## _cr09115 ## Source details **Canonical URL:** [_cr09115](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09115.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09115.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09115.pdf.json) --- ### Scope and methodology - Assessment based on the 40+9 Recommendations of the Financial Action Task Force (FATF). - Methodology: AML/CFT assessment Methodology 2004, as updated in June 2006. - Mission on-site: April 30 – May 15, 2007. - Prepared as part of the Financial Sector Assessment Program (FSAP); presented to GIABA and endorsed November 6, 2007. ### Assessment team - Ian Carrington (LEG, mission chief and financial sector expert) - Navin Beekarry (LEG, legal expert) - Ernesto Lopez (LEG, financial sector expert) - Maria Célia Moreira Martins de Ramos (legal expert under LEG supervision) ### Sources of information - Materials supplied by authorities, on-site meetings (list in Annex 2 to the detailed assessment), and subsequent information provided by authorities. --- ### Legal framework, criminalization and enforcement — key findings - Money laundering (ML) - First criminalized in 1993; AML Law No. 17/VI/2002 (December 18) expanded predicate offences beyond drugs. - Article 3-1 ML penalties: imprisonment terms of 4 to 12 years (3-1-a), 2 to 10 years (3-1-b), and 1 to 5 years (3-1-c). - ML offence uses a catalogue/list of predicate offences (Article 3) that omits multiple FATF-designated categories (e.g., participation in an organized criminal group and racketeering; environmental crime; murder and grievous bodily injury; robbery and theft; migrant smuggling; bribery; counterfeiting of currency; insider trading; market manipulation). - Extraterritoriality: Article 3-3 refers to acts committed outside the national territory but does not clearly eliminate need for foreign conviction for the predicate offence. - Between 2004 and 2007 the judiciary police reported only eight ML preliminary enquiries; no ML convictions. - Table excerpts (judiciary police statistics): - STRs received by SCITE: 2004 — 3; 2005 — 5; 2006 — 0; 2007 (Jan–Apr) — 0. - All Crimes Initiated: 2004 Initiated: 2,231; 2005 Initiated: 2,659; 2006 Initiated: 3,540. - Terrorist financing (TF) - UN Convention for the Suppression of the Financing of Terrorism ratified May 3, 2002, but FT not criminalized domestically — no autonomous TF offence. - Articles 315–316 Penal Code criminalize terrorist organization membership/support but do not comprehensively criminalize TF as required by FATF SR.II. - Rating: SR.II — NC. - Confiscation/freezing/seizure - Comprehensive statutory powers exist (AML Law Articles 6–7; CPC Articles 234–254; Drugs Law 78/IV/1993), including confiscation of “profits, interests, and other advantages derived” and property of corresponding value. - Constitutional presumption of innocence (Article 34-1) limits confiscation to conviction context; interim measures available (Article 23 AML Law; Article 243-5 CPC). - Data on freezing/seizure/confiscation are sparse; recommendation to collect and maintain specific statistics. --- ### Institutional arrangements, FIU and STR handling - Reporting and FIU functions - STRs must be filed to the judiciary police (JP) under Article 23-1 of Law 17/VI/2002. - JP receives STRs centrally in SCITE (Central Section for the Investigation of Trafficking of Stupefacients): - SCITE staffing: chief + 13 (2 sub-inspectors and 11 agents) — total 14. - SCITE performs limited analysis, treats STRs like criminal accusations, and promptly informs the Public Ministry (PM); JP lacks operational independence to act as an FIU. - JP cannot obtain banking records or protected information without PM involvement and a court order (procedures cumbersome). - SCITE does not issue reporting guidelines; BCV and ministry of finance have regulatory authority but have not exercised it for STR guidance. - FIU status and recommendations - No dedicated FIU established; assessors rate R.26 — NC. - Recommendations include establishing a full-fledged FIU, centralizing STR reception, conducting desk analysis, authorizing the FIU to obtain additional information without initiating police/judicial inquiries, and enabling information exchange with foreign FIUs (EGMONT membership). - STR performance and statistics - STR counts: 2004 — 3; 2005 — 5; 2006 — 0; 2007 (Jan–Apr) — 0. Very low reporting rate; all STRs from banks and related to drug predicate offences. --- ### Preventive measures — financial institutions (banks, IFIs, para-banks, insurance, capital markets) - Financial sector profile and vulnerabilities - Types: banks, para-banks, international financial institutions (IFIs), insurance companies, capital market intermediaries. - On-shore commercial banks: Banco Comercial do Atlantico; Caixa Economica do Cabo Verde (CECV); Banco Interatlantico; Banco Caboverdiano de Negocios (first three include foreign branches/ownership). - IFIs: Law 12/2005 governs IFIs; 13 entities licensed as IFIs, 7 active at mission; concerns about “mind and management” and possibility of institutions operating without substantive physical presence in Cape Verde. - Remittances: workers’ remittances about 20 percent of national GDP in 2004; remittances significant to banking liabilities. - Insurance: motor insurance ≈ 50 percent of premium income; pure life insurance ≈ 2 percent of market. - Real estate: rapidly expanding; potential channel for illicit proceeds; some properties sold “at prices that appeared to be below the cost of construction.” - Geography/demographics: total land area 4,033 sq km; coastline ≈ 965 km; population ≈ 500,000. - Customer due diligence (CDD) and monitoring - Primary instruments: Law 17/VI/2002; Technical Instructions TI 108 and TI 109 (August 2003). - Threshold rules: specified identity documents required for transactions in excess of one million escudos (EUR 9,090); for transactions below threshold only general obligation to identify customer — ambiguity on acceptable documents. - Reliance on foreign institutions: permitted but without framework ensuring those third parties are well-supervised or compliant with FATF standards. - Beneficial ownership: Article 17 requires identification where “economic beneficiary” differs from direct contact, but no affirmative duty to determine ownership/control structures; trusts not recognized domestically. - PEPs: limited provision only in Law 12/2005 applicable to IFIs; no general PEP framework for domestic institutions. - Wire transfers / SR.VII: banks not required to include originator information in wire transfer messages; SR.VII — NC. - Record-keeping: Article 20 requires retention for five years, but lacks specificity on transaction reconstruction, account files, and timely availability to authorities. R.10 — PC. - Internal controls and compliance - Article 21 requires institutions to create an AML unit but no explicit legal requirement to appoint a senior compliance officer, to ensure its independence, or to maintain an independent audit function; R.15 — NC. - Employee training and screening inadequate and inconsistent. - Supervision by Bank of Cape Verde (BCV) - BCV is the AML/CFT regulator for banks, para-banks, IFIs, and many financial activities; AGMVM is a unit within BCV for capital markets. - BCV powers: directive and inspection powers (Article 49 Law 3/1996), but administrative sanctions for AML breaches imposed by minister of finance — BCV can instruct/recommend but cannot unilaterally impose AML administrative penalties. - DSU (BCV Supervision Department) staffing: 14 employees; limited AML inspection experience — since 2003 DSU performed five exclusive AML/CFT inspections and one combined inspection. - Recommendations: widen BCV inspection powers for IFIs (Law 12/2005), provide BCV autonomy to impose AML sanctions, develop AML supervisory strategy and risk assessment, increase AML training for staff. --- ### Preventive measures — Designated Non-Financial Businesses and Professions (DNFBPs) - Coverage and implementation - AML Law extends many requirements (except record keeping) to gaming establishments, real estate brokerage, property buying for resale, dealers in precious metals and stones, antiques, works of art and motor vehicles. - Lawyers, notaries, accountants, and trust/service providers are not covered by the legal framework. - Ministry of finance designated as regulator for DNFBPs but has not issued implementing regulations or guidance; no active AML supervision. - Real estate agents and motor vehicle dealers represent the most significant DNFBP activity; real estate market largely unregulated and informal. - DNFBP findings - Most covered DNFBPs unaware of obligations; no STRs from DNFBPs. - No casinos currently in operation; potential investor interest exists. - Trusts and company service providers not present as distinct industries; trusts not recognized domestically. - Ratings and recommendations - R.12, R.16, R.24–R.25 — NC in multiple respects due to lack of regulation, guidance, supervision and enforcement. - Recommended actions: issue regulations, prioritize outreach (real estate priority), extend coverage where appropriate to lawyers/accountants for specific activities, provide DNFBP guidance and supervisory resources. --- ### STRs, tipping-off, suspension and reporting regime - Legal text (Article 23) - “Financial entities shall immediately inform the judiciary police ... if they become aware or have a well-founded suspicion ...” and “shall refrain from carrying out any transactions which they reasonably suspect ... and shall inform the Prosecutor-General ... who may order the suspension.” - Suspension: if not ratified by judicial ruling within 24 hours (extended to 48 hours for transactions > one million escudos), the transaction may proceed. - Operational effects - Mandatory suspension requirement has deterred STR filings — institutions reluctant to suspend customers’ property rights. - No clear prohibition of tipping-off for unsolicited STRs; tipping-off protection limited and incomplete. - Recommended reforms: clarify reporting authority, prohibit tipping-off, make attempted transactions reportable, include TF as STR trigger once criminalized, provide guidance/templates, consider feasibility of CTR system. - STR volume and source - STRs minimal and concentrated: only eight STRs reported since 2002, all from banks and linked to drug trafficking. --- ### International cooperation, MLA and extradition - Mutual Legal Assistance (MLA) - Legal bases: bilateral and multilateral treaties, ECOWAS, AML Law Article 6, Drugs Law Article 42, CPC provisions. - Central authority: Attorney General’s Office (Public Ministry) coordinates MLA; judiciary police can cooperate internationally. - Article 6 AML Law allows JP to investigate and seize assets located in Cape Verde following a foreign judiciary authority request; reciprocity and secrecy conditions apply (Article 6-3). - Evaluative findings: - R.36 — PC: framework exists but not comprehensive; FT not criminalized undermines MLA on TF. - R.37 — PC: dual criminality application unclear; team could not conclude it is not an impediment. - R.38 — NC: lack of coordinating mechanisms for confiscation requests, no asset forfeiture fund, no sharing framework. - Extradition - Constitution prohibits extradition of Cape Verdean citizens; aut dedere aut judicare principle applies. - Extradition of foreigners possible per Decree-Law No. 6/1997; ML offence punishable by 1 to 12 years is extraditable. - TF not criminalized: extradition and cooperation on TF uncertain. - Rating: R.39 — PC (limitations due to lack of demonstrable case experience). - UNSCRs and conventions - Vienna and Palermo Conventions ratified; UN 1267/1373 recognized but not effectively implemented (SR.III — NC). - UN Convention on Suppression of TF ratified but not implemented domestically — SR.I and SR.II — NC. --- ### Operational capacity, resources, statistics and coordination - Judiciary police (JP) — SCITE - Staffing: 14 (1 chief + 13 staff). Performs both STR investigative and normal police functions; combination undermines analytical capacity. - Access to information: limited — JP requires PM/court order for external government databases and protected information; process seen as cumbersome and delaying analysis. - BCV supervision resources - DSU staff: 14; AGMVM staff: 2 full-time + BCV non-executive members. - Funding sources: BCV receives 0.75 percent of insurance premium income; fees for banks limited and one-time; DSU funded from BCV general resources. - AML inspections limited: since 2003 only five standalone AML/CFT inspections and one combined inspection performed. - Statistics - R.32 — NC: maintenance of statistics across agencies weak; lack of data on prosecutions, convictions, freezing/seizure/confiscation amounts undermines effectiveness review. - National coordination - NCC (National Committee for Coordination on the Fight against Drugs, Organised Crime and Corruption) exists (established 1995) and could be broadened, but active, effective operational national coordination on AML/CFT is low — R.31 — PC. - Resource recommendations - Increase specialized staff, training, and resources for JP, PM, BCV, customs. - Create dedicated FIU with adequate staffing, training, databases and operational independence. - Develop systems for collecting and using statistics on STRs, investigations, prosecutions, and asset recovery. --- ### Key quantitative references and thresholds (exactly as in source) - Mission dates: April 30 – May 15, 2007. - STRs received by SCITE: 2004 — 3; 2005 — 5; 2006 — 0; 2007* — 0 (*Year 2007 only from January to April). - SCITE staffing: chief + 13 (2 sub-inspectors and 11 agents) = 14. - Transaction identification threshold: one million escudos (EUR 9,090). - Escudo fixed exchange rate: 1/110 to the Euro. - Penal sanctions for ML (Article 3-1): - 3-1-a) imprisonment 4 to 12 years; - 3-1-b) imprisonment 2 to 10 years; - 3-1-c) imprisonment 1 to 5 years. - Insurance market: motor insurance ≈ 50 percent of annual premium income; pure life insurance ≈ 2 percent. - Remittances: workers’ remittances about 20 percent of national GDP in 2004. - Geography/demographics: total land area 4,033 sq km; coastline ≈ 965 km; population ≈ 500,000. - IFI licensing: 13 licensed IFIs, 7 active at mission; Law 12/2005 maximum period to commence operations after license: 360 days. - BCV DSU staff: 14 employees. --- ### Consolidated priority recommendations (short action plan) - Legal reforms - Broaden ML predicate offence list to align with FATF R.1 and the Glossary; clarify that prior conviction for the predicate offence is not required for an ML conviction. - Expressly and autonomously criminalize terrorist financing consistent with Article 2 of the UN Convention; make TF a predicate offence for ML; ensure extraterritorial reach as appropriate. - Implement UNSCRs 1267 and 1373 with domestic freezing/unfreezing mechanisms, listing/de-listing procedures, and guidance to reporting entities. - FIU and STRs - Establish a full-fledged FIU with statutory autonomy and resources; amend Law 17/VI/2002 to make the FIU the direct recipient of STRs. - Authorize FIU to perform meaningful analysis, obtain additional information from reporting entities without initiating police/judicial inquiries, and exchange information with foreign FIUs (EGMONT). - Standardize STR forms and require reporting of attempted transactions and TF suspicions once TF criminalized; prohibit tipping-off. - Supervisory and regulatory measures - Strengthen BCV powers: widen inspection powers for IFIs (Law 12/2005), allow BCV to impose administrative AML sanctions, adopt an AML supervisory strategy and risk assessment (including IFIs and remittances). - Require financial institutions to implement comprehensive internal AML/CFT controls, designate senior compliance officer(s), maintain independent audit, adopt written policies, and provide ongoing AML/CFT training and employee screening. - Remove CDD/documentation threshold of one million escudos for fundamental identification obligations; require consistent CDD, beneficial ownership identification, ongoing due diligence, and PEP measures across all financial institutions. - Issue wire transfer rules (SR.VII) requiring originator information to accompany transfers and define measures for transfers missing originator data. - DNFBPs, legal persons and NPOs - Ministry of finance to issue DNFBP regulations, commence supervision, and conduct outreach — priority: real estate, motor vehicle dealers, notaries. - Extend CDD/STR obligations to lawyers, accountants and notaries for FATF-specified activities and provide protections for reporting in good faith. - Review NPO sector, implement registration/licensing, require records retention (at least five years), and designate an authority to monitor and coordinate TF risk mitigation. - Improve commercial registries (interconnectivity, statistics) to ensure access to beneficial ownership and company information. - Law enforcement, MLA and international cooperation - Provide JP and PM with resources, specialized training and investigative tools (wiretaps, controlled delivery, undercover operations) and create specialized ML/TF units. - Clarify dual criminality interpretation and expedite MLA/extradition procedures; improve mechanisms for international cooperation including sharing with foreign FIUs and foreign supervisors; consider an asset forfeiture fund and procedures for sharing confiscated assets. - Operational data and monitoring - Implement systems to collect and maintain comprehensive statistics on STRs, ML/TF investigations, prosecutions, convictions, freezing/seizures/confiscations and MLA/extradition actions. - BCV, JP and PM to coordinate on guidance, feedback to reporting institutions and use data strategically to detect under/over-reporting. --- *Source: _cr09115 (IMF Country Report No. 06/334, selected extracts and Annex III).* ### Preface7 ### Preface7 ### Scope and Methodology - Assessment based on the 40+9 Recommendations of the Financial Action Task Force (FATF). - Prepared using the AML/CFT assessment Methodology 2004, as updated in June 2006. - Considered materials supplied by the authorities, information obtained on-site during the mission (April 30 – May 15, 2007), and other information subsequently provided by the authorities. - The mission met with officials and representatives of all relevant government agencies and the private sector; a list of bodies met is set out in Annex 2 to the detailed assessment report. - The assessment was conducted as part of the assessment of Cape Verde under the Financial Sector Assessment Program (FSAP). ### Assessment Activities and Coverage - Review scope included: - Institutional framework and relevant AML/CFT laws, regulations, guidelines and other requirements. - Regulatory and institutional systems to counter money laundering (ML) and the financing of terrorism (FT) through financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs). - Capacity, implementation, and effectiveness of the systems in place. - The report: - Provides a summary of the AML/CFT measures in place in Cape Verde at the time of the mission and shortly thereafter. - Describes and analyzes those measures. - Sets out Cape Verde’s levels of compliance with the FATF 40+9 Recommendations (see Table 1). - Provides recommendations on how certain aspects of the system could be strengthened (see Table 2). ### Assessment Team - Conducted by a team of assessors composed of staff of the International Monetary Fund (IMF) and an expert acting under the supervision of the IMF. - Evaluation team members: - Ian Carrington (LEG, mission chief and financial sector expert) - Navin Beekarry (LEG, legal expert) - Ernesto Lopez (LEG, financial sector expert) - Maria Célia Moreira Martins de Ramos (legal expert under LEG supervision) ### Outcomes and Endorsement - The report was produced by the IMF as part of the FSAP assessment of Cape Verde. - Presented to the Groupe Intergouvernemental d’Action Contre le Blanchiment en Afrique (GIABA). - Endorsed by GIABA at the eighth session of the plenary meeting of its technical committee on November 6, 2007. ### Acknowledgements - The assessors express their gratitude to the Cape Verde authorities and institutions for their excellent cooperation and assistance throughout the assessment mission. *Source: _cr09115 - Preface7* ### EXECUTIVE SUMMARY ### _cr09115 - EXECUTIVE SUMMARY ### Key Findings — Legal Systems and Related Institutional Measures - Cape Verde first criminalized money laundering in 1993; at that time the offence was limited to proceeds obtained through illicit trafficking in drugs or substances used to produce drugs. - In 2002, Cape Verde enacted legislation that expanded the list of predicate offences and criminalized money laundering in a manner consistent with the material and subjective elements required by the Vienna Convention. - The range of predicate offences under the existing legislation falls short of the requirement of the Palermo Convention. - There have so far been no convictions for money laundering. - Cape Verde has ratified the UN Convention for the Suppression of the Financing of Terrorism, but has not yet criminalized the offence of the financing of terrorism in its domestic legal system. - Cape Verde has a comprehensive framework addressing freezing, seizing, and confiscation of the proceeds and instrumentalities of crimes including money laundering or assets of corresponding value, with adequate provisions to protect the rights of bona fide third parties. - Financial institutions and other covered persons/entities must file suspicious transaction reports (STRs) with the judiciary police (JP); however, the JP does not perform all the functions of a financial intelligence unit (FIU). - Within the JP, STRs are received by an internal unit known as the Central Section for the Investigation of Trafficking of Stupefacients (SCITE). - SCITE conducts very limited analysis of reports and informs the Public Ministry (PM) whenever reports are received. - STRs are treated similarly to criminal investigations; SCITE is not operationally independent and lacks autonomy to decide what information can be disseminated. - After informing the PM, the JP has substantial autonomy in pursuing matters related to STRs. - The JP has general powers to obtain information and to carry out inspections and searches for documents and information, including banking information if authorized by a magistrate of the PM, but lacks resources and expertise to adequately perform investigatory functions related to money laundering offences. - Money declaration requirement: persons entering the country must declare to customs when in possession of foreign currencies or bearer securities in excess of one million escudos (EUR 9,090). - The customs department is responsible for compliance but indicates it does not have the power to stop or restrain currency or bearer instruments that are falsely declared or suspected to be related to money laundering (ML) or financing of terrorism (FT). ### Preventive Measures — Financial Institutions - Cape Verde’s preventive regime is built on its principal money laundering law and technical instructions (TIs) issued by the Bank of Cape Verde (BCV). - TIs require specific types of identity documents where transactions are in excess of one million escudos (EUR 9,090). - For transactions below this threshold there is a general obligation to identify the customer, but less certainty about acceptable identity documents. - Customer due diligence (CDD) regime allows financial institutions to rely in part on verifications provided by foreign institutions without a framework ensuring those institutions are well-supervised or adequately apply the FATF recommendations. - Existing preventive arrangements do not adequately address risks posed by higher-risk customers such as politically-exposed persons (PEPs), correspondent banking relationships, and introduced business. - The framework does not require financial institutions to apply Cape Verde requirements to foreign branches and subsidiaries. - Concerns about international financial institutions (IFIs): - Under existing arrangements, institutions operating in this sector can fall outside acceptable arrangements for global consolidated supervision and can operate without a substantive physical presence in Cape Verde. - In some instances, regulatory arrangements for these institutions are less rigorous than for domestic-sector institutions. - Weaknesses in transaction monitoring: - Obligation to monitor transactions is limited to transactions suspected of being linked to predicate offences currently covered by the money laundering legislation, impacting the obligation to report suspicious transactions. - Record-keeping: - Legal framework meets requirements for record retention periods, but institutions appear unaware of these requirements and generally lack well-documented record retention policies. - Supervision: - BCV is the regulator for all activities conducted by financial institutions; the auditor general of capital markets (AGMVM) is a unit within BCV. - The bank supervision department has issued AML regulations and undertaken AML inspections of banks operating in the domestic market. - The department has not clearly defined an AML/CFT supervisory strategy and lacks a clear perspective on varying risk levels across financial institutions and lines of business. - Department staff have had varying degrees of basic AML supervision training but need a more systematic and focused program of training. ### Preventive Measures — Designated Non-Financial Businesses and Professions (DNFBPs) - AML obligations extend to gaming establishments, real estate or property brokerage, property buying for resale, and dealers in precious metals and stones, antiques, works of art, and motor vehicles. - Lawyers, notaries, accountants, and trust and company service providers are not covered by the legal framework. - There are currently no gaming houses or casinos in Cape Verde; authorities reported possible future investor interest in establishing a casino. - There are no persons providing trust and company services as a distinct business activity. - Authorities report no significant activity in the sale of precious metals and stones, antiques and works of art. - The ministry of finance and public administration is designated as the regulator of DNFBPs but has not issued regulations or guidance to assist implementation of the principal money laundering law for covered DNFBPs. - Covered DNFBP service providers interviewed were generally not aware of their obligations under the AML law. - Significant DNFBP activity: - Real estate agents and dealers in motor vehicles conduct the only covered activities with significant business volume. - Real estate market is largely unregulated and highly informal, except for resort-like projects which account for the vast majority of intermediation; these projects are undertaken by large foreign and multinational agents whose principal clients are foreigners (mainly from the UK). - Demand for newer and higher-end motor vehicles has surged in recent years, presumably motivated by bank-lending policies targeting this market and by high tariffs on importation of used cars. - Law’s coverage of motor vehicle dealers is comprehensive and not limited to sellers of high-end vehicles. - Approximately 120 lawyers are licensed to practice in Cape Verde and are supervised by the Bar Association; notaries are public officers employed by the ministry of justice and are generally responsible for authentication of real estate title deeds. - Notaries do not receive money from persons involved in purchase of property and do not perform designated functions under FATF Recommendation 12. - Notaries are well placed to detect suspicious transactions related to real estate contracts but have no legal obligation to do so. ### Legal Persons and Arrangements; Non-Profit Organizations - Legal persons may be civil or commercial in nature; common company types include partnerships, limited liability companies, and cooperatives; there are a small number of joint-stock companies (“sociedades anónimas”). - Mandatory registration: all legal persons, associations, foundations, and companies must be registered in the commercial registry. - Records must include company by-laws, names and identification of shareholders, name of the legal person, object, place of incorporation, amount of capital, capital held by each shareholder, composition of management, and persons who can act on behalf of the company. - Changes to these elements must also be registered. - Information in the commercial registry is available to the general public; any interested person can access identification of any shareholder. - Companies have a legal obligation to make information on nominative shares available to competent authorities and any interested persons. - Joint-stock companies can issue nominative and bearer shares. - Bearer shares are issued in paper form and are not subject to registration by the Public Registrar (only annotated in the books maintained by the company). - Holders of bearer shares must be identified during the annual general meeting and when receiving dividends. - There are very few joint-stock companies in Cape Verde and an even smaller number that issue bearer shares. - Cape Verde’s Civil Code governs associations, foundations, and unincorporated associations, establishing requirements for constitution and internal organization; these entities are also subject to registration in the commercial registry. - Before registration, the registrar must verify constitution in accordance with the country’s constitution and civil code and that aims are legal; similar verification occurs for commercial legal persons. - Information recorded includes by-laws, names of managers, place of incorporation, object, names of persons who can act on their behalf, and capital and property held by legal persons if they are foundations. - Cape Verde has not taken specific measures to review the vulnerability of these entities to abuse in the context of financing of terrorism. ### National and International Cooperation - Cape Verde lacks a strong framework for national cooperation on AML/CFT issues. - The national committee for coordination on the fight against drugs, organized crime and corruption (NCC) brings together most relevant government institutions and is potentially a good foundation for cooperation, but there is no strong and effective operational cooperation across all relevant agencies. - Some interaction exists between the JP and the public prosecutor’s office, but no mechanism governs cooperation or ensures structured and consistent collaboration. - Little or no coordination exists between BCV and law enforcement agencies; BCV issued guidelines to financial institutions for reporting suspicious transactions without consulting the JP, the agency that receives STRs. - Mutual legal assistance (MLA) is carried out through bilateral and multilateral treaties applicable in Cape Verde. - The attorney general’s office is the central authority with the ability to render mutual legal assistance in judiciary matters and to coordinate gathering relevant information from the public ministry and criminal police. - The criminal police can cooperate internationally and respond to foreign requests for assistance. - Upon receiving a specific and well-founded request from a judiciary authority of a foreign state, the judiciary police can investigate whether assets or products arising from money laundering committed abroad are located in Cape Verde, and can search and seize those goods or products applying measures in the criminal procedure code and inform foreign authorities of outcomes. - If enquiries reveal assets or products related to money laundering or the relevant predicate offence, Cape Verdean authorities can initiate criminal proceedings for money laundering and take necessary measures to prevent disappearance or confiscation of assets. - Authorities did not produce evidence of international cooperation on financing of terrorism matters. - In the absence of criminalization of FT, lack of clarity about the application of the dual criminality principle creates doubt about authorities’ ability to cooperate on FT matters using the existing MLA framework. ### General Information and Situation of Money Laundering and Financing of Terrorism - Geography and demographics: - Cape Verde is located off the west coast of Africa, approximately 500 km due west of Senegal. - Comprised of 10 islands, 9 of which are inhabited. - Total land area of 4,033 sq km and a coastline of approximately 965 km. - Population of approximately 500,000; heavy emigration results in more nationals living outside Cape Verde than in the country. - Vast majority of the population is on the islands of Santiago (capital Praia) and Sao Vincente. - Some of the largest emigrant groups are located in Boston (USA), Portugal and the Netherlands. - Recent economic activity growth on the island of Sal, primarily in real estate and tourism sectors. - Strategic location near major North-South sea routes; serves as important communications station and sea and air refueling site. - Political and institutional: - Former Portuguese colony; independence in 1975. - Constitution changed in 1990 promoting political openness and multi-party democracy starting in 1991. - Constitution guarantees separation of legislative, executive, and judicial branches. - President of the Republic is elected by universal direct suffrage; Prime Minister appointed by the President; cabinet members appointed by the President at the recommendation of the Prime Minister. - Cape Verde is a member of the African Union, CPLP, ECOWAS, CILSS, and GIABA. - Development and economy: - United Nations Human Development Index ranks Cape Verde 106 out of 177 countries, placing it at the top of the list of Sub-Saharan African countries and in the “medium” human development category. - High ranking among West African countries in World Bank’s “Worldwide Governance Indicators”; highest-rated in “political stability”, “rule of law”, “control of corruption”, “government effectiveness,” and “voice and accountability”. - Service-oriented economy: commerce, transport, tourism, and public services account for a large share of economic activity; foreign aid and migrant remittances are key income sources. - Strong recent economic performance supported by private and official capital flows and The Program Poverty Reduction Growth Facility from the IMF. - Cape Verde was among the first countries to receive Millennium Challenge Account support in 2005: amount of US$110 million disbursed over five years to finance growth in physical and human capacities. - Private investment largely directed to construction and tourism sectors which exhibit strong growth trends. - Money laundering context: - Authorities believe drug trafficking is the primary predicate offence generating illicit proceeds in Cape Verde. - Cape Verde’s strategic location makes it an ideal transit point for drugs shipped from South America to Europe. - Establishment of the National Committee for Coordination on the Fight against Drugs, Organized Crime and Corruption (NCC) was driven by concerns about growth in local drug trade. - Since the NCC’s establishment in 1995, developments including increasing incidence of Cape Verde nationals found on boats from which drugs were seized led authorities to conclude there was a significant transnational element to the drug trade. - Authorities reported prior concern Cape Verde might have been used as a transshipment point in trafficking of persons between South America and Europe; subsequent investigations did not substantiate these concerns. *Source: EXECUTIVE SUMMARY — _cr09115* ### 31. Cape Verde’s international financial sector is vulnerable to abuse in the layering stages of ### 31. Cape Verde’s international financial sector is vulnerable to abuse in the layering stages of ### Key vulnerabilities and illicit finance channels - International financial sector vulnerability: - “Vulnerable to abuse in the layering stages of money laundering.” - Most institutions in this sector are subsidiaries of financial institutions headquartered in the EU, primarily Portugal, and are therefore subject to consolidated supervision, but “a number of them are not.” - “Under the current arrangements it is possible for institutions to be licensed in Cape Verde that are neither subject to consolidated supervision nor have their mind and management in Cape Verde.” - Real estate market: - “Rapidly expanding real estate market” including private residences, office complexes, large condominium and apartment projects is identified as “a potential channel for illicit proceeds.” - Reported instances where newly constructed properties were sold “at prices that appeared to be below the cost of construction.” - Non-profit sector: - “The non-profit sector has some vulnerability in the context of the sector is largely unregulated with many institutions only having a reporting responsibility to donor organizations.” - Authorities “have also not undertaken any review of this sector to determine its FT vulnerabilities.” ### Overview of the financial sector: institutions and structure - Types of institutions: “banks, para-banks, international financial institutions, insurance companies and capital market intermediaries.” - On-shore banks operating in Cape Verde: - Banco Comercial do Atlantico - Caixa Economica do Cabo Verde (CECV) - Banco Interatlantico - Banco Caboverdiano de Negocios - “The first three of these institutions are branches of foreign banks.” - “Banco Caboverdiano de Negocios has majority local ownership and a Portuguese bank which holds 46 percent of its share capital has an option to purchase an additional 5 percent to give it majority ownership.” - Other financial institutions: - “5 para-banks two insurance companies, 3 capital market licensees, and 13 entities licensed to operate as IFIs.” - “At the time of the mission’s visit only seven of the IFIs were active.” - Historical notes: - Up to 1993, BCV was both monetary authority and sole commercial banking entity; in 1993 BCV ceased commercial banking and Banco Comercial do Atlantico took over. - Insurance privatization in 1990 created Garantia, now one of two insurance companies. - Insurance market composition: - “Motor insurance represents the largest segment of insurance business conducted in Cape Verde, accounting for approximately 50 percent of annual premium income.” - “Pure life insurance represents a very small segment of the market (approx 2%)” and often purchased only as collateral requirement. ### International Financial Institutions (IFIs) - Legal framework: - IFIs framework set out in “Law 12/2005.” - Law 12/2005 requires ownership to include a financial institution from the OECD or other country that, in the opinion of the BCV, has good supervisory mechanisms; such financial institutions are required to own “at least 15 percent of the shareholding.” - The law “contains another provision that allows the minister of finance to override these requirements.” - Law seeks physical presence of IFIs in Cape Verde but “falls short of the requirement for mind and management to be located there.” - Additional legal provisions: - IFIs are subject to “Law 43/III/88.” Article 2 states principle activity should be provision of financial services in foreign currency to non-residents, but allows IFIs to provide credit in foreign currency for financing fixed assets, underwrite securities issued by residents in an “organized market,” and participate in other authorized operations. - IFI licensing and status at visit: - “13 entities licensed to operate as IFIs, 7 of which were actually in operation.” - Of the operating IFIs: “Five of the banks that were in operation were in majority owned by Portuguese financial institutions and one was in majority owned by an Angolan bank. The remaining institution that was in operation at the time of the assessment was owned by a group of individuals.” - “The six institutions that have been licensed but were not yet in operation are owned by groups of individuals.” - “Two of these entities appear to have passed the maximum period allowed by the law (360 days) for institutions to commence operations after receiving a license.” - Licensed IFIs (operational status and ownership) — derived from authority information: - Banco Insular — Active — Portuguese Financial Institution - Banco Sul Atlantico — Active — Angola Financial Institution - Banco Português de Negócios — Active — Portuguese Financial Institution - Banco Motepio Geral-Cabo Verde — Active — Portuguese Financial Institution - Banco Espirito Santo — Active — Portuguese Financial Institution - Caixa Central de Crêdito Agricola Mutuo — Active — Portuguese Financial Institution - Banco Fiduciario Internacional — Active — Portuguese Individuals - Banco International Trading — Inactive — UK Individual - Eurofin — Inactive — Cape Verde and Portuguese Individuals - Banco Internacional de Investimentos — Inactive - Arwen Investments Limited — Inactive — UK Financial Institution - CA-Finance -Gestao — Inactive — Spanish Individuals - Banco Privado Internacional — Inactive — Portuguese Individuals ### Capital markets and stock exchange - Bolsa de Valores de Cabo Verde: - “Created in 1995, the Bolsa de Valores de Cabo Verde actually commenced operation in December 2005.” - Current listings: “44 government treasury bonds and 4 local companies.” - Listed companies: “Banco Comercial do Atlantico, CECV (commercial banks), Seceded Cabo Verde de Tabasco, and Enroll Empress de Combusttneis.” - Exchange members: “The only members of the stock exchange are the four commercial banks that operate in the domestic market.” - Platform and model: “The exchange uses a Euronex platform and an operational model that combines both auction and quote driven systems.” - Securities are “dematerialized and all transactions are conducted through the banking accounts of the members.” - Ownership and privatization plans: “The stock exchange is owned by the government which hopes to privatize it within the next two years.” ### Para-banks, remittances, and post office services - Para-banks: - “There are four entities licensed as para-banks in Cape Verde.” - Named para-banks: Promotora (venture capital company), Cotacambios, ECV (exchange bureaus), and Sociedade Interbancaria e Sistema de Pagmentos (international payments system). - “Para-banks are not allowed to accept deposits from the public.” - Remittance services: - Emigrant remittances represent “a significant portion of the liabilities of the banking system.” - “With more nationals living outside of the country than within, financial institutions receive a steady stream of remittances from the Cape Verdean are diaspora.” - Authorities have “no evidence that there is an informal funds transfers system.” - Remittance services must be provided by either banks or para-banks. - Remittance providers (under agency arrangements with Western Union): Banco Comercial do Atlantico, CECV (banks), and ECV and Cotacambios (para-banks). - “The relatively high concentration of these services, given the small size of the country, is an indication of the important role that remittances play in the Cape Verde economy.” - Services provided through the Post Office: - CECV (one of four commercial banks) uses post office branch network to deliver banking services in areas without CECV branches. - Post office staff collect customer information and send it to the affiliated CECV branch; “due diligence is performed by the CECV branch and not by the post office.” ### Cross-ownership and market concentration - Significant cross-ownership among financial institutions; examples (estimates provided by industry interviewees): - CGD (Portugal) holds 70% of Banco Interatlantico (Commercial Bank) - CGD (Portugal) holds 52% of Banco Comercial do Atlantico (Commercial Bank) - Banco Comercial do Atlantico holds 35% of Garantia (Insurance Co.) - Garantia holds 12.5% of Banco Comercial do Atlantico (Commercial Bank) - Montepio Geral (Portugal) holds 27% of Caixa Económica de Cabo Verde (Commercial Bank) - Impar (Insurance Co.) holds 11.5% of Caixa Económica de Cabo Verde (Commercial Bank) - Banif (Portugal) holds 46% of Banco Caboverdiano de Negócios (Commercial Bank) ### Regulatory scope and supervisory responsibilities - Structure of AML/CFT supervision for financial activities: - BCV is identified repeatedly as the AML/CFT regulator/supervisor for banks, IFIs, para-banks and many financial activities listed in Table 5 (e.g., acceptance of deposits, lending, financial leasing, transfers of money or value, issuing and managing means of payment, trading, underwriting, portfolio management, safekeeping, etc.). - Sample structural data points (as presented): - “Commercial banks 4 135 BCV” (from Table 3 header context indicating number of institutions and total assets ($ million) format). - Branches/subsidiaries abroad table shows “Commercial banks 0 0 2 Bank of Portugal” (format indicating number of branches abroad, number of subsidiaries abroad, number, supervisor). ### DNFBP sector coverage and priorities - DNFBP legal coverage: - “Law 17 of 2002 extends all its requirements, except with respect to record keeping, to some of the activities required by FATF Recommendation 12.” - “The ministry of finance has authority to regulate and oversee compliance with AML obligations by DNFBPs, but it has not issued any regulations or guidance yet.” - Assessors' notional priorities for CDD and reporting implementation (based on interviews and available information): - Casinos (above $3,000): “Do not exist, but not prohibited. There are plans to open one in the medium term.” AML: ministry of finance; Sector: ministry of justice; Priority: Low. - Real Estate Agents: “The profession is unregulated and no association exists. Transactions outside the key players are small and informal. Real estate boom partly driven by foreign buyers; most of them are serviced by large foreign agencies and one locally-owned agency.” AML: ministry of finance; Sector: none; Priority: Medium. - Dealers in precious metals or stones (above $10,000): “No data available.” AML: ministry of finance; Sector: No info; Priority: Not enough information. - Notaries (Total: 15 notaries, all Government employees; most notaries also act as registrars; they do not handle parties’ money): AML: None; Sector: Directorate of Registrars (ministry of justice); Priority: High (opportunity for ML filters or “gate keepers”). - Lawyers (120 licensed lawyers): AML: None; Sector: Bar Association; Priority: Medium. - Independent legal professionals: “Only 1 independent legal professional has been licensed.” AML: None; Sector: Bar Association; Priority: Low. - Accountants: “No data available (allegedly there are few practicing accountants due to informality of commerce).” AML: None; Sector: None; Priority: Low. - Company Service Providers: “They do not exist a distinct profession. Services like the sale of “shelf” companies, registered agents, nominee directors or partners, are not offered. Tax law does not support the creation of shelf companies.” AML: No; Sector: None; Priority: Low. - Trust Services Providers: “Trusts cannot be created under CV law and there are no trust service providers.” Not applicable; Priority: Low. *Source: IMF Country Report No. 06/334, Annex III (selected extracts).