Liberia’s Financial Sector Faces Scrutiny over Money Laundering and Compliance Regulations

GIABA’s Damning Report on Liberia’s AML/CTF Regime

Monrovia, Liberia - The Intergovernmental Action Group against Money Laundering in West Africa (GIABA) has released a report highlighting several shortcomings in Liberia’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) framework [1].

Findings: The report, which follows a mutual evaluation, identified various weaknesses in Liberia’s AML/CTF regime.

Heightened Scrutiny and Enforcement Action

The importance of complying with AML/CTF regulations was emphasized following the report [2][3]:

Press Release: The Financial Intelligence Unit (FIU) of Liberia urged all financial institutions, including the insurance sector, to adhere to the regulations.
Enforcement Actions: Two financial institutions, Sinkor Monrovia-based and Afriland Bank, were penalized for non-compliance.
- Fines: Sinkor Monrovia-based institution was fined LD$500,000.
- Penalties: Afriland Bank was penalized $250,000 LRD.

Challenges Facing Liberia’s AML/CTF framework

Liberia has been criticized for its weak enforcement of AML/CTF requirements [4][5]:

Classification as a Major Money Laundering Country: The U.S. State Department has classified Liberia as a major money laundering country.
Limited Capacity: Financial institutions in Liberia have limited capacity to detect and prevent money laundering activities.
Underfunded and Lacking Technical Capacity: The country’s financial intelligence unit is underfunded and lacks the technical capacity to collect, analyze, and disseminate financial intelligence.

Compounding Factors

The challenges to Liberia’s AML/CTF regime are compounded by other factors [6]:

Cash-based Economy: Liberia’s cash-based economy and weak border controls facilitate the smuggling of illicit goods.
Corruption: Rampant corruption further increases Liberia’s vulnerability to money laundering activities.

Unregulated Financial Operations

Other areas of concern include unregulated money exchange operations and unregulated artisanal diamond and gold mines [6]:

Money Exchange Operations: Various unlicensed foreign exchange sites and unregulated entities raise concerns.
Artisanal Diamond and Gold Mines: Largely unregulated, adding to the difficulty of monitoring potential money laundering activities.

Progress and Improvements Needed

Despite some improvements in Liberia’s AML/CTF regime [7], significant improvements are needed to fully strengthen the framework [5]:

Rankings: Liberia ranked 137 out of 179 countries in 2021, an improvement from the previous year.
Basel AML Index: Liberia’s ranking in the Basel AML Index improved from 32/141 to 29/141.

International Assessments and Expectations

The Financial Action Task Force (FATF) evaluated Liberia using its 2013 methodology and gave the country low scores in three categories: technical and effectiveness, transparency and international cooperation [5]. Improvements are expected in these areas, with the Central Bank of Liberia working closely with international partners to address the deficiencies identified.