Cape Verde’s Struggle to Combat Money Laundering

Cape Verde, a country that ratified the UN Convention against the Financing of Terrorism in 2002, has yet to criminalize the financing of terrorism domestically. This shocking revelation highlights the need for urgent action to combat money laundering and terrorist financing.

Incomplete Legal System and Lack of Institutional Measures

Cape Verde’s legal system is incomplete and lacks adequate institutional measures to prevent money laundering. Financial institutions are required to file suspicious transaction reports with the judiciary police, but these reports are not adequately analyzed or disseminated.

Concerns about International Financial Institutions

International financial institutions operating in Cape Verde often fall outside acceptable arrangements for global consolidated supervision and operate without a substantive physical presence in the country. This raises significant concerns about their impact on the country’s anti-money laundering efforts.

Weaknesses in Record Retention and Transaction Monitoring

The country’s legal framework requires financial institutions to maintain records for five years, but institutions appear unaware of this requirement and do not have well-documented record retention policies. Additionally, there are fundamental weaknesses in relation to the obligation to monitor transactions, which impacts on the obligation to report suspicious transactions.

Regulatory Challenges

The Bank of Cape Verde (BCV) has issued anti-money laundering regulations, but it lacks a clear supervisory strategy and perspective on the varying levels of risk across different financial institutions. BCV’s staff also requires more systematic training in anti-money laundering supervision.

Concerns about Designated Non-Financial Businesses and Professions

Designated non-financial businesses and professions, such as real estate agents and dealers in motor vehicles, conduct significant volumes of business but lack adequate regulation. The ministry of finance and public administration is responsible for regulating these sectors, but it has not issued any regulations or guidance to assist with the implementation of the principal money laundering law.

Recommendations

To address the weaknesses identified above, we recommend:

• Criminalizing the financing of terrorism domestically
• Strengthening institutional measures to prevent money laundering
• Improving analysis and dissemination of suspicious transaction reports
• Regulating international financial institutions operating in Cape Verde
• Enhancing training for anti-money laundering supervision staff
• Issuing regulations and guidance for designated non-financial businesses and professions

Access the Full Report

The full report can be accessed on the website of the Financial Action Task Force (FATF).