* ### 1. AML regulator ### 1. AML regulator ### Sector observations and DNFBP coverage - Dealers in antiques: "No data available Yes 1. AML: ministry of finance 2. Sector:: No info Not enough information" - Art Dealers: "No data available Yes 1. ministry of finance 2. Sector:: No info Not enough information" - Dealers in motor vehicles: "No data available but there is a generalized concern among authorities and the public about recent unexplained display of wealth through new cars. Yes 1. ministry of finance 2. Sector:: No info Medium" ### Overview of commercial laws and mechanisms governing legal persons and arrangements (paragraphs 48–56) - Most enterprises are owned by individual businessmen; common company forms: "partnerships (sociedades em nome colectivo), limited liability companies (sociedades por quotas), and cooperative companies (sociedades cooperativas)"; "very few joint-stock companies (sociedades por acções)". - Registration: All companies "must be registered in the commercial registry to obtain legal personality." - Conservador role: The Conservador verifies conformity with the law (company code) and "should refuse the registration otherwise." - Legal personality entitlements: once acquired, companies "are entitled to perform any contracts pertaining to their scope and to own property and register property under their name." - Minimum setup rule: "As a general rule setting up a company requires at least two persons, however under certain circumstances, individual limited companies or joint-stock companies can be created." - Notaries: In every municipality there is a Conservador who frequently performs the role of a notary; notaries attribute public authority to documents, verify compliance, and record them in official books. Some contracts (e.g., transfer of real estate) "must be performed by notaries on a mandatory basis." - Public access: "Registration in the commercial registry is mandatory for legal persons, associations and companies and information is available to the public," including company by-laws, shareholders, capital, management, and authorized representatives. - Foreign companies: When a foreign company wishes to do business in Cape Verde "it must set-up a permanent representation in the country" compliant with the company code and register in the commercial registry. - Enforcement: "The public prosecutor is the authority with powers to verify whether a company is complying with the rules of the company code" and may initiate civil proceedings including winding up and liquidation. - Associations: Freedom under Article 51 of the Constitution; may be created freely if they do not promote proscribed activities; registration in the commercial registry required to obtain legal personality. The Civil Code governs associations, foundations, and unincorporated associations. - Unincorporated associations: "do not have legal personality and the individual persons acting on their behalf have personal and unlimited responsibility for their activities." - NGOs: NGOs active in cooperation and development; a voluntary NGO platform established in 1996 "associating more than 100 NGOs in the country." Funds usually come from northern countries, mostly European. "The NGOs are accountable exclusively to their donors and not to any governmental agency." - Micro-finance: Some NGOs provide small loans "usually not higher than 500,000 Escudos, (Euro 4,545) per associate." A draft law (approved by the National Assembly on September 10, 2007 (Law No. 15/VII/2007)) provides for regulation of micro-finance, assigning BCV responsibility for authorizing and controlling micro-finance institutions and special registration within BCV. - Trusts: "The concept of express trusts and similar legal arrangements does not exist in the Cape Verde legal system and therefore express trusts and legal arrangements can not be created or recognized as such." ### Overview of strategy to prevent money laundering and terrorist financing (paragraphs 57–59) - Legal framework timeframe: Cape Verde’s AML framework is based on instruments promulgated "over a period of 12 years from 1993 to 2005." - Coverage gaps: "While the current framework does not adequately address all of the FATF recommendations," authorities attempt implementation and are considering strengthening measures. - Institutional implementation: "The authorities have not developed any national vehicle or arrangement for implementing the framework and implementation is therefore undertaken by various institutions." - Coordination: The minister of finance "recently established a National GIABA Coordinating Commission" composed of specialists to "propose, energize, and monitor actions targeting the near-term upgrade of Cape Verde’s AML/CFT system and improved follow-up of relations with the GIABA". - Sector focus: Authorities consider the banking sector "Cape Verde’s main vulnerability as a gateway for money laundering." Insurance and securities activity are limited and regarded as "very low money laundering risk" or manageable via banking AML arrangements. - DNFBP implementation: "The legal framework covers some DNFBPs, but the authorities have made no effort to implement AML requirements for these persons or entities." - Emphasis on cash and placement: Authorities view Cape Verde as likely to be used "at the placement stage in money laundering" and emphasize cash as a laundering medium. - International financial sector: Authorities "do not appear to have specifically studied the vulnerabilities that can arise from the activities of institutions that operate in the international financial sector" and have not prioritized ML risk management for those institutions. ### Institutional framework for combating ML/TF (paragraphs 60–81) - Ministry of Justice: Responsible for executing justice policies; takes legislative initiative and creates conditions for implementing conventions, laws, and regulations on money laundering and financing of terrorism. - Ministry of Finance: "Directly responsible for issuing the regulations to implement the AML obligations of the DNFBPs included in the law." Has authority to oversee DNFBP compliance and is responsible for financial sector development and AML-related legislation. - BCV of Cape Verde: Regulator of banks and non-bank financial institutions; oversight mandate includes issuing rules under the AML Law 2002 and overseeing compliance; can publish notices, circular notes, and technical instructions with sanctions. - General Auditor of Capital Markets (AGMVM): Unit within BCV; regulator for capital market intermediaries; since the four licensed capital market intermediaries are banks, "AGMVM does not undertake any AML supervisory activities" and "has not issued any AML regulations or guidelines and does not undertake any on-site inspection of licensees." BCV functions as AML supervisor for capital market intermediation. - Ministry of Foreign Affairs: Responsible for foreign policy aspects of AML/CFT, monitoring ratification of international instruments, international cooperation, and distribution of UN Sanctions List of Resolution 1267; represents Cape Verde to UN working groups. - Ministry of Internal Affairs: Oversees security and law and order via national police; has an indirect role in AML due to state security responsibilities. - Judiciary Police (JP): "Responsible for the investigation of criminal offences under the supervision of the public prosecutors’ office." Has exclusive competence to investigate money laundering offences under direction of the public prosecutor. JP set up three specialized units: drug trafficking, economic crimes and money laundering, and organized crime. Suspicious transaction reports are sent to the JP for investigation. JP is part of the ministry of justice and operates across islands; investigations submitted to the public prosecutor’s office for prosecution. - National Police: Includes maritime police, fiscal police, and public order police; recently merged under national police administration but retain specific functions. The national police "does not investigate drug trafficking and money laundering offences" but assists JP when needed. - Customs (General Directorate of Customs, GDC): Administers movement of goods, people, and vehicles; collects duties and interdiction of prohibited goods. Customs role in AML/CFT: implement obligation to monitor movement of cash across borders and manage declaration of currency or negotiable instruments above a certain limit; "Customs has not put any measures in place to monitor compliance with this obligation." - Customs structure: Operates through five directorates including Directorate for Fraud and Investigation; staffed by 200 persons. Customs contraventions investigated by customs and prosecuted before the customs court; criminal investigations sent to the judiciary police. - Public Prosecutor’s Office: Has power to prosecute criminal offences including money laundering; oversees criminal investigations by the judiciary police. Attorney general heads the office; officers are magistrates appointed by the judicial council. The head of prosecution division is the Chief Prosecutor. It is an autonomous institution. - National Committee for Coordination on the Fight against Drugs, Organised Crime and Corruption (NCC): Established in 1995 by Legislative Decree (Article 41) to coordinate fight against drug trafficking; mandate expanded to include corruption and organized crime. Responsibilities include strategy development, promoting international cooperation, proposing policies and legislation, evaluating operational needs, and developing programs for institutional, technical and resource support. Committee structure: higher council, commission, and working committees, assisted by a Secretariat headed by an executive secretary. Membership includes ministries (justice, internal affairs, foreign affairs), public prosecution office, judicial council, Bank of Cape Verde, fiscal police, immigration, customs, registry of companies and notaries, and NGOs on an ad hoc basis. - General Directorate of Registry of Companies: Integrated into the ministry of justice; registrar functions performed by public officials; registrar services established in every municipality or county but "records are not centralized and are generally not well managed." In most municipalities registrar and notary functions combined and performed by a notary. "There are 15 notaries in Cape Verde, the vast majority of whom (approx. 12) also perform registrar services." - Scope of Law 17/VI/2002: "Applies to credit and para-banking institutions, insurance companies and enterprises that manage pension funds. It does not cover securities firms and collective investment schemes." Rationale: at time of drafting there were no entities exclusively undertaking such activities; up to assessment time "there were still no entities, other than licensed banks, that were providing these services." *Source: IMF country assessment document excerpt (annex III, sections 1.4–1.5).* ### 82. The authorities have also not generally adopted a risk-based approach to the ### _cr09115 - 82. The authorities have also not generally adopted a risk-based approach to the ### Risk-based implementation and supervision - The authorities have not generally adopted a risk-based approach to the implementation of their AML framework (paragraph 82). - Some aspects of the regime for preventive measures are applied only when transactions are in excess of a specified threshold; this approach is applied infrequently and is not reflective of a consistent risk-based approach (paragraph 82). - Some financial institutions report applying risk-based approaches in a limited manner, but such measures are not explicitly sanctioned by the authorities. Example: some institutions apply reduced CDD measures when dealing with one of the four companies listed on the Bolsa de Valores de Cabo Verde (paragraph 82). - Day-to-day supervision has concentrated supervisory resources on banks, viewed by the authorities as having the highest vulnerability to abuse in the context of ML. Authorities have not focused significant supervisory resources on IFIs (paragraph 83). ### Progress since prior assessments - Cape Verde has not been subject to a previous AML/CFT assessment (paragraph 84). ### Criminalization of Money Laundering: statutes and penalties - Primary law: Law No 17/VI/2002 of December 18 (AML Law) — Article 3-1 sets ML penalties from 1 to 12 years imprisonment, depending on actions committed (paragraph 85). - Article 3-1 specifies: - a) Apply, transfer, convert, assist or facilitate any operation of conversion or transfer of those goods or products, in all or in part, directly or indirectly, for the purpose of concealing or disguising its illegal origin or assist a person involved in the commission of any of those offences to evade the legal consequences of its acts, will be punished by imprisonment for a term from 4 to 12 years; - b) Conceals or disguises the true nature, source, location, disposition, movement or ownership of, or rights with respect to such property or proceeds, will be punished by imprisonment for a term from 2 to 10 years; - c) Acquires or receives on any terms, or possesses or uses such property or proceeds, will be punished by imprisonment for a term from 1 to 5 years (paragraph 85). - ML was first criminalized under Section 7 of Law No.78/IV/1993, of July 12; Section 7 has been repealed but other provisions of the 1993 law remain in force and remain important for provisional measures on seizure and confiscation and for special investigation techniques (paragraph 86). - AML Law of 2002 expanded predicate offences beyond drug trafficking to include terrorism, kidnapping, trafficking of minors, sexual abuse of minors, child pornography business, living on earnings from prostitution, arms trafficking, extortion, corruption, embezzlement of public funds, harmful administration of public sector business, illicit appropriation of goods owned by the state or by a cooperative, fraudulent procurement or misallocation of a subsidy, grant or loan, and economic and financial offences (paragraphs 87, 88). ### International conventions and compliance gaps - Cape Verde ratified the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 on October 19, 1994 (National Assembly Resolution No. 71/IV/1994) (paragraph 89). - Cape Verde is a party to the UN Convention against Transnational Organized Crime of 2000 (Palermo Convention) (Resolution No. 92/VI/04, published May 31, 2004) (paragraph 90). - The ML criminalization is not fully in accordance with Palermo Convention requirements and does not include all serious offences as defined by the Palermo Convention and FATF Recommendation 1 (paragraphs 91, 92). ### Scope of predicate offences and property - The AML Law uses a catalogue/list of predicate offences (Article 3) which does not encompass all designated categories required in FATF Recommendation 1 and the Glossary (paragraphs 91, 97, 101). - Missing categories (listed in the report) that should be included as predicate offences: participation in an organized criminal group and racketeering; terrorism financing; environmental crime; murder and grievous bodily injury; robbery and theft; migrant smuggling; illicit trafficking in stolen and other goods; bribery; counterfeiting of currency; counterfeiting and piracy of goods, smuggling; forgery, piracy, insider trading and market manipulation (paragraph 97). - Article 3-1 extends the ML offence to "all the goods and products" derived from predicate offences regardless of thresholds, and Article 7-1/7-3 refers to confiscation of “profits, interests, and other advantages derived from those goods” (paragraph 98). - Civil-law meaning of "goods" (“bens”) includes land, securities, and any kind of physical and immaterial property, supporting a broad interpretation for confiscation (footnote 7; paragraph 98). ### Autonomy of ML offence and extraterritoriality - Article 3-3 of the AML Law allows initiation of criminal investigative proceedings for an ML offence regardless of the result of an investigation or a conviction on the predicate offence, and states punishment applies even if the acts constituting the predicate offence were committed outside national territory (paragraphs 99, 103). - The provision does not clearly eliminate the need for a person to be convicted abroad for the predicate offence before an ML conviction can be imposed in Cape Verde — there is no direct indication that a foreign conviction is unnecessary (paragraph 99). - Article 3-2 establishes the autonomy of the ML offence relative to the predicate offence and specifies that the penalty for ML should not exceed the maximum and minimum limits of the predicate offence penalty (paragraph 100). ### Mens rea and material elements - ML is a willful offence; the offender must know that goods or products derive from predicate offences listed in Article 3 (paragraph 95). - Willfulness is interpreted according to Article 13 of the Penal Code as direct willfulness, necessary willfulness, or eventual willfulness (paragraph 95). - Material elements of conversion, facilitating, concealment, disguising, acquiring, or possessing proceeds align with UN Vienna and Palermo Conventions; corresponding predicate offences are criminalized under various Penal Code articles cited in the report (paragraph 96). ### Enforcement activity and statistics - Authorities reported only eight ML preliminary enquiries were initiated by the judiciary police between 2004 and 2007; five of those were forwarded to the public ministry for formal prosecution and no accusations have been undertaken before the courts (paragraph 93). - Concern: the judiciary police has not initiated any investigative proceedings since 2006 despite no significant reduction in profit-generating crimes; there is a perfect match between number of ML enquiries and number of STRs received by the judiciary police, indicating authorities are not actively pursuing ML investigations from sources other than STRs (paragraph 94). - Table 8. All Crimes Investigated Since 2004 (source: Statistics provided by the judiciary police (abstract)): - 2004 — Balance (from Previous years): 10,200; Initiated: 2,231; Prosecuted: 656; Closed: 31; Sent to PM but still pending additional substantiation: 93. - 2005 — Balance (from Previous years): 11,651; Initiated: 2,659; Prosecuted: 320; Closed: 102; Sent to PM but still pending additional substantiation: 70. - 2006 — Balance (from Previous years): 13,817; Initiated: 3,540; Prosecuted: 477; Closed: 5,886; Sent to PM but still pending additional substantiation: 209. - Table 9. Sample of Profit-Generating Crimes Investigated (source: Statistics provided by the judiciary police (abstract)): - Theft — Initiated in 2002: 1,162; Initiated in 2003: 1,334; Initiated in 2004: 1,189; Initiated in 2005: 852; Initiated in 2006: 1,022. - Theft with violence — Initiated in 2002: 223; Initiated in 2003: 213; Initiated in 2004: 388; Initiated in 2005: 1,178; Initiated in 2006: 1,371. - Counterfeiting — Initiated in 2002: 58; Initiated in 2003: 17; Initiated in 2004: 50; Initiated in 2005: 44; Initiated in 2006: 52. - Counterfeiting currency — Initiated in 2002: 22; Initiated in 2003: 34; Initiated in 2004: 50; Initiated in 2005: 37; Initiated in 2006: 60. - Money Laundering — Initiated in 2004: 3; Initiated in 2005: 5. - Trafficking in narcotics — Initiated in 2002: 81; Initiated in 2003: 98; Initiated in 2004: 110; Initiated in 2005: 88; Initiated in 2006: 69. - TOTAL — Initiated in 2002: 1,546; Initiated in 2003: 1,711; Initiated in 2004: 1,761; Initiated in 2005: 2,210; Initiated in 2006: 2,585. - Total Without Thefts — Initiated in 2002: 161; Initiated in 2003: 164; Initiated in 2004: 184; Initiated in 2005: 180; Initiated in 2006: 192. ### Identified systemic weaknesses and recommendations (as implied by analysis) - The ML offence under Law No.17/VI/2002 is not in full conformity with FATF Recommendation 1 due to an insufficient catalogue of predicate offences (paragraphs 91, 92, 101). - The system lacks the ability to deal with ML suspicions effectively and should undergo a comprehensive review — concerns include low numbers of ML investigations, lack of investigative activity since 2006, and reliance on STRs as the sole origin of ML enquiries (paragraph 94). - The list of predicate offences in Article 3 should be enlarged in accordance with FATF Recommendation 1 and the Glossary (paragraph 101). *Source: _cr09115 - 82. The authorities have also not generally adopted a risk-based approach to the (IMF staff report content provided).* ### 1. There is concurrence when the author, has committed an offence and commits another ### 1. There is concurrence when the author, has committed an offence and commits another ### Concurrence and Count of Crimes - There is concurrence when the author has committed an offence and commits another offence before a final conviction for the previous one. - The number of crimes is established by: - the number of criminal types of offences that have been effectively perpetrated, or - the number of times that the same type of offence has been perpetrated by the author. - Although the authorities’ interpretation may be correct, no proceedings exist so far that apply this interpretation of the law. ### Ancillary Offences (c. 1.7) - Article 3 of the AML Law makes express reference to “any form of participation” in the commission of an ML offence; thus all forms of participation under Cape Verde law are punishable. - Article 7 of the Penal Code (subsidiary application to the ML offence) makes applicable forms of participation such as: - attempt (Article 21), - complicity (Article 27), - co-partnership (Article 25). - Penal Code criminalizes “criminal association” (Article 291) with penalties from 1 to 8 years of imprisonment. - AML Law (Article 3-1-a) includes aiding, abetting, facilitating, and counseling in money laundering via the wording: “[any person who...] assists or facilitates any operation of conversion or transfer ..., directly or indirectly, for the purpose of concealing or disguising its illegal origin, or assists a person involved in the commission of any of those offences to evade the legal consequences of its acts...”. ### Additional Element (c. 1.8) - No indication that an act occurring overseas which does not constitute an offence there but would be a predicate offence domestically constitutes an ML offence under Cape Verde law. ### Liability of Natural Persons (c. 2.1) - General criminal law implied in Articles 11 and 13 of the Penal Code: criminal liability applies to individual persons. - Article 3 of the AML Law: a natural person is liable for ML if such person knowingly engages in the criminal activity. ### Mental Element of the ML Offence (c. 2.2) - Article 3 of the AML Law: only actions committed willfully are punishable. - Article 13 of the Penal Code recognizes three forms of willfulness: - direct willfulness (intentional), - necessary willfulness (offender mentally anticipated that action would necessarily lead to the offence), - eventual willfulness (offender anticipated the offence could be a consequence and admitted this outcome). - Proof of intent follows Articles 173 and following of the Penal Procedure Law; intentional element can be inferred from objective factual circumstances. ### Liability of Legal Persons (c. 2.3 and c. 2.4) - Article 9 of the Penal Code: - Companies and other legal entities under private law responsible for offences committed by their bodies or representatives in their name and pursuing its interests, unless perpetrator acted against orders. - In unincorporated entities, monetary penalties imposed against the entity's property or, if insufficient, against each associate’s property. - Article 7 of the Penal Code makes these rules applicable to the ML offence. - Concurrent liabilities: - Administrative liability (contra-ordenações) for financial entities under Articles 16–25 of the AML Law, in accordance with Article 30 of the AML Law. - Civil liability for damages under the Civil Code and Articles 100 and 406 of the Penal Code, as referenced in Article 7 of the Penal Code. - Employees may face disciplinary proceedings. ### Sanctions for ML (c. 2.5) - Natural persons: - Penalties of imprisonment ranging from 1 to 12 years depending on conduct (Article 3-1, a) to c) of the AML Law). - Ancillary penalties: temporary suspension of functions (Article 72 of the Penal Code) and prohibition of performing functions (Article 73 of the Penal Code). - Legal persons: - Fines ranging from 40 days (minimum) to 1000 days (maximum); for corporations from 60 days (minimum) to 1500 days (maximum) (Art. 79 and 67 of the Penal Code). - Supplementary penalties (Art. 81 of the Penal Code) such as closure of premises, deprivation of public subsidies, prohibition to bid in a public tender for certain periods. - Assessment: penalties applicable to natural and collective persons seem comprehensive, dissuasive and proportionate. ### Recommendations and Comments (2.1.2) - General finding: ML offence respects elements specified in the UN Vienna Convention and shows reasonable conformity with the Palermo Convention. - Important deficiencies requiring attention: - The scope of the ML offence should be broadened to encompass, at a minimum, all categories in the list of “designated categories of offences” in Recommendation 1 and the Glossary. Currently not covered: participation in an organized criminal group and racketeering; terrorism financing; environmental crime; murder and grievous bodily injury; robbery and theft; migrant smuggling; illicit trafficking in stolen and other goods; bribery; counterfeiting of currency; counterfeiting and piracy of goods; smuggling; forgery, piracy, insider trading and market manipulation. - Law should clearly provide that a conviction for the predicate offence is not necessary before issuing a ML conviction in connection with that predicate offence. ### Compliance with Recommendations 1 and 2 (2.1.3) - R.1: PC - Predicate offences in Article 3 of Law n 17/VI/2002 are insufficient and omit serious offences that FATF R.1 requires. - No evidence that a conviction for the predicate offence is not necessary before issuing an ML conviction. - Not fully established that the author of a predicate offence can also be convicted for laundering proceeds of that offence. - Number of ML investigations seems low relative to predicate offences and none has resulted in accusations or convictions for ML. - R.2: LC - Doubts on effective implementation: since enactment of AML law in 2002 there have been few ML investigations and no accusations before the Courts. ### Criminalization of Terrorist Financing (SR.II) — Description and Analysis (2.2.1) - Cape Verde is party to the UN International Convention on the Suppression of the Financing of Terrorism (ratified May 3, 2002 and published in the Official Gazette). - Constitutional note: Article 12-2 and 4 — the Convention prevails over internal law of infra-constitutional nature except regarding criminalization provisions; Article 176-1 c) requires internal provision to criminalize behavior. Such a legal instrument has not been issued yet; plans exist to do so. - Currently no law criminalizes terrorism financing as an autonomous offence in accordance with Article 2 of the UN Convention. - Penal Code provisions related to terrorism: - Article 315 defines terrorist group/organization (No. 4) and punishes founding, leading or being part of a terrorist organization with penalties of 6 to 12 years imprisonment. - Article 316 criminalizes support of, or cooperation with, a terrorist organization with a penalty of 5 to 10 years imprisonment. - Neither Article 315 nor Article 316 has been applied in practice; exact meaning of Article 316 remains unclear. - Assessors consider Article 316 does not cover all forms of willful provision or collection of funds as required by Article 2 of the UN Convention and FATF SR II. - No separate provisions criminalize terrorist acts by an individual. - Terrorism offences in Articles 315 and 316 are predicate offences for ML under Article 3-1 of the AML Law, but criminalization of terrorism is inadequate and there is no direct criminalization of FT. - Authorities provided no statistical data on proceedings, accusations, or convictions under Articles 315 and 316. - Recommendation: Authorities should consider criminalizing terrorist acts committed by an individual, in any form of participation, consistent with the UN Convention on the Suppression of TF. ### Criminalization of Financing of Terrorism (c. II.1 — II.3, c. 2.2, c. 2.3–2.5) - No autonomous and express offence of terrorism financing in Cape Verde law (c. II.1). - As no autonomous TF offence exists, TF is not a predicate offence for ML (c. II.2). - Extraterritorial jurisdiction for TF offence: None (c. II.3). - Mental element: FT is not criminalized (applying c. 2.2). - Liability of legal persons for FT: None (applying c. 2.3 and c. 2.4). - Sanctions for FT: None (applying c. 2.5). ### Recommendations and Comments on TF (2.2.2) - Financing of terrorism should be expressly and autonomously criminalized consistent with Article 2 of the UN Convention and SR II. - Consider in law that TF is a predicate offence for ML. - Provisions should clarify that the offence is punishable even when: - terrorist acts carried out abroad, or - the organization or group functions outside national territory, - but the terrorism suspect or the funds or goods related to the suspect are found in Cape Verde. ### Compliance with Special Recommendation II (2.2.3) - SR.II: NC - Financing of terrorism, terrorist acts, terrorist organization, and individual terrorists not criminalized in accordance with Article 2 of the UN Convention and FATF SR II. - Terrorism financing is not considered a predicate offence for ML as required by FATF SR II. ### Confiscation, Freezing and Seizing of Proceeds of Crime (R.3) — Description and Analysis (2.3.1) - Judicial authorities (judges and public prosecutors) can identify, freeze, seize and confiscate goods or funds derived from predicate offences if found in national territory; can initiate prosecution and punishment of ML offences. - Seizable/confiscatable goods include property, profits, interests, or any other advantages derived directly or indirectly from the predicate offence. - AML Law provides for confiscation by the state of goods or products related to ML, and profits, interests, or other products derived from proceeds of an offence in case of conviction (Articles 6-1 and 2, and 7-1 and 3 of the AML Law). - Public prosecution may request judge to confiscate property of the offender under civil law to ensure compensation for damages (Article 11 of AML Law). - Legal framework provisions: - Article 243 of the Code of Penal Procedure: public prosecution, judge, and in urgency the police may seize goods that are product, profit, price or advantage of the offence. - Article 253-3 of the Code of Penal Procedure: court can confiscate products of the offence upon conviction. - Law 78/IV/93 (Articles 27 and 17) addresses products derived from drug trafficking. - Articles 6 and 7 of AML Law relate to other predicate offences. ### Confiscation of Property Related to ML, FT or Other Predicate Offences (c. 3.1) - Article 253-3 of the Penal Code: court competent to confiscate products of offences in case of conviction for predicate or ML offence. - Article 17 of Law No. 78/IV/1993: confiscation of products derived from drug trafficking in case of conviction; allows assets of equal value to be provided to the State when products cannot be apprehended. - AML Law (Articles 7 and 13-1) provides similar measures for other predicate offences. ### Provisional Measures to Prevent Dealing in Property Subject to Confiscation (c. 3.2) - Goods, funds, profits and advantages subject to possible future confiscation can be apprehended and attached to proceedings or entrusted to a court official or trustee with a drawn deed (Article 243-5 of the Code of Penal Procedure). - Article 23 of the AML Law: financial entities should stay execution of any operations they have reasons to suspect are related to predicate offences or ML and notify interim measures to the Attorney-General; wait for confirmation of suspension for a 24-hours period, or 48 hours when the value of the operation is above 1 million eEcudos (Approx. Euro 9,090). - The Escudo has a fixed exchange rate of 1/110 to the Euro. ### Ex Parte Application for Provisional Measures (c. 3.3) - Article 234 of the CPC: no notice to the offender is required prior to seizure of products of the offence. ### Identification and Tracing of Property Subject to Confiscation (c. 3.4) - Judicial authorities (public prosecutor, judge, judiciary police in urgent cases) can order and execute searches of any person and premises, apprehend goods and funds under Articles 234, 235, 242 of the CPC. - Articles 28 and 29 of Law 78/IV/1993 provide similar powers regarding drug trafficking. - Article 6 of the AML Law refers to measures stated in the CPC. - Article 22 of the AML Law: power to require specific and individualized information from financial entities, registries or tax authorities about property, goods, deposit accounts or other valuables belonging to the offender in drug trafficking or related ML cases. - Article 255-1 a) of the CPC: telephone tapping authorized by a judge allowed to collect evidence on ML offences. - Interception of electronic mail authorized by a judge possible if Public Prosecutor considers it of great importance to discover truth or collect evidence of offences punishable with a maximum penalty equal to three years. - Articles 30 and 31 of Law 78/IV/1993: similar investigative techniques applicable to drug trafficking and connected ML. ### Protection of Bona Fide Third Parties (c. 3.5) - (Content ends prior to providing detailed text on protection of bona fide third parties.) *Source: _cr09115 - 1. There is concurrence when the author, has committed an offence and commits another* ### 134. Protection of bona fide third parties’ rights is provided for through Article 8 of the AML ### _cr09115 - 134. Protection of bona fide third parties’ rights is provided for through Article 8 of the AML ### Protection of bona fide third parties; Power to Void Actions - Article 8 of the AML Law allows a third party to demonstrate that goods or property do not belong to the offender and are not related to the offence; in this situation the property will be released and delivered to such person by the court. - If the case is of "extreme complexity" the judge could refer it to a civil court for decision (Article 8-5 of the AML Law). - Article 11 of the AML Law provides for an interim measure of seizure of property of the offender according the Civil Procedure Law to ensure effectiveness of a conviction, mainly in reference to a future compensation for damages to the State or third persons, avoiding divestiture of goods or property by the offender. - Article 298 of the CPC foresees a similar interim measure in general terms. - Under general principles of the Civil Code, contracts can be declared void by the Court if their objects are goods deriving from criminal offences. ### Confiscation, forfeiture, and burden of proof - Creating or taking part in a criminal organization is an offence punishable under Article 291 of the Penal Code. - All objects used or intended to be used in the organization would be confiscated upon conviction, under Article 243-1 of the CCP. - There is no civil forfeiture institution in Cape Verde. - Article 34-1 of the Cape Verdean Constitution: "everyone is presumed innocent unless a conviction is pronounced by the court"; therefore only after conviction is it legally possible to confiscate property. - The Constitution ensures every offender is entitled to a fair trial "in the shortest time possible." ### Assessment and recommendation (Freezing, seizure, confiscation) - The legal framework on freezing, seizure and confiscation seems comprehensive and allows for functioning of the system. - Authorities provided few statistical data on goods, property, and on values frozen, seized or confiscated; therefore it is difficult to assess the system’s effectiveness. - Recommendation: - "Cape Verdean authorities should implement a system that allows for the collection and maintenance of specific data on the freezing, seizure and confiscation of goods, property and values, related to the underlying offence." ### Compliance with Recommendation 3 - Rating: R.3 LC - Summary of factors underlying rating: - "The legal framework seems to be adequate, however doubts arise about its effectiveness since there is very little data on goods, property, and values frozen, seized or confiscated on ML investigations." ### Freezing of funds used for terrorist financing (SR.III) — legal framework and practice - Cape Verde has not yet enacted an autonomous TF criminal offence. - The preventive regime in the AML Law, including the obligation on financial institutions to report suspicious transactions, does not apply in the case