Financial Crime World

Liberia’s Anti-Financial Crime Regime: Progress and Challenges in the Face of Money Laundering and Terrorist Financing Threats

Background

The West African nation of Liberia, which emerged from a more than decade-long civil war in the early 2000s, continues its journey toward institutional and infrastructure rebuilding. While the country has experienced a relatively stable political climate since then, Liberia’s financial crime landscape remains a concern.

Assessments and Placement on Follow-up Process

In a 2011 Mutual Evaluation Report, assessors identified several significant deficiencies within Liberia’s anti-financial crime regime, primarily due to the absence of a comprehensive anti-money laundering (AML) legislative framework and a lack of frameworks to counter the financing of terrorism. Consequently, the implementation of AML/CFT measures was deemed not effective under international standards.

Liberia was placed on the Expedited Regular Follow-up process, requiring annual reporting. Despite progress, the country failed to address strategic deficiencies, leading to placement on the Enhanced Follow-up process in November 2016. However, in November 2017, Liberia was returned to the Expedited Follow-up process following intense efforts and commitment at the highest level to rectify these issues.

Money Laundering Risks

According to Liberia’s National Risk Assessment report, the country faces high money laundering (ML) risks. The primary predicate offenses generating ML include:

  • Corruption and bribery
  • Illicit drug trafficking
  • Tax evasion
  • Currency counterfeiting
  • Human trafficking and smuggling
  • Product counterfeiting and piracy

With a significant cash economy and informal cross-border transactions, it is crucial to regulate and supervise financial institutions and designated non-financial businesses and professions (DNFBPs), particularly lawyers.

Terrorist Financing Threats

Although terrorist financing (TF) incidents in Liberia are limited, the country has several vulnerabilities:

  • A porous border
  • Widespread ideological teachings
  • A large informal economy

Liberia has implemented an Anti-Money Laundering and Counter-Financing of Terrorism and Proliferation Strategy and Action Plan (AS-AP) and registered notable improvements in its technical compliance with FATF Recommendations. However, several challenges remain.

Areas of Improvement

Key areas where Liberia needs to improve according to FATF Recommendations include:

  1. New technologies: Virtual Assets (VA) and Virtual Assets Service Providers (VASPs) (R.15)
  2. DNFBPs – Customer Due Diligence (CDD) and other measures (R.22 and R23)
  3. Transparency and beneficial ownership of legal persons (R.24)
  4. Transparency and beneficial ownership of legal arrangements (R.25)
  5. Regulation and supervision of Financial Institutions (R.26)
  6. Regulation and supervision of DNFBPs (R.28)
  7. Sanctions for non-compliance with national AML/CFT requirements (R.35)

Ongoing Challenges

Liberia has made strides in combating money laundering through the adoption of a four-year AS-AP but requires significant improvements in Immediate Outcome areas:

  • Confiscation
  • TF investigation and prosecution
  • ML investigation and prosecution
  • Preventing misuse of NPOs for TF purposes
  • Supervising and monitoring non-bank financial institutions and DNFBPs

Recommendations

To strengthen Liberia’s anti-financial crime system, the following recommendations are suggested:

  • Intensifying efforts to understand ML/TF risks
  • Enhancing supervision of non-bank financial institutions and DNFBPs
  • Providing technical, human, and financial resources to the Financial Intelligence Agency
  • Strengthening asset declaration compliance
  • Assessing the risks of non-profit organizations (NPOs) to prevent TF abuse.