Financial Crime World

Madagascar’s Financial Sector Lacks Effective Anti-Money Laundering Measures

A recent assessment by a team of experts has revealed that Madagascar’s financial sector is plagued by weaknesses in its anti-money laundering (AML) and combating the financing of terrorism (CFT) measures.

Weaknesses in AML/CFT Measures

  • Many non-financial businesses and professionals, such as lawyers, notaries, and accountants, are unaware of AML/CFT risks and do not implement effective measures to prevent money laundering.
  • Insurance companies only apply client identification obligations, while commercial banks are the only institutions that seek to identify beneficial owners.

Lack of Effectiveness in Reporting Suspicious Transactions

  • Many private sector actors refer to the AML law as a limitation on cash payments rather than a requirement to file an STR when funds appear to come from a crime or offense.
  • The competent authorities have limited powers to verify the truthfulness of documents submitted and do not conduct character background checks.

Supervision Challenges

  • Risk-based supervision is not performed, and AML/CFT issues are often dealt with in the same way as prudential issues during on-site visits.
  • International cooperation in AML/CFT is extremely limited, with SAMIFIN being the only entity that exchanges information with foreign counterparts.

Recommendations for Improvement

Strengthen Public Administration

  • Implement effective measures to prevent money laundering and terrorist financing
  • Enhance international cooperation and coordination

Fight against Informality in the Private Sector

  • Reduce the use of cash and financial exclusion
  • Promote formalization of economic activities

Implement a Global Strategy

  • Mobilize actors involved in AML/CFT
  • Develop a comprehensive strategy to prevent money laundering and terrorist financing

Priorities for Improvement

  1. Strengthen public administration
  2. Fight against informality in the private sector, use of cash, and financial exclusion
  3. Implement a global strategy based on the mobilization of actors involved in AML/CFT

The implementation of these recommendations is crucial to improving Madagascar’s financial sector and reducing its vulnerability to money laundering and terrorist financing.