of TF. - UN Security Council Resolutions 1267 and 1373 are recognized as applicable in the legal framework in Cape Verde. - Provisions of the Penal Code (terrorism, Articles 315-4, 316, Article 4-1 a)) and Criminal Procedure Code permitting freezing, seizure and confiscation of proceeds and instrumentalities of crime may in some instances permit action against funds, property and goods used by terrorist groups or derived from their activities. - Article 315-4 of the Penal Code defines "group or a terrorist organization" and punishes founding, leading or being part of such organization. - Article 316 criminalizes support for, or cooperation with a terrorist organization or group without being part of it. - "Although an autonomous TF offence has not yet been adopted, there are plans to do so." ### Freezing under S/Res/1267 and S/Res/1373; implementation gaps - S/Res/1267: - Mandatory and applicable under the UN Charter and Article 12-3 of the Constitution. - Articles 315, 4-1 a) of the Penal Code and Article 243 of the CPC could permit seizure of funds belonging to listed groups or persons, and Article 253-3 of the CPC could permit confiscation after conviction. - "No other specific measures, legislative or administrative, have been issued or taken to implement Resolution 1267." - "In practice, no accounts or other funds or property have been frozen in application of Resolution 1267" and regulations for financial institutions provide no mechanism to freeze based on the lists. - S/Res/1373: - Mandatory and applicable under the UN Charter and Article 12-3 of the Constitution. - "No specific measures, legislative, or administrative, have been issued or taken to implement Resolution 1373." - "No accounts or other funds of property have been frozen in application of Resolution 1373." - Freezing actions taken by other countries: - Legally considered possible combining UN Resolutions with CPC provisions, but "no such requests have been presented to Cape Verde." - Extension to assets controlled by designated persons: - Applies only to persons that might be considered part of a terrorist group or cooperate/collaborate with those organizations as stated in the Penal Code. ### Communication, guidance, and procedural gaps - The ministry of foreign affairs sent UN lists to ministries of justice and internal affairs for implementation; lists were provided to financial entities subject to AML Law but "implementation was not monitored by the competent authorities." - "No guidance has been provided to financial institutions regarding implementation of the resolutions by BCV or any other authority." - "No mechanisms exist for considering requests for de-listing or for unfreezing assets of de-listed persons." - "No procedures are in place for un-freezing of the assets of persons inadvertently affected." - "No additional provisions exist in national law" for access to frozen funds for expenses and other purposes. - Review of freezing decisions: - Mechanisms available are judicial and decisions to freeze, seize or confiscate are subject to appeal under Articles 436 and 437 of the CPC. - Seizure and interim measures: - Article 243-5 of the CPC: goods subject to possible future confiscation can be apprehended and attached to proceedings or entrusted to a court official or trustee with a deed. - Article 234 of the CPC: no notice to the offender is required prior to seizing products derived from such offences. - Article 298 of CPC: interim measure for seizing offender's property according to Civil Procedure Law to ensure effectiveness of conviction and prevent divestiture. - Protection of third parties: - Article 253-1 of the CPC: apprehended property pertaining to third parties and no longer needed for investigation and evidence should be provided to the person who proves entitlement. - Enforcement of SR III obligations: - Freezing powers are judicial in nature and should be applied by public prosecutors or judges. - Judges: independent, impartial, obliged to enforce the law under Articles 220-3 and subject to the Superior Council of the Magistrates for disciplinary purposes (Article 220-9). - Public prosecutors: obliged to act according to the legality principle, part of a hierarchical body, subject to disciplinary power of the Attorney-General under Article 224- 2, 3, and 9. ### Recommendations and comments (SR.III) - The system should be revised to ensure all situations referred to in UN Security Council Resolutions are immediately applicable and allow freezing and seizure of all funds, goods and property of any kind of suspects of terrorism, including individual terrorists or anyone pertaining to a group or a terrorist organization. - Establish internal mechanisms to ensure UN Security Council Resolutions are transmitted for implementation to all financial and non-financial entities subject to the AML/CFT regime. - Competent authorities should monitor implementation of these resolutions and collect data on their application to allow policy and legal measures to be established. - Implement an internal process of listing and de-listing according to the UN Security Council Resolutions. - Authorities should start to develop comprehensive data on goods, property, and values frozen, seized or confiscated. ### Compliance with Special Recommendation III - Rating: SR.III NC - Summary of factors underlying rating: - "Cape Verdean authorities did not demonstrate that the UN Security Council Resolutions 1267 and 1373, although technically applicable within the jurisdiction, are effectively implemented." - "Provisions in the Penal Code and CPC alone do not provide for effective and immediate freezing, seizure and confiscation of goods, funds, assets and property of designated persons, terrorists, those who finance terrorism or terrorist organizations." - "In addition, there is no obligation on financial entities or others to monitor for and report accounts or other property of such persons, nor do competent authorities supervise the actions of such entities in this regard." ### The Financial Intelligence Unit and its functions (R.26) - Summary: - The judiciary police centralizes receipt of STRs but does not fulfill all functions of an FIU. - Consensus exists on need to create an FIU but authorities have not decided type and location. - Current arrangements undertake some FIU functions: centralized receipt of STRs and dissemination to prosecutorial authorities. - Relevant legal provisions: - AML Statute (Law 17/VI/2002 of December 16), especially Article 23-1 on obligation to inform suspicious transactions. - Statute of the judiciary police (Decree-Law 4 of 1993), especially Articles 2 and 3. - Centre for receipt of STRs: - Under current law, the judiciary police (JP) is the exclusive recipient of STRs in Cape Verde; reporting institutions must communicate suspicions to the JP. - Article 23-1 of the AML Statute: "Financial entities shall immediately inform the judiciary police, in particular by facsimile or electronic mail, if they become aware or have a well-founded suspicion that funds or assets received by them or recorded in their books are derived from offences provided for in Article 3 or whenever they have knowledge of any facts that may constitute indication of the commission of such offences". - Internal group for receiving and processing STRs: the central section for the Investigation of Trafficking of Stupefacients (SCITE), chief reports to a deputy director of the judiciary police; staff of 13 comprised of 2 sub-inspectors and 11 agents. The chief is also the national representative to GIABA. - Temporary suspension of transactions (Article 23, paragraphs 2 and 3): - Requires an additional report to the Prosecutor-General so he can confirm or cancel the suspension. - The report sent to the Prosecutor-General does not have the nature of an STR. - These two distinct obligations should be more clearly regulated and harmonized. - Centre for analysis and dissemination: - SCITE performs very limited analysis of STRs; treats STRs similarly to criminal accusations, verified by a preliminary police investigation almost immediately. - Process: brief notice to the PM, quick search in criminal-record databases and prior STRs, field investigation, then pass information to the PM. - To obtain banking records or confidential information, SCITE must liaise with the PM who would request a court order (procedure not yet used as a result of an STR). - STRs are not treated as an element in producing financial intelligence; SCITE adds limited analytical value. - Information analysis office: - Recently created within the JP but "not being used to enhance the financial analysis of STRs." - Restructuring separated desk review/analysis from field investigation functions; the new unit is not intended to deal with STRs. - Guidelines to reporting entities: - No guidelines or procedures exist for reporting entities on how to submit STRs; the JP is not authorized to issue them. - Informally, JP has given orientation about minimum information required. - BCV and the ministry of finance have authority for financial institutions and DNFBPs respectively under Articles 4 and 26 of AML Law 17/2002 but have not exercised that authority. - Consequently, banks (the only institutions so far reporting) send communications with various forms and degrees of quality; some financial institutions believe they are obliged to report to BCV and not the JP, contrary to the law. *Source: _cr09115 - 134. Protection of bona fide third parties’ rights is provided for through Article 8 of the AML* ### ANNEX III ### ANNEX III ### Communication and cooperation between banks and the JP - There is a good level of informal communication and cooperation between banks and the JP; AML officers from several banks interviewed and the head of the SCITE shared this opinion. - Final production of bank documents for use by the JP requires a court order, which "does not seem to be speedy enough." - There is a need for "adequate and enforceable standardization of the STRs sent to the JP or to any future FIU." - Comprehensiveness and good quality of STRs are key; lack thereof has a higher impact because the judiciary police cannot request additional information from reporting institutions without a court order (see criterion 26.4). ### Timely access to information (c. 26.3) and additional information from reporting parties (c. 26.4) - The JP has ready access to some, but not all, information an FIU would require for financial analysis. - Existing government databases (e.g., credit bureaus and other government agency sources) are not accessible to the JP without a court order. - Some records (like criminal records) are held directly at the judiciary police; others are accessed only upon request. - The JP does not have direct access to reporting institutions to complement STRs or to obtain information from institutions that did not originate the STR. - To obtain customer information or information protected by professional confidentiality, the JP must send a request to the public ministry, which must obtain an order from a competent judge. - Indirect means to obtain information could meet FATF R.26 only if they guarantee a "timely" analysis; the described procedure appears "too cumbersome" and no practical examples of its use were provided. ### Dissemination of information (c. 26.5) and operational independence (c. 26.6) - The SCITE does not have autonomy to decide which information should be forwarded to the PM; an FIU should be operationally independent to determine retention or transmission of cases to the PM. - The JP must disclose all STRs to the Ministerio Publico at the time of receipt and after concluding preliminary gathering of information; the JP cannot stop an inquiry on its own without reporting back to the PM. - Article 3-4 of the Statute of the judiciary police (Decree-Law 4 of 1993): "All the cases investigated by the judiciary police must be communicated to the PM, unless they have been explicitly delegated to it." - Article 2 of the Statute: "The judiciary police intervenes during the preliminary instruction phase of the criminal proceedings, or equivalent, under the direction and subordination from the Public Ministry." - Nevertheless, after informing the PM, the JP has significant autonomy in conducting investigations: - Article 2-3 of Decree-Law 4 of 1993: the JP "has autonomy for the operational planning and the technical execution of the investigative actions, as well as administrative autonomy as defined in the laws of public accounting." - In practice, the JP informs the PM of STR receipt and conducts preliminary inquiries autonomously, consulting the PM when it needs to lift banking secrecy or obtain other confidential information. - The law does not formally recognize the JP’s operational autonomy with respect to STR verification, analysis, and enrichment before initiating police inquiries or judiciary proceedings. - Recent stricter exercise of PM powers to instruct all criminal investigations increases the need for formal mechanisms to allow STR verification and analysis prior to police or judicial action. - The immediate judicialization of STRs may contribute to a low number of reports (see reference to Section 3.7). ### Legal competence and protection of information (c. 26.7) - Article 5 of Law 17 of 2002: the JP has "exclusive competence ... to investigate the offences of laundering of money or other assets provided for herein"—interpreted as indicating JP is the only police force with competence to carry out these investigations unless delegation is given. - The law imposes a duty of confidentiality on the JP: - Article 9 of Decree-Law 4 of 1993: (i) all acts in the context of judicial process or assisting judicial authorities are secret; (ii) staff revealing breaches are subject to criminal and disciplinary actions. - STRs are guarded within the police with additional protections: reports are kept in a separate, more secure location and accessible to a limited number of staff. - Article 22 of Law 17/VI/2002: - "Information furnished pursuant to the preceding paragraph may be used only for the investigation and punishment of offences provided for in Article 3 hereof and may not be employed for other purposes, nor may the identity of the person furnishing it be revealed." - "Only the copy of the banking information shall be kept with the procedural documents, in all cases identifying the transmitting institution without bearing the signature of the person who transmitted the information, and the original shall be filed in secrecy with the criminal police." ### Limits in protection of reporting institution identity and tipping-off - The identity of the institution which files a report is not adequately protected. - The JP forwards all documentation from its preliminary inquiry to the PM, including the STR; nothing prevents a judge from incorporating the STR and letting it be seen by the accused. - Article 22 protections apply when the PM requests information from a financial institution but not when a financial institution files an unsolicited STR. - Article 22-4 allows: "The accused may, during the trial and adjudication hearing, request verification of conformity between the original and copy of the information transmitted." - The prohibition on tipping-off in Article 22-5 refers to PM requests for information and not to the filing of STRs (which is in Article 23). ### Publication of annual reports (c. 26.8) - None of the government agencies in Cape Verde has prepared or released reports including ML typologies and trends, or statistics based on STRs, amounts involved, subsequent investigations, etc. - No agency has been assigned FIU responsibilities as such; the judiciary police could provisionally undertake part of these tasks in the context of the National Coordination Committee Against Drugs (NCC). ### Egmont membership (c. 26.9) and principles of exchange of information (c. 26.10) - Authorities do not view the current structure as that of an FIU and have not considered applying for EGMONT membership. - The JP has been unable to sign memoranda of understanding with foreign FIUs due to the potential use of any information in judicial proceedings, given blending of police and analysis functions within SCITE. - The judiciary police is authorized to exchange information only with foreign judicial authorities and not with foreign FIUs, even if part of a police agency. - Examples of international cooperation provided by the JP were via rogatory letters and Interpol; no examples of cooperation with foreign FIUs were given. - Article 6 of Law 17 of 2002 (summarized): - Upon an individualized and substantiated request by competent foreign judicial authorities addressed to the Central Directorate of the Criminal police, steps provided for under Cape Verdean law to ascertain whether property or proceeds derived from crimes are on national territory shall be taken and the outcome communicated. - If such property or proceeds are on national territory, Cape Verdean judicial authorities shall take steps to prevent disappearance or dissipation, including freezing or seizure. - International judicial assistance shall conform to reciprocity and secrecy; information furnished at the request of foreign authorities may not be used for purposes other than indicated in the request. - The reference to "ascertaining whether property is located" (Art. 6-1) could constrain exchange of FIU-type information not linked to asset location (e.g., STR content, suspicious activity descriptions, ID numbers, linkages). - EGMONT requires members to be empowered to receive STRs in relation to terrorist financing; the lack of such an offence in Cape Verde may compromise future applications for membership. ### Adequacy of resources, integrity, training, and statistics (c. 30.1–30.3; R.32) - The Central Section for the Investigation of Narcotic Trafficking (SCITE) comprises 1 chief and 13 sub-inspectors and agents (14 people total). - While this staffing "might be enough to deal with the current load of financial analysis work," the depth of analysis is inadequate. - These 14 people perform both investigation of STRs and regular police functions, including field investigations (both STR and non-STR related). - The combination of police investigation functions with financial intelligence production has been detrimental to the latter. - The JP could create a distinct unit exclusively responsible for desk analysis of STRs and supported by police databases to improve efficacy. - No preference was expressed by assessors regarding the location of a future FIU; several options were being considered. - Regardless of location, amendments to the AML law and other legal/regulatory provisions will be necessary to guarantee technical independence of the new Unit. - Important investments needed: staffing, training, specialization, access to adequate information. - The FIU should not be charged with non-core FIU functions unless exceptionally and only if provided with additional resources. - Gaining the trust of reporting institutions is critical; reporting institutions should be better educated about reporting obligations via outreach, training, oversight and enforcement. - Legal impediments to cooperation include immediate judicialization of STRs induced by Article 3 of Decree-Law 4 of 1993 and possibility that a copy of the STR be disclosed to the accused (Article 22-4). - If the FIU is located outside the judiciary police, it should have access to at least the same information/databases that SCITE currently has. - Amendment recommended: Article 23 of Law 17 of 2002 should make the new Unit the direct recipient of STRs. ### STR statistics (applying R.32 to FIU) - Collection of statistics about the number of STRs and subsequent investigations is inadequate, even given the low number of STRs received. - Authorities did not provide information to determine source of reports by category and size of banks, amounts cited, most common predicate crimes, or economic activities involved. - Table 10. STRs Received by the SCITE of the Judiciary Police: - 2002 - - - 2003 - - - 2004 3 1 - 2005 5 1 - 2006 0 3 - 2007* 0 0 - *Year 2007 only from January to April. Three STRs are still pending SCITE’s conclusion and remittance to the public ministry. - Prior to the mission, the authorities' assessment questionnaire responses indicated a significantly larger number of reports and subsequent investigations than were verifiable. - Authorities are not using statistics strategically (e.g., to detect underreporting by particular institutions). - There is little communication between the JP and BCV; BCV could benefit from input on the quality and characteristics of reports and could cooperate to standardize STR form and minimum content. ### Recommendations and Comments (section 2.5.2) - Make a prompt decision about the location of the future FIU, taking into consideration the views of all relevant stakeholders (including law enforcement, the judiciary, the financial sector and BCV). The FIU should centralize the reception and administration of STRs, conduct a specialized desk analysis of them and forward the resulting cases to the PM. Adequate operational independence, resources, training and sources of information need to be given to the FIU. - Amend the law to provide for the establishment of a full-fledged FIU in accordance with the R.26. - The new FIU should be authorized to obtain additional information from reporting institutions with respect to STRs without the need to initiate a police or judiciary inquiry and having to obtain a court order. It should also be able to exchange information with foreign counterparts and consider applying for membership in EGMONT. - Law 17 of 2002 should be revised to prevent Article 22-4 being interpreted as allowing accused persons in a trial to have access to the actual STR filed by a reporting institution. STRs should be treated as intelligence and not as evidence in court. - Once the new FIU is created, special measures should be taken to prevent its confidential information from being disclosed to offices or agencies other than the competent judicial authorities. *Source: ANNEX III (excerpt provided).* ### ANNEX III ### _cr09115 - ANNEX III ### Compliance with Recommendation 26 / FIU Arrangements - R.26: NC - The judiciary police (JP) does not fulfill all FIU functions required by R26: - No meaningful analysis is performed before launching a routine police investigation for all STRs. - STRs are handled like any criminal accusation; only preparatory work is cross-checking names in police databases. - JP does not have timely access to additional information from reporting institutions or access to any confidential information from external sources. - JP is not authorized to exchange information with foreign FIUs. - JP has not issued reporting guidelines to reporting institutions; it is not authorized to establish procedures for sending reports, and does not prepare reports on typologies, ML trends, or other analytical information to facilitate private sector detection of suspicious transactions. - JP lacks necessary operational independence to determine which STRs should be communicated to the PM and when not to prosecute a case. - The number of STRs so far received is negligible, negatively impacting the effectiveness of any FIU arrangements in CV. - Recommendations implied by findings: - Authorize a dedicated FIU function to perform meaningful STR analysis and issue reporting guidance. - Establish procedures for information exchange with foreign FIUs and access to confidential external information. - Improve operational independence to prioritize STR referrals to the Public Prosecutor (PM). ### Law Enforcement and Prosecution Framework (R.27 and R.28) - Organization and responsibilities: - Investigation of criminal offences is carried out by the judiciary police, the public prosecutor, the national police, or the directorate general of customs. - The Public Prosecutor’s Office has sole responsibility to prosecute investigations (“accusation”) before the courts of law. - Enforcement agencies are autonomous and carry out functions independently. - National police investigates minor criminal offences (“contra-ordonances”), maintains law and order, and assists the judiciary police as needed; it cannot investigate serious criminal offences. - Judiciary police has exclusive competence to investigate money laundering offences under the AML Law. - Law enforcement authorities do not have power to investigate financing of terrorism offences because Cape Verde has not criminalized financing of terrorism. - Customs department responsible under law to ensure compliance with obligation to declare import of currency. ### Legal Basis and Powers for Investigation, Seizure, and Confiscation - Constitutional and statutory basis: - Public Prosecutor’s constitutional responsibilities include “represent the State”, “institute criminal proceedings”, and participate in “execution of the criminal policy defined by the sovereign organs of the State” (Article 222). - Law on the Public Ministry of 1998 and CPC Articles 64, 65, 68-2 b confirm PM’s exclusive authority to initiate criminal proceedings and duty to prosecute all crimes except where complaint or private prosecution required. - Seizure and confiscation: - Penal Code Articles 98 and 99 and subsequent Articles allow seizure of objects used or destined for use in commission of a crime. - AML law Article 6 allows seizure and confiscation of goods/products resulting from money laundering crimes referred to in Article 3, pursuant to request from competent foreign judiciary authorities. - AML Law Article 7 provides for confiscation of assets/products related with the money laundering offence stating that they should be confiscated to the State. - Powers to take evidence: - Judiciary Police Law and CPC Articles 179-194 regulate powers to take down evidence and seizure of relevant documents. ### Designation, Procedural Powers, and Limits - Designation of authorities (c. 27.1): - Article 5 of the Money Laundering Law vests exclusive competence for ML investigations in the judiciary police, exercisable under direction of the public prosecutor. - Judiciary police does not have power to investigate financing of terrorism (not criminalized). - Customs responsibility under Article 15 AML Law to ensure compliance with declaration of imported currency. - Postpone or waive arrest/seizure (c. 27.2): - No specific provisions in CPC or AML law authorizing investigation authority to waive arrest or seizure related to ongoing ML investigation. - Power to postpone or waive arrest in drug-related ML investigations exercised under Articles 33.1 of the Drugs Law of 1993. - Article 33 of Law 78/IV/93 allows PM to authorize the Public Prosecutor not to interfere with individuals carrying narcotics or psychotropic substances in transit to facilitate identification/charging of trafficking participants; PM may authorize judiciary police not to interfere to gather evidence or cooperate with destination/transit countries. - Recommendation implied: extend such powers to money laundering offences with predicate offences other than drug offences. - Special investigative techniques (legal basis) (c. 27.3 and c. 27.4): - CPC Chapters III and IV, Articles 234-242 (Inspections and Searches) and Articles 243-254 (Seizures) allow use of specialized investigation tools for ML offences. - Article 234–4 lists crimes exempt from judicial authorization for inspections and searches, which include an offence of ML—therefore no requirement for judicial authority in an ML investigation in those cases. - Chapter V CPC allows interception and recording of telecommunications for criminal investigations under procedural formalities. - Article 255 CPC allows wiretaps in ML investigations if judge-authorized and condition that measure is critical to discovering truth or proving crimes with maximum prison sentence of more than three years; power exercisable only in respect of suspects or persons suspected of receiving communications from the suspect and under strict operational formalities (Article 256). - Other techniques available: controlled delivery, undercover operations, postal inspections (Article 30). - However, judiciary police has not so far used specialized techniques (interception/recording, controlled delivery, undercover operations) in ML or drug investigations. ### International and Specialized Cooperation (c. 27.5 and c. 27.6) - Legal framework allows cooperation with other jurisdictions for ML and drug trafficking investigations (AML Law and Drugs Law Art.6.3). - Article 33 Law 78/IV/93 enables PM to conduct controlled delivery and cooperate with destination/transit countries in drug investigations. - No specialized investigation groups have been set up to investigate proceeds of crime. - No review of ML and FT methods, techniques, and trends has been carried out by law enforcement authorities. ### Compulsion of Documents, Witnesses, and Timeliness (c. 28.1–28.2) - Power to obtain information/evidence: - Article 281 CPC imposes obligation on every citizen to collaborate with judiciary police. - Articles 234–242 and 243–251 CPC define inspections and searches on any premises including lawyers’ offices; Article 239 CPC requires judge supervision and prior informing of professional association when searching lawyers or professionals with secrecy obligations. - Article 32.2 of the 1993 Drugs Law: a bank or financial institution may not refuse a request for information by the public prosecutor where necessary for an investigation. - Article 246 CPC, Article 32 Drugs Law, and Article 22 of the 2002 Law require financial entities, when ordered, to furnish judge or public prosecutor with information, documents or objects necessary for ML investigations and prosecutions; when judiciary police requires such information the application should be made by the PM. - Use of compelled information limited to investigating and prosecuting crimes referred to in the 2002 Law; exclusion of certain offences as predicate offences limits Article 22 application. - Power to compel banking information is subject to confidentiality and Article 22 AML Law; there is no limit on type of information and process is fairly quick. - Power to take witness statements: - Article 173 CPC provides power to obtain evidence; power to take witness statements vested in relevant authorities. ### Resources, Integrity, Training, and Statistics (c. 30.1–30.4; R.32) - Resources and capacity: - Investigating and prosecuting agencies are under-staffed and do not have the resources necessary for proper investigation and prosecution of ML offences. - Judiciary police and PM enjoy sufficient operational independence and autonomy in exercise of investigative and prosecuting functions. - Level of awareness of AML issues is low. - Recommendation: adequate resources and training in money laundering should be a priority for national agencies; AML training should address both general and specialized skills. - Integrity: - Constitution defines appointment mode for Chief Public Prosecutor and public prosecutors, ensuring probity and merit. - Recruitment emphasizes merit; prosecutors may not serve in other public or private capacity except unpaid academic/scientific legal research (Art. 224). - Integrity criteria reiterated in ministry internal regulations; officials expected to act with impartiality and legality. - Training: - Officers of the Public Prosecutor’s Office and judiciary police have participated in conferences, seminars, and videoconferences on money laundering topics but have not had specialized training or exposure to ML investigative techniques or methods. - General lack of specialized skills and capacity to investigate and prosecute ML crimes. - Judges have participated in a few workshops on general AML/CFT aspects; authorities indicated need for further and more specialized training. - Statistics and monitoring (applying R.32): - Absence of systematic collection of data hampers review and monitoring of compliance with the law. - Few statistics are kept or available regarding criminal investigations and prosecutions. - Low level of statistics provided regarding ML investigation and delay in investigating suspicious transactions indicate the system is not implemented effectively. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09115.pdf* ### 217. The authorities are conscious of the need for a more organized and structured approach to ### _cr09115 - 217. The authorities are conscious of the need for a more organized and structured approach to ### 2.6.2 Recommendations and Comments — Law enforcement capacity - The law enforcement system in Cape Verde needs to be strengthened to ensure effective implementation of the AML/CFT framework. - Recommendations and observations: - The authorities should give adequate attention to the investigation of ML cases. - The judiciary police and Public Prosecutor’s Office do not have the necessary resources, skills and training to adequately comply with the FATF Recommendations. - There is need for more specialized staff, and use of specialized investigative techniques. - The enactment of legislation criminalizing the offence of financing of terrorism should also provide the mandate to law enforcement authorities to investigate and prosecute the financing of terrorism offences. - The amendment of the list of predicate offences to include all predicate offences listed under the FATF Recommendation 1 is necessary to extend the application of Article 22. - The power to take down witnesses’ statements in relation to AML/CFT investigation should be made more explicit. - There is need for the authorities to put in place a system of collecting data for purposes of cooperation and reviewing trends and the effectiveness of the system. Data and other information should include information on prosecutions, convictions, penalties, freezing/seizing and confiscation. The powers of investigation and prosecution should extend to offences related to FT. - Both the judiciary police and the Public Prosecutor’ Office should consider establishing units specialized in the investigation and prosecution of ML and FT. - Rating summary factors relevant to s.2.6 underlying overall rating: - R.27 PC - Law enforcement agencies do not have a mandate to investigate and prosecute FT offences. - The power to postpone or waive arrest of a suspect or seizure of property only exists for drug offences. - Limited attention is paid to pursuing ML investigation as evidenced by low level of statistics. - R.28 PC - Absence of indication of use of existing power to compel production and searches for documents and information in ML investigation. - No power to compel production of documents and searches in relation to FT offences since FT is not an offence in Cape Verde. ### 2.7 Cross Border Declaration or Disclosure (SR.IX) — Description and analysis - General framework: - Cape Verde has a declaration system: every person entering Cape Verde in possession of currency or bearer securities exceeding one million escudos, (approx. €9,090) is under an obligation to declare the amount to the customs authorities. Failure to do so constitutes an administrative infraction sanctioned under the law. - The General Directorate of Customs (GDC), under the minister of finance, is responsible for administering the requirements of the law (Article 15.2 AML Law). The responsibility to investigate and prosecute offences related to false declaration in violation of Article15 of the AML Law is imposed on the GDC (Art. 33). - Article 15 of the 2002 Money Laundering Law provides the legal basis for the declaration system. - Mechanisms and gaps (c. IX.1–IX.7, IX.10–IX.15): - Cape Verde opted for an inbound declaration system only; the law does not apply to passengers leaving Cape Verde and is silent on transportation methods such as shipments through containerized cargo or mailing. - Currency includes both banknotes and coins; bearer securities include negotiable instruments such as checks, traveler’s checks, and promissory notes. - The law places the obligation to supervise compliance on the GDC, but no system or mechanism has been put in place to administer the obligation. - There is no provision in the AML Law or Customs Law that enables customs to request and obtain from a person in violation of the declaration obligation further information about the origin of the currency or bearer instruments. Authorities claim general customs powers permit this, but there is no legal provision to support that interpretation. - The AML law does not contain any provision allowing customs to stop or restrain currency or bearer instruments for purposes of investigating ML or TF. General customs powers to restrain goods for customs offences are not applicable to currency in violation of the declaration obligation or suspected of being linked to ML. - Article 15-3 provides that documentation collected by GDC must be maintained for a period of five years, presuming a maintenance system; however, GDC has not established a system and no information on amounts or identification data is maintained. - The AML law does not provide for information obtained in violation of the declaration obligation, or about suspicious cross-border transportation, to be notified to the FIU. Customs has not implemented the declaration system required by Article 15-2. - Domestic coordination exists on an as-required basis between customs and judiciary police, but only for specific cases related to general customs and drugs offences. - Customs cooperates with foreign counterparts within the Nairobi Convention framework, but the authorities did not clearly indicate how cooperation would occur with non-signatory countries; cooperation under the Nairobi Convention does not extend to transportation of currency and bearer instruments related to ML. - Article 35 of the 2002 AML Law sanctions violation of the duty to declare cash transfers over one million escudos with a fine between 250,000 and 25 million escudos; the minister of finance is responsible for applying fines. Sanctions have not been applied due to lack of implementation. - Imprisonment sanctions for ML under Article 3 of the AML Law also apply where cross-border transportation of currency or negotiable instruments may be related to ML, but violations of the declaration obligation are treated administratively (Article 35). - Confiscation provisions exist across CPC, Customs Law, Drugs Law of 1993, and the AML law, but it is not clear if the AML Law’s “assets and products” term covers confiscation of currency in violation of the declaration obligation. - Cape Verde has not enacted any law on combating the financing of terrorism and has not implemented UN SCRs 1267 and 1373. - Power exists under general customs laws to notify foreign agencies of unusual movement of precious metals and stones, but no such notifications have been made and basis for cooperation with non-Nairobi signatories was not clarified. - Information exchanged between law enforcement agencies is subject to confidentiality and limited-use conditions, but the law does not provide safeguards for reporting of cross-border transactions; authorities claim regulations must be adopted to provide such safeguards. - Authorities have not considered implementing FATF Best Practices for SR.IX. - The customs system is computerized but not accessible by all competent authorities and contains no cash declaration or money laundering information due to absence of implementation of Article 15 requirements. ### 2.7.2 Recommendations and Comments — Cross-border controls - Legal and operational actions recommended: - The law should be amended to cover both incoming and outgoing persons. - Customs should implement the obligation by establishing a mechanism to monitor and enforce compliance with the law. - Once the system is implemented, records should be maintained of amounts of cash and bearer negotiable instruments and identity data in instances where a declaration exceeds the prescribed threshold, there is a false declaration or there is a suspicion of ML or FT. - Powers should be defined so authorities may request and obtain information. - Powers to restrain currency found in breach of the obligation should be provided; the Law should be amended to provide for the restraint of currency for the purposes of determining whether it is related to ML/FT. - Sanctions should be applied following a case of false declaration. - Resources and training should be provided to customs officers for effective implementation of the obligation. - It should be clarified that the requirement to monitor the movement of currency and bearer negotiable instruments applies to movement through the mail and through the use of containerized cargo. - 2.7.3 Compliance with Special Recommendation IX — Rating summary factors - SR.IX NC - The obligation to declare the cross-border movement of cash and negotiable instruments is not applicable to outgoing movements. - Absence of implementation by customs and lack of adequate powers to enforce the obligation. - Lack of clarity about powers to seize and retain currency or bearer instruments in violation of the declaration obligation. - Failure to maintain data related to the amount of currency and bearer negotiable instruments and identification data. - No power to communicate information related to currency or bearer instruments in violation of the obligation, to the FIU. ### 3 Preventive Measures — Financial Institutions (Risk of ML/TF) - Risk assessment and sector vulnerabilities: - The authorities have not undertaken an assessment of Cape Verde’s vulnerability to money laundering and terrorist financing. - Officials perceive the main vulnerability to be cash transactions performed in the banking sector. - Authorities acknowledge Cape Verde is a transshipment point in the movement of drugs between South America and Europe; proceeds are primarily related to the drug trade. Investigations into human trafficking transshipment did not produce evidence of such activity. - The banking sector dominates financial sector activity and is considered the main vulnerability as a gateway to the financial sector. - Life insurance is a relatively new product and currently accounts for less than 2 percent of total premium income; investment products are offered only as components of life insurance products. The insurance sector is not considered to have a high level of vulnerability to ML. - There are modest levels of capital market activity; there are no entities licensed solely as capital market licensees—capital market intermediaries are licensed banks. - International financial institutions represent another vulnerability, particularly for layering stages of money laundering. A weakness is the presence of institutions not adequately captured in global consolidated supervision of home regulators and therefore only subject to supervision by BCV, whose weaknesses are described elsewhere in the report. - Law 17/VI/2002 applies to credit and para-banking institutions, insurance companies, and enterprises that manage pension funds. It does not cover securities firms and collective investment schemes; at time of drafting there were no entities exclusively undertaking such activities and up to assessment time there were still no entities other than licensed banks providing these services. *Source: _cr09115 - 217.