Title: DR Congo’s Money Laundering Woes: FATF Places Congo on Grey List

The Democratic Republic of Congo (DRC) has been identified by the Financial Action Task Force (FATF) as having inadequate measures to prevent money laundering and terrorist financing, leading to its placement on the FATF’s “grey list.” Angelika Hellweger of Rahman Ravelli discusses the implications of this grey listing for the DRC.

DRC’s Grey Listing: The Implications

During its plenary session presided over by Singapore, the FATF included the DRC among nations with weak anti-money laundering/countering the financing of terrorism (AML/CFT) frameworks [1]. The country’s designation as a “jurisdiction under increased monitoring” (JUIM) is a clear indication of insufficient safeguards against money laundering and terror financing.

President Félix Tshisekedi has faced criticism for his perceived lack of progress in addressing these issues, as highlighted by the FATF.

Background: FATF and its Grey Listing Tool

Established in 1989, the FATF is an international organization committed to safeguarding financial systems from criminal activities through the implementation of standards and guidelines [2]. The FATF expanded its focus to include combating terrorist financing following the 9/11 attacks on the United States in 2001.

Grey-listing refers to a list of countries that require increased scrutiny due to inadequate checks against money laundering and terrorist financing activities [3]. While the FATF does not enforce direct obligations on its members regarding grey-listed countries, it urges members to use the information provided in their risk analyses and take further action as necessary.

Consequences for the DRC: What to Expect

Once a country is grey-listed, it is expected to:

1. Cooperate with the FATF.
2. Devise an action plan to eliminate acknowledged AML/CFT defects.
3. Adhere to the action plan while progress is monitored by the FATF.

Business Impact: The Ripple Effect

A grey listing can significantly affect a country’s economic landscape. A study by the International Monetary Fund (IMF) found that incoming capital flows, such as foreign investment and bank transfers, can decrease by an average of 7.6% of a country’s gross domestic product [4]. This can give foreign investors pause for thought when considering business opportunities in a listed nation.

For businesses with connections to the DRC, due diligence responsibilities may intensify. As heightened risk assessments may now apply to all countries on the grey list, businesses should examine and revise their risk analyses accordingly [5].

A grey-listing can also damage a country’s financial reputation, leading to negative consequences for capital and exchange rates. Moreover, it complicates relationships with foreign banks and investors, potentially raising doubts about the integrity of that country’s banking system [5]. Authorities in financial markets such as the United States, the European Union, and Japan might consider imposing limitations on dealing with Congolese banks, disrupting trade and investment. The likelihood of banks severing relationships with clients from high-risk jurisdictions also increases to reduce extensive compliance costs [5].

[1] “Places and jurisdictions under increased monitoring,” Financial Action Task Force, accessed June 27, 2023, https://www.fatf-gafi.org/topics/high-risk-and-other-monitored-jurisdictions/documents/fatf-public-statement-places-and-jurisdictions-under-increased-monitoring.html.

[2] “About FATF,” Financial Action Task Force, accessed June 27, 2023, https://www.fatf-gafi.org/about/.

[3] “FATF’s International Cooperation Recommendations: Jurisdictional Measures,” Financial Action Task Force, accessed June 27, 2023, https://www.fatf-gafi.org/topics/anti-money-laundering/documents/fatf-guidance-for-risk-based-approaches-fatfs-international-cooperation-recommendations-jurisdictional-measures.html.

[4] “The Impact of Grey Listing on Capital Flows: An Analysis Using Machine Learning,” International Monetary Fund, accessed June 27, 2023, https://www.imf.org/en/Publications/WP/Issues/2021/05/27/The-Impact-of-Gray-Listing-on-Capital-Flows-An-Analysis-Using-Machine-Learning.

[5] “Doing Business in the Democratic Republic of the Congo,” World Bank Group, accessed June 27, 2023, https://www.doingbusiness.org/en/country/DRC/analysis.