instructs:

1. Credit institutions and financial companies, in the context of intermediating investment or donation projects, must observe the following measures:

   a) Conduct prior due diligence for identification, verification, and risk profile assessment of the client upon establishing the business relationship, including enhanced due diligence measures;

   b) Obtain information regarding the activities of potential financiers or donors, namely: (i). Information on shareholders, partners, and national representatives in the potential projects; (ii). Documentation or information certifying any authorizations issued by national government entities, regarding investment projects or social and humanitarian projects in their favor; (iii). Documents resulting from interactions with the Mozambican Government.

   c) Verify the incorporation and registration data of the potential investor or donor in their country of origin, duly translated into Portuguese;

   d) Request historical information regarding the execution of financing or donations in Mozambique, on behalf of the potential investor or donor, as well as information on projects in which they are or have been involved in their country of origin or elsewhere;

   e) Assess the movements of bank accounts held by potential beneficiaries, including fund inflows and outflows, as well as their respective account balances;

   f) Confirm the existence of prior cases of fund transfers, by potential financiers or donors, to Mozambique and, where applicable, the banks or intermediary or beneficiary entities of the channeled value;

   g) Verify the execution of the transfer from the potential financier or donor to the beneficiary, in the aforementioned project or donation, aiming to prove the actual receipt of funds;

   h) Confirm the authenticity of the SWIFT message for the foreign exchange transaction;

   i) Analyze the registration of unusual or suspicious situations in the transaction, namely: (i). Transaction timing: time and frequency of execution differing from current practice, such as periods with few operations of this nature or non-working days, including in the countries of origin of the purported transaction; (ii). Payment instruction: amounts differing from the norm or a specifically mandated person submitting the process; (iii). New relationships: payment to a new beneficiary or to a new country.

2. Any doubts regarding the interpretation and application of this Circular must be submitted to the Licensing and Foreign Exchange Control Department of the Central Bank of Mozambique.

CENTRAL BANK OF MOZAMBIQUE Financial Stability Department

Benedita Maria Guimino Administrator

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