* ### ANNEX III ### ANNEX III ### Supervisory strategy and ML risk - Supervisory resources are allocated in accordance with perceived prudential and ML risks but are not based on an objective analysis of ML risk. - Authorities focus most supervisory resources on banks operating in the domestic sector, reflecting a belief that domestic banks are most vulnerable to ML. - This approach does not address vulnerability arising from the activities of IFIs, which are not effectively captured by BCV supervisory regime. ### Legal framework for preventive measures - Principal instruments: Law 17/VI/2002, Technical Instruction attached to Circular Series A, No. 108 of August 2003 (TI 108), Technical Instruction attached to Circular Series A, No. 109 of August 2003 (TI 109). - TIs are secondary legislation issued by BCV under Law 17/VI/2002 and are enforceable. - Article 42 of Law 10/VI/2005 provides that BCV can “approve regulations and other regulatory acts, in the context of Bank’s functions, which must be complied with by those institutions subject to its supervision”. - Article 4 of Law 17/VI/2002 gives BCV power to monitor and oversee application of regulations and measures for the prevention of laundering in the banking and financial sector, establishing BCV’s power to issue TIs and the obligation of financial institutions to comply. - Scope of Law 17/VI/2002: credit and near-banking institutions, insurance companies, companies that manage pension funds, and “entities that explore the public postal service to the extent that they provide financial services”; applies to branches, agencies, and other forms of representation located in Cape Verde but headquartered abroad. - TI 108 covers credit institutions and para-banks and “entities that explore the public postal service to the extent that they provide financial services”; covers branches/agencies located in Cape Verde but headquartered abroad. - TI 109 covers companies that carry out life insurance activity and are based in Cape Verde (interpreted as entities headquartered there); covers branches/agencies located in Cape Verde but headquartered abroad. - No TI has been issued to cover securities market institutions. ### Prohibition of anonymous accounts (criterion 5.1) - Cape Verdean law does not expressly prohibit anonymous accounts or accounts in fictitious names. - Authorities indicate anonymous accounts or accounts in fictitious names are effectively not permitted due to Article 16 of Law 17/VI/2002 and TIs 108 and 109. - Historical context: - Prior to 1993, BCV was the only institution offering banking services and did not permit anonymous accounts. - BCV discontinued commercial banking services in 1995. - Circular 96 of August 2000 required financial institutions to identify customers or their representatives when opening deposit accounts; similar circulars reportedly issued in 1995 and 1997 (copies not provided). - No private insurance companies operating prior to 1992; public Institute of Insurance and Social Welfare provided insurance services. - Life insurance estimated to account for approximately 2 percent of total premium income in 2006. - Authorities conclude a gap of approximately 10 years existed between advent of private financial sector activity and enactment of Law 17/VI/2002, but there was little opportunity for anonymous-account abuse. - BCV officials and industry discussions indicate no anonymous accounts or numbered accounts have been encountered in inspections or practice. ### When Customer Due Diligence (CDD) is required (criterion 5.2) - Article 16 of Law 17/VI/2002 requires “financial entities” to demand identification of clients, regular or occasional, whenever they establish any business relationship. - Specified relationships include: opening deposit accounts, book savings accounts, funds transfers, currency exchange, providing valuable safekeeping services, providing guarantees, selling insurance policies, or transactions in any type of stock certificate. - No specific requirement to identify customers when there is a suspicion of ML or TF or where there are doubts about veracity of previously obtained information. - Law does not establish a threshold for identification of occasional customers; absence of requirements to perform CDD where institutions have doubts about previously obtained customer information and to comply with measures set out for wire transfers under SR VII are identified as weaknesses. ### Identification measures and verification sources (criterion 5.3) - Article 16 of Law 17/VI/2002: identification should be based on an identification card or any other official document containing a photograph; identification details noted in writing. - TIs 108/2003 and 109/2003 Chapters II (A): require identification using “a valid official document.” - Authorities interpret “official document” as government-issued identification such as national identification card, passport, or military identification card, all bearing a unique identifying number. - Vast majority of nationals have at least one such document; where absent, one can be easily obtained. - TI Chapters II (B) requirements: - Resident individuals: verify identity via identity card or other official identification bearing a photograph; require customer’s profession and employer(s) through another “original document” providing “unequivocal proof”; customer’s address must be confirmed by an item confirming veracity or other procedures deemed appropriate. - Non-residents: identification procedures similar to residents; where elements are not available TI 108 requires banks/near-banks to ask customer to name another bank “of acknowledged reputation” to attest to veracity; TI 109 requires insurance entities to ask customer to name an insurance company or financial institution with a contract in force to attest to veracity. - Financial entities required to immediately obtain such confirmation in writing before engaging in operations with the customer. - TI 109 additionally requires contacting immigration department or relevant consulate in Cape Verde to verify authenticity of an identification document for non-residents when doubts exist. - Application threshold and enhanced CDD: - Provisions are limited to face-to-face dealings where transactions individually or jointly exceed 1 million Escudos; not applicable to transactions below this threshold. - Authorities indicate TI 108/2003 and 109/2003 (Chapters II (B)(1)) intended as enhanced CDD measures to be applied for transactions in excess of one million escudos. - Concerns and weaknesses: - Lack of clarity on what constitutes “a bank of acknowledged reputation” or acceptable other financial institutions to attest to veracity. - No specific guidance or criteria provided; BCV may provide information on a case-by-case basis but this is criticised as impracticable and undesirable because it risks BCV becoming overly engaged in operational aspects. - Vague requirement likely to produce uneven results across institutions. ### Identification of legal persons and other arrangements (criterion 5.4) - Chapters II (1.3) of TI 109/2003 and TI 108/2003 require, for resident legal entities, obtaining name of firm, main objective or location of headquarters, confirmed by presentation of original documents providing unequivocal proof; verified by authorities during on-site inspections. - Requirement to verify company identity with an official document results in obtaining information on incorporation and legal status; customers normally present copies of the Official Gazette as proof of incorporation details. - Financial entities required to obtain tax identity number as verified by documents issued by the Internal Revenue Service. - Financial entities required to verify powers held by any individual to represent the company or move funds on basis of an original document conferring such powers. - For non-resident legal entities: same information except tax identity number; where doubts, banks/para-banks required to ask customer to name another bank “of acknowledged reputation” to attest to veracity; insurance entities to name insurance company/financial institution with contract in force to attest to veracity; confirmation in writing required before engaging. - Trusts: - Trusts not recognized under Cape Verde law and not used by customers of domestic financial institutions. - Article 43 of Decree-Law 12/2005 (regulating IFIs) requires special care when dealing with trusts and fiduciary agents to ensure institutions are aware of real client or beneficiary; applicable only to IFIs. - Identified deficiencies: - Requirement to obtain corporate name is insufficient: no express requirement to check legal status or proof of incorporation; Official Gazette may not be up-to-date and may be inadequate. - No requirement to verify legal form and address of directors. - No requirement to verify provisions regulating power to bind a legal person or arrangement; TI provisions are too narrow—restricted to verification of an individual’s power and limited to dealings with financial institutions or moving funds. - CDD measures for trusts are inadequate, applicable only to IFIs and do not specifically require verification of identity of trustees. ### Identification of beneficial owners (criteria 5.5; 5.5.1; 5.5.2) - Article 17(1) of Law 17/VI/2002: where elements of a banking operation reveal the economic beneficiary is someone other than persons who made direct contact, the institution must demand identity of the beneficiary and proof of such identity; proof can be presented in copy and electronic form. - Article 17(2): where operations are carried out internationally without any contact with the beneficiary and doubts about identity persist, and the amounts and nature of the operation justify, institutions may request the beneficiary’s identity and nature of the operation be proven by a financial institution of proven credibility. - Chapters II (B) (1.1) of TIs 108/2003 and 109/2003 require that where institution knows or suspects customer is not acting on his own behalf, it should obtain written information describing origin and destination of funds, identities of beneficiaries, and justification for operations in question. - Gaps and concerns: - No specific legal provisions requiring institutions to understand ownership and control structure of legal persons and legal arrangements or to determine the ultimate person who controls the customer. - Article 17 does not create an affirmative obligation for institutions to determine if a customer is acting on behalf of another person; institutions must only verify identity of beneficiary when they become aware of existence. - Article 17 is limited to banking operations and does not appear to cover other financial sector activity. - Under Article 17(2), further CDD efforts for international operations are only required where amount and nature justify; this discretionary standard is considered unacceptable for higher-risk customer categories. - Unclear how “proven credibility” of the attesting financial institution will be established. *Source: _cr09115 - ANNEX III* ### 274. While Article 43 of Law 12/2005 addresses CDD measures related to trusts, it only ### _cr09115 - 274. While Article 43 of Law 12/2005 addresses CDD measures related to trusts, it only ### Trusts and Customer Due Diligence (CDD) - Article 43 of Law 12/2005 requires institutions to "take special care and ensure that the beneficiaries are identified." - There is no requirement to identify the settlor, trustee or other persons exercising effective control over the trust. ### Information on Purpose and Nature of Business Relationship (c. 5.6) - The Cape Verdean legal framework has no specific requirements for financial institutions to obtain information on the purpose and intended nature of the business relationship. - Financial institutions generally try to understand the nature of the business a new client wants to undertake and his/her reasons for doing so (based on discussions with institutions). ### Ongoing Due Diligence on Business Relationship (c. 5.7; 5.7.1 and 5.7.2) - Apart from Article 19 of Law 17/VI/2002 there are no specific requirements for ongoing due diligence or for CDD records and data to be kept up to date. - Because there is no legal requirement, on-site inspections do not review measures used by institutions for ongoing due diligence or the updating of CDD records. - Only one institution indicated it has measures in place to achieve ongoing CDD objectives. ### Risk—Enhanced Due Diligence for Higher Risk Customers (c. 5.8) - Measures required for non-resident individuals, legal persons, and trusts are as indicated above. - Requirements for non-face to face customers are discussed under Recommendation 8. ### Risk—Application of Simplified/Reduced CDD Measures (c. 5.9, c. 5.10, c. 5.11) - The legal framework does not establish circumstances under which reduced or simplified CDD measures can be applied. - Some banks indicated they did not undertake CDD on all shareholders for companies whose shares were traded on the local stock exchange. - The insurance sector indicated it did not require all persons covered by group life insurance to be subject to full CDD measures. - Industry appears to use reduced CDD measures where there is a perception of lower ML risk, but authorities have not created a guidance framework, likely causing inconsistency. - Because the legal framework does not contemplate reduced CDD circumstances, these industry practices are effectively a breach of the AML law. - In the absence of a framework for simplified CDD, criteria c. 5.10 and c. 5.11 are not applicable. ### Risk—Risk-Based Application of CDD and Guidance (c. 5.12) - Cape Verdean laws and TIs do not expressly create a framework for a risk-based approach to AML/CFT supervision. - Authorities have issued no guidelines; measures adopted by FIs occur outside a framework controlled and monitored by the authorities. ### Timing of Verification of Identity (c. 5.13–5.16) - The legal framework does not expressly address timing of verification of identity. - Chapter III of the TIs indicates financial entities must refuse to engage in operations with customers who do not provide identification information for themselves or persons on whose behalf they act; authorities consider this to mean identity processes must be completed before establishment of all relationships. - Institutions generally require identification to be completed before business activity; one institution reported very rare instances of offering services to customers unable to produce satisfactory identification, requiring an official identity document before any payments. - The legal framework does not expressly create exceptions allowing CDD after a business relationship has commenced; authorities expect verification before commencement and check this during on-site inspections. - Chapter III of the TIs provides that if customers fail to provide required identification information, the financial institution must refuse to engage in operations; there is no requirement that institutions should consider filing an STR in these circumstances. - Apart from the rare instance noted, institutions indicated CDD measures are always completed before commencement of a business relationship. ### Existing Customers and Anonymous Accounts (c. 5.17–5.18) - No specific provisions address identification requirements for customers whose relationships pre-date Cape Verde’s AML legal framework. - Institutions generally have not reviewed files to determine customers predating the AML laws who were not subject to adequate CDD. - One institution reviewed CDD information and discovered accounts lacking adequate information, and it has suspended transactions on these accounts. - There are no requirements for institutions to apply CDD measures to persons who had anonymous accounts or maintained accounts in fictitious names; authorities believe no such accounts have ever existed. ### Politically Exposed Persons (PEPs) (c. 6.1–6.6, Additional Elements) - Main AML legal instruments do not contain provisions relating to PEPs except Law 12/2005 applicable to IFIs: Article 43-2 f provides that institutions should "use special caution in dealing with proposed clients who hold or have recently held high political or public service positions whether military or civilian, in order to prevent involvement with illicitly generated wealth, in particular wealth resulting from corruption." - Law 12/2005 does not require senior management approval for establishing or continuing relationships with PEPs. - There is no requirement for institutions to establish the source of wealth for customers and beneficial owners identified as PEPs. - Institutions are not required to conduct enhanced ongoing monitoring of relationships with PEPs. - Article 43-2 f does not distinguish between foreign and local PEPs; under Article 2 of Law 43/III/88 residents may, under certain circumstances, be customers of international banks, in which case Article 43-2 f would require they be treated as PEPs. - Cape Verde has signed but not ratified the Merida Convention. - Provisions relating to PEPs are only applicable to IFIs; entities operating in the domestic market are not covered. - The provisions of Law 12/2005 are very general and do not address the specific requirements of Recommendation 6; no guidance informs institutions that close family members and associates of PEPs represent similar risks. - Discussions indicated a low level of awareness among institutions of FATF requirements in relation to PEPs and no indication enhanced measures are employed. - Since domestic-sector institutions are not required to adopt PEP risk management measures, this matter is not addressed during on-site inspections. ### Cross-Border Correspondent Accounts (c. 7.1–7.3) - The legal framework does not include specific provisions relating to cross-border correspondent banking. - No requirement to obtain information on the respondent institution, assess its AML/CFT controls, seek senior management approval, document responsibilities, or take specific measures for payable-through accounts. - Authorities indicate Cape Verde banking institutions do not generally provide correspondent banking relationships and are more often the respondent bank. - No review of arrangements for management of ML risk associated with correspondent banking is undertaken during on-site inspections. - A framework satisfying Recommendation 7 should be put in place despite current limited practice. ### Misuse of New Technology and Non-Face-to-Face Relationships (c. 8.1–8.2.1) - The legal framework does not specifically address risks posed by new technology; authorities have not provided guidance and institutions have not generally adopted specific measures. - Chapters II (B) (1) of TIs 108/2003 and 109/2003 require that when financial institutions intend to initiate business relations or carry out occasional transactions which, individually or jointly, attain or exceed 1 million Escudos and there is no direct contact involving physical presence, identity information could be verified by notarized copies sent by registered mail or written certification provided by a bank or insurance company named by the customer. - Weaknesses in these requirements: - They are only triggered for transactions of 1 million Escudos or more; for non-face-to-face relationships with transactions less than 1 million Escudos, the only requirement is identity confirmation based on an identity card or other official document bearing a photograph. - The measures do not appear mandatory because TIs suggest information "could be verified" by one of two ways; TI language does not seem to create a specific obligation requiring either option. - Authorities have not developed guidance on types of institutions acceptable to attest to veracity of information. ### Recommendations (3.2.2 Recommendation 5) - The authorities should consider expressly prohibiting the use of anonymous accounts. - Financial institutions should be required to undertake customer due diligence measures where there are doubts about the veracity of previously obtained information. - The threshold of one million escudos in Chapters II (B)(1) of TIs 108 and 109 should be removed. If the authorities wish to maintain the arrangement allowing a foreign bank to verify identity information, the following conditions should also apply: - Financial institutions should be required to satisfy themselves that the foreign financial institution is regulated and supervised (in accordance with Recommendation 23, 24, and 29), and has measures in place to comply with, the CDD requirements set out in R.5 and R.10. - In determining in which countries the third party can be based, competent authorities should take into account information available on whether those countries adequately apply the FATF Recommendations.12 - The ultimate responsibility for customer identification and verification should remain with the financial institution relying on the third party. - Financial institutions should be required to verify the legal status or proof of incorporation of legal persons or legal arrangements by obtaining proof of incorporation or similar evidence and information concerning the customer’s name, the name of trustees, legal form, address, directors, and provisions regulating the power to bind the legal person or legal arrangement. - Financial institutions should not rely on information contained in the Official Gazette as proof of a company’s incorporation details; authorities could consider use of certificates of incorporation issued by the national registrar. - Financial institutions should be required to identify beneficial owners and take reasonable measures to verify the identity of such persons using relevant information or data obtained from a reliable source such that the financial institution is satisfied that it knows who the beneficial owner is. - Financial institutions should determine whether the customer is acting on behalf of another person and take reasonable steps to obtain sufficient data to verify the identity of that other person. - For customers that are legal persons or legal arrangements, financial institutions should take reasonable measures to understand the ownership and control structure and determine who are the natural persons that ultimately own or control the customer. - When dealing with trusts, financial institutions should verify the identity of the settlor, trustee or other person exercising effective control over the trust. - Financial institutions should be required to obtain information on the purpose and intended nature of the business relationship. - Financial institutions should be required to conduct ongoing due diligence on the business relationship. - Ongoing due diligence should include scrutiny of transactions throughout the relationship to ensure consistency with the institution’s knowledge of the customer, their business risk profile, and where necessary, the source of funds. - Financial institutions should ensure documents, data or information collected under the CDD process is kept up-to-date and relevant by reviewing existing records, particularly for higher risk categories of customers or business relationships. - Financial institutions should be required to perform enhanced due diligence for higher risk categories of customer, business relationship or transaction. - Authorities can consider permitting financial institutions to complete verification of identity of customers and beneficial owners following establishment of a business relationship provided that it occurs "as soon as reasonably practicable," is essential not to interrupt normal conduct of business and money laundering risks are effectively managed. - Where a customer is permitted to utilize the business relationship prior to verification of identity, financial institutions should adopt risk management procedures including limitations on number, types and/or amount of transactions and monitoring of large or complex transactions outside expected norms. - Where a financial institution is unable to verify the identity of a customer or beneficial owner, it should consider making a suspicious transaction report. - Where the financial institution has already commenced the business relationship and is unable to satisfactorily verify the customer or beneficial owner, it should be required to terminate the business relationship and to consider making a suspicious transaction report. *Source: _cr09115 - 274. While Article 43 of Law 12/2005 addresses CDD measures related to trusts, it only* ### ANNEX III ### ANNEX III ### Compliance with Recommendations 5–8 (CDD, PEPs, Correspondent Banking, Technology) - Recommendation 5 (R.5) — Rating: NC - Use of threshold for instances in which specified forms of identification are required can lead to inadequate documentation being taken in circumstances where threshold is not met. - Inadequate arrangements for circumstances in which foreign financial institutions are confirming the authenticity of CDD identification documents or information. - Lack of affirmative obligation for institutions to determine if a customer is acting on behalf of another party. - Number of weakness in the requirements for the identification of legal persons. - Lack of a requirement to obtain information on the purpose and intended nature of business relationship. - No requirement for ongoing due diligence or for CDD records to be kept up to date. - Inadequate CDD Requirements for Trusts. - No requirement for institutions to apply CDD to customers whose relationship with the institution pre-dated the 2002 law, on the basis of materiality and risk. - Policy recommendations extracted from text: - Financial institutions should be required to apply CDD requirements to persons who were customers before the enactment of Law 17/VI/2002 on the basis of materiality and risk, and to conduct due diligence on such existing relationships at appropriate times. - Recommendation 6 (R.6) — Rating: NC - No effective framework to address the risk posed by PEPS. - Policy recommendations extracted from text: - The provisions relating to PEPs should be applicable to all financial institutions, not just IFIs as is currently the case. - Financial institutions should be required to put in place appropriate risks management systems to determine whether a potential customer, a customer, or the beneficial owner is a PEP. - Financial institutions should be required to obtain senior management approval for establishing business relationships with a PEP. - Where a customer has been accepted and the customer or beneficial owner is subsequently found to be, or subsequently becomes a PEP, financial institutions should be required to obtain senior management approval to continue the business relationship. - Financial institutions should be required to take reasonable measures to establish the source of wealth and the source of funds of customers and the beneficial owners identified as PEPs. - Financial institutions should be required to conduct enhanced ongoing monitoring of their business relationships with PEPs. - Recommendation 7 (R.7) — Rating: NC - No effective framework to address the risk posed by cross-border correspondent banking relationships. - Policy recommendations extracted from text: - Financial institutions should be required to gather sufficient information about a respondent institution, to understand the nature of the respondent’s business, and to determine from publicly available information, the reputation of the institution and the quality of supervision, including whether it has been subject to a money laundering or terrorist financing investigation or regulatory action. - Financial institutions should be required to assess the respondent institution’s AML/CFT controls, and ascertain that they are adequate and effective. - Financial institutions should be required to obtain approval from senior management before establishing new correspondent relationships. - Financial institutions should be required to document the respective AML/CFT responsibilities of each institution. - Where a correspondent relationship involves the maintenance of “payable-through accounts,” financial institutions should be satisfied that: - Their customer (the respondent financial institution) has performed all the normal CDD obligations set out in Recommendation 5 on those of its customers that have direct access to the accounts of the correspondent financial institution; and - The respondent financial institution is able to provide relevant customer identification data upon request to the correspondent financial institution. - Recommendation 8 (R.8) — Rating: NC - No requirements for institutions to have policies in place or to take measures to prevent the misuse of technological developments in ML or FT. - No adequate framework for circumstances in which institutions are allowed to rely on verification of identity provided by a foreign financial institution. - Policy recommendations extracted from text: - Financial institutions should be required to have policies in place or take such measures as may be needed to prevent the misuse of technological developments in money laundering or terrorist financing schemes. - Financial institutions should be required to have policies and procedures in place to address any specific risks associated with non-face-to-face business relationships or transaction. These policies and procedures should apply when establishing customer relationships and conducting ongoing due diligence. - The authorities should develop a clear framework for and provide guidance on the types of institutions that would be acceptable to attest to the veracity of the information provided. ### Third Parties and Introduced Business (Recommendation 9) - Legal and supervisory gaps: - Article 43-2 d of Law 12/2005 allows IFIs to streamline or omit procedures to confirm the identity of clients where referred by other financial institutions. - Law 12/2005 does not require institutions to immediately obtain specific CDD data from the introducing institution. - Article 43 requires the referring institution to explicitly state it has used due diligence and that documentation is available to IFIs on request, but does not require that such documents be available without delay. - Article 43 requires the referring institution to be headquartered in an OECD country and subject to normal supervision, but does not place an obligation on institutions to be satisfied that the third party has specific CDD measures in place. - Authorities limit introducers to OECD members countries but the use of the term “normal supervision” is vague and subject to differing interpretations. - No explicit requirement that the ultimate responsibility for customer identification and verification remains with the Cape Verdean institution. - Institutions met by the mission did not accept introductions on the basis of CDD work undertaken by third parties; provisions relate only to IFIs. - Recommendations and policy points: - The current provisions for introduced business should be applied to all institutions and not just IFIs. - Where financial institutions rely on a third party to perform some elements of the CDD process, they should be required to satisfy themselves that copies of the identification data and other relevant documentation relating to CDD requirements will be made available from the third party upon request without delay. - Financial institutions should be required to satisfy themselves that the third party is regulated and supervised in accordance with FATF Recommendations 23, 24, and 29 and has measures in place to comply with CDD requirement set out in FATF Recommendations 5 and 10. - The authorities should make it clear to financial institutions that in circumstances of business introductions, they retain the ultimate responsibility for undertaking CDD measures. - Compliance rating for R.9 — Rating: NC - No effective framework to address the risk posed by third party introduced business arrangements. ### Financial Institution Secrecy or Confidentiality (Recommendation 4) - Legal framework highlights: - Secrecy duty on financial institutions is lifted through Article 40 of Law No. 3/V/1996 of July 1 (the Banking Act), applicable to BCV according to Article 62 of Law 10/VI/2002, through Article 42-1 of Decree-Law 12/2005, and through Articles 22, 23, and 24 of the AML Law. - Article 39, Law 3 of 1996 (Duty of Secrecy): - 1. Lending institutions and near-banks and the branches of institutions headquartered abroad, together with the respective incumbents of boards of directors, managers, directors, agents, and employees, as well as other persons who, on a permanent or occasional basis provide services to them, either directly or through a third party, may not disclose or make use of facts or information concerning the operation of the institution or branch, or its relations with its customers, of which they have gained knowledge as a result of fulfilling their functions or providing their services. - 2. In particular, the duty of secrecy applies to the names of clients, deposit accounts and movements therein, and other banking, financial or foreign exchange operations. - 3. The duty of secrecy does not expire upon cessation of the said functions or provision of services. - Article 40 (Exceptions): The facts or elements covered by the duty of secrecy may only be disclosed: - (a) With authorization from the client, in cases concerning relations with that client; - (b) With authorization from the institution or branch, when the information exclusively relates to the operations of that institution or branch; - (c) To the Bank of Cape Verde, within the scope of its attributions; - (d) Under the terms of criminal law and criminal process; - (e) Under the terms of any other legal provision that expressly permits such disclosure. - IFIs are bound by a stricter secrecy duty in Article 8 of Law No. 43/III/88 and Article 42 of Decree-Law No. 12/2005, amended by Decree-Law No. 44/2005. Breach by IFI employees may be an offence even when the employee acted with mere negligence. - AML Law (Article 23) imposes a duty on financial entities to report to the judiciary police any funds or goods suspicious of ML or predicate offences; Article 22-1 requires providing judges and public prosecutors, at their request, with information, documents and any other objects necessary to the investigation of a ML offence. - BCV is bound by secrecy duty in its organic law; Article 24 of AML Law requires BCV to inform the judiciary police when inspections identify facts indicating an offence. - Inhibition and concerns: - Stricter duty of secrecy for IFIs may discourage employees from filing STRs; arrangements for compliance with the obligation to file STRs are more burdensome and difficult for IFI employees. - Recommendation: - The regime of secrecy applicable to IFIs should be reviewed and put in accordance with the regime applicable to financial institutions in general, with the purpose of not discouraging IFIs and their employees from reporting suspicious transactions of ML and TF. - Compliance with Recommendation 4 — Rating: PC - The legal secrecy duty regime applicable to IFIs is stricter than the one applicable to domestic financial institutions in general, rendering more difficult and riskier for employees of IFIs to discover and report suspicious operations to the judiciary police. ### Record-Keeping and Wire Transfer Rules (Recommendation 10 and SR.VII) - Legal framework: - Article 20 of Law 17/VI/2002 governs record-keeping and is referenced with respect to CDD requirements. - Record-keeping findings: - Article 20 of Law 17/VI/2002 requires that financial institutions keep records, in any form, of the documents pertaining to the record of the operations carried out for a period of five years after the end of the relationship with the customer. - There is no requirement for transaction records to be sufficient to permit the reconstruction of individual transactions to provide evidence for the prosecution of criminal activity if necessary. Law 17/VI/2002 allows institutions to keep records in “any form.” - Article 20 requires keeping records of documents pertaining to the identification of the client but contains no specific reference to account files or business correspondence and therefore no clear requirement for such records to be maintained for a period of five years after the end of the relationship. There is also no requirement for records to be maintained for longer periods as may be requested by competent authorities. - There is no specific legal requirement for records to be available on a timely basis to domestic competent authorities upon appropriate authority. - Practices observed: - Various practices in relation to record management and retention across institutions. - In the absence of clear internal policies, a number of institutions have retained records since inception of their operation. At least one institution has adopted a blanket policy that records should be maintained for 20 years. - None of the institutions met appeared to have written policies that completely satisfied either the requirements of Article 20 of Law 17/VI/2002 or FATF Recommendation 10. - Institutions did not have clearly stated policies establishing an objective of maintaining records in a manner that would facilitate the production of evidence for the prosecution of criminal activity. - Wire transfer / originator information note: - Text continues into "Obtaining Originator Information (applying c. 5.2 and 5.3 in R.5, c.VII.1)" but the excerpt ends at this point. *Source: _cr09115 - ANNEX III* ### 322. Customer information must be obtained from all customers, including for wire transfers. ### _cr09115 - 322. Customer information must be obtained from all customers, including for wire transfers. ### Customer Due Diligence (CDD) for Wire Transfers - The same CDD requirements apply to all customers and transactions (including one-off transactions) and apply to money transfer services provided only by financial institutions in Cape Verde. - Required information includes the customer’s name and national identity number, plus an account number which is always assigned by financial institutions in Cape Verde (see Section 3.2 on customer identification). - No threshold exists for the collection of customer data; therefore, all wire transfers are subject to the same requirements. - Western Union is a major provider of remittance services in Cape Verde but can only operate under contractual arrangements with financial institutions supervised by BCV. ### Recordkeeping Requirements for Wire Transfers - The same recordkeeping requirements applicable to other customer information apply to wire transfer information (Article 16 of Law 17/VI/2002 requires client identity for specific activities). - Identification requirements are general and not specific to wire transfers; there are no provisions addressing SR VII–specific recordkeeping requirements. ### Inclusion of Originator Information in Transfers (SR VII.2–VII.4) - Wire transfers are not regulated regarding the information that must be included in the communication and transmitted. - No regulations require insertion of originator information in the wire transfer message or specify handling of incoming wires lacking full originator information. - BCV regulations on electronic transfers only establish the International Bank Account Number (IBAN) standard for Cape Verdean banks (Technical Instruction 126 of 2007). - Banks are not required to include originator information in national or cross-border wire transfers. ### Risk-Based Procedures for Transfers Missing Originator Information (SR VII.5) - There are no regulations addressing this aspect of the FATF Recommendations. ### Restrictions on De Minimis Threshold and Monitoring of Compliance (SR VII.6) - There are no regulations dealing with restrictions on de minimis thresholds for originator information. - There are no regulations dealing with monitoring compliance with SR VII and therefore no supervision by the BCV. ### Sanctions for Non-Compliance with SR VII (SR VII.7) - There are no regulations dealing with sanctions under SR VII; hence no sanctions are applicable for non-compliance. ### Recordkeeping and Transaction Reconstruction (Recommendations related to R.10) - The assessment finds the absence of legal requirements that: - Transaction records be sufficient to permit reconstruction of individual transactions to provide evidence for prosecution of criminal activity. - Account files and business correspondence be maintained. - Records be available on a timely basis to domestic competent authorities. - Records be maintained for such periods as may be required by competent authorities. - Financial institutions express uncertainty about legal recordkeeping requirements. ### Recommendation 10 (specific recommended actions) - Financial institutions should be required to maintain transaction records for at least five years following the completion of the transaction or longer if requested by a competent authority in specific cases and upon proper authority; this should apply whether the account or business relationship is ongoing or terminated. - Records should be sufficient to permit reconstruction of individual transactions to provide evidence for prosecution of criminal activity. - Financial institutions should be required to maintain records of identification data, account files and business correspondence for at least five years following termination of the business relationship, or longer if requested by a competent authority in specific cases and on proper authority. - Financial institutions should ensure all customer and transaction records and information are available on a timely basis to domestic competent authorities upon appropriate authority. ### SR VII (recommendation to BCV) - The BCV should issue regulations to ensure financial institutions include accurate and meaningful originator information (name, national identification number and account number) on all wire transfers that are sent, and to ensure that the information remains with the transfer or related message through the payment chain. - Regulations should require monitoring for, and enhanced scrutiny of, transfers that do not contain complete originator information. ### Compliance Ratings and Underlying Factors - R.10: Partially Compliant (PC) - Absence of requirement for transaction records to permit reconstruction for prosecution. - Absence of requirement for account files and business correspondence to be maintained. - Absence of requirement that records be available on a timely basis to domestic competent authorities. - No requirement for records to be maintained for periods as may be required by competent authorities. - Uncertainty among financial institutions about legal recordkeeping requirements. - SR.VII: Non-Compliant (NC) - No measures in place to address SR VII requirements except to obtain and verify originator’s identification (only one out of seven criteria complied with). - Banks not required to include originator information in national or cross-border wire transfers. - No regulations indicating what to do with incoming wires missing full originator information. - Some positive practices exist because remittance services are undertaken only by Western Union under contractual arrangements, and Western Union is expected to comply with stricter US regulations (not enforceable by Cape Verdean authorities). ### Monitoring of Transactions and Relationships (R.11 and R.21) — Key Findings - The monitoring obligation is drafted in confusing terms, but authorities and financial institutions have a more adequate understanding of the obligation as contemplated in R.11. - Implementation focuses excessively on counter/teller operations; insufficient resources are dedicated to automated or periodic analysis of customer transactions. - No regulatory framework exists to apply countermeasures to countries that disregard FATF standards; financial institutions are not required to pay special attention to transactions with such countries. - Legal framework: Article 19 of Law 17 of 2002 requires financial entities to pay particular attention to customers and transactions that by frequency, unusual volume, complex structure or irregular character arouse suspicions of connection with predicate offences; Article 19(2) requires ascertaining origin/destination of funds and true nature of transaction and non-disclosure to the customer. - Technical Instructions 108 and 109 (2003) repeat Article 19 and add that whenever the amount of operations exceeds 1 million escudos, financial entities shall take the additional measures specified. Note: 1 million Escudos is almost equivalent to €9,090. - The law limits scrutiny to transactions suspected of being linked to predicate offences, rather than to transactions having “no apparent economic or visible lawful purpose,” narrowing the monitoring obligation. - In practice, large-size deposits are the predominant trigger for detection; branch/teller identification is the primary detection mechanism. - No legal requirement to document reviews of suspicious transactions, though institutions document reviews in practice. - Article 20 of Law 17, 2002 requires preservation of copies of documents relating to customer identification and recording of completed transactions for a period (text incomplete in source), but does not explicitly require preservation of internal analysis records. - Institutions must furnish an annual summary of “cases detected” to BCV; Technical Instructions 108 and 109 require annual reports of “suspicious cases detected and notified” and external auditors must notify BCV of any sign of money laundering they become aware of. - BCV issued guidance (annex to Technical Instruction 108 of 2003) listing examples of potentially suspicious operations, with a strong emphasis on the placement stage of money laundering. - No requirement to apply enhanced CDD measures based on higher-risk countries or to apply countermeasures; Annex to Instruction 108 (added in 2005) does not mention risk associated with countries insufficiently applying FATF Recommendations. - Some banks’ internal practices are more aligned with FATF standards, but such practices are not enforceable. ### Recommendations on Monitoring and Country Risk (Recommendations 11 and 21) - Recommendation 11: - Obligation to pay special attention to all transactions and patterns that are unusually complex or large and without an apparent economic or visible lawful purpose. - This obligation should not be limited by thresholds or circumscribed to instances where the institution suspects linkage to a predicate crime. - Reporting institutions should be obliged to maintain a written record of their review process and findings. - Recommendation 21: - Institutions should be required to pay special attention to transactions from or to countries that do not or insufficiently apply the FATF Recommendations; authorities should provide guidance about who these are and how to identify them. - Authorities should be able to apply countermeasures within the legal framework (taking into account the FATF Methodology examples) to countries that insufficiently apply FATF standards, if needed. