Financial Crime World

Money Laundering Allegations Surface in Cape Verde: IMF Report Reveals Gaps in AML/CFT System

Date: April 1, 2009

The International Monetary Fund (IMF) has published a comprehensive assessment report on Cape Verde’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) system. The following highlights the key findings from the report.

Regulatory Framework Gaps

  • Criminalization of Predicate Offenses: Although money laundering was criminalized in 1993, Cape Verde’s legislation does not cover the full range of predicate offenses required by the Palermo Convention.
  • Financing of Terrorism (FT): The country has yet to criminalize FT, despite having ratified the UN Convention for the Suppression of the Financing of Terrorism.

Limitations of Financial Intelligence Unit (FIU)

Although financial institutions in Cape Verde have an obligation to file Suspicious Transaction Reports (STRs) with the Judiciary Police (JP), it does not function as a fully-independent FIU:

  • Limited Resources and Expertise: JP has limited resources and expertise to efficiently handle AML/CFT investigations.
  • Lack of Operational Independence: The Central Section for the Investigation of Trafficking of Stupefacients (SCITE) within the JP analyzes STRs; however, it lacks the operational independence and autonomy to share information with other agencies.

Inadequate Measures for Certain High-risk Customer Segments

  • Politically Exposed Persons: The legal framework fails to sufficiently address the risks associated with politically exposed persons and their associated businesses.
  • Correspondent Banking Relationships: Financial institutions are subject to customer due diligence (CDD) requirements but the framework does not extend to correspondent banking relationships or introduced businesses.
  • Foreign Branches: Existing regulations do not apply to foreign branches and subsidiaries operating in Cape Verde.

Non-financial Businesses and Professions (DNFPs)

Designated non-financial businesses and professions, such as lawyers, notaries, accountants, and trust and company service providers, are not covered by the AML/CFT regulatory framework in Cape Verde.

Recommendations and Conclusion

The IMF assessment team held meetings with officials from relevant government agencies and private institutions during their visits to Cape Verde in April and May 2007. The report was part of the Cape Verdean financial sector assessment program and was endorsed by Groupe Intergouvernemental d’Action Contre le Blanchiment en Afrique (GIABA) in November 2007.

The report’s assessors express their appreciation to the Cape Verdean authorities and institutions for their assistance during the assessment mission. Key recommendations for improving Cape Verde’s AML/CFT system include:

  • Criminalizing FT and expanding the range of predicate offenses
  • Strengthening the independence and autonomy of the FIU
  • Implementing due diligence measures for DNFPs
  • Enhancing the ability of law enforcement to adequately deal with ML/FT investigations
  • Adopting regulations for foreign branches and subsidiaries.