Financial Crime World

DR Congo: A High-Risk Jurisdiction for Money Laundering and Terrorist Financing

According to reports from the Financial Action Task Force (FATF) and the US Department of State, the Democratic Republic of Congo (DRC) remains a high-risk jurisdiction for money laundering and terrorist financing.

FATF Status

The country’s inclusion on the FATF’s List of Jurisdictions with Strategic Deficiencies in Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) measures since October 2022 highlights the DRC’s AML/CFT shortcomings. The FATF’s latest statement on February 23, 2024 urged the DRC to address five key areas:

  1. Disseminating the National Risk Assessment (NRA) on money laundering and terrorist financing to all stakeholders
  2. Developing and implementing a risk-based supervision plan
  3. Strengthening the Financial Intelligence Unit’s operational and strategic analysis capability
  4. Enhancing the capabilities of investigative and prosecutorial authorities
  5. Demonstrating effective implementation of TF and PF-related Recommendations

FATF Compliance

The FATF’s Mutual Evaluation Report on the DRC, conducted in 2021, found the country was Compliant for none of the 40 FATF Recommendations, Largely Compliant for 4 recommendations, and Substantially Effective for none of the 11 areas of Effectiveness. The DRC scored as Highly Effective for none of the same 11 areas.

US Department of State Assessment

The 2016 International Narcotics Control Strategy Report (INCSR) identified the DRC as a ‘Monitored’ jurisdiction. Some key findings from the report include:

  • The country’s vast territory, weakness of law enforcement and judicial system, porous borders, and dollarized economy put the DRC at risk of money laundering and terrorist financing.
  • The informal sector’s prevalence, widespread bribery, and endemic corruption make the situation more complicated.

Country Characteristics

  • The DRC covers approximately 2.4 million square kilometers and shares 7,000 kilometers of porous borders with nine neighboring countries.
  • The informal sector, worth up to ten times the size of the formal sector, heavily relies on cash transactions and operates with minimal regulatory oversight.
  • The parallel foreign exchange market is significant and tolerated by the government.
  • Inefficient customs and tax policies, along with low public sector salaries, contribute to a climate of bribery and unlawful transactions, particularly in import/export activities and mineral exploitation and sales.

Vulnerabilities and Risks

  • Gold, diamonds, and other minerals are mined in the DRC and are vulnerable to smuggling.
  • Sources of illicit revenues include casinos, smuggling of gold, diamonds, and weapons.
  • Customs and tax fraud, tax evasion, misappropriation of public funds, and corruption run rampant throughout all sectors of society.
  • There are no free ports or designated free trade zones in the DRC, further complicating efforts to combat money laundering and terrorist financing.

Sanctions and Armed Conflict

Certain Congolese and foreign individuals and armed groups contributing to the ongoing conflict in the DRC are subject to UN, US, and EU sanctions. These include arms embargos, travel bans, and asset freeze orders against militia and rebel group members. Armed groups responsible for the conflict are actively engaged in extractive industries, particularly the mining sector, and profits from these illicit activities contribute significantly to the financing of their operations.