Cape Verde’s Efforts to Combat Money Laundering and Terrorist Financing Face Criticism

Overview of the Investigation

A recent investigation by the Specialized Unit for Investigation of Trafficking of Stupefacients (SCITE) has revealed significant concerns about Cape Verde’s framework for preventing money laundering and terrorist financing.

Weaknesses in the Current Framework

• SCITE lacks operational independence and autonomy to decide what information can be disseminated.
• Customs officials lack the power to stop or restrain currency or bearer instruments suspected of being related to money laundering or terrorist financing.
• Financial institutions are required to implement customer due diligence procedures, but there is uncertainty about the types of identity documents considered acceptable for transactions below a certain threshold.
• Financial institutions can rely on verifications from foreign institutions without establishing a framework to ensure that only well-supervised institutions apply international standards.

Concerns About International Financial Institutions

• Institutions operating in this sector may fall outside global consolidated supervision and operate without a physical presence in the country.
• Regulatory arrangements for these institutions are often less rigorous than those for domestic institutions.

Monitoring Transactions

• There are fundamental weaknesses in monitoring transactions, which hinders the obligation to report suspicious transactions.
• The legal framework requires records to be maintained for a certain period, but financial institutions lack well-documented record retention policies.

Supervision and Regulation

• The Bank of Cape Verde (BCV) is responsible for regulating all financial institution activities, including anti-money laundering (AML) supervision. However, BCV lacks a clear AML/CFT supervisory strategy and has not defined varying levels of risk across different financial institutions and lines of business.
• There are concerns about the lack of regulations and guidance for certain designated non-financial businesses and professions (DNFBPs), such as gaming establishments, real estate agents, lawyers, notaries, accountants, and trust and company service providers.

Conclusion

The investigation concludes that Cape Verde’s efforts to combat money laundering and terrorist financing face significant challenges due to these weaknesses. To address these concerns, it is essential for the country to:

• Strengthen its regulatory framework
• Enhance AML/CFT supervision
• Provide adequate training for financial institutions and DNFBPs