Cape Verde’s Efforts to Combat Money Laundering Fall Short

A recent report by a leading international organization has criticized Cape Verde’s efforts to combat money laundering, highlighting significant shortcomings in its legal framework and implementation.

Legal Framework Lacking

According to the report, Cape Verde was one of the first countries to criminalize money laundering in 1993. However, its laws have not kept pace with evolving threats. While the country has expanded its list of predicate offenses, it still falls short of international standards. Moreover, there have been no convictions for money laundering to date.

Financial Intelligence Unit Lacking Autonomy and Resources

The report also highlighted concerns about Cape Verde’s financial intelligence unit (FIU), which is responsible for analyzing suspicious transactions reports (STRs). The FIU lacks autonomy and resources, making it difficult for it to effectively perform its functions.

Weaknesses in Preventive Measures

In addition, the report criticized the country’s framework for preventive measures, citing weaknesses in:

• Customer due diligence: Financial institutions are required to identify customers, but there is limited guidance on acceptable identity documents.
• Transaction monitoring: There is no clear framework for verifying information provided by foreign institutions.

Risks from International Financial Institutions

The report noted that Cape Verde’s regime for international financial institutions (IFIs) poses significant risks, as institutions operating in the sector may fall outside of global consolidated supervision and operate without a substantive physical presence in the country.

Record-Keeping Requirements

Furthermore, the report identified fundamental weaknesses in record-keeping requirements, with many institutions unaware of their obligations under the money laundering law. The bank supervisor’s lack of clear AML/CFT strategy and inadequate training for its staff also raised concerns.

Implications and Recommendations

The report’s findings have significant implications for Cape Verde’s efforts to combat money laundering and terrorist financing. The country’s failure to implement effective measures may put it at risk of being used as a haven for illicit activities, undermining the integrity of its financial system and potentially harming its reputation.

To address these concerns, the report recommends that Cape Verde:

• Strengthen its legal framework by expanding its list of predicate offenses and increasing penalties for money laundering.
• Enhance the autonomy and resources of its FIU to enable it to effectively analyze STRs.
• Implement a clear framework for preventive measures, including customer due diligence and transaction monitoring.
• Improve its regime for IFIs, ensuring that institutions operating in the sector are subject to robust supervision and oversight.
• Provide adequate training for bank supervisors and other relevant officials to ensure they have the necessary skills and knowledge to effectively supervise AML/CFT compliance.

By implementing these recommendations, Cape Verde can strengthen its efforts to combat money laundering and protect its financial system from illicit activities.