Financial Crime World

Central African Republic’s Banking Sector Fails to Categorize Customers Accurately, Leaving ML/TF Risks Unaddressed

The Central African Republic’s (CAR) banking sector has been found to struggle with accurately categorizing its customers based on their profiles and transactions. This lack of effective risk mapping makes it challenging for financial institutions to determine customer risk profiles, leaving them vulnerable to money laundering and terrorist financing (ML/TF) risks.

Challenges in Risk Mapping

Despite efforts to implement reinforced measures to reduce identified risks, the sector’s understanding of ML/TF risks remains patchy. The evaluation found that banks are fulfilling their duty of vigilance only moderately well, with a modest number of suspicious transaction reports (STRs) filed compared to the criticality of the risk in this sector.

Non-Bank Financial Institutions

  • Microfinance institutions
  • Payment service providers
  • Insurance sector
  • Specialized trade finance vehicles

These non-bank financial institutions were found to have limited understanding of ML/TF risks. The insurance sector, microfinance institutions, and specialized trade finance vehicles showed a more limited grasp of these risks.

Regulatory Body’s Inadequate Measures

The country’s regulatory body has not taken adequate measures to identify and sanction foreign exchange bureaus operating clandestinely. Similarly, the understanding of ML/TF risks among designated non-financial businesses and professions (DNFBPs), such as notaries, is still in its infancy.

Supervision and Control Functions

The lack of effective control functions and supervision over financial institutions and DNFBPs has also been highlighted. Supervisors failed to identify beneficial owners and implement adequate Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) measures. The country’s central authority for mutual legal assistance and extradition is also lacking a centralized system for archiving and managing files.

Report Conclusions

The report concludes that CAR faces significant security and political challenges, which have a major impact on economic and social development. In this context, the country is exposed to a range of ML/TF risks, including:

  • Misappropriation of public funds
  • Drug trafficking
  • Corruption
  • Human trafficking

National Recovery and Peacebuilding Plan

The Central African Republic’s National Recovery and Peacebuilding Plan aims to establish lasting peace and stability throughout the country. However, the country’s economic recovery will depend on effective implementation of AML/CFT measures.

In summary, the CAR’s banking sector faces significant challenges in accurately categorizing customers, leaving ML/TF risks unaddressed. The country’s regulatory body, non-bank financial institutions, and supervision and control functions all require improvement to mitigate these risks. Effective implementation of AML/CFT measures is crucial for the country’s economic recovery and stability.