Cabo Verde

Political situation

The Republic of Cabo Verde held municipal elections in February 2012. The peaceful conduct of the campaigns in the preceding months reflects Cabo Verde’s image as an example of democracy and stability, and of respect for the rule of law and human rights. This context of democratic consolidation and lasting peace creates an environment that is highly conducive to political accountability, good governance and economic growth, which could help win the fight against ML/TF.

Cabo Verde is cited as an example of public-sector governance, having carried out major reforms that have reduced corruption and improved the quality of business transactions. The country scored 60 out of 100 and ranked 39th out of 174 countries in 2012, according to Transparency International. This ranking places Cabo Verde high among ECOWAS countries in terms of governance and accountability – a remarkable achievement.

Cabo Verde is a middle-income country (MIC) according to the AfDB and IMF classifications. It had a gross national income per capita of USD 3,270 in 2010, well above the USD 1,175 threshold for lending to middle-income countries. Cabo Verde has a relatively small population (estimated at fewer than 500,000), a population growth rate of 1.4% in 2010 and a life expectancy of 72 years. According to the AfDB, the country had a literacy rate of around 84% in 2010. Cabo Verde’s Human Development Index has risen slightly since 2010, at an average rate of 0.6% a year. With these results, the country moved from 129th place in the World Bank’s Doing Business ranking in 2011 to 119th in 2012.

Economic and financial situation

Following a financial crisis in the euro area that slowed economic growth from 5.4% in 2010 to 5% in 2011 owing to weak demand for exports, the Cabo Verdean economy was expected to grow by 5.1% in 2012 and 2013.

Meanwhile, fiscal adjustments helped stabilise the country’s reserves and contributed to stronger macroeconomic policy coordination in 2012. Credit growth slowed considerably during the year, reflecting weaker demand and increased credit risk. These results enabled the country to maintain reserves equivalent to three months of imports, given that its currency will remain pegged to the euro. The inflation rate in 2012 was around 3%, compared with 4.5% in 2011.

In line with Cabo Verde’s medium-term development strategy, the government decided to transform its economy by diversifying its production base. It has therefore continued to develop growth clusters such as fisheries and maritime services, financial services, information technology (IT) and air transport services.

However, the country’s development efforts have continued to be hampered by a series of challenges, including difficult geographical conditions, as Cabo Verde is a small island nation with a small domestic market. The well-known shortage of infrastructure has undermined Cabo Verde’s competitiveness. Cabo Verde also relies on external sources of financing, in particular development aid and remittances from the diaspora, and is vulnerable to external shocks. The World Bank estimated remittances at around USD 200 million in 2012, or about 9.4% of the country’s GDP, compared with USD 178 million in 2011.

As a result, impressive economic growth has not reduced Cabo Verde’s high unemployment rates, particularly among young people, who make up more than 50% of the labour force. In addition, the high level of unemployment in a context of impressive economic growth indicates that national wealth is concentrated in the hands of a few. The resulting social inequality is likely to act as a catalyst for predicate offences to ML/TF.

Cabo Verde has a modest but dynamic financial system, with 4 deposit money banks making up about 80% of the financial sector, which represented around 77.3% of GDP in 2010.

Prevalence of predicate offences

As a hub for sea and air transport between Africa, the Caribbean, South America and Europe, Cabo Verde is seeing an increase in illegal immigration and drug trafficking. Although no major drug seizures were reported in 2012, Cabo Verde’s image as a key transit country for drugs from South America to Europe remains. While the corruption situation is not alarming, some cases of corruption by officials have been reported, which may undermine government efforts to tackle the production or distribution of drugs and the laundering of the resulting proceeds. Cross-border cash transfers intercepted by customs during border checks on travellers, and the use of shell companies in the real estate sector to conceal or disguise the illicit origin of dirty money, remain challenges linked to crime and the laundering of proceeds.

