Financial Crime World

SAO TOME AND PRINCIPE: Banks Face Compliance Challenges Amid Tightening Regulations

Strengthening Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Framework

Sao Tome and Principe is facing increasing pressure to implement the Financial Action Task Force (FATF) Recommendations in order to strengthen its anti-money laundering (AML) and combating the financing of terrorism (CFT) framework. According to the latest FATF Follow-Up Report 2023, the country’s banking sector is still grappling with several compliance challenges.

Compliance Challenges

  • The report highlights that while Sao Tome and Principe has made significant progress in implementing many of the FATF Recommendations, there are still several areas where it falls short.
  • Specifically:
    • R.4 - Confiscation and provisional measures: Received a “partially compliant” rating due to improvements needed in its legal framework.
    • R.8 - Non-profit organisations: Rated “non-compliant” due to ineffective regulations for non-profit entities.
    • R.24 - Transparency and beneficial ownership of legal persons: Rated “non-compliant” due to lack of transparency in the registration process.

Progress in Combating Terrorist Financing

  • Sao Tome and Principe received high ratings for its implementation of measures aimed at combating terrorist financing, including:
    • R.6 - Targeted financial sanctions related to terrorism and terrorist financing: Rated “largely compliant”.
    • Customer due diligence (CDD) requirements: Rated “partially compliant” in this area.

Challenges Facing the Banking Sector

  • The FATF Report highlights that Sao Tome and Principe’s banking sector faces several challenges in implementing effective AML/ CFT measures, including:
    • Inadequate resources
    • Lack of capacity building
    • Insufficient international cooperation

Response to the Report’s Findings

  • In response to the report’s findings, the country has announced plans to:
    • Strengthen its regulatory framework
    • Enhance customer due diligence requirements
    • Improve its international cooperation with other countries

Benefits of Implementing FATF Recommendations

  • By implementing the FATF Recommendations, Sao Tome and Principe can reduce the risks associated with money laundering and terrorist financing, protect its financial system, and maintain its reputation as a stable and secure financial hub in West Africa.