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09115.pdf* ### ANNEX III ### ANNEX III ### Rating summary — key weaknesses (R.11, R.21) - R.11 — PC - Monitoring obligation is "excessively limited and confusing" because only transactions considered “suspicious” of being linked to ML or its predicate crimes (which are not a complete list either) require special attention. - Implementation by financial institutions is closer to the objectives of R.11 than Cape Verdean law, but they perform very little automated or periodic analysis of customer transactions. - Detection burden is excessively placed on cashier/teller officers and large-size deposits seem to be the only criterion used for detection. - Monitoring not effectively enforced as evidenced by the scarce number of STRs and few supervisory tools to test compliance. - There is no obligation to document the analysis in writing. - R.21 — NC - No special attention is required when dealing with countries that insufficiently apply FATF Recommendations. - The same weaknesses of R.11 apply to the obligation to examine background of transactions with foreign countries (monitoring is limited to predicate offence being suspected). - No countermeasures are currently available nor have been considered to deal with countries that insufficiently apply the FATF standards. ### Suspicious Transaction Reports and other reporting — description and analysis (R.13-14, 19, 25 and SR.IV) - Legal and operational framework - Institutions must "immediately inform the judiciary police and suspend the transaction when they suspect that the 'funds or goods' are derived from crimes that are predicate of the ML offence" (noting the list of predicate offences does not include TF and some other offences required by FATF). - There is no clear prohibition of tipping-off customers. - Reporting institutions are legally protected from civil and criminal liability when reporting in good faith, but there is a generalized reluctance to report. - There is no standard form or procedure for reporting; some financial institutions do not know which is the competent authority to receive STRs. - The number of STRs has been negligible since the inception of the obligation in 2003 and it dropped to zero in 2006. - Key statutory text (Article 23 of Law 17 of 2002 — as presented) - "Financial entities shall immediately inform the criminal police, in particular by facsimile or electronic mail, if they become aware or have a well-founded suspicion that funds or assets received by them or recorded in their books are derived from the offences provided for in Article 3 or whenever they have knowledge of any facts that may constitute indication of the commission of such offences." - "Financial entities shall refrain from carrying out any transactions which they reasonably suspect to be related with the commission of the crimes mentioned in Article 3 of this Law and shall inform the request for such transactions to the Prosecutor-General of the Republic or to the judicial officer of the public prosecution department designated by him, who may order the suspension of the operation concerned." - "Financial entities may carry out the transactions if the suspension order is not ratified by a judicial ruling within 24 hours from the time (...) , such period being extended to 48 hours in exceptional circumstances and with respect to transactions whose amount exceeds the sum of one million escudos." - Observations on scope and practice - Financing of terrorism has not been criminalized, neither is it a predicate offence of money laundering. - Article 23's wording does not clearly distinguish transactions that trigger an STR from those that require temporary suspension. - In practice, reporting institutions have never suspended a transaction at their own initiative; suspensions occur only upon receipt of a court order. - The mandatory suspension requirement has become a deterrent to filing STRs because it places on institutions the burden of near-certainty and the decision to restrict customers’ property rights. - Paragraphs 1 and 2 of Article 23 create doubts about whether a subset of “more serious suspicious transactions” must be reported to the PM rather than the JP, which would impede JP awareness. - STR statistics and scope - "Only eight reports have been produced since the inception of the obligation in December 16, 2002. All of them came from banks and in relation with predicate offences related to illegal drugs." - Table 11. STRs - YEAR — Reports - 2002 — - - 2003 — - - 2004 — 3 - 2005 — 5 - 2006 — 0 - 2007* — 0 - *Year 2007 only from January to April - Suspicions related to several FATF-required crimes (financing of terrorism being one) are not reportable because they are not included as predicate offences in Article 3. - The STR provision is deficient insofar as it links reporting to the limited list of predicate offences; a system based on reporting "unusual transactions" rather than only "suspicious transactions" is noted as an acceptable alternative under the FATF Methodology for SR.IV. - Thresholds, attempted transactions, and tax matters - There are no reporting thresholds for STRs, but monitoring focuses almost exclusively on large cash transactions, limiting detection of suspicious operations below large thresholds used in Cape Verde. - The requirement of a "well-founded suspicion" and absence of guidance on what constitutes such suspicion or the timing for filing ("immediately") likely contribute to the low reporting rate. - There is no requirement to report attempted transactions; authorities and private institutions do not consider attempted transactions reportable under the current framework. - Nothing in law or regulation allows reporting institutions not to report a suspicion solely because the operation involves tax matters, but there is no explicit provision to that effect; if tax matters justify an irregular transaction and tax matters are not a predicate offence, it might not be reportable unless the tax argument is suspected to be a sham. - Legal protection and tipping-off - Article 25 provides legal protection: "The furnishing of information or assistance reasonably and in good faith pursuant to Articles 22 and 23 shall not constitute infringement of the duty of bank secrecy or entail criminal, civil, disciplinary or administrative liability for the person who furnished it or for the institution involved." - There is no clear provision prohibiting reporting institutions and employees from informing the customer (or another person) of the STR. The provision that might serve this purpose applies only to furnishing information at the request of the judge or the PM (Art. 22, literal 5), different from unsolicited STRs. - If Article 23-2 is interpreted as requiring financial institutions to suspend all suspicious transactions, this could involuntarily tip-off reported customers. - Confidentiality, CTRs, and guidance - Measures to keep names and personal details of reporting staff confidential exist but are largely ineffective. - Authorities have not studied the feasibility and utility of obliging reporting of all cash transactions above a fixed threshold; no CTR system exists in law or operation. - Little formal guidelines and no feedback have been provided to financial institutions regarding STRs; BCV's Technical Instructions include a list of example suspicious transactions from other countries but no standard report template. - Some financial institutions mistakenly believe that STRs must be filed with the BCV rather than with the JP as required by law. ### Recommendations and policy actions (from section 3.7.2) - Recommendation 13 - Include the financing of terrorism as an offence that must trigger an STR when reporting institutions suspect or have reasonable grounds to suspect that funds are linked or related to, or are to be used for terrorism, terrorist acts or by terrorist organizations. - Make it mandatory to report any suspicion arising from attempted transactions. - Clarify that all suspicious transactions should be reported to the same central authority, and that this authority should also be informed when a suspicious transaction has been suspended by the reporting institution. - Make explicit via regulation, and educate using guidelines and outreach, that the obligation to file an STR applies regardless of whether the transaction involves tax matters. - Consider amending the definition of suspicious transactions to allow filing of STRs with a lower degree of suspicion. - Make it mandatory for reporting institutions to notify the FIU, and not only the PM, in the event that they suspend a transaction considered to be suspicious. - Recommendation 14 - Prohibit tipping-off the customer and any third party about a report being filed. - Revise the requirement for mandatory suspension of suspicious transactions to prevent alerting the customer. Consider possibly limiting suspension to exceptional cases such as when there is “fear of flight of funds” in addition to monetary thresholds (not applicable to SRIV reports, once the FT is criminalized). - Establish procedures, guidelines and templates for the filing of STRs and more precise definitions for timing of their filing. - Recommendation 19 - Consider the feasibility and utility of establishing a system of Cash Transaction Reports (CTR), taking into account resources to handle such reports, what use authorities would make of them, and whether expected objectives justify costs compared to alternatives (e.g., lowering STR suspicion benchmarks as suggested for R.11). - If a CTR system is adopted, threshold amounts need to be set in accordance with the country's economic context and the average amount of various types of financial transactions. - Recommendation 25 - Supervisory and enforcement entities should provide feedback about suspicious transactions reported by reporting entities and issue guidelines on how those reports should be filed. ### Compliance conclusions (R.13, R.14, R.19, R.25, SR.IV) - R.13 — NC - Implementation is ineffectual; current requirement places too high a threshold for the reporting sector. - Extremely low number of STRs since 2003. - STR obligation refers only to Cape Verde's list of predicate crimes for ML, which does not include all FATF-required predicate crimes. - Some financial institutions are unaware of their obligation to report or how to file STRs and which authority should receive them. - It is unclear whether all suspicious transactions should be reported to the same central authority or whether that authority should be informed when a transaction has been suspended. - R.14 — NC - No prohibition against tipping-off for unsolicited STRs in good faith (tipping-off prohibition applies only when complying with court-ordered disclosures). - Mandatory suspension of all reported transactions is tantamount to alerting the customer. - R.19 — NC - Authorities have not evaluated feasibility and utility of establishing a CTR system. - R.25 — NC - No guidelines for financial institutions on how STRs should be filed; no feedback provided to the few banks that have reported. - SR.IV — NC - Financing of terrorism is not criminalized and therefore not among the list of predicate crimes that could be the subject of an STR. - The STR obligation, as described in the law, does not allow reporting suspicion of any crime (only those predicate of ML). *Source: _cr09115 - ANNEX III* ### 370. Article 21 of Law 17/VI/2002 provides that financial institutions must create a unit ### _cr09115 - 370. Article 21 of Law 17/VI/2002 provides that financial institutions must create a unit ### Internal systems, procedures, and controls (Article 21 and related provisions) - Article 21 of Law 17/VI/2002 requires financial institutions to create a unit responsible for observance of norms for prevention of the laundering of money and other goods proceeding from criminal activities. - The unit is to be responsible for: - annual evaluation of the cases reported to the judiciary authorities; - preparation of procedural rules to add efficiency to operations; and - providing collaboration requested by the Bank of Cape Verde (BCV). - No legal requirement that internal procedures, policies, and controls be: - communicated to employees; or - explicitly address measures covering CDD, record-keeping, detection of unusual and suspicious transactions, and reporting obligations. - Authorities expect the procedural rules banks are required to develop would cover these issues. - Some institutions have produced internal procedures and guidelines reproducing requirements of Law 17/VI/2002 and the TIs on preventive measures; where legal weaknesses exist, they are repeated in institutions’ internal procedures. - On-site examinations by BCV do not address adequacy of internal systems and controls. ### Compliance management, compliance officer, and access to information - No specific requirement for institutions to have compliance management arrangements or to designate an AML/CFT compliance officer at management level. - No requirement for any officer or unit to have timely access to customer identification data, other CDD records, and other relevant information. ### Independent audit of internal controls (c. 15.2) - No specific legal requirement for institutions to have an independent audit function. - Authorities consider Article 17/VI/202 to require compliance and internal audit functions, but institutions often combine compliance and internal audit functions. - Combining compliance and internal audit functions undermines independence and assigns day-to-day operational functions to internal audit staff. ### Ongoing employee training (c. 15.3) - Article 21 requires institutions to train and keep personnel up-to-date on prevention of laundering of capital and other goods proceeding from criminal activity; special attention to staff at counters and those providing services to foreigners. - No specific requirement that staff be informed of ML and FT techniques, methods, and trends, or to have clear explanations of laws and obligations including CDD and suspicious transaction reporting. - Institutional practices vary: - Some institutions have done little specific AML/CFT training. - Others have done some training. - No institution met by the mission has a comprehensive and consistent AML/CFT training program. ### Employee screening procedures (c. 15.4) - No legal requirement that institutions screen to ensure high standards when hiring employees. - Most institutions visited have adopted some measures; integrity assessments commonly rely on obtaining a police report for criminal record checks, but this is not universal. - Common practice includes contacting former employers to enquire about reasons for leaving prior positions. ### Independence of compliance officer (c. 15.5) - No specific provisions for establishment of a compliance officer position. - Industry discussions indicate weak internal systems and controls to manage AML/CFT risks; industry at an early stage of establishing such arrangements. - Examples: - One institution had only very recently appointed a compliance officer with AML responsibility. - Another had no one with AML responsibility. - In another, the internal audit department was not familiar with many aspects of the institution’s AML risk management systems. - Conclusion: requirements fall short of FATF standard; absence of clear compliance infrastructure and requirement to appoint a compliance officer is a major weakness, as is absence of independent audit function and employee screening. ### Application to foreign branches and subsidiaries (c. 22.1, 22.1.1, 22.1.2, 22.2, 22.3) - TI 108 covers credit institutions and para-banks and entities that use the public postal service to provide financial services; covers branches, agencies and other representation located in Cape Verde but headquartered abroad. - TI 109 covers companies that carry out life insurance activity and are “based in Cape Verde” (interpreted as headquartered there); covers branches/agencies in Cape Verde but headquartered abroad. - No TI issued to cover securities market institutions. - No requirement that Cape Verde’s AML legal framework be applied to foreign branches and subsidiaries of institutions headquartered in Cape Verde. - No requirement for institutions to pay particular attention to branches/subsidiaries located in countries that do not or insufficiently apply the FATF recommendations, nor to apply higher standards where differences exist. - This weakness is mitigated currently because no Cape Verde licensed institutions have foreign branches and subsidiaries, but laws allow opening such branches/subsidiaries and weaknesses should be addressed. - No requirement to inform home country supervisor when a foreign branch or subsidiary is unable to observe appropriate AML/CFT measures. - No requirement to apply consistent CDD measures at the group level considering customer activity across branches and majority-owned subsidiaries worldwide. ### Recommendation 15 (summary of required actions) - Financial institutions should be required to establish and maintain internal procedures, policies and controls to prevent money laundering and terrorist financing and to communicate these to their employees; policies should cover CDD, record keeping, detection of unusual and suspicious transactions, and reporting obligations. - Financial institutions should be required to develop appropriate compliance management arrangements, including appointment of an AML/CFT compliance officer at management level. - The AML/CFT compliance officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. - Financial institutions should maintain an adequately resourced and independent audit function to test compliance with procedures, policies and controls. - Financial institutions should establish ongoing employee training to keep employees up-to-date on developments, including current ML/TF methods and trends, and clear explanation of AML/CFT laws and obligations, in particular CDD and suspicious transaction reporting. - Financial institutions should implement screening procedures to ensure high standards when hiring employees. ### Recommendation 22 (summary of required actions) - Financial institutions should ensure foreign branches and subsidiaries observe AML/CFT measures consistent with home country requirements and FATF recommendations to the extent permitted by host country laws and regulations. - Particular attention should be paid to branches/subsidiaries in countries that do not or insufficiently apply FATF recommendations. - Where minimum AML/CFT requirements differ between home and host countries, branches/subsidiaries should apply the higher standard to the extent host country laws permit. - Financial institutions should inform their home country supervisor when a foreign branch or subsidiary is unable to observe appropriate AML/CFT measures because prohibited by host country laws and regulations. ### Compliance with Recommendations 15 and 22 — ratings and factors - R.15: NC - Weaknesses in current requirements for institutions to maintain internal policies, procedures and controls to manage ML/FT risks. - No clear requirement to establish AML/CFT compliance function including designation of a compliance officer at managerial level. - No requirement for an independent audit function. - No requirement for screening of employees. - R.22: NC - Current arrangements are not applicable to foreign branches and subsidiaries of Cape Verde financial institutions. ### Shell banks (R.18) — prohibition, correspondent banking, and related concerns - Law 3/96 does not expressly prohibit establishment of shell banks in Cape Verde. - Article 12-1 of Law 12/2005 (applicable to IFIs) requires an autonomous financial institution not be authorized unless founding partners include a financial institution holding a minimum of 15 percent of shares and that financial institution is headquartered in an OECD country or another country BCV deems to have proper supervisory mechanisms. - Article 12-2 of Law 12/2005 allows the minister of finance and public administration to waive Article 12-1 requirements “when the qualification of the backers and interest of the Republic of Cape Verde justify it,” doubling the minimum capital requirement in such cases. - Article 44 of Law 12/2005 requires IFIs to have a duly empowered representative in Cape Verde authorized to carry out acts entailed by their activities; representatives may be attorneys, accountants, or similar. - Further IFI requirements include: - Maintain accounting records and handwritten books at headquarters. - Own facilities for Cape Verde headquarters beginning with the third year of full activity (waivable by the minister). - Hire accountants who are residents of Cape Verde and are accredited there. - Hire external auditors accredited in Cape Verde or any OECD country. - Article 10 of Law 43 of 1988 requires IFI management to be permanent residents of Cape Verde with sufficient powers to commit the institution. - Concerns: - BCV has not decided which non-OECD countries meet the “proper supervisory mechanisms” test; one IFI is already owned by a financial institution from a non-OECD country. - Article 12-2 waiver creates risk by removing safeguards; mechanisms to ensure international banks are captured by global consolidated supervision are lacking. - Five licensed IFIs are owned by individuals and are not subject to global consolidated supervision; one of these was operational at assessment time. - Article 44 provisions ineffective at ensuring “meaningful mind and management” in Cape Verde given that representatives can be attorneys/accountants. - It is possible for a Cape Verde financial institution to operate outside sound consolidated supervision and avoid effective mind and management in Cape Verde; some IFIs may become shell banks upon commencing operations. - No prohibition on Cape Verde banks maintaining correspondent relationships with shell banks. - No requirement that Cape Verde financial institutions satisfy themselves that respondent foreign financial institutions do not permit their accounts to be used by a shell bank. ### Shell banks — recommendations and rating - Recommendations: - Cape Verde should not allow establishment or continued operation of shell banks. - Amend Articles 12 and 44 of Law 12/2005 to ensure banks in Cape Verde have a physical presence (effective mind and management) and affiliation to a group subject to effective consolidated supervision. - Financial institutions should not be permitted to enter into, or continue, correspondent banking relationships with shell banks. - Financial institutions should be required to satisfy themselves that respondent foreign financial institutions do not permit their accounts to be used by shell banks. - R.18: NC - Current arrangements do not preclude operation of shell banks in Cape Verde. - No requirements for financial institutions to ensure respondent institutions do not permit use of accounts by shell banks. - No requirements that prohibit Cape Verde banks from maintaining relationships with shell banks. ### Supervisory and oversight system (BCV) — powers and effectiveness - Key legal provisions cited include AML Act (Law 17/VI/2002, Articles 4, 30, 33, 35, 36, and 38); Organic Law of BCV (Law 10/VI/2002, Article 23); Banking Act (Law 3/V/1996, Articles 47, 48, 49, 82, 83 and 84); and Law of IFIs (Decree-Law 12 of 2005, Articles 28 to 32). - BCV has legal powers of regulation with respect to financial institutions covered by the AML Law and to supervise their compliance. - BCV performs AML inspections on a regular basis but effectiveness is limited by: - inadequate training of staff; and - a limited regulatory framework. - The menu of administrative sanctions appears broad, proportionate and dissuasive, but supervision is not strict; to date no serious violations have been found and no penalties have been imposed. - BCV can instruct and recommend sanctions, but lacks autonomy to impose them because ultimate sanction power lies with the minister of finance. *Source: IMF assessment text provided in content unit _cr09115 - 370. Article 21 of Law 17/VI/2002 provides that financial institutions must create a unit* ### 396. The two regulators of financial institutions in Cape Verde are the BCV and the General ### _cr09115 - 396. The two regulators of financial institutions in Cape Verde are the BCV and the General ### Regulatory structure and responsibilities - Two regulators: the BCV and the General Auditor of Securities Markets (AGMVM), which is a unit within BCV. - AGMVM’s regulatory and supervisory powers are vested in the office of the Governor of the BCV. - BCV is the regulator for banks, para-banks, insurance companies and IFIs. - AGMVM is the regulator of capital market intermediaries and the stock exchange. - AML supervision of BCV licensees is undertaken by BCV. - Since the four entities licensed to undertake capital market intermediation are banks, AGMVM does not carry out any AML supervisory functions. ### Legal framework for types of institutions - Law 3/V/1996 regulates lending institutions and para-banks. - Lending institutions include banks, special lending institutions and other entities classified as such by law. - Special lending institutions include credit cooperatives and savings banks. - Only lending institutions may accept deposits or other reimbursable funds from the public. - Para-banks (per Law 3/V/1996) include: - Investment companies - Venture capital companies - Regional development corporations - Foreign exchange agencies - Investment fund management companies - Factoring companies - Hire purchase companies - Credit card issuance or management companies - Other entities classified as such by law - Securities intermediation governed by Law 53/V/1998. - Insurance institutions operate under Law 52-F/1990. - Law 12/2005 sets regulatory framework for IFIs. Article 4-2 provides for establishment of: - Banks - Insurers - Financial services firms - Collective investment organizations - Article 2 of Law 17/VI/2002 applies law to credit and para-banking institutions, insurance companies and enterprises that manage pension funds. - Gaps noted: activities undertaken by entities not licensed as para-banks may not be covered by Law 17/VI/2002; Law 43/88 allows IFIs to engage in banking, insurance and securities and other activities determined by the minister of finance; absence of explicit coverage of all activities of Cape Verde financial institutions is of concern. ### Designation of competent authority and supervisory powers (c. 23.2) - Article 47 of Law 3/V/1996 gives BCV supervisory responsibility for banks, para-banks and branches of foreign institutions. - Article 48 of Law 3/V/1996 tasks BCV to: - Monitor activities of entities subject to supervision; - Enforce regulations governing the activity of the entity; - Inspect establishments and conduct on-site reviews of accounts and other elements it deems relevant; - Issue recommendations to correct irregularities. - Article 29 of Law 12/2005 designates BCV as supervisor for IFIs licensed under that legislation and allows BCV to supervise Cape Verde entities as well as subsidiaries and branches if the latter’s countries of origin do not exercise consolidated prudential supervision or do so in a form that BCV considers to be inadequate. - Article 28 of Law 12/2005 permits BCV to undertake consolidated prudential supervision of IFIs and their subsidiaries and branches if the regulator in the institution’s country of origin does not perform consolidated supervision or does so in a manner BCV considers inadequate; BCV may also supervise subsidiaries and branches in Cape Verde even if subject to supervision by another entity. - Concern: supervision of IFIs is discretionary (BCV’s discretion) rather than mandatory, creating inadequate arrangements, particularly for subsidiaries. - Article 4 of Law 17 of 2002 designates BCV as the AML regulatory and supervisory authority for financial institutions and empowers BCV to issue rules of good banking practice to combat laundering and to monitor and oversee application of regulations and measures for prevention of laundering in the banking and financial sector. - Article 23 of Law 10/2002 (Organic Law of BCV) emphasizes authority to issue enforceable “directives”, undertake inspections and administer sanctions with respect to institutions under its supervision. ### Fit and proper criteria; prevention of criminals controlling institutions (c. 23.3 and 23.3.1) - Article 26 of Law 3/V/1996 establishes fit and proper criteria for directors and managers of banks and para-banks. - Article 32 defines qualified shareholding as direct or indirect holdings representing at least 10 percent of an institution’s equity or voting rights or holdings that allow a significant influence in its management. - Disqualifying conditions under Law 3/V/1996 include: - Bankruptcy, insolvency, declared in a national or foreign court ruling, of the person or a firm in which he or she was a partner, administrator, director or manager. - Sentencing or indictment in Cape Verde or abroad for crimes of falsification, theft robbery, fraud, abuse of trust, issuance of unfunded checks, corruption, money laundering or acts detrimental to the national economy. - Serious or repeated violations of regulations governing lending institutions, para-banks and other financial institutions, in Cape Verde or abroad. - Weakness: Article 10 of Law 3/V/1996 allows issuance of bearer shares; authorities assert banks do not issue bearer shares and most bank shares are held by large well-known institutions, including three Portuguese financial institutions, but authorities lack a systematic method to verify licensees have not issued bearer shares—this undermines effective application of fit and proper criteria for shareholders. - Law 53/V/98 (securities intermediaries): - Article 6 prohibits persons from holding management or supervisory positions if they: - Have been declared bankrupt insolvent or responsible for the bankruptcy or insolvency of companies they headed or were directors, executives or managers of. - Have been found guilty of crimes involving forgery, larceny theft, fraud, hindrance of creditors, extortion, embezzlement, breach of trust, or usury. - Article 5 requires suitable qualifications and experience for such persons but does not specify the qualifications. - Law 53/V/98 does not require fit and proper tests for persons who participate in ownership of capital market licensees. - Law 52-F/1990 (insurance): - Article 23 requires directors of licensees be persons of integrity. - Article 9-2 b) establishes a similar requirement for shareholders but does not provide fit and proper requirements for managers. - Authorities acknowledge insurance law is out-dated and in need of significant amendment. - Article 32 of Law 12/2005 authorizes BCV to: - Prevent unsuitable entities or groups of interest from acquiring majority or controlling positions in a business corporation or subsidiary; - Force liquidation of majority or controlling positions in a business corporation or subsidiary if holders are deemed unsuitable; - Immediately stop operations or financial activities that violate principles of safeguarding the soundness, safety, stability and transparency of the international financial system; and combating the laundering of illicit capital. - Concerns: - Framework for assessing fitness and propriety of IFI owners is less precise than for banks and para-banks; unclear disqualifications for IFI ownership and absence of criteria for managers and directors. - Inconsistency across laws: 3/V/1996 and 53/V/98 cover directors and managers; 52-F/1990 limited to shareholders and directors with vague “integrity” requirement. ### Application of prudential regulations to AML/CFT (c. 23.4) - BCV effectively functions as the only regulator of financial institutions; AGMVM is a unit within BCV and its powers are effectively vested in BCV, although AGMVM has supervisory powers from Securities Market Code law 50/V/98. - BCV has broad regulatory and supervisory powers for banks and para-banks under Article 47 of Law 3/V/1996; these powers apply to AML regulation and supervision. - Article 29 of Law 12/2005 provides BCV’s prudential supervision of international banks shall be carried out on an ongoing, regular basis through: - analysis of financial and other reports institutions are required to produce; - questionnaires; - onsite inspection of accounting records and procedures; and - contact and exchange of information with supervisory authorities and institutions. - Difference in inspection powers: - For banks and para-banks (Article 48, Law 3/V/1996): BCV can “inspect the establishments and conduct on-site reviews of accounts and other elements it deems relevant.” - For IFIs (Article 29, Law 12/2005): BCV’s inspections limited to “onsite inspection of accounting records and procedures.” - Concern: IFI inspection powers are narrower and inconsistent with broader powers for banks/para-banks. - Identified issues creating a weaker regulatory framework for IFIs: - ability of the minister of finance to override eligibility criteria for IFIs under Art 12 (1) of Law 12/2005; - vagueness in BCV’s power regarding fitness and propriety of IFIs; - possibility for shell banks under Law 12/2003; - stricter confidentiality rules related to IFIs; - limited inspection powers for IFIs; - requirement for BCV to give prior notice to an IFI before information can be provided to a foreign supervisor is unnecessarily restrictive. ### AML supervisory strategy, risk focus, and coordination - Treatment of trusts, PEPs and introduced business arrangements fall short of FATF Recommendations. - DSU did not articulate a clear AML supervisory strategy; DSU places high priority on supervision of the four commercial banks due to their relative size in domestic financial sector. - No indication DSU considered other AML risk factors such as: - high level of remittances received by Cape Verde as a potential vulnerability to ML; - higher AML risk posed by institutions operating in the international financial sector that are not covered by consolidated supervision from a supervisor applying FATF Recommendations. - Poor coordination and consultation between BCV and JP: - BCV issued a circular to financial institutions listing typically suspicious transactions without consulting JP (the entity receiving STRs). - No discussion between BCV and JP on concerns related to quality of STRs being submitted. - As a result, BCV is not properly prepared in on-site inspections to assess adequacy of measures and practices adopted by financial institutions to recognize and report STRs. ### Licensing and monitoring of remittance/exchange services (c. 23.5 and 23.6) - All remittance services (and exchange services) in Cape Verde must be performed by financial institutions licensed and prudentially regulated by BCV. - Further details referenced in assessment of SR.VI in section 3.10. ### Licensing and AML/CFT supervision of other financial institutions (c. 23.7) - There are no other institutions providing financial services in Cape Verde outside the scope of BCV’s licensing and supervision. ### Guidance, feedback, and inspection powers (c. 25.1, 25.2, 29.1, 29.2) - BCV issued guidelines on money laundering in a document annexed to Circular Series A, No 117 of April 13 2005, providing examples of potentially suspicious transactions covering cash transactions, bank deposits, and activities by non-financial institutions. - AGMVM has not issued any ML guidelines. No other guidelines available. - Financial institutions expressed that BCV should provide more comprehensive guidance, including implementation guidance and relevant international developments. - Judiciary police has not provided reporting institutions with feedback on quality of STRs, current ML techniques, etc. - Supervisory authority coverage: - Article 4 of Law 17/2002 and Article 47 of Law 3/1996 confirm BCV supervision over credit and para-banking institutions, insurance companies, and enterprises that manage pension funds. - Article 48 of Law 3/V/1996 gives BCV power to