Financial Intelligence Unit’s Report shows Liberia is Prone to Money Laundering
MONROVIA – Liberia’s Financial Intelligence Unit (FIU) has uncovered that the risks of money laundering in the financial sector and among the ‘Designated Non-Financial Business Professionals (DNFBPs) are high.
The discovery was contained in the National Risks Assessment (NRA) report on ‘Money Laundering and Terrorist Financing in Liberia.’
Addressing a press conference marking the official launch of the report on Tuesday, the Director General of the FIU, Mr. Edwin W. Harris said the completed NRA report, which is the first of its kind in Liberia, is poised to provide stakeholders and the world on the risks Liberia faces when it comes to money laundering and terrorist financing.
While the report shows that the major outcomes of the NRA portray Liberia’s money laundering risks as high in the financial sector as well as the DNFBPs, the NRA report also reveals that Liberia’s terrorist financing risk is low.
With the completion and publication of the report, Mr. Harris said the FIU will launch and anti-money laundering policy, strategy and action plan on mitigating the risks relating to money laundering in Liberia.
As mandated under ‘Recommendation One’ of the Financial Action Task Force (FATF) 40+ recommendations that countries should identify and understand their risks, Mr. Harris said the FIU will distribute over 300 hard copies of the NRA report to all stakeholders and partners in October 2021.
He said financial institutions and DNFBP will be required to use the NRA Report on money laundering and terrorist financing as a guide in mitigating the risks to money laundering in their respective sectors.
He revealed that the Liberia Working Group, on the second round of mutual evaluation, will host series of activities, including focus group discussions, town hall meetings and outreach to all stakeholders in the anti-money laundering and countering terrorism financing regime in Liberia.
The report, he added, can be downloaded from key websites in the county, including the FIU itself, the Central Bank of Liberia (CBL), the Liberia Revenue Authority (LRA), the Executive Mansion, the Ministry of Finance and Development Planning (MFDP), the Liberia Extractive Industries Transparency Initiative (LEITI), and the General Auditing Commission (GAC), amongst others.
What’s in the Report
The report named corruption and bribery, illicit drug trafficking and tax evasion, among others, as the most committed predicate offences in Liberia.
Excerpt of the report: “After comprehensive collection and analyses of information from LEAs database with the application of qualitative and quantitative methods of research, the following were derived as the most committed predicate offences in Liberia based on the number of cases investigated and forwarded to the court, the number of prosecutions, and convictions, namely; Corruption and bribery, Illicit trafficking in narcotic drugs and psychotropic substances, Robbery or theft, Tax evasion, Trafficking in human beings and migrant smuggling, Counterfeiting and piracy of products, currency counterfeiting and terrorism, including terrorist financing.”
The NRA gathered that the microfinance regulatory and supervisory framework in Liberia is not based on a comprehensive tiered risk-based approach, where Micro finance institutions (MFI) are regulated and supervised according to the risk they pose to the financial sector and consumers. Instead, the current regulatory and supervisory framework attempts to regulate and supervise uniformly by institution type.
It added that the Rural Community Financial Institutions (RCFIs) cannot meet all the important standards set out in the RCFIs regulations and they are separate from the MDI regulations despite having a similar business line.
MDIs, Non-deposit taking MFIs, RCFIs, and credit unions are not under a tiered risk-based approach that regulates according to risk, she said.
Moreover, 129 the non-deposit taking MFIs are not under comprehensive regulations despite providing credit to over 21,000 consumers with some loans approaching US$10,000, and many institutions do not meet the requirements, including report.
The NRA report also pointed out that Liberia has nine commercial banks with a network of ninety (90) branches, 51 of which are in Montserrado County.
The use of ATM and point-of-sale (POS) machines also remains low, the report said, adding that the limited infrastructure and access points provided by formal financial sector institutions is a key barrier to achieving financial inclusion.
With this limited infrastructure, the report stated that it has been difficult to reach a heavily rural population; with approximately 3.4 million or 75% of Liberia’s population living outside Monrovia, according to an IMF 2013 rough estimate. “Liberia’s financial sector is bank dominated, as is typical of low-income developing countries,” the report said.
In its recommendations, the FIU called for a tiered risk-based approach to be adopted in the financial sector. According to the anti-graft institution, this is the approach taken by several other countries in Africa such as Kenya, Uganda, and Ghana.
It adds that in these countries, the financial system regulatory framework permits a wide range of institutional providers of microfinance services in a tiered structure, and the microfinance sectors appear to be much larger, consist of more diverse institutions, and have better prospects for self-sustainability
The FIU called for the Introduction of Amendments to various regulations such as Microfinance Deposit-taking Institutions (MDI) Regulation 2012, No. CBL/RSD/004/2012, Rural Community Financial Institutions, CBL/RSD/002/2016, and Credit Unions Regulation, No. CBL/RSD/001/2015 among others to reflect the tiered risk-based approach and tier 130 categorization.
Such Amendments, the report notes, entail setting capital thresholds and other requirements for Tier 3 to distinguish from small deposit taking MFIs in Tier 4, and the incorporation of the activities of large RCFIs and credit unions, among others.
It called for the CBL to set an original vision in a National Money Strategy to “foster a national ecosystem of mobile money in Liberia that promotes economic growth, contributes to financial inclusion, increases transparency and reduces waste of public resources.”