Financial Crime World

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Yemen’s Anti-Money Laundering Efforts Face Major Shortcomings

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A recent assessment has highlighted significant deficiencies in Yemen’s Ministry of Social Affairs’ supervision and oversight role, exacerbating the risk of terrorist exploitation in the country. The review also revealed a substantial gap in communication between the ministry and national non-profit societies and institutions.

Anti-Money Laundering Mechanism Deficiencies

The Anti-Money Laundering (AML) mechanism in Yemen relies heavily on the AML Committee, comprising members from various authorities, including law enforcement agencies and financial institutions. However:

  • The absence of representatives from other relevant authorities, such as the Customs Authority and the General Investment Authority, has hindered effective coordination and cooperation.
  • This lack of representation makes it challenging to ensure a comprehensive approach to combating money laundering.

International Conventions

Yemen has not fully ratified key international conventions aimed at combating terrorism financing, including:

  • The 1999 UN Convention for the Suppression of the Financing of Terrorism

The country’s legal framework allows for judicial cooperation in mutual legal assistance and extradition, but the lack of clear statistics on the number of requested and executed representations hinders the assessment of its effectiveness.

Yemen’s legal system does not provide a definition for “funds” or cover all designated categories of predicate offenses, making it difficult to prosecute money laundering cases. Additionally:

  • The country lacks express provisions covering the criminal liability of legal persons.
  • Terrorism financing is not criminalized, which limits the effectiveness of AML measures.

Customer Due Diligence Practices

The assessment also highlighted concerns regarding customer due diligence (CDD) practices in financial institutions. Specifically:

  • Many financial institutions fail to:
    • Verify the identity of beneficial owners
    • Inspect transactions
    • Obtain information on the purpose and nature of business relationships

Implications for Yemen’s Efforts

The report’s findings have significant implications for Yemen’s efforts to combat terrorism financing and money laundering. The country must address these shortcomings to:

  • Prevent the misuse of its financial system by terrorist organizations
  • Maintain its reputation as a responsible member of the global anti-money laundering community

Compliance Ratings

Yemen has been rated partially compliant with several Financial Action Task Force (FATF) recommendations, including those related to money laundering offenses, confiscation, and preventive measures. However:

  • Significant deficiencies were identified in customer due diligence practices, resulting in a non-compliant rating in this area.

The full report is available upon request.