Financial Crime World

Cape Verde’s Anti-Money Laundering Efforts Under Scrutiny

A recent investigation by SCITE (Investigation of Trafficking of Stupefacients) has shed light on significant weaknesses in Cape Verde’s anti-money laundering (AML) and combating the financing of terrorism (CFT) framework.

Weaknesses in AML/CFT Framework

The report highlighted several concerns regarding Cape Verde’s AML/CFT regime, including:

  • The country’s customs department lacks the power to stop or restrain currency or bearer instruments suspected of being linked to money laundering or terrorist financing.
  • Financial institutions have limited resources and expertise to adequately perform their investigative functions related to money laundering offenses.
  • There is a lack of clarity on the types of identity documents required for customer due diligence (CDD) transactions below the threshold of one million escudos (EUR 9,090).
  • The framework does not adequately address the risks posed by certain high-risk customers, such as politically-exposed persons (PEPs), and those associated with correspondent banking relationships and regimes for introduced business.

Concerns regarding International Financial Institutions

The investigation also revealed that international financial institutions (IFIs) operating in Cape Verde may fall outside acceptable arrangements for global consolidated supervision and operate without a substantive physical presence in the country.

Regulatory Oversight

The Bank of Cape Verde (BCV) is responsible for supervising all activities conducted by financial institutions, but:

  • The BCV has not clearly defined an AML/CFT supervisory strategy.
  • There is a lack of clarity on the varying levels of risk across different financial institutions and their lines of business.

Regulation of Designated Non-Financial Businesses and Professions

The report also highlighted weaknesses in the regulation of designated non-financial businesses and professions (DNFBPs), including:

  • Real estate agents and dealers in motor vehicles conduct significant volumes of business but are not subject to regulations or guidance from the Ministry of Finance and Public Administration.

Recommendations for Improvement

Overall, the investigation has identified several areas for improvement in Cape Verde’s AML/CFT framework. The government will need to take concrete steps to address these weaknesses and ensure that its financial system is better equipped to combat money laundering and terrorist financing.

Key Takeaways

  • Strengthen the country’s customs department to stop or restrain currency or bearer instruments suspected of being linked to money laundering or terrorist financing.
  • Provide financial institutions with adequate resources and expertise to perform investigative functions related to money laundering offenses.
  • Clarify the requirements for customer due diligence (CDD) transactions below the threshold of one million escudos (EUR 9,090).
  • Improve regulation of high-risk customers, such as politically-exposed persons (PEPs), and those associated with correspondent banking relationships and regimes for introduced business.
  • Ensure international financial institutions operating in Cape Verde comply with global consolidated supervision arrangements.
  • Define a clear AML/CFT supervisory strategy and risk assessment approach for the Bank of Cape Verde (BCV).
  • Regulate designated non-financial businesses and professions (DNFBPs) to prevent abuse.