Yemen’s Institutions Criticized for Lack of Oversight and Cooperation in Fighting Financial Crimes

A recent report has highlighted significant deficiencies in Yemen’s institutions and associations, particularly in regards to combating financial crimes such as money laundering (ML) and terrorist financing (TF).

Deficiencies in Supervision and Oversight

The Ministry of Social Affairs was found to be lacking in its supervision and oversight role due to a shortage of human, financial, and technical resources. Additionally, there is a large gap in communication between the Ministry and national non-profit societies and institutions regarding awareness raising on terrorist exploitation risks and taking necessary measures to protect this sector.

Ineffective AML Mechanism

Yemen’s Anti-Money Laundering (AML) mechanism relies heavily on the AML Committee, which comprises members from different authorities. However, the absence of representatives from some authorities concerned with AML matters, such as the Customs Authority, the General Investment Authority, and the Ministry of Social Affairs, has hindered coordination between committee members.

Lack of International Cooperation

Yemen has signed and ratified several international conventions aimed at combating financial crimes, including the 1998 Vienna Convention and the 2000 Palermo Convention. However, the report noted that there is no sufficient coordination between different authorities and a lack of statistics on Mutual Legal Assistance (MLA) requests and executions.

Cooperation with Foreign Counterparts

Yemen relies heavily on diplomatic channels, Interpol, and the AML Committee for cooperation with foreign counterparts. The report noted that while Yemen has a legal framework for judicial cooperation in the field of mutual legal assistance and extradition, there is no clear constraint on the execution of MLA requests.

Non-Compliance with FATF Recommendations

The report highlighted several areas where Yemen falls short of complying with the Financial Action Task Force (FATF) recommendations, including:

• Lack of a definition for “funds”
• Failure to cover all designated categories of predicate offenses
• ML sanctions not considered proportionate
• Inability to measure the effectiveness of its AML legal system due to the absence of statistics

Preventive Measures

In terms of preventive measures, the report noted that Yemen’s secrecy laws are consistent with international recommendations. However, customer due diligence practices are lacking in many financial institutions (FIs). The report highlighted several areas where FIs fail to comply with Customer Due Diligence (CDD) requirements, including:

• Lack of identification of beneficial owners and economic right holders

Conclusion

Overall, the report concludes that Yemen’s institutions and associations require significant improvement in their supervision and oversight roles, as well as cooperation with foreign counterparts, to effectively combat financial crimes such as ML and TF.