1. This Report on the Observance of Standards and Codes for the Financial Action Task Force (FATF) 40 Recommendations for Anti-Money Laundering (AML) and 9 Special Recommendations on Combating the Financing of Terrorism (CFT) was prepared by the Legal Department of the IMF. 1 The report provides a summary of the AML/CFT measures in place in the Union of the Comoros (the Comoros) and of the level of compliance with the FATF 40+9 Recommendations, and contains recommendations on how the AML/CFT system could be strengthened. The assessment is based on the information available at the time of the on-site mission conducted from May 6 to 20, 2009, and other verifiable information subsequently provided by the authorities. It was conducted using the 2004 Assessment Methodology as updated. The Detailed Assessment Report (DAR) on which this document is based was adopted by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) plenary on March 24, 2010. The views expressed here, as well as in the full assessment report, are those of the IMF team, and do not necessarily reflect the views of the Government of the Comoros or the Executive Board of the IMF.
B. Key Findings
2. Since 2003, the Comoros has introduced a number of measures to establish an AML/CFT regime. However, the legal framework has many shortcomings and is generally not effectively implemented. As a result, none of the FATF 40+9 recommendations have been rated compliant, and only four recommendations have been rated largely compliant. These recommendations relate to cross-border correspondent relationships (R.7), the protection for STR reporting (R.14), document production, search and seizure powers for law enforcement agencies (R.28), and domestic cooperation (R.31). The remaining 36 recommendations and all the nine special recommendations have been rated either non-compliant or partially compliant.
3. The 2003 Presidential ordinance that criminalizes money laundering (ML) has not been widely implemented. The implementation of an AML/CFT policy began in 2008 with the appointment of the members of the Financial Intelligence Unit (FIU), awareness-raising efforts with entities concerned in the public and private sectors, and the enactment in March 2009 of an ordinance that expanded the scope of the AML/CFT preventive measures and covered the financing of terrorism. However, there have been no investigations or convictions for ML/FT.
4. The limited capacity to absorb the proceeds of foreign offenses and the fact that the financial system is relatively underdeveloped minimize the risk of some ML activities. Central and islands’ authorities do not have criminal statistics that would enable one to estimate the income gained from predicate offenses committed on the islands. Nevertheless, due to the level of development in the Comoros, income of this type seems to have been limited compared to the sums generated in other countries, although it may have relatively significant effects on the local economy. The main income-producing predicate offenses seem to be narcotics trafficking, migrant smuggling, and corruption.
5. There are further specific vulnerabilities in the Comoros due to the limitations of the procedures for identifying legal and natural persons. 2 Significant weaknesses are found in the administration of civil and commercial registries, and the registration of offshore companies in Anjouan, as well as the recent enactment of a law on economic citizenship might be attractive to criminals. The Anjouan authorities state that they have abandoned the development of the offshore sector since the summer of 2008. The Anjouan law on offshore banks was unconstitutional as it was in violation of the provisions of the organic law which set out the respective competencies of the central government and the islands. However, the law enabling the creation of offshore companies was legallyadopted by the Parliament of Anjouan and, since it has not been repealed, continues to present a risk. As for economic citizenship, the authorities have indicated that they have implemented strict control measures3 that are intended to prevent abuses, but concerns regarding the possible misuse of this arrangement for criminal purposes do remain.
6. The Comoros has not had any terrorist acts on its soil. However, an investigation regarding terrorist acts was initiated several years ago and is still pending. It involves a Comorian who is suspected of being a member of Al-Qaeda and sometimes considered to be the organization’s representative in eastern Africa. The Comoros are a potential transit point for international terrorism, particularly due to limited resources and training in counterterrorism and maritime security.
C. Legal Systems and Related Institutional Measures
7. Money laundering is a criminal offense under Comorian law in accordance with the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna Convention) and the 2000 United Nations Convention against Transnational Organized Crime (Palermo Convention). All crimes or offenses may constitute predicate offenses of ML and, consequently, Comorian legislation does not specify a threshold for offenses. However, some offenses included in FATF’s designated category of offenses are not listed in the Criminal Code (CC) or special laws: e.g., trafficking in human beings and migrant smuggling, environmental crimes, and piracy.
8. The criminalization of the financing of terrorism is not in compliance with Article 2 of the 1999 United Nations Convention for the Suppression of the Financing of Terrorism (New York Convention). There are no provisions allowing the Comorian authorities to freeze the assets of terrorists and other persons designated by the United Nations Security Council Resolution (UNSCR) 1267 (1999) and subsequent resolutions, and of UNSCR 1373 (2001).
9. The authorities have established an FIU, the members of which have been appointed, but the unit has not yet received any suspicious transaction reports. Moreover, the authorities responsible for prosecutions, which take place in an environment characterized by a lack of resources and some instances of corruption, have not yet had the opportunity to implement their powers in investigations of ML or FT. The physical cross-border transportation of currency is subject to general exchange control regulations and specific AML/CFT regulations, although the latter have not yet been implemented.
D. Preventive Measures—Financial Institutions
10. The 2009 ordinance makes the main financial institutions operating in the Comoros subject to AML/CFT measures, but does not cover insurance companies. Life insurance is allowed but currently not distributed. Due diligence measures have been in place for financial institutions since 2003 and are laid out in the 2009 ordinance. These measures do not cover numbered accounts (which are possible but do not exist in practice), and do not require the updating of information collected under the customer due diligence process, nor do they provide adequate limitations on the application of simplified measures, especially in cases of suspicion of ML/FT.
