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Risk Assessment Highlights Inadequate Measures to Combat Money Laundering and Terrorist Financing in Central African Republic

A recent evaluation has revealed that banks and financial institutions in the Central African Republic (CAR) are failing to adequately identify and mitigate money laundering and terrorist financing risks.

Understanding of Risks is Patchy

The country’s understanding of these risks is patchy, with many financial institutions and designated non-financial businesses and professions (DNFBPs) lacking effective measures to prevent these crimes. According to the evaluation:

  • Banks are fulfilling their duty of vigilance only partially, with a limited number of suspicious transaction reports (STRs) filed compared to the criticality of the risk involved.
  • Money transfer service providers, which are part of international groups, also lack robust measures to prevent money laundering and terrorist financing.
  • Non-bank financial institutions, such as microfinance institutions and payment service providers, have an even more limited understanding of these risks.

Shortcomings in Control Functions

The evaluation highlighted shortcomings in the control functions designed to prevent the exploitation of financial institutions and DNFBPs for money laundering and terrorist financing purposes. Specifically:

  • Supervisors of financial institutions conduct satisfactory due diligence, but the system for identifying beneficial owners is weak.
  • There are no competent authorities designated to monitor non-compliance with anti-money laundering (AML) and counter-terrorist financing (CFT) obligations among DNFBPs.

Centralized System Lacking

Furthermore, the country lacks a centralized system for archiving and managing files related to mutual legal assistance and extradition in the field of AML/CFT. The country has not requested or granted international cooperation in these matters during the evaluation period.

Security and Political Challenges

CAR faces significant security and political challenges, including periods of political instability and armed conflict, which have a negative impact on economic and social development. To address this situation:

  • The government has established a national recovery and peacebuilding plan.
  • Laws governing transactions linked to cryptocurrencies and establishing bitcoin as an official currency have been enacted.

Conclusion

The evaluation concludes that CAR is exposed to a range of money laundering and terrorist financing risks, including misappropriation of public funds, drug trafficking, corruption, and human trafficking. The country’s lack of effective measures to prevent these crimes poses a significant threat to its financial system and stability.

Recommendations

To address these risks, the government must take immediate action to:

  • Improve its understanding of AML/CFT risks
  • Develop more robust risk maps
  • Implement reinforced measures to reduce identified risks
  • Establish a centralized system for archiving and managing files related to mutual legal assistance and extradition in the field of AML/CFT
  • Designate competent authorities to monitor non-compliance with AML/CFT obligations among DNFBPs.