Cape Verde Cracks Down on Offshore Banks: New Laws and Closures Following Money Laundering Allegations and Luanda Leaks Investigation

Finance Minister Announces Closure of Foreign Customer-Only Banks

Cape Verde’s Finance Minister, Olavo Correia, announced the closure of banks catering exclusively to foreign customers, including Banco Bic Cabo Verde, as part of the government’s response to the Luanda Leaks investigation and growing concerns over money laundering.

New Laws and Implementation

During a unanimous parliamentary meeting on February 21, 2023, new laws were passed to shutter such “offshore” banks.
These banks were given a one-year window to begin serving local residents or face closure.
The legislation came into effect following the Luanda Leaks investigation.

The Luanda Leaks Investigation and Isabel dos Santos’ Financial Dealings

The Luanda Leaks investigation exposed the financial dealings of Angolan billionaire Isabel dos Santos and her relationship with her father, former Angolan president Jose Eduardo dos Santos.
Dos Santos, who owned a 42.5% stake in Banco Bic Cabo Verde, purchased it in 2013.
The bank was an essential part of her payments system, and she invoiced over $35 million to accounts at her Cape Verdean bank following contracts signed in Angola between 2016 and 2017.

Previous Criticisms and International Scrutiny

In 2019, an international review of Cape Verde’s financial sector found insufficient application of anti-money laundering laws and a total lack of supervision in high-risk sectors.
The financial industry was criticized for having an inadequate understanding of money laundering and terrorism financing.

Economic Growth and the Need for Effective Enforcement

According to Thierry Vircoulon, a researcher at the French Institute of International Relations, Cape Verde’s economic growth is based on being a remote archipelago that offers a mix of legitimate and illicit money, similar to classic Caribbean island tax havens.
Despite the legislation, implementing it remains a challenge.
With international scrutiny increasing, Cape Verde faces significant pressure to take decisive action against the use of its banks for illicit activities.

Prior Regulations and Waivers

At the time, Cape Verde’s regulations required foreign banks to be 15% owned by a bank in an OECD country.
Local regulators granted Banco Bic Cabo Verde a waiver to circumvent this rule.

Co-Investors and Local Regulators

London-based Finance Uncovered reported that dos Santos’ co-investors pressured local regulators to grant the banking license.

Pressure to Combat Money Laundering and Terrorism Financing

With international scrutiny increasing, Cape Verde faces significant pressure to take decisive action against the use of its banks for illicit activities.
Effective enforcement is crucial in combating money laundering and terrorism financing.