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Central African Republic’s Efforts to Combat Money Laundering and Terrorist Financing Face Significant Challenges

The Central African Republic (CAR) has been struggling to effectively combat money laundering and terrorist financing (ML/TF), according to a recent evaluation.

Understanding Risk

While banks and other financial institutions are taking steps to comply with anti-money laundering and combating the financing of terrorism (AML/CFT) regulations, their understanding of risk does not always translate into effective risk maps. Many financial institutions in CAR lack a comprehensive understanding of ML/TF risks, which hinders their ability to determine customer risk profiles.

Implementation of Risk Reduction Measures

The implementation of reinforced measures to reduce identified risks is also insufficient. Banks and money transfer service providers are fulfilling their duty of vigilance, but the number of suspicious transaction reports (STRs) emanating from them appears disproportionate to the criticality of the risk in this sector.

Non-Bank Financial Institutions

Non-bank financial institutions (NBFIs), including microfinance institutions (MFIs) and payment service providers (PSPs), have a patchy understanding of AML/CFT risks and duties. The insurance sector, MFIs, and stock transfer firms (STFVs) are particularly lacking in their understanding.

Shortcomings

The evaluation also highlighted shortcomings in the mechanisms set up to ensure transparency of legal entities and arrangements in CAR, as well as inadequate control functions to prevent the exploitation of these entities for ML/TF purposes. Additionally, the country has not taken adequate measures to identify and sanction foreign exchange bureaus that continue to operate clandestinely.

Regulation of Cryptocurrencies

The regulation of cryptocurrencies is also lacking, with no specific implementing measures to regulate the activities of virtual asset service providers (VASPs).

Security and Political Challenges

CAR faces significant security and political challenges, including periods of political instability and armed conflict, which have a major impact on economic and social development.

ML/TF Risks

In this context, CAR is exposed to a range of ML/TF risks, including:

• Misappropriation of public funds
• Illicit trafficking in precious stones and metals
• Drug trafficking
• Corruption
• Human trafficking

The country’s TF threat is characterized by the existence of armed groups on its territory.

Conclusion

Overall, the evaluation concluded that CAR’s efforts to combat ML/TF face significant challenges, and that a comprehensive approach is needed to address these issues effectively.