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Cape Verde’s Financial System Fails to Meet International Standards in Fight Against Money Laundering
A recent assessment has revealed significant weaknesses in Cape Verde’s legal framework and institutional measures aimed at preventing money laundering and combating the financing of terrorism.
Criminal Code Lacks Compliance with International Conventions
The country, a member of the United Nations and the African Union, has failed to adequately criminalize money laundering and terrorist financing. The assessment found that Cape Verde’s criminal code does not fully comply with the Palermo Convention and the Vienna Convention on Corruption. Furthermore, the country has also failed to criminalize the financing of terrorism, despite ratifying the UN Convention for the Suppression of the Financing of Terrorism in 2002.
Weaknesses in Financial Intelligence Unit (FIU)
The assessment highlighted weaknesses in Cape Verde’s FIU, which is responsible for receiving and analyzing suspicious transaction reports (STRs). The FIU lacks operational independence and does not have the autonomy to decide what information can be disseminated. As a result, STRs are often treated as criminal investigations rather than as intelligence reports.
Financial Institutions Lack Adequate Customer Due Diligence
The assessment also found that Cape Verde’s financial institutions lack adequate customer due diligence procedures and do not adequately identify higher-risk customers, such as:
- Politically-exposed persons (PEPs)
- Those associated with correspondent banking relationships
- Regimes for introduced business
Inadequate Framework for International Financial Institutions (IFIs)
The country’s framework for the operation of IFIs is also inadequate, allowing institutions to operate without a substantive physical presence in the country.
Record Retention and Supervision Weaknesses
Many financial institutions in Cape Verde lack well-documented record retention policies and are unaware of their obligations under the money laundering law. The Bank of Cape Verde, the country’s regulator, has not clearly defined an anti-money laundering (AML) supervisory strategy and does not have a clear perspective on the varying levels of risk across different financial institutions and their lines of business.
Designated Non-Financial Businesses and Professions (DNFBPs)
The assessment also highlighted weaknesses in Cape Verde’s regulations and guidance for DNFBPs, such as:
- Real estate agents
- Dealers in motor vehicles
- Lawyers
Many DNFBPs are not aware of their obligations under the AML law, and there is a lack of regulation and oversight in these sectors.
Conclusion
The findings of this assessment are a wake-up call for Cape Verde to strengthen its legal framework and institutional measures aimed at preventing money laundering and combating the financing of terrorism. The country must take immediate action to address these weaknesses and ensure that its financial system is fully compliant with international standards.