11. The requirement to report suspicious transactions does not extend to all funds suspected of being related to FT and does not cover attempted transactions. While being required to report suspicious transactions since 2003, no financial institution has ever filed an STR. This could be explained by the absence of guidelines to assist financial institutions in the implementation of their reporting obligations, as well as by fears regarding the confidential treatment of STRs.
12. There are no specific obligations regarding reliance on third parties and intermediaries, non-face to face business relationships, and branches and subsidiaries abroad. However, the latter two situations do not exist in the Comoros at the present time. Moreover, the conditions for the licensing of insurance companies and the registration of exchange houses and money remitters should be prescribed. Thus far, most institutions subject to the law have not yet put AML/CFT policies and procedures in place. Although the central bank has begun to monitor implementation of the AML/CFT preventive measures, it does not have the necessary resources to perform its mission.
E. Preventive Measures—Designated Non-Financial Businesses and Professions
13. The 2009 ordinance covers all designated non-financial businesses and professions (DNFBPs), but the obligations laid out are very limited and have not been implemented to date. AML/CFT monitoring and supervision of DNFBPs are generally weak or nonexistent.
F. Legal Persons and Arrangements & Non-Profit Organizations
14. Legal persons have to be registered and must provide to the registrar information such as identification of the managers, administrators, or partners responsible for company debts. However, the Comorian authorities lack the necessary resources to ensure that information, which is recorded manually by the Registry of the Regional Court of each island, is up-to-date and accurate. Trusts and other similar legal arrangements are not used in the Comoros. In Comorian law, nonprofit organizations (NPO) come under the law on associations. However, the registration of foreign NPOs is subject to a separate regime, which is characterized by a lack of centralization and is based on agreements with the ministries concerned for given projects, including the obligation to provide limited identification data.
G. Domestic and International Co-operation
15. The FIU, whose composition resembles more an intergovernmental coordination committee than an operational unit, could potentially be an effective leader of domestic coordination.
16. The Vienna, Palermo, and New York Conventions have been signed and ratified, but have not been transposed into domestic law, which prevents their implementation and impedes international cooperation.
17. The Comorian legal framework allows the authorities to cooperate broadly with foreign counterparts to exchange information, for investigations and proceedings aimed at implementing provisional measures and the confiscation of the proceeds of and instrumentalities used in ML, for extradition, and for mutual legal assistance. The weaknesses of the criminalization of FT in Comorian law and the lack of criminalization of some of the designated predicate offenses, coupled with the strict application of the principle of dual criminality, tend to limit the scope of the assistance that the authorities are able to provide to other countries. In the absence of requests for mutual legal assistance or extradition for ML/FT offenses, it is not possible to assess the capacity to respond to such requests in a timely fashion and in a constructive and effective way.
|Compliant (C): the Recommendation is fully observed with respect to all essential criteria.|
Largely compliant (LC): there are only minor shortcomings, with a large majority of the essential criteria being fully met.
Partially compliant (PC): the country has taken some substantive action and complies with some of the essential criteria.
Non-compliant (NC): there are major shortcomings, with a large majority of the essential criteria not being met.
Not applicable (NA): a requirement or part of a requirement does not apply, due to the structural, legal or institutional features of a country.
|FATF 40+9 Recommendations and Ratings||Key Assessor Recommendations|
|Legal System and Related Institutional Measures|
|Criminalization of Money Laundering|
|Criminalization of Terrorist Financing|
|Confiscation, freezing, and seizing of proceeds of crime|
|Freezing of funds used for terrorist financing|
|The Financial Intelligence Unit and its functions|
|Law enforcement, prosecution and other competent authorities|
|Cross Border Declaration or disclosure|
|Preventive Measures: Financial Institutions|
|Risk of money laundering or terrorist financing|
|Customer due diligence (CDD), including enhanced or reduced measures|
|Third parties and introduced business|
|Financial institution secrecy or confidentiality|
|Record keeping and wire transfer rules|
|Monitoring of transactions and relationships|
|Suspicious transaction reports and other reporting|
|Internal controls, compliance, audit and foreign branches|
|Supervisory and oversight system-competent authorities and SROs Role, functions, duties and powers (including sanctions)|
|Money value transfer services|
|Preventive Measures: Non-Financial Businesses and Professions|
|Customer due diligence and record-keeping|
|Suspicious transaction reporting|
|Regulation, supervision, monitoring, and sanctions|
|Other designated non-financial businesses and professions|
|Legal Persons and Arrangements & Nonprofit Organizations|
|Legal Persons-Access to beneficial ownership and control information|
|Legal Arrangements-Access to beneficial ownership and control information|
|National and International Cooperation|
|National cooperation and coordination|
|The Conventions and UN Special Resolutions|
|Mutual Legal Assistance|
|Other Forms of Cooperation|
|Resources & Statistics|
The assessment team consisted of Emmanuel Mathias (team leader), Chady El Khoury (both LEG), Habib Hitti (expert under the supervision of LEG), and André Cuisset (expert under the supervision of the World Bank and the IMF).
Deployment of a biometric system for the identification of natural persons has been under way since June 2008.
The authorities indicate that they consult Interpol, UNODC, and the intelligence services of the country of origin of the applicant.