AML/CFT situation

Following a Plenary discussion of the follow-up to Cabo Verde’s MER in November 2011, the country was placed under enhanced monitoring, having failed to demonstrate tangible progress in implementing the recommendations of its mutual evaluation report. Cabo Verde therefore amended Decree No. 1/2008 of 2008 and replaced it with Decree No. 09/2012 of March 2012. The new decree moved the Financial Intelligence Unit (FIU) from the Central Bank of Cabo Verde to the Ministry of Justice. The FIU has established informal agreements with the FIUs of Ireland and Italy. The Government of Cabo Verde has drawn up guidelines for real estate agents and casinos to guide professionals in these sectors on how to conduct their transactions and prevent money laundering.

Despite these measures, the gaps and challenges in Cabo Verde remain considerable. For example, while the FIU received 100 suspicious transaction reports (STRs) in 2012, only five were processed and referred to the Attorney General. More than 90% of STRs were filed by commercial banks, especially those located on the island of Santiago. While commendable, this is an indication of the limited involvement of other reporting entities in AML/CFT in the country. The FIU will need to reach out to other reporting entities, win their trust and encourage them to fulfil their obligations.

The relocation of the FIU has not strengthened its strategic and operational capacity, as it continues to face financial, logistical and human resource problems. The institutional frameworks and capacities established against ML/TF remain weak, despite the growing threat of drug-related money laundering. Cabo Verde’s Inter-Ministerial Committee on AML/CFT, which is the national body for coordinating AML/CFT activities, has not been functional since 2010. As a result, no meetings or awareness-raising activities have been held in the past two years. Likewise, Cabo Verde has still not adopted a national AML/CFT strategy.

Technical assistance

As part of efforts to raise awareness and extend the fight against money laundering to various civil society groups, GIABA organised a 2-day AML/CFT awareness seminar for journalists in Praia on 29-30 August 2012. The seminar aimed to:

• Build a strong partnership with the media, in a concerted manner, for the effective dissemination of AML/CFT issues;
• Familiarise the media with regional AML/CFT initiatives, in particular GIABA’s mandate; and
• Strengthen the network of journalists to promote the dissemination of information on AML/CFT systems.

A total of 40 participants from French- and Portuguese-speaking ECOWAS countries, namely Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo, attended the 2-day seminar. At the end of the seminar, the following outcomes were noted: the emergence of a group of highly qualified journalists with in-depth knowledge of AML/CFT measures and a good understanding of GIABA’s mandate; good local, regional and international media coverage of the seminar; the establishment of an ad hoc committee to set up a French- and Portuguese-speaking network; and the development of an action plan on how the network of media professionals will promote GIABA’s aims and objectives.

In October 2012, AML/CFT IT resources were installed at the Cabo Verde FIU to assist in the receipt, analysis and dissemination of suspicious transaction reports. In addition, GIABA provided user training on the software to the FIU so that staff could take full ownership of the equipment. Nevertheless, given the many challenges, Cabo Verde needs further assistance. Its other needs are to:

• Provide the FIU with the human, technical and
• logistical resources it needs to respond effectively and in a timely manner to AML/CFT challenges;
• Improve the control of cross-border movements of cash, precious metals and precious stones in the country;
• Regulate and supervise non-financial sectors effectively;
• Provide continuous training to the authorities concerned with AML/CFT, as well as to other officials of reporting entities, on suspicious transaction reporting obligations;
• Raise awareness among judges and prosecutors of the importance of confiscating, on behalf of the State, the proceeds of drug trafficking and other similar offences in the fight against organised crime.

Conclusion

Cabo Verde remains one of the peaceful and stable countries in West Africa. Yet it is vulnerable to, and even threatened by, money laundering and related criminal activities. Its location and geographical features continue to make it a natural transit point for drugs from Latin America to Europe and other destinations. In addition, the country’s attractiveness to tourists and investors makes it a prime target for the laundering of the proceeds of organised crime.

Given Cabo Verde’s lack of progress in complying with AML/CFT standards, the country should take measures to, among other things:

• Provide the FIU with the resources it needs to function properly, and begin the process of joining the Egmont Group;
• Make the Inter-Ministerial Committee on AML/CFT operational; and
• Adopt a national AML/CFT strategy.