Cape Verde

Cape Verde is one of the smallest countries of this region in terms of size and population. Its strategic location 500 km from the west coast of Africa near major north–south sea routes, its important communications station, and its sea and air refueling site also carry potential risks of money laundering. The economy is service-oriented, with commerce, transport, tourism, and public services accounting for 66% of GDP. Future prospects depend heavily on the maintenance of aid flows, the encouragement of tourism, remittances, and the momentum of the government’s development programme.

Cape Verde has a relatively small financial sector, which consists of only four banks and two insurance companies, so it may not be an attractive centre for money laundering. However, the under-regulation of the non-financial sector and the new offshore facilities make the island vulnerable to money laundering. While financial institutions and other covered persons or entities have an obligation to file suspicious transaction reports with the Judiciary Police (JP), this office does not perform all the functions of an FIU. Within the JP, reports are received by an internal unit known as the Central Section for the Investigation of Trafficking of Narcotics. This unit does very limited analysis of reports and informs the public ministry whenever reports are received.

There are some serious concerns about Cape Verde’s framework for the operation of international financial institutions. Under existing arrangements it is possible for institutions operating in this sector to fall outside of acceptable arrangements for global consolidated supervision and to operate without a substantive physical presence in Cape Verde. In a number of instances regulatory arrangements for these institutions are also less rigorous than the arrangements in place for institutions that operate in the domestic sector.

Cape Verde has demonstrated commitment to establish an FIU by nominating potential members, but the FIU is yet to be established by a decree; no office accommodation has been designated for it. Until this happens, there is a potential ML/FT risk because the country is unable to exchange financial information with the international community. Cape Verde has experienced relative political stability since independence in 1975, but the institutional framework for the prevention and control of money laundering is either new or nonexistent. Despite this, Cape Verde has demonstrated its commitment to combating ML and FT in recent times.

The legal system of Cape Verde is based on that of Portugal. Money laundering has been criminalized through AML Law No. 17/VI/2002. The offence of money laundering has been built in accordance with the material and subjective elements of the relevant international conventions.Article 3(1)a) to c) of Law 17/VI/2002 (the AML Law) fulfils paragraphs (1)b)(i) and (ii) of Article 3 of the Vienna Convention and Article 6(1)a)(i) and (ii) of Palermo Convention. Paragraph (4) of the same provision also provides for the criminalization of money laundering if the predicate offence has been committed outside of the national territory. Money laundering is defined as a predicate offence under the AML law and the current definition extends to any type of property. Property is considered the proceeds of crime that have been derived from an unlawful act, as stated in Article 243 of the Code of Criminal Procedure.

The Cape Verde ML law provides that persons entering the country must make a declaration to Customs when they are in possession of foreign currencies or bearer securities in excess of one million escudos (EUR 9,090). The Customs Department has the responsibility to ensure compliance with this obligation but it does not have the power to stop or restrain currency or bearer instruments that are falsely declared or are suspected to be related to ML or FT. The Law establishes preventive and repressive measures against the laundering of money and other assets of criminal origin foreseen in its Article 3, beyond what is already applicable, in the same subject, to the proceeds derived from drug trafficking.The customer due diligence (CDD) regime allows financial institutions to base customer identification, in part, on verifications provided by foreign institutions, without establishing a framework to ensure that only well-supervised institutions that adequately apply the FATF recommendations are used for this purpose. Existing arrangements for preventive measures do not adequately address the risks posed by certain types of higher risk customers such as politically exposed persons and those associated with correspondent banking relationships and regimes for introduced business. The framework does not require financial institutions to apply Cape Verde requirements to foreign branches and subsidiaries. AML obligations are extended to individuals or corporations engaged in the operations of 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.

Cape Verde has also ratified some AML/CFT-related conventions, including the 1988 UN Vienna Convention, the Suppression of Financing of Terrorism Convention and UN Palermo Convention. However, while Cape Verde has ratified the UN Convention for the Suppression of the Financing of Terrorism, it has not yet criminalized the offence of the financing of terrorism in its domestic legal system. 51. The Bank of Cape Verde is the regulator for all activities conducted by financial institutions. The Auditor General of Capital Markets is a unit within the Bank of Cape Verde. The Bank Supervision Department has issued AML regulations and has undertaken AML inspections of banks that operate in the domestic market. But it has not clearly defined an AML/CFT supervisory strategy and it does not have a clear perspective on the varying levels of risk across the different financial institutions and their lines of business. The Ministry of Finance and Public Administration is designated as the regulator of designated non-financial businesses and professions (DNFPBs). The Ministry has not issued any regulations or guidance to assist with the implementation of the principal AML law in respect of the covered DNFBPs. Most people who undertake some of the covered activities are generally not aware of their obligations under the AML law. 52. Furthermore, Cape Verde does not have a strong framework for national cooperation in the context of AML/CFT matters. The National Committee For Coordination on the Fight against Drugs, Organized Crime and Corruption is potentially a good foundation for such cooperation as it brings together most of the relevant government institutions. While this committee has successfully undertaken some relevant initiatives, there is no effective operational cooperation across all relevant agencies. There is some degree of interaction between the JP and the Public Prosecutor’s office which, by the nature of their functions, are compelled to collaborate on investigations and prosecutions, but there is no mechanism that governs such cooperation or ensures that it takes place in a structured and consistent way. There is little or no coordination between the Bank and the law enforcement agencies, which is reflected in the fact that the Bank issued guidelines to financial institutions for the reporting of suspicious transactions, without consulting with the JP, the agency that receives suspicious transaction reports.

Overall, while Cape Verde demonstrated a strong political commitment to combat money laundering and terrorist financing, there is still more it can do in real time, to seriously address these menaces in a coordinated and consistent manner.