Democratic Republic of Congo: A High-Risk Jurisdiction for Money Laundering and Terrorist Financing

According to reports from the Financial Action Task Force (FATF) and the US State Department, the Democratic Republic of Congo (DRC) continues to present significant risks for money laundering (AML) and terrorist financing (CTF).

FATF’s Concerns and Recommendations

For the second consecutive time, the FATF has identified strategic deficiencies in the DRC’s AML/CTF regime. In its latest statement on 23 February 2024, the organization expressed concerns over the country’s progress in addressing these deficiencies.

Since October 2022, the DRC has taken steps to strengthen its AML/CTF regime. Some of these actions include:

1. Completing a three-year AML/CTF National Strategy
2. Disseminating a National Risk Assessment (NRA) on Money Laundering and Terrorist Financing to key stakeholders

However, the FATF urged the DRC to keep implementing its action plan to address the following deficiencies:

• Enhancing Financial Intelligence Unit (FIU) capacity for operational and strategic analysis
• Developing and implementing a risk-based supervision plan
• Strengthening investigation and prosecution capability
• Ratifying and implementing key international conventions
• Adopting and implementing the FATF Recommendations

In the FATF’s Mutual Evaluation Report from 2021, the DRC was rated non-compliant for zero recommendations and largely compliant for four recommendations out of 40. Moreover, the country was deemed substantially effective in zero areas and highly effective in zero areas of effectiveness in its AML/CTF regime.

US State Department’s Concerns

The US State Department’s 2016 International Narcotics Control Strategy Report (INCSR) designated the Democratic Republic of Congo as a ‘Monitored’ jurisdiction due to concerns related to the country’s economic instability, porous borders, and significant informal sector.

Weak law enforcement, a large parallel foreign exchange market, an inadequate judicial system, and prevalent corruption contribute to a favorable environment for money laundering and terrorist financing in the DRC.

Some potential high-risk areas for illicit financial transactions include:

• Import/export activities
• Mineral exploitation and sales

Minerals, particularly gold, diamonds, and others, have long been extensively mined and smuggled out of the DRC. Activities such as casinos, smuggling of gold, diamonds, and weapons contribute significantly to illicit revenues.

Other factors contributing to this environment include:

• Inefficient customs and tax policies
• Weak public sector oversight

Further challenges come from UN, US, and EU sanctions targeting armed groups and certain individuals contributing to the conflict in the DRC. These sanctions include arms embargoes and asset freeze orders against specific militia and rebel group members.

Despite having ratified and implemented several international conventions, the DRC still lacks sufficient resources and expertise to effectively monitor and address AML/CTF risks.

List of Heading 1

• Strategic deficiencies in DRC’s AML/CTF regime identified by FATF
• National Strategy and NRA implementation underway since October 2022
• FATF’s action plan recommendations to address deficiencies

List of Heading 2

• FATF Mutual Evaluation Report (2021) findings for DRC
• Rating for recommendations and effectiveness

List of Heading 3

• US State Department’s concerns and designation for DRC as a ‘Monitored’ jurisdiction
• Economic instability, porous borders, and significant informal sector
• Challenges from weak law enforcement, inadequate judicial system, and prevalent corruption

List of Heading 4

• High-risk areas for illicit financial transactions
  • Import/export activities
  • Mineral exploitation and sales

List of Heading 5

• Effects of UN, US, and EU sanctions on DRC’s financial regulatory environment
• Resources and expertise required to effectively address AML/CTF risks