Mutual Evaluation Report Summary – Liberia

1 October 20235 Minute Read

Liberia is a post-conflict country still faced with challenges of rebuilding its institutions and infrastructures after suffering from more than a decade-long war. It has enjoyed a generally stable political environment since then. The country’s previous Mutual Evaluation Report was adopted in May 2011. Significant deficiencies stemmed from the lack of an approved comprehensive anti-money laundering legislation. The assessors deemed the implementation of AML/CFT measures of acceptable international standards in Liberia as not effective due to a lack of Financial Intelligence Unit or any legal frameworks to combat the financing of terrorism.

That Mutual Evaluation concluded that the country was Partially Compliant (PC) with 22 Recommendations and non-compliant (NC) with 27 Recommendations. As a result, Liberia was placed on the Expedited Regular follow-up process, requiring annual reporting.

The country then failed to address some of the identified strategic deficiencies its anti-financial crime regime and was placed on the Enhanced Follow Up process in November 2016.

In November 2017, the GIABA Plenary returned Liberia to the Expedited Follow Up process due to concerted efforts and high-level commitment in the country to address the deficiencies. In line with the GIABA Mutual Evaluation Process and Procedures, Liberia exited the follow-up process in December 2020 to enable the country to prepare for its second round of mutual evaluation.

Liberia is exposed to high Money Laundering (ML) risks according to its National Risk Assessment report. The main proceeds generating ML predicate offences in Liberia are corruption and bribery, illicit trafficking in drugs and psychotropic substances, tax evasion, currency counterfeiting, trafficking in human beings and migrants smuggling, counterfeiting and piracy of products, and robbery/ theft.

There is also widespread use of cash and a large informal economy, including informal cross-border physical transportation of cash. Within the financial sector, banks offer a variety of products and transactions, and have a deeper connection with the international financial system than other Financial Institutions (FIs) and the Designated Non-Financial Businesses and Professions (DNFBPs). Amongst the DNFBPs, lawyers are the most vulnerable to misuse for ML purposes.

Finally, the incidence of terrorism and terrorist financing (TF) in Liberia is low, but the preponderance of cash transactions, the limited oversight of NPOs, its porous borders, and some ideological teachings expose the country to TF threats.

Overall Ratings and Effectiveness

Since its last mutual evaluation in 2011, Liberia has taken some steps to improve its AML/CFT regime. The country made notable improvements in its overall level of technical compliance with the FATF Recommendations by amending some of its AML/CFT laws and regulations aimed at remedying the identified deficiencies. However, some deficiencies remain when looking at the country’s technical compliance framework, including:

New technologies: virtual assets (VA) and virtual assets service providers (VASPs) (R.15)
DNFBPs-CDD and other measures (R. 22 and R23)
Transparency and beneficial ownership of legal persons (R.24)
Transparency and beneficial ownership of legal arrangements (R.25)
Regulation and supervision of FIs (R.26)
Regulation and supervision of DNFBPs (R.28)
Sanctions for failure to comply with national AML/CFT requirements (R.35)

Liberia has implemented an AML/CFT system that is moderately effective in Immediate Outcome 1 - the understanding of ML/TF risks and national co-ordination.

However, assessors determined a low level of effectiveness for the remaining Immediate Outcomes. As of now, fundamental improvements are required in the areas of confiscation, TF investigation and prosecution, and investigation and prosecution of ML. There is also a need to strengthen supervision and monitoring of non-bank financial institutions, DNFBPs and in preventing misuse of NPO for TF purposes.

Liberia has implemented an AML/CFT system through the adoption of a four-year Anti-Money Laundering and Counter-Financing of Terrorism and Proliferation Strategy and Action Plan (AS-AP). The country was rated as moderately effective in Immediate Outcome 1 - the understanding of ML/TF risks and national co-ordination.

Cooperation and coordination at the policy level is one of the strengths of Liberia’s anti-financial crime system. The Inter-Ministerial Committee (IMC), which is the country’s main AML/CFT policy development mechanism, leads domestic coordination. However, Liberia does not have an operational cooperation mechanism in relation to PF.

Main deficiencies and recommendations

Liberia needs to continue improving its understanding of ML/TF risks through additional sectoral and thematic assessments as well as ensuring the results are widely disseminated to relevant stakeholders.

The Central Bank of Liberia has recently implemented risk-based supervision for banks, but supervision for non-bank financial institutions is not based on risk and there is still no supervision for DNFBPs.

Supervisors should provide to high and medium risk financial institutions and DNFBPs detailed information regarding:

Guidance and training on implementation of CDD, especially regarding the verification of identity of customers without National Identification cards, foreign customers and legal persons and identification of BO
Sector-specific risk indicators to improve STR reporting
Guidance on the identification of domestic and foreign PEPs, including the need to identify family members and close associates
Access to FIs/DNFBPs to asset declarations of public officials to facilitate the implementation of EDD measures.

The Government should provide technical, human, and financial resources to the Financial Intelligence Agency to strengthen its analytical ability to better support financial investigations by LEAs and enable it to conduct its supervisory responsibility. The FIA should access and fully optimise all the available information in the databases of relevant public authorities to support its analysis.

Moreover, although the new AML/CFT Act and the AS-AP serve to demonstrate Liberia’s commitment to pursue confiscation as a policy objective, these frameworks are relatively new. The identification, location, and tracing of proceeds of crime is limited by weak compliance with public officials’ assets declarations. The use of unenforceable voluntary restitution agreements, the lack of investigation to trace proceeds of crime beyond the predicate offence and the lack of criminal convictions inhibit Liberia’s ability to effectively recover proceeds of crime.

Finally, Liberia has assessed the TF risk of the NPO sector but did not focus on identifying the sub-set of NPOs at risk of TF abuse. There is not any assessment that allows Liberia to justify its conclusions that some NPOs that receive funding from international sources are at risk of being used for TF. In addition, there is no specific guidance and outreach to raise awareness about the potential misuse or abuse of NPOs for TF purposes.