Financial Crime World

Financing Illicit Activities: A Shadowy Side of São Tomé and Príncipe’s Economy

São Tomé and Príncipe, the smallest African country with an area of 1,001 square kilometers, has become a potential hotspot for financial crimes despite its thriving offshore financial sector and strategic location.

São Tomé and Príncipe’s Ranking in Criminality and Financial Crimes

  • São Tomé and Príncipe ranks 98th out of 161 countries in terms of criminality level, according to the ENACT Organized Crime Index.
  • However, its resilience to organized crime is relatively low, with a ranking of 136.

Forms of Financial Crimes

Financial crimes include:

  • Money laundering
  • Tax evasion
  • Terrorist financing

These activities often coincide with other transnational organized crimes, such as drug and human trafficking, ultimately undermining the economic stability and development prospects of affected countries.

Attractions and Challenges of São Tomé and Príncipe’s Financial Sector

Attractions

  • Tax regime offers zero tax on dividends, interest, and royalties for international companies
  • Offshore banking sector is lightly regulated and offers privacy protections

Challenges

  • Lack of transparency and weak regulatory framework
  • Lack of awareness and capacity to detect and prevent illicit activities

Consequences of Financial Crimes

Financial crimes can lead to:

  • Loss of public trust and confidence in the financial system
  • Decreased economic stability
  • Exacerbated economic instability

Steps Taken to Combat Financial Crimes

  • São Tomé and Príncipe ratified the United Nations Convention against Transnational Organized Crime and its related protocols in 2018
  • Established the Financial Intelligence Unit (FIU) in 2016
  • International cooperation and technical assistance

Remaining Challenges

  • Economic reliance on offshore financial sector
  • High level of corruption

Multifaceted Approach to Addressing Financial Crimes

  • Strengthening regulatory frameworks and enhancing the capacity of law enforcement and financial intelligence units
  • Fostering transparency and accountability through increased public awareness
  • International cooperation in the global fight against financial crimes.