Risks Abound in Central African Republic’s Financial Sector

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The financial sector in the Central African Republic (CAR) is plagued by a multitude of risks, making it challenging for authorities to determine customer risk profiles.

Identified Risks

Despite efforts to reduce identified risks, measures implemented are not sufficient to address the threats. Banks and money transfer service providers have fulfilled their duty of vigilance only partially, with a surprisingly low number of Suspicious Transaction Reports (STRs) filed compared to the criticality of the sector’s inherent risk.

Non-Bank Financial Institutions

Non-bank financial institutions (FIs), such as microfinance institutions and payment service providers, demonstrate varying levels of understanding regarding anti-money laundering and combating the financing of terrorism (AML/CFT) risks. The insurance sector shows limited understanding of these risks, while there are no licensed foreign exchange bureaus in operation.

Digital Currencies

The country’s recent introduction of the Sango coin and the lack of implementing measures to regulate this sector leave its activities exposed to money laundering and terrorist financing risks. The financial inclusion rate in CAR is low, making it more susceptible to reliance on virtual assets (VAs).

Control Functions and Supervision

The evaluation of control functions revealed shortcomings in the supervision system for financial institutions and designated non-financial businesses and professions (DNFBPs). Supervisors conduct due diligence, but the weak system for identifying beneficial owners hinders effective AML/CFT actions.

The country’s mechanisms for ensuring transparency of legal entities and arrangements also require improvement. The collection, storage, and updating of information on legal entities and arrangements are inadequate, and checks on the authenticity of information are empirical and insufficient. Access to information collected is limited, making it challenging to prevent misuse for money laundering and terrorist financing purposes.

International Cooperation

The country’s general legal framework for mutual legal assistance and extradition is suitable, but a centralized system for archiving and managing files is lacking, impeding the provision of information on collection and processing times. The country has not requested or granted international cooperation in AML/CFT matters during the evaluation period.

Security Challenges Undermine Economic Development

CAR faces significant security and political challenges that have hindered economic and social development since its independence in 1960. Despite efforts to establish lasting peace and stability, the security situation remains fragile, with various conflicts having a devastating impact on the country’s economy.

Exacerbating Factors

The country’s exposure to money laundering and terrorist financing risks is exacerbated by its complex political landscape, with armed groups operating on its territory. The commission of underlying offences, such as misappropriation of public funds, drug trafficking, and corruption, generates huge financial profits, making it essential for authorities to strengthen their AML/CFT measures.

Call to Action

In light of these challenges, CAR’s financial sector must prioritize the implementation of robust risk management strategies to prevent the exploitation of its entities and arrangements for money laundering and terrorist financing purposes.