inspect establishments and conduct on-site reviews of accounts and other elements it deems necessary. - Article 29-c of Law 12/2005 allows BCV on-site inspection of accounting records and procedures for IFIs only. - Concern reiterated: limiting BCV’s on-site inspection powers for IFIs to “accounting records and procedures” is narrower than the on-site powers under Article 48 of Law 3/V/1996 and is inappropriate. *Source: _cr09115 - 396. The two regulators of financial institutions in Cape Verde are the BCV and the General* ### 432. The BCV has adequate powers to compel production of records (c. 29.3 and 29.3.1). ### _cr09115 - 432. The BCV has adequate powers to compel production of records (c. 29.3 and 29.3.1) ### Powers to obtain information and inspection - Article 49 of Law 3 of 1996 gives the BCV broad powers to compel production of documents and information without a Court order. Key provisions (Article 49, Duty of Information) include: - Institutions subject to supervision "shall be obliged to furnish to the Bank of Cape Verde the information that the Bank deems necessary to verify.....compliance with the remaining legal and regulatory norms that govern their activity, their administrative organization and the efficacy of their internal controls." - Institutions "must also allow the inspection of their establishments by the Bank of Cape Verde, and the examination in situ of the elements which the Bank may consider relevant." - "The Bank of Cape Verde may extract copies of all pertinent documentation." - Owners "are obliged to furnish to the BCV any elements or data that the Bank may consider relevant for the supervision of said institutions." - The obligation in numeral (4) also applies to members of fiscalization bodies and to internal and external auditors. - Law 12/2005 (Article 29 (a)) requires BCV to carry out prudential supervision through analysis of reports institutions are periodically required to produce, submit and publish. The law does not create an explicit duty of institutions to submit information on demand but infers that institutions can be required to provide such information. - The same provisions permit the BCV to review oversight of foreign branches and subsidiaries; however, at the time of the report, financial institutions headquartered in Cape Verde do not have foreign branches and subsidiaries. ### Enforcement, sanctioning authority, and limits - The BCV can instruct administrative sanctions but cannot impose them; the minister of finance decides imposition. Relevant legal text: - Article 33 of Law 17, 2002: "The investigation of administrative offences provided for herein and institution of corresponding proceedings shall be entrusted to the entity having authority to supervise or oversee the business sector concerned. The minister of finance shall have authority to impose sanctions provided for herein with powers of delegation." - This lack of autonomy to impose penalties for AML violations is not consistent with FATF R.29 expectations that supervisors be authorized "to impose adequate administrative sanctions for failure to comply." - The report notes inconsistency: BCV has full autonomy to impose penalties for breach of prudential requirements but not for AML breaches. - Some AML requirements lack any specified administrative sanction: Articles 35 and 36 of Law 12/2002 list administrative offences punishable by fines but omit the requirement to refuse the transaction when identification is not possible (Article 18) and the requirement to create an AML compliance unit within financial institutions (Article 21). Thus breaches of Articles 18 and 21 currently have no corresponding administrative penalty. ### Availability and applicability of sanctions - AML Law establishes administrative and criminal sanctions applicable to natural and legal persons. Criminal sanctions include fines and imprisonment; administrative sanctions (contra-ordencoes) range from administrative fines to withdrawal of certain rights (e.g., suspension or revocation of a right). - Article 30 of AML Law 17/2002: "Financial entities shall be liable for the commission of administrative offences involving non-observance of their rules of conduct insofar as their managers, employees or representatives have acted within the scope of their duties, even if unlawfully, or in the name and on behalf of those institutions." - Article 28 clarifies negligence in administrative offences is punishable; Article 27 states the general administrative regime applies subsidiarily. - Legal persons can be forced to liquidate under Article 257 of the Code of Commercial Companies (Decree-Law 3 of 1999) when purpose becomes illicit or contrary to public order; the Prime Minister must request judicial liquidation. - Managers and employees can be sanctioned including disqualification and public publication of verdicts: - Article 38 of Law 17, 2002 creates ancillary sanctions: "a) Disqualification from discharging the corporate positions and duties of administrator, director, manager or head of financial entities for a period of 1 to 10 years ...; b) Publication of the verdict by the Bank of Cape Verde at the expense of the offender." - Article 30-2 preserves disciplinary liability and rights of recourse by institutions against managers, employees, or representatives. - No statistics or other information provided to evaluate how these sanctions have been implemented. ### Effectiveness, proportionality, and dissuasiveness of sanctions - Fines range from 250,000 to 50,000,000 Escudos (approx. €2,272 to €454,545) and "appear dissuasive" in the context of Cape Verde: - Mid-career, senior public officer salary is around €700 per month. - The second largest bank in terms of deposits has a capital of about US$3,480,000. - Fines appear proportional when compared to penalties for prudential violations (Chapter IX of the Banking Act, Law 3 of 1996). - Effectiveness cannot be assessed due to recent introduction of the regime and lack of sanctions imposed. The absence of sanction cases is not taken as evidence of dissuasiveness; assessors note consensus that BCV should reinforce supervisory practices and staff training to better target AML risks. ### Adequacy of resources, integrity, and training of competent authorities - Supervision Department of BCV (DSU) staffing: - DSU has 14 employees: one director, two coordinators, six technical advisors, one legal advisor, two assistant technicians, two administrative support technicians. - Banking area coordinator leads five technical advisors responsible for supervision of four credit institutions, seven IFIs, and four banks. - Another coordinator responsible for insurance area supervises two insurance companies and three brokerage companies. - DSU includes a credit risk rating office with two technicians and a motor vehicle guarantee fund managed partly by the insurance area coordinator with assistance from an administrative technician. - AGMVM (unit within BCV) staffing: - AGMVM has two full time staff members and the services of two members of BCV staff considered non-executive members of AGMVM; their services are available as required. - Funding and fees: - Authorities state BCV receives 0.75 percent of premium income from insurance companies annually; these amounts are "insignificant" relative to supervisory costs. - Banks pay a fee equivalent to 0.1 percent of initial capital at time of licensing (one-time). Banks do not pay an annual license fee. - Administrative change fees (e.g., board membership changes) and new branch opening fees are fixed at 50,000 Escudos (Euro 4,045). - All IFI fees are paid to the Ministry of Finance and Public Administration. - DSU is effectively funded from BCV's general resources and considers it has a high degree of "technical" autonomy in supervisory strategies and methodologies. - Licensing authority arrangements: - BCV has complete autonomy for licensing near-banks. - Minister of finance is licensing authority for banks and IFIs; applications are submitted to BCV which recommends to the minister. BCV reports the Minister "virtually always acts in accordance with its recommendation." - Integrity provisions: - BCV internal statute requires employees to be competent and of "good civic behavior." - Article 62 of Law 10/VI/2005 subjects BCV executive bodies and persons rendering service to a duty of secrecy under terms applicable to credit and bank-like institutions. - Training: - DSU director has received AML/CFT training (Bank de France, GIABA, UNODC study tour to Brazil). - DSU reports all staff have received some AML/CFT training, including events abroad, but there is no systematic comprehensive training program. DSU head indicates need for further training in AML supervisory strategies and practices. ### Supervisory practice and inspections - Weak implementation of AML supervisory arrangements: - Since 2003, DSU has undertaken only five exclusive AML/CFT inspections and one combined AML/CFT and prudential inspection. - Inspections focus on domestic-sector headquarters in Santiago; no inspections of branches on other islands despite economic activity in tourism and real estate outside Santiago. - Recommendations summarize identified supervisory gaps and required actions (selected recommendations related to this content unit): - Recommendation 23 (coverage and fit-and-proper): - Law 17/VI/2002 should be amended to ensure coverage irrespective of entity type for activities including: Financial leasing; The transfer of money or value; Issuing and managing means of payment; Financial guarantees and commitments; Trading in money market instruments, foreign exchange, exchange rate and index instruments, transferable securities, commodities futures trading; Participation in securities issues and related services; Individual and collective portfolio management; Safekeeping and administration of cash or liquid securities on behalf of other persons; Otherwise investing, administering or managing funds or money on behalf of other persons; Money and currency changing. - Fit and proper criteria should be uniform across all laws regulating financial institutions and applicable to shareholders, managers and directors; integrity should be fully defined. Article 10 of Law 3/V/1996 should be amended to remove provision permitting licensees to issue bearer shares. - Authorities should review regulatory arrangements for IFIs to meet international standards. - BCV should undertake an AML/CFT risk assessment of financial institutions operating in Cape Verde and develop an appropriate regulatory and supervisory strategy. - Recommendation 25 (guidance and STR procedures): - Authorities should develop comprehensive AML/CFT guidance covering FATF Recommendations, Cape Verde legal framework, guidance on domiciles for CDD of non face-to-face customers, and information on jurisdictions not applying FATF Recommendations. - BCV, in coordination with the JP, should issue procedures, guidance and templates for filing STRs. - Recommendation 29 (inspection powers and capacity): - BCV’s inspection powers in Law 12/2005 should be widened to match powers under Law 3/V/1996 applicable to domestic market institutions. - BCV should update its inspection manual to include AML compliance procedures and tools. - BCV should inspect branches of domestic institutions and IFIs. - BCV staff should receive additional training on AML supervisory strategies and practices. - Recommendation 17 (sanctions and autonomy): - AML Law and sanctioning regime should be fully implemented for any breach of AML requirements. - BCV should be given autonomy to impose (not only instruct and recommend) administrative sanctions for AML breaches by financial institutions and employees. - Law 17/2002 should be amended so administrative sanctions cover violation of all requirements (currently Articles 18 and 21 lack corresponding penalties). ### Compliance ratings summary (section 3.10.3) - R.17 PC - Factors: Wide range of criminal and administrative sanctions exists for legal and natural persons, but absence of imposition of sanctions limits assessment of effectiveness, proportionality and dissuasiveness. Administrative sanctions do not apply to obligations to create an ML compliance unit and to refuse transactions when identification is not possible. The BCV can only instruct and recommend (not impose) sanctions for AML violations. - R.23 NC - Factors: Lack of comprehensive coverage of all forms of financial activity by various entity types; absence of clear supervisory strategy and risk outlook by business line; lack of consistency in fit-and-proper assessments across banking, insurance and securities sectors; absence of inspections of branches and IFIs; less robust legal framework for effective supervision of IFIs. - R.25 NC - Factors: No effective guidance provided to financial institutions. - R.29 PC - Factors: BCV’s inspection powers under Law 12/2005 are not sufficiently broad. *Source: _cr09115 - 432. The BCV has adequate powers to compel production of records (c. 29.3 and 29.3.1).* ### ANNEX III ### ANNEX III ### 3.11 Money or Value Transfer Services (SR.VI) — Description and Analysis - Legal and market framework - All remittance services (and exchange services) must be performed by banking or para-banking institutions licensed and prudentially regulated by BCV. - Informal remittances are illegal and subject to administrative penalties under the Exchange Law. - Informal currency exchange operators exist mostly at small scale (street vendors). - Some cash couriers have been occasionally caught entering or exiting the country carrying significant amounts of undeclared cash (see SR.IX analysis). - Workers’ remittances were about 20 percent of national GDP in 2004, creating potential ML/FT misuse risk. - Relevant legislation and authorities - Decree-Law 30 of 2000 (as amended by Decree-Law No. 24/2003) lists authorized institutions for foreign exchange transactions. - BCV Notice No. 3/2003 establishes conditions for value transfer and exchange activities. - Decree-Laws No. 25/98 and 26/98 (the “Exchange Law”) also relevant. - Article 14 of AML Law 17, 2002: “International transfers of national or foreign currency, means of payment abroad or bearer securities may be effected only through banking or financial institutions authorized to carry out such transactions.” - Application of AML/CFT requirements - Money transfer services provided by regulated financial institutions are subject to the same AML requirements as other services under Article 2 of Law 17, 2002. - Weaknesses in BCV’s supervisory framework affect compliance with monitoring obligations (c. VI.3), though prudential regulation goes beyond SR.VI’s monitoring requirement. - Registration, agents, and sanctions - Agencies/outlets through which financial institutions provide money transfer services must be registered by BCV per the Banking Act and the exchange law. - The sanctioning regime applicable to remittance businesses is the same as discussed in Section 3.10; administrative sanctions have been pursued against illegal money exchanges by BCV. - Best practices - Because remittance services are provided only by prudentially regulated banking and para-banking institutions, the system goes beyond the Best Practices Paper addressing informal remittances. ### 3.11 — Recommendations and Compliance - Key recommendation - BCV should step up efforts to oversee compliance with preventive requirements by remittance operators. - Compliance with Special Recommendation VI - SR.VI rating: PC - Underlying factors: Licensing and preventive requirements are in place, although monitoring of MVT services (which are only provided by financial institutions) is negatively affected by the same weaknesses of the supervisory framework of the BCV described in Chapter 3.10. ### 4 Preventive Measures — Designated Non-Financial Businesses and Professions (DNFBPs) #### 4.1 Customer Due Diligence and Record-Keeping (R.12) - General findings - AML Law 17 of 2002 extends most requirements and the sanctioning regime (except record keeping) to some DNFBP activities, but there has been no implementation. - The ministry of finance has authority to regulate and oversee DNFBPs but has not issued regulations, guidance, or commenced AML/CFT supervision of covered persons/entities. - Legal reference - Article 26 of Law 12/2007: applies principles and obligations of the AML law to persons engaged in gaming establishments, real estate brokerage or property buying for resale, dealing in precious stones or metals, antiques, works of art or motor vehicles, mutatis mutandis, except as provided in Article 20 [record keeping]. The government department responsible for finance shall regulate application and oversee compliance. - Practical implementation - No regulations/guidance issued; no suspicious transactions reported; DNFBPs largely unaware of obligations. - Most DNFBPs are unregulated and operate informally without commercial licenses. - Formal businesses welcome enforcement as a means to prevent ML and encourage formalization. - The mission could not identify or meet with the ministry officials responsible for DNFBP regulation and oversight; no evidence of plans/strategies available. - Scope analysis (coverage status) - Company service providers (CSP): not covered — mitigating factor due to absence of such an industry in practice. - Lawyers, notaries, and accountants: not covered — lawyers and notaries play roles in foreign investment in real estate; see lawyers section. - Trusts service providers (TSP): not applicable — trusts are not recognized in Cape Verde. - Real estate agents: Covered — market unregulated and highly informal; majority of intermediation by large foreign/multinational agents attracting foreign buyers (mostly from the UK). - Casinos: Covered — no casinos currently in Cape Verde; AML Law requires CDD on all customers (no threshold provided). - Dealers in precious metals or stones: Covered — activities perceived to be very small scale; AML Law requires CDD on all customers (no cash threshold). - Car dealers, antique and art dealers: Covered — surge in demand for newer/higher-end motor vehicles; AML coverage extends to all motor vehicle dealers. - Lawyers, notaries, and legal profession details - Legal qualification and practice governed by Law 91/VI/2006 and Bar Association statutes. - Around 120 private lawyers practice across nine islands. - Qualification requires a degree in law for five years and a mandatory internship of one and a half year. - Bar Association is regulatory/supervisory authority for lawyers; disciplinary sanctions exist but are rarely imposed in practice. - Solicitadores profession exists but the only licensed person no longer practices. - Notaries are public officers (ministry of justice employees) who authenticate deeds; they do not receive transaction monies and are not involved in FATF R.12 activities but are well placed to detect suspicious transactions. Notaries reported reluctance to report due to lack of legal protection against suits; making them obliged reporters would afford the same legal protection as other reporting institutions. #### 4.1 — Recommendations and Comments - The same recommendations in Section 3 to improve preventive requirements for financial institutions apply to DNFBPs. - Take necessary administrative and regulatory steps to implement the AML law with respect to DNFBPs; conduct outreach, education, and engagement with these sectors. Priority: real estate businesses. - Expand the AML law scope to include lawyers and accountants when they act for clients in: - buying and selling of real estate; - managing clients’ money, savings accounts, and other assets; - organizing contributions for creation, operation or management of companies; - creation, operation or management of legal persons or arrangements. - Consider applying identification thresholds for casinos and dealers in precious metals or stones consistent with FATF R.12 interpretive guidance, or set lower thresholds based on assessed risks. - Consider gathering data on persons forming companies via registrar’s office documents to determine if a CSP industry is emerging and should be regulated. #### 4.1 — Compliance with Recommendation 12 - R.12 rating: NC - Underlying factors: - Not all DNFBPs are subject to the AML law. - No implementation since enactment in December 2002. - No regulations or guidance drafted; businesses unaware of obligations. - Preventive regime deficiencies applicable to financial institutions largely apply to DNFBPs (limited CDD scope, monitoring, and STR requirements). #### 4.2 Suspicious Transaction Reporting and Internal Controls for DNFBPs (R.16) - Findings - Some DNFBPs are subject to the same reporting requirements as financial institutions, but no implementation has taken place (see Section 4.1). - Recommendations - Require lawyers, notaries, solicitors, and accountants to report suspicious transactions when engaged in activities under FATF R.16-a. - Expand AML law scope to include notaries and registrars, with adequate protection against civil and criminal litigation when reporting in good faith. - Compliance with Recommendation 16 - R.16 rating: NC - Underlying factors mirror R.12: incomplete coverage, no implementation since December 2002, no regulations/guidance, businesses unaware, and preventive deficiencies apply. #### 4.3 Regulation, Supervision and Monitoring (R.24-25) - Findings - Ministry of finance is the supervisory authority for covered DNFBPs and is responsible for issuing implementing regulations. - Article 26 enables sanctioning by fine for non-compliance (same sanctioning regime as for financial institutions). - No fines have been imposed; the ministry provided no evidence of capacity to pursue AML responsibilities for DNFBPs. *Source: _cr09115 - ANNEX III* ### 482. There are no casinos operating in Cape Verde but the authorities indicated that a group of ### _cr09115 - 482. There are no casinos operating in Cape Verde but the authorities indicated that a group of ### Casinos and DNFBP supervision (Articles and authority) - There are no casinos operating in Cape Verde but the authorities indicated that a group of foreign investors have indicated an interest in establishing an operation. Casinos are regulated under Article 26 which extends the preventive obligations imposed on financial institutions and the ministry of finance is the designated AML supervisor (as for all DNFBPs). - The power to issue guidelines to DNFPs is covered under Article 26, but: - No such guidelines have yet been issued in respect of the entities covered under the AML Law. - There are no other measures or legal provisions in place to monitor compliance of covered DNFBPs. - None of the divisions or staff of the ministry of finance have been assigned the responsibility to follow up on its obligations as supervisory and regulatory authority under Article 26 of Law 17 of 2002. - The AML Law does not impose any obligation for competent authorities to provide feedback to financial and non-financial entities. Nor has any feedback been provided by the supervisory authority. - The criteria related to self-regulatory organizations (SROs) are not applicable given that the regulatory authority for DNFBPs is clearly assigned to the ministry of finance. - Except for the Bar Association (for lawyers), there do not seem to exist other industry associations with enough organization and breadth to assist the Government in future outreach efforts, or which could potentially be designated as SROs for AML/CFT purposes. ### DNFBP recommendations (section 4.3.2) - Regulations should be issued by the ministry of finance to implement the law with respect to the DNFBPs, having regard to the special characteristics of each of them. - The ministry of finance should carry out supervision of compliance with the AML law for DNFBPs. Adequate training and resources should be provided for the ministry. - Undertake, as much as possible, a risk assessment of the different DNFBP economic sectors to determine the depth and characteristics of the supervision required, based on their exposure to misuse for ML and TF. For example, determine if CSP or casino markets are expected to grow in the future and take adequate steps for their regulation. - Guidelines should be developed for DNFBPs, especially on how to identify suspicious transactions or operations in their respective activities, and there should be efforts to elevate the level of awareness of ML/FT risks and regulations by the private sector. ### DNFBP compliance ratings (section 4.3.3) - R.24: NC — The ministry of finance was designated as the competent authority to regulate and supervise all DNFBPs but it has not taken any action in this respect. - R.25: NC — Section-specific rating NC. No guidelines or feedback have been issued. ### Other DNFBPs and modern-secure transaction techniques (R.20) - Car dealers, art dealer, and antique dealers are subject to the obligations of Law 17/2002. The ministry of finance has not exercised its authority to regulate and supervise these sectors from an AML perspective. - The Cape Verdean economy is cash-intensive and its financial system is at its early stages of development. - There is no information available about any plans to encourage the use of advanced technologies in the financial system to minimize ML risks posed by the intensive use of cash, and there was little evidence of such technologies being in place. ### Recommendations on modern transaction techniques (section 4.4.2) - Encourage the development and use of modern and secure techniques for conducting financial transactions that create a disincentive for the use of cash and are less vulnerable to ML. ### Compliance with Recommendation 20 (section 4.4.3) - R.20: PC — Cape Verde considered and decided on the application of AML requirements to other businesses (namely car dealerships, antique dealers and art dealers) but there has been no implementation of an AML regime for these activities. - There was no evidence or information available on efforts to develop modern and secure techniques of money management that are less vulnerable to money laundering. ### Legal persons — registration and access to beneficial ownership (R.33) - Legal framework: - The company code (Código das Empresas Comerciais), Legislative Decree No. 3/99 of March 29, contains provisions on types of companies, by-laws, incorporation, registration, issuing of shares, type of shares, requirements for transferability of shares, amongst others. - Article 104 of the company code: a company must be created according to one of the types of companies provided for in the company code (tipicidade principle). - Most common company types: partnerships (sociedades em nome colectivo), limited liability companies (sociedades por quotas), and cooperative companies (sociedades cooperativas); joint-stock companies (sociedades por acções) are still in a very limited number. - Companies may be set-up by public deed in the Notary Office (when they acquire immovables) or by private document, but every company must be registered at the commercial registry to obtain legal personality. - Cape Verde Authorities did not present any statistics on the numbers and types of corporations and legal persons established in the country but indicated that there were very few joint stock companies. - Commercial registry and access to information: - The Conservador of the registry verifies conformity with the law and must refuse registration otherwise. - A Conservador, who is a public official, exists in every municipality and frequently performs also the role of Notary, under the supervision of the Directorate of Registries and Notaries within the ministry of justice. - Registration of companies is mandatory and the registered information is available to the public; any interested person may obtain a certificate with the main elements of the legal person and a copy of the by-laws. - Registered information available includes: names and identification of the shareholders, identification of the physical persons dominating the shareholder, the name of the company, the object of the company, the place of incorporation, the amount of capital, stakes of each shareholder, the composition of management and the identification of the persons acting on behalf of the company. - It is not possible to obtain registered information of a legal person or company from an office registry other than the one where the company or legal person is registered. - Foreign companies wishing to do business in Cape Verde must set up a permanent representation and register in the commercial registry. - Measures to prevent unlawful use: - Registration of companies, associations, foundations and companies of any type is mandatory and must include by-laws, names and identification of shareholders, name of the legal person, object, place of incorporation, amount of capital, stakes of each shareholder, composition of management and persons acting on behalf of the company. - Registration of any changes in these elements is mandatory, according to the Code of commercial registry. Failure to register is punishable by fines stated in the commercial registry Code. - Under Article 253 of the company code, when a legal person must register certain actions without complying with the registration requirement, such actions are not legally recognized or enforceable to their benefit. - Example: before registration of incorporation all its shareholders are unlimitedly and personally liable for all the debts of the corporation (Article 139-1 of the company code). - Access to beneficial ownership information: - Information recorded in the commercial registry is available to the public; any interested person may have access to identification of the physical shareholder owning or controlling the company, directly or indirectly, and its share in the capital of the company. - Where a company holds shares in another company the physical persons who own or control the shares must also be identified and information on their identity maintained in the Registry. - Nominative shares issued by a joint stock company are registered in a special book maintained in the company and the identification of the first owner is registered there (Article 371 of the company code); if shares are not materialized they must be registered within the company (Articles 371 and 367 of the company code). - This information is available to competent authorities and also to interested persons through a court order and according to the legal duties of the company. - Bearer shares: - Joint-stock companies may issue nominative or bearer shares according to the decision of the general assembly. - Bearer shares: holding the securities grants the legitimacy to exercise embodied rights and transfer of ownership results in the transmission of the share, without registration. - In case of non-materialized shares they must be nominative (Article 379 of the company code). - Bearer shares are issued in paper form and are registered in the book of registration of shares maintained within the company, per Article 371 of the company code, which includes numbers of issued shares and the name and address of the first owner of each share. - The holder of bearer shares must be identified when participating in general assembly meetings and when receiving dividends (Article 413-2 company code). - Obtaining information held in registration books of the company, such as identity of shareholders, can only be achieved through a court order. - The number of joint-stock companies is very small and the number of companies issuing bearer shares is even smaller; assessors consider the regime of bearer shares does not provide any noticeable risk of ML. - Limitations: - Although the legal framework seems comprehensive the absence of statistics regarding the number of companies of each type and of those issuing bearer shares prevents assessors from getting a clear view of the effectiveness of the system. - Access for financial institutions: - As the information recorded in the Registry is publicly available and identification of the physical owner of shares is required and must be registered, financial entities can have access to it. - It was not possible to assess in practice if financial institutions demand this information and the timeliness with which they receive a response from the Registry. ### Legal persons — recommendations (section 5.1.2) - It would be important to promote the interconnection of the Registries Offices in order to allow for a comprehensive and effective public knowledge of the records on companies and legal persons and enhance the accessibility of the registered information. - It would be highly important to collect maintain and provide statistical data on the number of companies, types of companies, legal persons, number of companies issuing shares and bearer shares, and extinction and liquidation of companies by public prosecutors. ### Compliance with Recommendation 33 (section 5.1.3) - R.33: PC — The inability of the authorities to provide statistics to substantiate the arrangements as described above cast doubt about the effectiveness of the system. ### Legal arrangements and trusts (R.34) - The concept of express trusts and other similar legal arrangements, such as “fiducie”, “treuehand” or “fideicomisso” does not exist in the Cape Verdean legal system and therefore express trusts and other legal arrangements can’t be created or recognized as such, according to national law. - Article 43 of Decree-Law 12/05 mentions trusts as a special risk that IFI’s must be aware of, and it mandates the institutions to identify the “real or final” client, whoever he/she may be. This does not amount to recognition of foreign trusts in Cape Verde. - The Hague Convention of 1985 on the Law Applicable to Trusts and on their Recognition (of which Cape Verde is not a party) describes what recognition would entail; given the absence of such situations, assessors consider FATF R.34 as not applicable in Cape Verde. - R.34: NA — Express trusts and other similar legal arrangements, such as “fiducie”, “treuehand” or “fideicomisso” are not provided for or recognized in the internal legal system of Cape Verde. ### Non-profit organisations (SR.VIII) — legal framework and activities - Principle of freedom of association under Article 51 of the Constitution: citizens may constitute associations freely provided they do not promote violence, racism, xenophobia, dictatorship, have military or similar purpose, or aims contrary to penal law. - The Civil Code provides the legal regime applicable to associations, foundations and unincorporated associations, including constitution, internal organization, legal motives for extinction and effects. - Associations and foundations should be registered in the commercial registry to obtain legal personality. - Registration checks: the Conservador should verify constitution according to the Constitution and Civil Code and prohibit registration if aims are illegal. - Registered elements for NPOs: by-laws, name, name of management, place of incorporation, object, identification of persons acting on behalf of the legal person, and the capital and property attributed to the legal person if it is a foundation. - NGOs and platform: - NGOs established, on a voluntary basis, a platform of NGOs in 1996, associating more than 100 NGOs in the country. - NGOs have prepared assistance programs related to economic and social development, cooperation and training, based on financing from European and Canadian NGOs. - NGOs are accountable exclusively to their donors and not to any governmental agency; where they receive grants, loans or subsidies from governmental agencies they are obliged to report their financial status to the ministry or agency involved. - Micro-finance: - Some NGOs are involved in micro-finance activity, providing small loans usually not higher than 500,000 Escudos (approx. €4,545) per associate. - A draft law under discussion in the National Assembly would regulate micro-finance, authorizing micro-finance entities by BCV and subjecting them to its supervision; BCV will maintain a special registry of these entities. - The lending activity of micro-finance institutions meets the definition of financial institution as set out in the glossary to the FATF Recommendations and appears to fit into the category of “credit institution” set out in Article 2 of the Law 17/VI/2002. - The authorities should ensure these institutions are effectively captured in the AML regulatory framework. *Source: _cr09115 - 482. There are no casinos operating in Cape Verde but the authorities indicated that a group of (IMF document).* ### 504. According to the Cape Verde authorities considering the type of financing received by ### _cr09115 - 504. According to the Cape Verde authorities considering the type of financing received by ### NPO sector assessment and vulnerabilities (Review of Adequacy of Law and Regulations of NPOs; Protecting the NPO Sector) - Authorities consider NPO funding to come generally from European and North American countries and mostly from governmental agencies or from NGOs accredited with the European Community; monitoring of use of funds is performed by donors. - Given the dimension of the country and the social ambiance and criminality trends where terrorism acts were never present, the authorities do not consider the NPO sector as particularly vulnerable for TF. - No comprehensive review of laws and regulations related to NPOs has been undertaken. - Cape Verde does not have in place a system that allows for comprehensive knowledge of all types of NPOs established in the country, including information on: - size; - funds received and spent; - donors; - managing officials; and - activities undertaken. - Authorities are not in a good position to assess risks arising from possible abuse of NPOs by terrorists. - No general outreach undertaken to the NPO sector to raise awareness of vulnerabilities to terrorist abuse. - No demonstrated processes to promote transparency, accountability and integrity in NPO management, even for the most relevant NPOs in terms of size and funds received and distributed. - No integrated approach demonstrated to acknowledge the purpose and objectives of activities of the whole NPO sector, nor the identity of persons controlling their activities (including board members); board member data were not publicly available. - It seems that there is no general register applicable to NPOs. - No demonstration of a set of sanctions applicable to NPOs failing to comply with existing laws and regulations. - Registration of main elements of legal persons (associations and foundations) in the commercial registry is mandatory and available to the public; certificates may include by-laws, name, management, place of incorporation, object, identification of persons acting on behalf of the legal person, and capital and property for foundations. - No demonstration that NPOs are obliged to maintain records and documents of operations for a period of at least five years to clarify how funds have been spent. - No demonstrated coordinated system among national authorities relevant to TF prevention to share useful information on TF threats and implement investigative actions rapidly. - All information on foreign funds incoming to NGOs is communicated by credit institutions to BCV of Cape Verde. - No demonstrated points of contact or procedures to respond to international requests on NPOs suspected of involvement in terrorist support. ### Recommendations specific to NPO sector (Additional Element—Best Practices for SR VIII) - Cape Verde should conduct an express review of its NPO sector to verify in depth any vulnerability to misuse of NPOs for TF and ML, and institute adequate measures to promote transparency, accountability and integrity in NPO management. - Implement measures to collect comprehensive information concerning all NPOs in the country, including: - size; - activities performed; - management conduct; - sources of funding; and - use of resources. - Implement measures to license or register NPOs and require them to maintain records of transactions for a period of at least five years. - Charge a domestic authority with responsibility to monitor NPO activity and put in place mechanisms to allow cooperation between domestic and international authorities and exchange of information at national and international levels regarding suspicious activities linked to financing of terrorism. - Ensure entities undertaking micro-finance activity are effectively captured in the AML regulatory framework. ### Compliance with Special Recommendation VIII (SR.VIII) - Rating: NC - Summary of factors underlying rating: - Cape Verde did not conduct an express review of its NPO sector to verify in depth vulnerabilities to misuse for TF and ML and has not instituted adequate measures to prevent and cope with these threats. ### National cooperation and coordination on AML/CFT (R.31) - Significant weaknesses exist in mechanisms facilitating coordination and collaboration among agencies involved in the fight against money laundering. - Some interaction exists between the judiciary police and the public prosecutor’s office, but no mechanism or structure ensures coordination and collaboration on money laundering investigations and prosecution. - No effective collaboration or coordination between supervisory authorities, law enforcement, or financial and non-financial entities. - Authorities acknowledge absence of strong coordination and collaboration on AML/CFT issues can negatively impact implementation of the law. - No legal mechanism specifically provided for coordination and cooperation among entities involved in the fight against money laundering. - The National Coordination Committee (NCC), set up by Legislative Decree in 1995 with membership including ministries of justice, internal affairs, foreign affairs, the public prosecution office, the Bank of Cape Verde, general directorate of customs, and registry of companies and notaries, could be used as an avenue for some coordination on AML issues; its mandate focuses on drug offences and organized crime. - No mechanisms exist for consultation between competent authorities and regulated institutions. - No centralized system for collecting and maintaining statistics on money laundering and the financing of terrorism; a few statistics were provided by the judiciary police on prosecutions related to ML and the number of foreign requests for assistance. ### Recommendations and compliance for R.31 - Recommendations: - Establish a national mechanism to ensure coordination and cooperation among agencies on AML/CFT issues; consider extending the mandate and powers of the NCC for effective focus on AML/CFT implementation. - Ensure the national mechanism maintains appropriate statistics on investigations and prosecutions related to money laundering and financing of terrorism. - Compliance with Recommendation 31: - Rating: PC - Summary of factors underlying rating: - Coordination and cooperation among domestic institutions involved in fighting ML is low. - No coordination or cooperation presently exists on issues related to FT. ### International conventions, UNSCRs and legal framework (R.35 and SR.I) - Legal system enables direct application of international conventions duly signed and ratified into domestic laws per Article 12-2 and Article 12-4 of the constitution; conventions creating criminal obligations require domestic legislation for applicability. - Vienna and Palermo Conventions have been signed and ratified; most provisions related to criminalization of offences and sanctions have been incorporated into domestic legislation. - Cape Verde has signed and ratified the UN International Convention for the Suppression of the Financing of Terrorism; however, it has not yet enacted legislation criminalizing the financing of terrorism or put in place the necessary framework to implement the convention. - UNSCRs 1267 and 1373 form part of the national legal system but have not yet been implemented; no measures enabling freezing of terrorist funds have been put in place, although assets related to UNSCR 1267 can be subject to freezing procedures in Cape Verde. - Freezing and seizure procedures also apply in relation to offences linked to terrorist organizations under Articles 315 and 316 of the Penal Code. ### Ratification and implementation details - Ratified instruments and implementation notes: - Cape Verde is party to the Vienna Convention (UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of December 19, 1988) and the Palermo Convention (UN Convention Against Transnational Organized Crime) and Additional Protocols listed in Resolution No. 92/VI/04. - Most provisions related to criminalization of offences and sanctions in those conventions have been incorporated into domestic legislation. - Cape Verde has acceded to and approved the UN International Convention on the Suppression of the Financing of Terrorism and signed/approved multiple CFT-related conventions (list provided in source). - Implementation of Vienna Convention (Articles 3–11, 15, 17 and 19): - Steps taken to incorporate Articles 3–11 into domestic law via Drugs Law, AML Law, Protection of Witnesses Law, Extradition Decree, Mutual Legal Assistance Decree; Penal Code, CPC, Judiciary Police Law and Public Prosecutor Law complement these instruments. - Law 78/IV/93 (Drugs Law) incorporates essential provisions of the Vienna Convention. - Drug-related offences are classified as predicate offences for money laundering. - Offences and investigative tools (controlled delivery, interception of communications) are covered through relevant laws (e.g., Articles 31 and 33). - Confiscation powers and territoriality principles are reflected in AML Law (Arts. 6–14), CPC (Arts. 243–), and Drugs Law. - Obligations related to extradition and mutual assistance (Articles 6 and 7 of Vienna Convention) are covered in Article 42 of the law. - Provisions of Article 15, 17, and 19 of the Vienna Convention (transportation means, export documentation, sea trafficking) have not been incorporated into national law. - International cooperation on extradition is regulated under the Constitution (Art. 37), the Penal Code (Art. 4.b,c, and 84), Resolution of the National Assembly 98/VI/2004, cooperation agreement with ECOWAS on civil and criminal matters, Resolution 159/2000 of September 12, Resolution 7/2000 of 12 May, and Article 42 of Drugs Law (1993). *Source: _cr09115 - 504. According to the Cape Verde authorities considering the type of financing received by (IMF assessment text provided)* ### 536. Mutual legal assistance cooperation is covered under AML Law (Art. 6) related to police ### _cr09115 - 536. Mutual legal assistance cooperation is covered under AML Law (Art. 6) related to police ### Implementation of international conventions and instruments - UN International Convention on the Suppression of the Financing of Terrorism: provisions not incorporated into national law; remain without effect in the national legal system (paragraph 537). - Palermo Convention: Implementation must be construed in the context of both the AML Law and the Law on Drugs (538). Measures enacted but "not fully consistent with the provisions of the Convention" and implementation remains a challenge (539). - Vienna Convention / Palermo Convention: material and intentional elements of money laundering are built into Article 3 (1) a) to c) of Law 17/VI/2002 (the AML Law); territoriality principle in paragraph (3) of that provision (540). - UNSCRs 1267 and 1373: have not been implemented; no mechanism established to ensure implementation (558). ### Criminalization, scope, and elements of money laundering - Money laundering offense: Article 3 (1) a) to c) of Law 17/VI/2002 incorporates required elements (540). - Intent requirement: not expressly provided in AML Law; Article 177 of the CPC allows evidence/assessment of facts; jurisprudence permits inference of intent from objective factual circumstances (541). - Willfulness: under Cape Verdean law money laundering is considered a willful offence; Article 13 of the Penal Code makes different forms of willfulness admissible; negligent money laundering is not admissible (542). - Property definition: Article 243 of the CPC includes property derived from an unlawful act and proceeds of crime; this definition is adopted in the AML Law (543). - Predicate offences: AML Law adopts a list approach (544); not all FATF designated offences are covered (545). - Self-laundering: concept not defined in AML Law; authorities indicate no basic principles preventing application to individuals who commit a predicate offence; concurrence of offences governed by Article 31 of the Penal Code (Legislative Decree 4/2003) with sentencing rules including a 25 years' imprisonment cap and 800 days' fine cap (546). - Ancillary/co-participation: Article 1-1 references commission “under any form of collaboration” (547). - Liability of legal persons: Article 9 of the Penal Code extends criminal liability to corporations/legal persons of private nature with specified conditions (548). ### Sanctions, seizure, and confiscation - Sanctions: for money laundering provided in Article 3; failure to comply with Law regulated under Articles 35–38 (549). - Seizure powers: general provisions in Penal Code and CPC allow seizure of objects used or destined to be used for commission of a crime; seizure can be authorized by public prosecutor or judge (549). - Confiscation: Articles 98 and 99 of the Penal Code enable confiscation of objects used or destined to be used for commission of a crime, and proceeds or objects derived from proceeds (550). - AML-specific confiscation: Article 7 of the AML Law provides for confiscation to the State and replacement by payment to the State of respective value where goods cannot be seized (551). - Protection of bona fide third parties: Articles 98 and 99 of the Penal Code and Article 8 of the AML Law (552). ### Law enforcement powers and investigative techniques - Responsible agencies: relevant law enforcement agencies for ML investigation and prosecution are provided for in the law (553). - Investigative techniques available: monitoring of correspondence, controlled delivery, videoconference, interception of communications, surveillance and tracking of a person, surveillance of facilities, and monitoring of criminal activity; potential to strengthen with other specialized techniques (553). ### Mutual legal assistance (MLA) legal framework and practice - Legal bases for MLA: (1) bilateral and multilateral treaties; (2) ECOWAS convention approved by National Assembly No. 159/2000 of September 4; (3) UN Vienna and Palermo Conventions applicable under Article 12-42 of the Constitution; (4) Article 6 of the AML Law and Article 42 of the Law on Drug Trafficking No. 78/IV/1993 of July 12 referring to CPC Articles 234, 238, 239, 242, 243, 244, 246 and 255; (5) Legislative Decree No. 6/1997 of May 5 on foreigners and extradition (560). - Central authority: the PM’s Office is central authority for receiving/sending requests and coordinating gathering of relevant information from PM and criminal police; criminal police can also cooperate internationally (560). - Article 6 AML Law: provides basis for cooperation in seizure/confiscation following a request from a foreign judiciary authority to the judiciary police; judiciary police can investigate, search, and seize goods/products and inform foreign authorities (561). - Criminal proceedings/asset preservation: where assets relate to ML or predicate offence, authorities can initiate criminal proceedings and freeze/confiscate assets (Art. 6-2) (562). - Instrumentalities: Article 6 reference covers proceeds but not instrumentalities; Article 16 of the Drugs Law allows forfeiture of equipment/materials used or intended for use in commission of drug-related offences and ML related to drugs (563). - Property of corresponding value: Article 7 extends property to property of corresponding value, including income, interest, profits, or other advantages for forfeiture in favor of the State (564). - Limitations: Article 6-3 requires reciprocity and confidentiality (banking secrecy) for foreign requests; information should not be used other than for purpose indicated (565). - Possible range of MLA: exchange of information, documents, taking evidence, freezing/seizure and confiscation of assets/products; cooperation also under bilateral agreements with Portugal, ECOWAS, and CPLP with specified procedures (566–567). - Operational powers without formal request: public prosecutor, judge, or judiciary police can provide information on goods/property and use CPC powers to search, identify, freeze, seize funds or goods suspected of ML even when activity occurred abroad (Article 6-1 and -2; Articles 234–254 CPC) (568). - Timeliness and statistics: no legal provision ensuring timely handling of requests though Attorney General’s Office and criminal police treat on a priority basis; between 2003 and March 2007, 17 rogatory letters received in PM’s office and 13 responses provided; 13 letters seemed processed within a reasonable length of time; no comprehensive statistics, informal cooperation not always captured (561, 569). - Reciprocity and secrecy conditions: Article 6-3 subjects cooperation to reciprocity and secrecy; arrangement not shown to be unreasonably restrictive and banking secrecy can be lifted in ML cases; these principles do not apply to TF because TF not criminalized and not predicate offence for ML (570). - Urgent requests: Interpol Cabinet in judiciary police can be used for urgent demands; actions must be implemented according to CPC; process appears to work reasonably well informally (571). - Fiscal matters: MLA will not be refused on basis that an offence is related to fiscal matters due to Article 18–21 of the Palermo Convention and Article 12-4 of the Constitution; no case cited that tested this (572). ### International cooperation scope and limits - Assistance limited to ML predicate offences foreseen in conventions and protocols such as drugs trafficking, organized crime, corruption, obstruction of justice, trafficking in persons and arms trafficking; some offences in conventions not predicate offences for ML (e.g., obstruction of justice) (555). - CPLP instruments: Cape Verde has signed three CPLP instruments on transfer of sentenced persons, extradition, and mutual legal assistance; they await ratification by three other states to come into force (559). ### Recommendations, ratings, and compliance - Recommendations: - Implement fully the provisions of the Vienna and the Palermo Conventions. - Make implementation of the UN Convention on the Suppression of the Financing of Terrorism a priority. - Put in place necessary measures, procedures, and mechanisms to implement UNSCRs 1267 and 1373 (6.2.2). - Compliance ratings (6.2.3): - R.35: PC — "The provisions of the Vienna Convention and the Palermo Convention have not been fully implemented. The Convention on the suppression of FT has not been implemented." - SR.I: NC — "The Convention on the suppression of FT has not been implemented. The UN Security Council Resolutions 1267 and 1373 have not been implemented." *Source: _cr09115 - 536. Mutual legal assistance cooperation is covered under AML Law (Art. 6) related to police* ### ANNEX III ### ANNEX III ### Provision of Assistance Regardless of Existence of Secrecy and Confidentiality Laws (c. 6.5) - Financial entities and DNFBPs should provide to the judge or the public prosecution information, documents and any other goods in their possession necessary for the instruction of an ML offence or that should be seized as instruments or proceeds of an offence; lifting the secrecy duty, under Article 22-1 of the AML Law. - Foreign authorities receiving the information and documents are required to maintain the secrecy on the information received and may only use it for the purpose stated in the request, according to Article 6-3 of AML Law. ### Availability of Powers of Competent Authorities (applying R.28, c. 36.6) - All legal provisional measures provided for in the CPC (Articles 234–254) such as the procurement of evidence, searching of premises and vehicles, ability to freeze and seize funds, goods or property are applicable to the investigation of ML offences when there is a request for cooperation presented by a foreign judiciary authority, in accordance with Article 6-1 and 2 of the AML Law. ### Avoiding Conflicts of Jurisdictions (c. 36.7) - Article 4 of the CP addresses territorial jurisdiction of Cape Verde Courts for offences committed abroad that are punishable in Cape Verde in the following cases (when no international convention states otherwise): - if the deeds constitute the crimes referred to in Articles 244–263 and 307–328; - if the deeds constitute the crimes referred to in Article 138, paragraphs 2 and 3, or in Articles 268–279 if the perpetrator is found in Cape Verde and cannot be extradited; - if the deeds are committed against Cape Verde citizens, provided that the perpetrator is customarily resident in Cape Verde and is found in Cape Verde; - if the deeds are committed by Cape Verde citizens, or by foreign nationals against Cape Verde citizens, provided that the perpetrator is found in Cape Verde, that the deeds are also punishable under the legislation of the place where they were committed, and that they constitute a crime for which the law permits extradition but for which extradition cannot be granted; and - if it is a case of crimes which are the responsibility of the Cape Verdean State to try pursuant to an international agreement. - The provisions apply only if the perpetrator has not been tried in the country in which the deed was committed or, if convicted in that country, has avoided fulfilling the penalty imposed. - Wherever Cape Verde law applies pursuant to this Article, the deed shall be tried in accordance with the law of the country in which the deed was committed if that regime is more favorable to the perpetrator. Any penalty shall be converted to the corresponding penalty under the Cape Verde system or, if there is no direct correspondence, to such penalty as Cape Verdean law may provide for the deed. ### International Cooperation under SR V (applying c. 36.1-36.6 in R. 36, c. V.1) and Additional Elements - The authorities did not produce any evidence that they have cooperated internationally in matters related to the financing of terrorism. - In the absence of the criminalization of FT, the lack of clarity about the application of the dual criminality principle creates doubt about the authorities’ ability to cooperate on FT matters, using the existing framework for MLA. (See discussion on R.36, R.37, R.38.) ### Dual Criminality and Mutual Assistance (c. 37.1 and 37.2) - Cape Verdean authorities assert that as Cape Verde is bound by the UN Palermo Convention which prevails over any domestic law or regulation, Article 18-9 of this Convention is applicable and international judicial cooperation may be granted, even in the absence of dual criminality. - Extradition of Cape Verdean nationals is forbidden by an absolute constitutional principle stated in Article 37 of the Cape Verdean Constitution; instead, the perpetrator must be subject to criminal proceedings in Cape Verde, according to Article 4-1 d) of the Penal Code. - Foreigners might be subject to extradition according to international treaties or conventions or under Articles 88, 89, and 90 of Decree-Law No. 6/1997 of May 5, which allows for the extradition of foreigners at the request of foreign states to be submitted to a criminal proceeding or to serve a sentence, even in the absence of a convention or agreement. - Extradition is legally possible only if the foreign court has jurisdiction for the trial and the offence is punishable with a penalty of one year or more of imprisonment, under Article 88 of Decree-Law No. 6/1997 of May 5. - Extradition is forbidden when in the requested country the offence is punishable by a death sentence or life imprisonment or offence to the physical integrity of the person; extradition is also prohibited for political grounds or for offences related to freedom of speech, under Article 90 of the decree-law. - Mission discussions did not provide conclusive evidence that the authorities’ interpretation of the dual criminality principle is flexible enough to overlook technical differences between laws to avoid impeding MLA. ### Timeliness to Requests for Provisional Measures including Confiscation (c. 38.1) - Article 6 of the AML Law sets forth cooperation between Cape Verde and a foreign state in matters of seizure and confiscation of assets, products and proceeds of crime. It provides that Cape Verde law provisions on locating, freezing and confiscating assets or products from ML, terrorism and predicate offences may be used in support of a foreign request. - The provision does not address instrumentalities used or intended for use in the commission of an ML or predicate offence; instrumentalities are provided for under Article 16 of the Drugs Law 1993. - There are no legal barriers to timely provision of assistance but there are no procedures in place to ensure assistance is provided in a timely manner and no experience to date with foreign judicial requests for assistance involving freezing or confiscation. ### Property of Corresponding Value (c. 38.2) - Article 6’s reference to assets and products can be interpreted as sufficiently wide to cover proceeds in the commission of money laundering or the predicate offence. - Article 7 extends to property of corresponding value, ensuring other assets, and any income, interest, profits or other advantages obtained therefrom, shall, under order of the court, be forfeited in favor of the state. - Paragraph 3 of Article 7 confirms applicability to claims, objects, or advantages obtained through transaction or exchange with claims, objects or advantages directly obtained from the offence. ### Coordination of Seizure and Confiscation Actions (c. 38.3) - Under Article 6, following a request by the judiciary police to a competent foreign authority, enquiries may be pursued under Cape Verdean Law to ascertain whether assets or products arising from money laundering are located in Cape Verde; results shall be forwarded to the requesting authority. - There are provisions in law or procedures to determine which country pursues the confiscation action. - Although law enables cooperation related to foreign requests for seizure and confiscation of assets or property related to ML/FT, there are no coordinating arrangements or mechanisms in place to facilitate such cooperation and no indication such cooperation has taken place. - Cooperation exists with Portugal based on a cooperation agreement on juridical and judicial matters, approved by Resolution 98/VI/2004 of June 7, regulating mutual legal assistance for seizure and forfeiture within the scope of Article 48 of the Penal Code. ### Asset Forfeiture Fund (c. 38.4) and Sharing of Confiscated Assets (c. 38.5) - The authorities have not given consideration to setting up an asset forfeiture fund. - Competent authorities do not maintain comprehensive statistics on mutual legal assistance regarding seizures, freezing and confiscation of assets, and extradition. - No framework is in place where statistics are kept to review the effectiveness and efficiency of the AML system. Except for statistics provided for rogatory requests, no statistics were provided regarding the number of MLA requests related to asset seizure, freezing and confiscation. - The AML Law does not allow for the possibility of sharing confiscated assets; all assets forfeited under Article 7 are in favor of the State (Cape Verde State) and not the requesting foreign state. ### Recognition of Foreign Orders (R 38 additional element) - Foreign judgments are recognized in Cape Verde in accordance with Recognition of Foreign Judgments Law No. 5/2005 of October 3. ### Recommendations and Comments (6.3.2) - Laws and measures regarding freezing or confiscation of property related to ML and FT should be strengthened to allow for expeditious response to foreign requests. - Consider setting up an asset forfeiture fund and the sharing of assets and property confiscated among countries which have participated, directly or indirectly, in the confiscation. - Extend the powers of freezing, seizure and confiscation to assets related to financing of terrorism, which is not an autonomous offence in the legal system of Cape Verde. - Establish a system for maintaining comprehensive statistics on mutual legal assistance regarding seizures, freezing and confiscation of assets, and extradition. ### Compliance with Recommendations 36 to 38 and SR.V (6.3.3) - R.36 — PC - Beyond bilateral and multilateral agreements negotiated by Cape Verde and the provisions of the CPC, Cape Verde has not established a comprehensive framework to regulate mutual legal assistance with foreign authorities in their respective fields of competence that facilitates international cooperation in a comprehensive and timely manner. - Cape Verde cannot ensure effective international cooperation when FT is under investigation by a foreign authority, since this offence has not been criminalized in Cape Verde. - R.37 — PC - It was not possible for the team to assert that the dual criminality principle applicable in Cape Verde is not an impediment to provide mutual legal assistance in criminal matters. - R.38 — NC - No coordinating mechanisms to facilitate cooperation on foreign requests for seizure or confiscation of assets or property related to FT. - No consideration given to setting up an asset forfeiture fund. - No power exists for sharing of confiscated assets related to ML/FT. - SR.V — NC - In the absence of the criminalization of FT, the lack of clarity about the application of the dual criminality principle creates doubt about the authorities’ ability to cooperate on FT matters, using the existing framework for MLA. ### Extradition (R.37, 39, SR.V) — Description and Analysis (6.4.1) - The Constitution (Article 37) forbids, in absolute terms, the extradition of Cape Verdean citizens, who can be subject to trial in Cape Verde, according to the principle aut dedere aut judicare in Article 4-1 d) of the Penal Code. The authorities indicate that in such situations the perpetrator can be subject to criminal proceedings in Cape Verde, according to Article 4 of the CPC. Legal Framework and Findings - Extradition of foreign individuals is allowed and regulated by international conventions and treaties negotiated by Cape Verde and, in the absence of treaties, under Articles 88, 89, and 90 of Decree-Law No. 6/1997 of May 5. - Foreign citizens or citizens without nationality that commit an ML offence can be subject to extradition because the ML offence is punishable with imprisonment between a minimum of 1 and a maximum of 12 years and according to Article 86 of Decree-Law No. 6/1997 of May 5, extradition may be granted when the offence is punishable with a penalty of one year or more of imprisonment. - Extradition is forbidden when in the requesting country the offence is punishable by a death sentence or life imprisonment or offence to the physical integrity of the person. Extradition is also prohibited for political grounds or for offences to freedom of speech, under Article 90 of the decree-law. - There are no provisions in Cape Verde law that allow for extradition of either Cape Verdean nationals or foreign nationals on the basis of a terrorist financing offence because TF is not an autonomous offence in Cape Verde. - Offences of belonging to a terrorist organization (Article 315 of the Penal Code) or cooperation with a terrorist organization (Article 316 of the Penal Code) are extraditable offences when committed by foreigners, due to penalties above one year imprisonment, as required in Article 86 of Decree-Law No. 6/1997 of May 5. - Extradition of foreigners should not be granted for offences of political, religious or freedom-of-speech nature, for offences to which the requesting state applies death penalty, imprisonment for life or violence against the person, or if the offender might be subject to torture or inhuman treatment, according to Article 37-3 of the Constitution. - According to the UN Palermo Convention applicable in Cape Verde and prevailing over domestic ordinary legislation (Article 12-4 of the Constitution), authorities claim international judicial cooperation is legally possible even in the absence of dual criminality; however, the review team could not assert that the dual criminality principle, as interpreted by authorities, is not an impediment to provide mutual legal assistance in criminal matters. - Since the ML offence is punishable with imprisonment between a minimum of 1 and a maximum of 12 years it is an extraditable offence under Article 86 of Decree-Law No. 6/1997 of May 5. - Extradition of Cape Verde nationals is forbidden by an absolute constitutional principle stated in Article 4 of the Cape Verde Constitution; the principle aut dedere aut judicare in Article 4-1 d) of the Penal Code applies and such persons can be subject to trial in Cape Verde. - Authorities indicate that when international treaties and conventions have been ratified their provisions are applicable in Cape Verde and it is an expectation that Cape Verde will provide a wide range of cooperation, including on procedural and evidentiary matters; however, the authorities were unable to demonstrate, on the basis of specific references, that the system has worked effectively. *Source: _cr09115 - ANNEX III* ### 602. The authorities did not provide any details about specific extradition proceedings and the ### _cr09115 - 602. The authorities did not provide any details about specific extradition proceedings and the ### Extradition: description and legal basis (paras 602–605) - Para 602: The authorities did not provide any details about specific extradition proceedings and the assessors were therefore unable to gauge the efficiency of the process. - Para 603: Under Article 105 of Decree-Law No. 6/1997 of May 5, the foreign person to whom the request for extradition is applicable can be immediately extradited when he has freely, willingly and before a judge, renounced the formal extradition process, whose existence and terms he knows. - Para 605: No statistics were provided regarding requests for extradition of either Cape Verdean nationals or foreign nationals living in Cape Verde. The authorities do not maintain a system of statistics regarding extradition cases. ### Extradition: recommendations and comments (section 6.4.2) - Cape Verdean authorities should create expressly the FT offence in accordance with the UN Convention on the Suppression of Terrorism Financing and consider this offence an extraditable one and also ensure that even before FT is criminalized they can extradite foreigners that have committed this offence in the requesting State. - Cape Verdean authorities should ensure that requests for extradition are dealt with expeditiously. - Cape Verdean authorities should ensure that nationals whose extradition has been requested for offences committed abroad are subject to trial in Cape Verde in a manner comparable to similar domestic prosecutions for serious offences. ### Ratings related to extradition and mutual legal assistance (section 6.4.3) - R.39: PC - In the absence of references to specific cases in which the extradition of a national was requested, the assessment team was unable to gauge if such cases were prosecuted in a manner comparable to similar domestic prosecutions for serious offences. - There was no evidence of cooperation with other countries in the context of a request for extradition of a Cape Verdean national. - R.37: PC - It was not possible for the Team to assert that the dual criminality principle applicable in Cape Verde is not an impediment to providing mutual legal assistance in criminal matters. - SR.V: NC - In the absence of the criminalization of FT, the lack of clarity about the application of the dual criminality principle creates doubt about the authorities’ ability to cooperate on FT matters, using the existing framework for MLA. ### International cooperation on ML/FT: channels and capabilities (paras 606–621, 632–633) - Para 606: Channels of cooperation exist between the police and customs authorities of Cape Verde and their counterparts of foreign countries, in relation to investigation of crime and customs offences in general. Police can cooperate on money laundering investigations; customs can only cooperate with counterparts on customs offences. - Para 607: Exchange of information related to money laundering investigation exists at the level of the judiciary police and the public prosecutor’s office; such exchanges may relate to any information relevant to a ML investigation. - Para 608: There is no indication of any cooperation or channels of cooperation between the supervisory authority, namely BCV and its foreign counterparts on matters relating to money laundering. - Para 609: The judiciary police are not able to consider a request for assistance or exchange of information from foreign FIUs that are not police FIUs. Such requests can only be addressed through formal legal assistance. - Para 611: Cape Verde law authorities are able to provide for a wide range of collaboration with other countries either bilaterally or through multilateral channels. Cooperation is facilitated through instruments such as the Nairobi Convention and regional organizations such as GIABA. Cape Verde is also a member of the Dublin Mini Group. - Para 613: The judiciary police is not allowed to provide information to FIUs of an administrative nature, because they are not considered to be “judiciary authorities” and the judiciary police is not considered by the authorities to be a formal FIU. Although the judiciary police receives suspicious transaction reports, it cannot cooperate or exchange information with a foreign FIU. In the view of the assessors, this situation constitutes a major shortcoming in the AML international cooperation system. - Para 615: Channels exist for exchange of information between Cape Verde competent authorities and their foreign counterparts although there are no laws that allow for such cooperation. The judiciary police can provide information to other foreign police forces through the interpol cabinet placed within the judiciary police, according to Article 42 of Legislative Decree No. 4/93 of May 12. The judiciary police can also provide informal cooperation subject to the principle of reciprocity and secrecy in Article 6-3 of the AML Law. - Para 616: Customs can, through the Nairobi Convention, exchange information with its foreign counterparts on investigation related to customs offences. - Para 617: Laws 3/V/1996 (banks), 53/V/1998 (capital markets) and 52/F/1990 (insurance) do not contain clear gateways for supervisory cooperation. Article 29 of Law 12/2005 provides that BCV can contact and exchange information with supervisory authorities from licensees’ countries of origin and “host” countries. - Para 618: The judiciary police is able to exchange information related to a money laundering investigation both spontaneously and upon request. The judiciary police is not able to exchange information with a foreign FIU that is not a police-type FIU. - Para 620: Cape Verdean competent authorities are able to carry out inquiries on behalf of their foreign counterparts through cooperation agreements with police forces of other countries. Such agreements exist with Portugal, Spain, and Holland. Customs can carry out such enquiries only in respect of customs offences. - Para 621: Although the judiciary police receives suspicious transaction reports, it is not able to make enquiries on behalf of foreign FIUs. - Para 622: The public ministry is able, through the judiciary police, to conduct investigations on behalf of its foreign counterparts. - Para 623: Exchange of information among police counterparts is based on condition of reciprocity, confidentiality, and provided the request is made in accordance with Cape Verde law. - Para 624: Article 48 of Law 12/2005 requires prior notification to the financial institution when communicating materials, data and information in respect of IFIs to another supervisory authority; this requirement is unreasonable and has the potential to reduce the effectiveness of supervisory cooperation. - Para 625: There is no provision in the law that ensures that foreign requests for cooperation are not refused on the sole ground that the requests are also considered to involve fiscal matters. Authorities claim such refusals have never occurred, but no example was provided. - Para 626: Article 22 of the AML Law allows for the provision of confidential banking information necessary for investigation and prosecution of money laundering offences irrespective of banking secrecy. The law does not provide clear gateways for sharing of information with foreign supervisors about institutions operating in the domestic financial sector. The judiciary police cannot share information with foreign FIUs that are not of a police nature. - Para 627: Article 22 of the AML law establishes safeguards regarding the use of banking information in carrying out investigation into money laundering; exchanged information is to be used only for the purpose of the request. - Para 628: Article 48 of Law 12/2005 places an obligation of confidentiality on a foreign supervisor receiving information on a financial institution from BCV. - Para 629–631: There are no provisions to allow exchange of information with non-counterparts; BCV cooperation is generally limited to foreign supervisors of financial institutions. A request from a foreign FIU cannot be considered by the judiciary police unless made by a foreign police agency using customary police channels. - Para 632–633: The authorities did not produce any evidence that they have cooperated internationally in matters related to the financing of terrorism. There has not been any cooperation in relation to the fight against the financing of terrorism. In the absence of the criminalization of FT, the lack of clarity about the application of the dual criminality principle creates doubt about the authorities’ ability to cooperate on FT matters, using the existing framework for MLA. There are no mechanisms to allow exchange of information with foreign non-counterparts in matters relating to the financing of terrorism. ### International cooperation: recommendations (section 6.5.2) - Cape Verde should develop cooperation mechanisms which will assist its competent authorities to cooperate with other countries on matters relating to the fight against money laundering and the financing of terrorism. - The implementation of the UN International Convention on the Suppression of the Financing of Terrorism, and related UNSCRs, should allow possibilities for cooperation on issues related to the fight against the financing of terrorism. - Channels for enhanced cooperation among countries on prompt exchange of information and conducting investigations on behalf of foreign counterparts, should be developed. - The law should be amended to allow for possibilities of cooperation between law enforcement and other competent authorities on matters related to ML. - Laws 3/V/1996, 53/V/1998, and 52/F/1990 should be amended to provide clear gateways for supervisory cooperation. - Law 12/2005 should be amended to remove the requirement for financial institutions to be informed when BCV provides information about that institution to another supervisor. ### Ratings related to international cooperation and SR V (section 6.5.3) - R.40: PC - Channels for cooperation between law enforcement and supervisory authorities of Cape Verde and their foreign counterparts, including MoUs, bilateral and multilateral arrangements, and exchanges on matters related to ML/FT are weak. - Possibilities for Cape Verde law enforcement and other competent authorities to conduct investigation on behalf of their foreign counterparts should be reinforced. - Law enforcement agencies cannot provide information to foreign FIUs that are not police FIUs. - Exchanges of information between Cape Verde law enforcement and other competent authorities and their foreign counterparts are limited. - Lack of clear gateways for sharing of information with other supervisors in Laws 3/V/1996, 53/V/1998, and 52/F/1990. - SR.V: NC - In the absence of the criminalization of FT, the lack of clarity about the application of the dual criminality principle creates doubt about the authorities’ ability to cooperate on FT matters, using the existing framework for MLA. ### Resources, statistics, and other issues (section 7.1) - R.30: PC - The investigating and prosecuting agencies are under-staffed and do not have the resources necessary for the proper investigation and prosecution of money laundering offence. - There is a lack of skills to investigate and prosecute money laundering and the financing of terrorism offences. - The JP lacks adequate resources and training to perform comprehensive analysis of STRs. Resources are stretched by regular police functions, including investigation of cases (both STR and non-STR related). - AML training provided to BCV staff appears to have been at a very basic level. As a result staff resources and capacity need to be enhanced. - R.32: NC - Maintenance of statistics is weak across all government agencies involved in AML. - The authorities have not collected sufficient information related to judicial proceedings of ML, namely concerning judicial accusations and convictions and also the specific penalties applied in the proceedings, and the amount of funds and goods frozen seized or confiscated. - Where statistics are available they are not used strategically to identify distribution of STRs across banking institutions or potential over/underreporting. *Source: IMF assessment extract (paras 602–634).* ### ANNEX III ### ANNEX III ### Legal systems - Forty Recommendations: 13 (note: factors set out only when rating is less than Compliant). - 1. ML offence — PC - The predicate offences for ML set forth in Article 3 of Law n 17/VI/2002 are insufficient and do not include some serious offences, that according to FATF Recommendation 1 should be included as predicate for ML. - No evidence that a conviction for the predicate offence is not necessary before issuing a ML conviction. - It has not been fully established within the Cape Verdean legal system that the author of a predicate offence can also be convicted for laundering the proceeds of the predicate offence. - The number of ML investigations seems low relative to the number of predicate offences, and none has resulted in accusations (let alone convictions) for ML. - 2. ML offence—mental element and corporate liability — LC - Doubts on effective implementation given few investigations on ML and no accusations before the courts since the enactment of the AML Law in 2002. - 3. Confiscation and provisional measures — LC - Legal framework seems adequate, but doubts on effectiveness given very low data on goods, property, and values frozen, seized or confiscated on ML investigations. ### Preventive measures - 4. Secrecy laws consistent with the Recommendations — PC - Legal secrecy duty regime applicable to IFIs is stricter than for domestic financial institutions generally, making it more difficult and riskier for employees of IFIs to discover and report suspicious operations to the judiciary police. - 5. Customer due diligence — NC - Use of threshold for instances in which specified forms of identification are required can lead to inadequate documentation being taken where threshold is not met. - Inadequate arrangements for circumstances in which foreign financial institutions are confirming the authenticity of CDD identification documents or information. - Lack of affirmative obligation for institutions to determine if a customer is acting on behalf of another party. - Number of weaknesses in the requirements for the identification of legal persons. - Lack of a requirement to obtain information on the purpose and intended nature of business relationship. - No requirement for ongoing due diligence or for CDD records to be kept up to date. - Inadequate CDD Requirements for Trusts. - No requirement for institutions to apply CDD to customers whose relationship with the institution pre-dated the 2002 law, on the basis of materiality and risk. - 6. Politically exposed persons — NC - No effective framework to address the risk posed by PEPS. - 7. Correspondent banking — NC - No effective framework to address the risk posed by cross-border correspondent banking relationships. - 8. New technologies and non face-to-face business — NC - No requirements for institutions to have policies in place or to take measures to prevent the misuse of technological developments in ML or FT. - No adequate framework for circumstances in which institutions are allowed to rely on verification of identity provided by a foreign financial institution. - 9. Third parties and introducers — NC - No effective framework to address the risk posed by third party introduced business arrangements. - 10. Record-keeping — PC - Absence of requirement for transaction records to be sufficient to permit reconstruction of individual transactions to provide evidence for prosecution. - Absence of requirement for account files and business correspondence to be maintained. - Absence of requirement that records should be available on a timely basis to domestic competent authorities. - Absence of requirement that records should be maintained for such periods as may be required by competent authorities. - Uncertainty among financial institutions about record keeping requirements of the law. - 11. Unusual transactions — PC - Monitoring obligation is excessively limited and confusing: only transactions considered “suspicious” of being linked to ML or its predicate crimes legally require special attention (predicate list incomplete). - Financial institutions’ implementation approaches are closer to R.11 objectives but perform very little automated or periodic analysis; detection burden falls on cashier/teller officers and large-size deposits are the primary detection criterion. - No obligation to document analysis in writing. - Monitoring not effectively enforced as evidenced by scarce number of STRs and few supervisory tools to test compliance. - 12. DNFBP–R.5, 6, 8–11 — NC - Not all DNFBPs are subject to the AML law. - No implementation of the law since December 2002: authorities have not enacted or drafted regulations or guidance; businesses are unaware of obligations. - Preventive regime deficiencies for financial institutions largely apply to DNFBPs. - 13. Suspicious transaction reporting — NC - Implementation ineffectual; current requirement places too high a threshold for reporting sector. - STR obligation refers only to list of predicate crimes of ML in CV, which does not address all FATF required predicate crimes. - Need to make explicit via regulation, and educate using guidelines and outreach, that obligation to file an STR applies regardless of whether the transaction involves tax matters. - Some financial institutions and DNFBPs are not aware of their obligation to report suspicious transactions, or how to file STRs and what is the competent authority to receive them. - 14. Protection and no tipping-off — NC - Tipping off prohibition does not exist for filing unsolicited STRs in good faith (it only applies when complying with court-ordered disclosures). - Mandatory suspension of all reported transactions is tantamount to alerting the customer. - 15. Internal controls, compliance and audit — NC - Weaknesses in requirements for institutions to maintain internal policies, procedures and controls to manage ML risks. - No clear requirement to establish AML/CFT compliance function including designation of a compliance officer at managerial level. - No requirement for an independent audit function. - No requirement for employee screening. - 16. DNFBP–R.13–15 and 21 — NC - Not all DNFBPs are subject to the AML law. - No implementation since December 2002; authorities have not enacted regulations or guidance; businesses unaware of obligations. - Preventive regime deficiencies (limited scope of CDD, monitoring and STR requirements) apply to DNFBPs almost entirely. - 17. Sanctions — PC - Wide range of criminal and administrative sanctions available, but absence of actual imposition of sanctions makes it difficult to assess effectiveness, proportionality and dissuasiveness. - Administrative sanctions do not apply to breach of obligation to create an AML compliance unit and to refuse transactions when identification is not possible. - The BCV can only instruct and recommend (not impose) sanctions for AML violations. - 18. Shell banks — NC - Current arrangements do not preclude operation of shell banks in Cape Verde. - No requirements for financial institutions to satisfy themselves that their respondent institutions do not permit their accounts to be used by shell banks. - No requirements that prohibit Cape Verde banks from maintaining relationships with shell banks. - 19. Other forms of reporting — NC - Authorities have not evaluated feasibility and utility of establishing a CTR system. - 20. Other NFBP and secure transaction techniques — PC - Cape Verde considered applying AML requirements to other businesses (car and antique dealers) but there has been no implementation. - No evidence of efforts to develop modern and secure techniques of money management less vulnerable to money laundering. - 21. Special attention for higher risk countries — NC - No special attention required when dealing with countries that insufficiently apply FATF Recommendations. - Same weaknesses of R11 apply to examining background of transactions with foreign countries (monitoring limited to predicate offence suspicion). - No countermeasures currently available nor considered to deal with countries that insufficiently apply FATF standards. - 22. Foreign branches and subsidiaries — NC - Current arrangements are not applicable to foreign branches and subsidiaries of Cape Verde financial institutions. - 23. Regulation, supervision and monitoring — NC - Lack of comprehensive coverage of all forms of financial activity by different types of financial institutions. - Absence of clear supervisory strategy and outlook on risk inherent in lines of business. - Lack of consistency in assessing fitness and propriety across banking, insurance and securities sectors. - Absence of inspections of branches of institutions operating in the domestic sector and IFIs. - Less robust legal framework to support effective supervision of IFIs. - 24. DNFBP—regulation, supervision and monitoring — NC - Ministry of finance designated as competent authority to regulate and supervise all DNFBPs but has not taken action. - 25. Guidelines and Feedback — NC - No Guidelines provided for financial institutions on manner of filing STRs, and no feedback given to the few banks that have reported. ### Institutional and other measures - 26. The FIU — NC - The judiciary police does not fulfill all FIU functions required by R26: - No meaningful analysis is performed before launching routine police investigations for STRs; STRs handled like any criminal accusation; preparatory work limited to cross-checking names in police databases. - JP not authorized to exchange information with foreign FIUs. - JP not authorized to establish procedures for sending reports and does not prepare reports on typologies, ML trends, or other analytical information to assist private sector detection. - JP lacks necessary operational independence to determine which STRs should be communicated to the Public Ministry and when not to prosecute. - Number of STRs received is negligible, negatively impacting effectiveness of FIU arrangements in CV. - 27. Law enforcement authorities — PC - Law enforcement agencies do not have a mandate to investigate and prosecute FT offences. - Power to postpone or waive arrest of a suspect or seizure of property exists only for drug offences. - Limited attention to pursuing ML investigations as evidenced by low level of statistics. - 28. Powers of competent authorities — PC - Absence of indication of use of existing power to compel production and searches for documents and information in ML investigation. - No power to compel production of documents and searches in relation to FT offences since FT is not an offence in Cape Verde. - 29. Supervisors — PC - BCV’s inspection powers as set out in Law 12/2005 are not sufficiently broad. - 30. Resources, integrity, and training — PC - Investigating and prosecuting agencies are under-staffed and lack necessary resources for proper investigation and prosecution of money laundering offences. - Lack of skills to investigate and prosecute money laundering and financing of terrorism offences. - JP lacks adequate resources and training to perform comprehensive analysis of STRs; resources stretched by regular police functions. - AML training provided to BCV staff appears to have been at a very basic level; staff resources and capacity need enhancement. - 31. National cooperation — PC - Coordination and cooperation among domestic institutions is low. - No coordination or cooperation presently exists on issues related to FT. - 32. Statistics — NC - Maintenance of statistics is weak across all Government agencies involved in AML. - Authorities have not collected sufficient information related to judicial proceedings of ML, including judicial accusations and convictions, specific penalties applied, and amounts of funds and goods frozen, seized or confiscated. - Where statistics are available they are not used strategically (e.g., to identify distribution of STRs across banking institutions). - 33. Legal persons–beneficial owners — LC - Inability of authorities to provide statistics to substantiate described arrangements casts doubt about effectiveness of the system. - 34. Legal arrangements – beneficial owners — NA - Express trusts and similar legal arrangements (“fiducie”, “treuehand”, “fideicomisso”) are not provided for or recognized in Cape Verde internal legal system. ### International Cooperation - 35. Conventions — PC - Provisions of the Vienna Convention and the Palermo Conventions have not been fully implemented. - The Convention on the Suppression of FT has not been implemented. - 36. Mutual legal assistance — PC - Beyond bilateral and multilateral agreements and provisions of the CPC, Cape Verde has not established a comprehensive framework to regulate mutual legal assistance that facilitates comprehensive and timely international cooperation. - Cape Verde cannot ensure effective international cooperation when FT is under investigation by a foreign authority because FT has not been criminalized. - 37. Dual criminality — PC - Team could not assert that the dual criminality principle applicable in Cape Verde is not an impediment to provide mutual legal assistance in criminal matters. - 38. MLA on confiscation and freezing — NC - No coordinating mechanisms to facilitate cooperation on foreign requests for seizure or confiscation of assets or property related to FT. - No consideration given to setting up an Asset Forfeiture Fund. - No power exists for sharing of confiscated assets related to ML/FT. - 39. Extradition — PC - In absence of references to specific cases requesting extradition of a national, assessment team unable to gauge if such cases were prosecuted comparably to similar domestic prosecutions for serious offences. - No evidence of cooperation with other countries in context of a request for extradition of a Cape Verdean national. - 40. Other forms of cooperation — PC - Channels for cooperation between Cape Verde law enforcement and supervisory authorities and foreign counterparts (including MoU and bilateral/multilateral arrangements, exchanges on ML/FT) are weak. - Possibilities for Cape Verde competent authorities to conduct investigations on behalf of foreign counterparts should be reinforced. - Law enforcement agencies cannot provide information to foreign FIUs that are not police FIUs. - Exchanges of information between Cape Verde law enforcement and other competent authorities and foreign counterparts are limited. - Lack of clear gateways for sharing information with other supervisors in Laws 3/V/1996, 53/V/1998, and 52/F/1990. ### Nine Special Recommendations - SR.I Implement UN instruments — NC - The Convention on the Suppression of FT has not been implemented. - UN Security Council Resolutions 1267 and 1373 have not been implemented. - SR.II Criminalize terrorist financing — NC - Financing of terrorism, terrorist acts, terrorist organizations and individual terrorists is not criminalized in accordance with Article 2 of the UN Convention on the Suppression of TF and FATF SR II. - Terrorism financing is not considered a predicate offence for ML as required by FATF SR II. - SR.III Freeze and confiscate terrorist assets — NC - Authorities did not demonstrate that UN Security Council Resolutions 1267 and 1373 are effectively implemented. - Provisions in the Penal Code and CPC alone do not provide for effective and immediate freezing, seizure and confiscation of goods, funds, assets and property of designated persons, terrorists, those who finance terrorism or terrorist organizations. - No obligation on financial entities or others to monitor for, and report, accounts or other property of such persons, nor do competent authorities supervise such entities. - SR.IV Suspicious transaction reporting — NC - Financing of terrorism is not criminalized and therefore not among the list of predicate crimes that could be the subject of an STR. - STR obligation as described in the law does not allow reporting the suspicion of any crime (only those predicate of ML). - SR.V International cooperation — NC - In absence of criminalization of FT, lack of clarity about application of dual criminality principle creates doubt about authorities’ ability to cooperate on FT matters using existing MLA framework. *Source: _cr09115 - ANNEX III* ### ANNEX III ### ANNEX III ### SR.VI — AML/CFT requirements for money/value transfer services (PC) - Licensing and preventive requirements are in place. - Monitoring of MVT services (which are only provided by financial institutions) is negatively affected by the same weaknesses of the supervisory framework of the BCV described in Chapter 3.10. ### SR.VII — Wire transfer rules (NC) - No measures in place to address the requirements of SR. VII, except to obtain and verify originator’s identification. - Banks are not required to include originator information in national or cross-border wire transfers. - There are no regulations indicating what to do with respect to incoming wires which do not contain full originator information. - Some positive practices arise because remittance services in Cape Verde are undertaken only by Western Union (under contractual arrangements with financial institutions), which is expected to comply with stricter US regulations albeit not enforceable by the Cape Verde authorities. ### SR.VIII — Nonprofit organizations (NC) - Cape Verde did not conduct an express review of its NPO sector with the aim of verifying in depth any vulnerability to the misuse of NPOs for TF and ML and institute the adequate measures to prevent and cope with these threats. ### SR.IX — Cash Border Declaration and Disclosure (NC) - The obligation to declare the cross-border movement of cash and negotiable instruments is not applicable to outgoing movements. - Absence of implementation by customs and lack of adequate powers to enforce the obligation. - Absence of powers to seize and retain currency or bearer instruments in violation of the declaration obligation. - Failure to maintain data related to the amount of currency and bearer negotiable instruments and identification data. - No power to communicate information related to currency or bearer instruments in violation of the obligation, to the FIU. ### Table 2. Recommended Action Plan to Improve the AML/CFT System — Key recommendations H3: 1. General / 2. Legal System and Related Institutional Measures - Criminalization of Money Laundering (R.1, 2) - Broaden the scope of the ML offence to encompass, at a minimum, a catalogue of offences included in the list of “designated categories of offences” referred in Recommendation 1 and the Glossary. - Provide clearly in law that a conviction for the predicate offence is not necessary before issuing a ML conviction in connection with that predicate offence. - Criminalization of Terrorist Financing (SR.II) - Terrorism Financing should be expressly and autonomously criminalized in accordance with Article 2 of the UN International Convention on the Suppression of TF. - Consider in law that TF is a predicate offence for ML and ensure the offence is punishable even when the terrorist acts have been carried out abroad or the organization or group is functioning outside the national territory, but the terrorism suspect or the funds or goods related to the suspect are found in Cape Verde. - Confiscation, freezing, and seizing of proceeds of crime (R.3) / Freezing of funds used for terrorist financing (SR.III) - Revise the system so that all situations referred in the aforementioned UN Security Council Resolutions are immediately applicable and allow for the freezing and seizure of all funds, goods and property of any kind of suspects of terrorism. - Establish internal mechanisms to transmit UN Security Council Resolutions for implementation purposes to all financial and non-financial entities subject to the AML/CFT regime. - Competent authorities should monitor implementation of these Resolutions and collect data on their application to allow for policy and legal measures. - Implement an internal process of listing and de-listing according to the UN Security Council Resolutions. - The Financial Intelligence Unit and its functions (R.26) - Amend the law to provide for the establishment of a full-fledged FIU in accordance with R.26. - Make a prompt decision about the location of the future FIU, taking into consideration the views of all relevant stakeholders. - The FIU should centralize reception and administration of STRs, conduct specialized desk analysis and forward resulting cases to the public ministry. - Provide adequate operational independence, resources, training and sources of information to the FIU. - Authorize the new FIU to obtain additional information from reporting institutions with respect to STRs without needing to initiate a police or judiciary inquiry. - Allow the FIU to exchange information with foreign counterparts and consider applying for membership in EGMONT. - Revise Law 17 of 2002 to prevent Article 22-4 from being interpreted as allowing accused persons in a trial access to the actual STR filed by a reporting institution; treat STRs as intelligence and not as evidence in court. - Once the new FIU is created, take special measures to prevent its confidential information from being disclosed to offices or agencies other than the competent judicial authorities. - Authorize the FIU to provide guidance to reporting institutions regarding the manner of reporting and to cooperate with other government agencies. - Law enforcement, prosecution and other competent authorities (R.27, 28) - Authorities should give adequate attention to the investigation of ML cases. - The judiciary police and Public Prosecutor’s Office lack the necessary resources, skills and training to adequately comply with the FATF Recommendations. - Need for more specialized staff, specialized investigative techniques including tracing and training. - Criminalization of financing of terrorism should provide the mandate to law enforcement to investigate and prosecute FT offences. - Amend the list of predicate offences to include all predicate offences listed under FATF Recommendation 1 to extend the application of Article 22. - Make explicit the power to take down witnesses’ statements in relation to AML/CFT investigations. - Put in place a system of collecting data for purposes of cooperation and reviewing trends and the effectiveness of the system, including data on prosecutions, convictions, penalties, freezing/seizing and confiscation. - Extend powers of investigation and prosecution to offences related to FT. - Consider establishment of units specialized in investigation and prosecution of ML and FT in the judiciary police and the Public Prosecutor’s Office. - Cross Border Declaration or disclosure (SR IX) - Amend the law to cover both incoming and outgoing persons. - Customs should implement the obligation by establishing a mechanism to monitor and enforce compliance with the law. - Maintain records of amounts of cash and bearer negotiable instruments and identity data when a declaration exceeds the prescribed threshold, there is a false declaration or there is a suspicion of ML/FT. - Define powers so authorities may request and obtain information. - Provide powers to restrain currency found in breach of the obligation for the purposes of determining whether it is related to ML/FT. - Apply sanctions following a case of false declaration. - Provide resources and training to customs officers for effective implementation. - Clarify that the requirement to monitor movement of currency and bearer negotiable instruments applies to movement through the mail and through the use of containerized cargo. H3: 3. Preventive Measures — Financial Institutions - Risk of money laundering or terrorist financing - No explicit numeric measures in this excerpt; see detailed recommendations in main text. - Customer due diligence, including enhanced or reduced measures (R.5–8) - Consider expressly prohibiting the use of anonymous accounts. - Require financial institutions to undertake CDD when there are doubts about the veracity of previously obtained information. - Remove the threshold of one million escudos currently associated with the provisions Chapters II {B}{1} of TIs 108 and 109. - If maintaining the arrangement allowing a foreign bank to verify identity, require that: - Financial institutions satisfy themselves that the foreign financial institution is regulated and supervised (in accordance with Recommendation 23, 24 and 29), and has measures to comply with the CDD requirements set out in R.5 and R.10. - In determining permissible countries for third parties, competent authorities should consider whether those countries adequately apply the FATF Recommendations. - Take measures to give effect to all other requirements of FATF Recommendations 5, 6, 7 and 8. - Third parties and introduced business (R.9) - Apply current provisions for introduced business to all institutions, not just IFIs. - Where reliance on a third party for CDD occurs, require financial institutions to ensure copies of identification data and other relevant CDD documentation will be made available upon request without delay. - Require financial institutions to satisfy themselves that the third party is regulated and supervised in accordance with FATF Recommendations 23, 24, and 29 and has measures to comply with CDD requirements set out in FATF Recommendations 5 and 10. - Clarify that in business introductions, the financial institution retains ultimate responsibility for undertaking CDD measures. - Financial institution secrecy or confidentiality (R.4) - Review the IFIs secrecy regime and align it with the regime applicable to financial institutions generally so as not to discourage IFIs and employees from reporting suspicious transactions of ML and TF. - Record keeping and wire transfer rules (R.10 and SR.VII) - Recommendation 10: - Require financial institutions to maintain transaction records for at least five years following completion of the transaction or longer if requested by a competent authority in specific cases and upon proper authority. Apply whether the account or business relationship is ongoing or terminated. - Require records sufficient to permit reconstruction of individual transactions to provide evidence for prosecution if necessary. - Require maintenance of identification data, account files and business correspondence for at least five years following termination of the business relationship, or longer if requested by a competent authority in specific cases and on proper authority. - Require that customer and transaction records and information be available on a timely basis to domestic competent authorities upon appropriate authority. - SR. VII: - The BCV should issue regulations to ensure that financial institutions include accurate and meaningful originator information (name, national identification number and account number) on all wire transfers that are sent, and to ensure that the information remains with the transfer or related message through the payment chain. - Regulations should require monitoring for, and enhanced scrutiny of, transfers which do not contain complete originator information. - Monitoring of transactions and relationships (R.11 and 21) - Amend legal and regulatory provisions to explicitly provide for: - Obligations to pay special attention to transactions and patterns that are unusually complex or large and without an apparent economic or visible lawful purpose. - This obligation should not be limited by thresholds or circumscribed to instances where the obliged institution suspects that the transaction is linked to the commission of a crime. - Reporting institutions should leave a written record of their review process and findings. - Institutions should pay special attention to transactions from or to countries which do not or insufficiently apply the FATF Recommendations; authorities should provide guidance about who these are and how to identify them. - Authorities should determine if counter measures can be applicable within the current legal framework and make necessary amendments to apply them to countries that insufficiently apply the FATF standards. - Suspicious transaction reports and other reporting (R.13, 14, 19, 25, and SR.IV) - Recommendation 13: - Include financing of terrorism as an offence that must trigger an STR when reporting institutions suspect or have reasonable grounds to suspect funds are linked to terrorism, terrorist acts or terrorist organizations. - Make it mandatory to report any suspicion arising from attempted transactions. - Clarify that all suspicious transactions should be reported to the same central authority, which should also be informed when a suspicious transaction has been suspended by the reporting institution. - Clarify via regulation and education that involvement of tax matters must not be justification not to file an STR. - Consider amending the definition of suspicious transactions to allow filing of STRs with a lower degree of suspicion. - Recommendation 14: - Prohibit tipping-off the customer and any third party about a report being filed. - Revise the system for mandatory suspension of all suspicious transactions to prevent alerting the customer, protect the institution and facilitate filing of reports. Consider limiting suspension to exceptional cases such as “fear of flight of funds” in addition to monetary thresholds (not applicable to SR.IV reports, once FT is criminalized). - Consider that the notification of suspension be sent to the same authority as the one receiving the STR. - Establish procedures, guidelines and templates for filing STRs. - Recommendation 19: - Consider feasibility and utility of establishing a system of Cash Transaction Reports (CTR), taking into account resources, intended use, and whether expected objectives justify the costs. - If implemented, set threshold amounts in accordance with the economic context and average amounts of various types of financial transactions. - Recommendation 25: - Supervisory and enforcement entities should provide feedback about suspicious transactions reported by reporting entities and guidelines on how those reports should be filed. - Internal controls, compliance, audit and foreign branches (R.15 and 22) - Recommendation 15: - Require financial institutions to establish and maintain internal procedures, policies and controls to prevent ML and TF and communicate these to employees. - Policies should cover CDD, record keeping, detection of unusual and suspicious transactions and obligation to report. - Require appropriate compliance management arrangements, including appointment of an AML/CFT compliance officer at management level. - Ensure AML/CFT compliance officer and relevant staff have timely access to customer identification data, CDD information, transaction records and other relevant information. - Require an adequately resourced and independent audit function to test compliance. - Require ongoing employee training on AML/CFT developments, methods and trends, and clear explanations of AML/CFT laws and obligations. - Require screening procedures to ensure high standards when hiring employees. - Recommendation 22: - Require financial institutions to ensure foreign branches and subsidiaries observe AML/CFT measures consistent with home country requirements and FATF recommendations to the extent host country laws permit. - Pay particular attention to branches and subsidiaries in countries that do not or insufficiently apply FATF recommendations. - Where minimum AML/CFT requirements of home and host differ, require application of the higher standard where permitted by host country laws. - Require financial institutions to inform their home country supervisor when a foreign branch or subsidiary is unable to observe appropriate AML/CFT measures because prohibited by host country laws. - Shell banks (R.18) - Cape Verde should not allow establishment or continued operation of shell banks. - Amend Articles 12 and 44 of Law 12/2005 to ensure banks operating in Cape Verde have a physical presence (effective mind and management in Cape Verde) and are affiliated to a group subject to effective consolidated supervision. - Prohibit financial institutions from entering into or continuing correspondent banking relationships with shell banks. - Require financial institutions to satisfy themselves that respondent financial institutions in a foreign country do not permit their accounts to be used by shell banks. - The supervisory and oversight system — competent authorities and SROs (R.23, 29, 17) - Law 17/VI/2002 should be amended to ensure that the following activities are covered irrespective of the type of entity undertaking the activity: (text continues in main document). *Source: _cr09115 - ANNEX III* ### ANNEX III ### ANNEX III ### Financial sector scope and fit-and-proper standards - Permitted activities listed include: Financial leasing; The transfer of money or value; Issuing and managing means of payment; Financial guarantees and commitments; Trading in money market instruments, foreign exchange, exchange rate and index instruments, transferable securities, commodities futures trading; Participation in securities issues and the provision of financial services related to such issues; Individual and collective portfolio management; Safekeeping and administration of cash or liquid securities on behalf of other persons; Otherwise investing, administering or managing funds or money on behalf of other persons; and Money and currency changing. - Fit and proper criteria: - Should be uniform across all laws regulating financial institutions. - Should be applicable to shareholders, managers and directors. - The term integrity should be fully defined in each law. - Article 10 of Law 3/V/1996 should be amended to remove the provision that permits licensees to issue bearer shares. - Institutional risk assessment and regulatory upgrade: - BCV should undertake an AML/CFT risk assessment of the financial institutions operating in Cape Verde and develop an appropriate regulatory and supervisory strategy. - The authorities need to review regulatory arrangements for IFIs to bring them up to international standards by addressing identified weaknesses. ### Guidance, suspicious reporting, and templates - Recommendation 25: - Develop a comprehensive set of AML/CFT guidance for financial institutions covering FATF Recommendations, relevant aspects of other international standards, the Cape Verde legal framework, implementation measures, guidance on acceptable domiciles for non face-to-face customer CDD assistance, and information on countries that do not or insufficiently apply the FATF Recommendations. - BCV, in coordination with the JP, should issue procedures, guidance and templates for the filing of STRs. ### Supervisory powers, inspections, and sanctions - Recommendation 29: - Widen BCV’s inspection powers as set out in Law 12/2005 to be similar to those applicable to institutions in the domestic market under Law 3/V/1996. - BCV should undertake inspections of branches of institutions operating in the domestic sector as well as IFIs. - Update BCV’s inspection manual to incorporate procedures and tools for supervision of compliance with AML requirements. - BCV staff should receive additional training on AML supervisory strategies and practices. - Recommendation 17 and sanctioning framework: - BCV should be given autonomy to impose (not only to instruct and recommend) administrative sanctions for breach of AML regulations by financial institutions and its employees. - The AML Law should be fully implemented including its sanctioning regime for any breach of the AML requirements. - Law 17 of 2002 should be amended to provide for administrative sanctions for the violation of all the requirements of said law (currently the breach of requirements from Articles 18 and 21 does not have a corresponding penalty). ### DNFBPs: preventive measures, STRs, regulation and supervision - Preventive Measures–Non-financial Businesses and Professions (SR.VI) - Customer due diligence and record-keeping (R.12): - Take necessary administrative and regulatory steps to implement the AML law with respect to DNFBPs and perform outreach to educate and engage these sectors. - Priority should be given to implementation by real estate businesses. - Expand the scope of the AML law to include lawyers and accountants when they engage, on behalf of their client, in preparing for or carrying out transactions concerning: buying and selling of real estate; managing clients money, savings accounts, and other assets; organization of contributions for the creation, operation or management of companies; creation, operation or management of legal persons or arrangements. - Expand the scope of the AML law to include notaries and registrars, especially to allow for the filing of suspicious transaction reports under adequate protection against civil and criminal litigation. - Consider circumscribing the preventive obligations of casinos and dealers in precious metals or stones to the thresholds allowed by FATF Recommendation 12 and its Interpretative Note, or to lower thresholds according to risk evaluation. - Suspicious transaction reporting (R.16): - Lawyers, notaries, solicitors and accountants should be required to report suspicious transactions when they engage in the activities described in FATF Recommendation 16. - Expand AML law scope to include notaries and registrars with protection against civil and criminal litigation when reporting in good faith. - Regulation, supervision, monitoring, and sanctions (R.24 and 25): - Recommendation 24: - Regulations should be issued by the ministry of finance to implement the law with respect to DNFBPs, with regard to their special characteristics. - The ministry of finance should supervise DNFBP compliance with the AML law and its future regulation; provide adequate training and resources; and designate clear AML responsibilities to its various departments. - Undertake a risk assessment of different DNFBP economic sectors to determine supervision depth and characteristics required. - Recommendation 25: - Develop guidelines for DNFBPs on how to identify suspicious operations and elevate private sector awareness of ML/FT risks and regulations. - Other designated non-financial businesses and professions (R.20): - Encourage development and use of modern and secure techniques for conducting financial transactions to disincentivize cash use and reduce ML vulnerability. ### Legal persons, legal arrangements, and nonprofit organizations - Legal Persons–Access to beneficial ownership and control information (R.33): - Promote interconnection of the Registries Offices to allow comprehensive and effective public knowledge of company records and enhance accessibility of registered information. - Legal Arrangements–Access to beneficial ownership and control information (R.34): - (No specific measures listed beyond the R.34 heading in the source.) - Nonprofit organizations (SR.VIII): - Conduct an express review of the NPO sector to verify vulnerabilities to misuse for TF and ML and institute measures to promote transparency, accountability and integrity. - Implement comprehensive information collection on all NPOs: activities, management, funding sources and application of resources to prevent use for criminal activities. - Implement licensing or registry of NPOs and maintain records of their transactions for a period of at least five years. - Ensure domestic authorities are charged with monitoring NPO activity and establish mechanisms for domestic and international cooperation and exchange of information regarding suspicious FT or terrorism activities. - Ensure entities undertaking micro-finance activity are effectively captured in the AML regulatory framework. ### National and international cooperation - National cooperation and coordination (R.31): - Establish a national mechanism to ensure coordination and cooperation among agencies on AML/CFT issues. - The mandate and powers of the NCC set up under the Drugs Law could be extended to focus on AML/CFT implementation. - The national mechanism should ensure appropriate statistics and data are maintained on investigations and prosecution related to money laundering and financing of terrorism. - The Conventions and UN Special Resolutions (R.35 and SR.I): - Authorities are encouraged to implement fully the provisions of the Vienna and the Palermo Conventions. - Implementation of the UN International Convention on the Suppression of the Financing of Terrorism should be a matter of priority. - Need to put in place necessary measures, including procedures and mechanisms, to implement UNSCR 1267 and 1373. - Mutual Legal Assistance (R.36, 37, 38, SR.V): - Strengthen laws and measures regarding freezing or confiscation of property related to ML and FT investigations to allow expeditious response to foreign requests. - Consider setting up an asset forfeiture fund and sharing confiscated assets among participating countries. - Extend powers of freezing, seizure and confiscation to assets related to financing of terrorism, which is not an autonomous offence in Cape Verde’s legal system. - Establish a system for maintaining comprehensive statistics on mutual legal assistance regarding seizures, freezing and confiscation of assets, and extradition. - Extradition (R.39, 37, SR.V): - Create expressly the TF offence in accordance with the UN International Convention on the Suppression of Terrorism Financing and consider this offence extraditable; ensure extradition of foreigners who committed this offence in the requesting state even before FT is criminalized domestically. - Ensure extradition requests are dealt with expeditiously. - Ensure nationals whose extradition has been requested for offences committed abroad are subject to trial in Cape Verde in a manner comparable to similar domestic prosecutions for serious offences. - Other Forms of Cooperation (R.40, SR.V): - Develop cooperation mechanisms to facilitate competent authorities’ cooperation with other countries on ML/FT matters. - FIU establishment should provide an avenue for more cooperation on ML/FT. - Amend the law to allow cooperation between Cape Verde competent and law enforcement authorities on ML matters. - Amend Laws 3/V/1996, 53/V/1998, and 52/F/1990 to provide clear gateways for supervisory cooperation. - Amend Law 12/2005 to remove the requirement for financial institutions to be informed when BCV provides information about that institution to another supervisor. - Develop channels for enhanced cooperation on prompt exchange of information and conducting investigations on behalf of foreign counterparts. ### Resources, statistics, and operational capacity - Resources and statistics (R.30 and 32): - Recommendation 30: - Strengthen resources of agencies within the AML regime. - Provide more training for investigators of money laundering, particularly in specialized investigative techniques. - SCITE for the time being, and the future FIU once created, require training on analysis of suspicious transactions, financial literacy and production of financial intelligence. - BCV staff should receive additional training on AML supervisory strategies and practices. - Provide resources and training to customs officers to monitor cross-border movement of currency and bearer negotiable instruments effectively. - The commercial registry should be capable of providing accurate and timely information on registered legal persons, and the identity of their representatives, officers and beneficial owners. - Recommendation 32: - Establish a system of collecting data for cooperation and reviewing trends and effectiveness of the system, including prosecutions, convictions, penalties, freezing/seizing and confiscation. - Once cross-border monitoring is implemented, maintain records of amounts of cash and bearer negotiable instruments and identity data where a declaration exceeds the prescribed threshold, there is a false declaration or suspicion of ML or FT. - Collect and maintain statistics on the number of companies, types of companies, legal persons, number of companies issuing shares and bearer shares, and extinction and liquidation of companies by public prosecutors. - Maintain detailed data to track progress and efficiency of investigations and prosecution related to ML and FT, and for analysis of trends in underlying criminality. - Establish a system for maintaining comprehensive statistics on mutual legal assistance regarding seizures, freezing and confiscation of assets, and extradition. ### Other issues and structural framework - General framework – structural issues: - The report highlights multiple legal amendments, regulatory upgrades, capacity-building, and statistical systems needed across the legal, supervisory, and operational framework to strengthen Cape Verde’s AML/CFT regime. *Source: _cr09115 - ANNEX III* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09115.pdf_