Countries/Jurisdictions of Primary Concern - Madagascar
Madagascar is neither a regional financial center nor a major source country for drug trafficking; however, Madagascar’s inadequately monitored 3,000 miles of coastline leave the country vulnerable to smuggling and associated money laundering. Criminal proceeds laundered in Madagascar derive mostly from domestic criminal activity, not generally related to the narcotics trade. The major sources of laundered proceeds in 2014 are tax evasion, tax appropriation, and customs fraud. Illegal mining and mineral resources smuggling, illegal logging, public corruption, and foreign currency smuggling are also areas of concern.
A 2009 coup d’état led to a deterioration of the rule of law, which facilitated trafficking of persons and a wide variety of goods. The current president was democratically elected in December 2013, and since then has publicly and privately proclaimed an emphasis on combatting corruption. Significant improvements have so far been elusive. The smuggling of gold, gemstones, and protected flora and fauna generates funds that are laundered through the financial system or through informal channels into which the government has limited reach. There is a significant black market for smuggled consumer goods. Trade-based money laundering occurs in Madagascar, involving both customs fraud and contraband. Media sources report that members of the former regime profited from, facilitated, and even directed criminal activity and money laundering.
Offshore banks and international business companies are permitted in Madagascar. Along with domestic banks and credit institutions, offshore banks are required to request authorization to operate from the Financial and Banking Supervision Committee, which is affiliated with the Central Bank.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks
Number of STRs received and time frame: 109: January 1 - November 19, 2014
Number of CTRs received and time frame: Not applicable
STR covered entities: Banks, financial intermediaries and advisors, money changers, casinos and gaming establishments, real estate dealers, postal services, insurance companies, mutual fund companies, and stockbrokers
money laundering criminal Prosecutions/convictions:
Prosecutions: Not available
Convictions: Not available
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Madagascar is not a member of a FATF-style regional body (FSRB).
Enforcement and implementation issues and comments:
On July 17, 2014, Law N° 2014-005 that criminalizes terror finance and transnational crime was promulgated by the President. Law N° 2014-005 provides the courts the ability to freeze assets without prior notice based upon credible suspicions of terrorist involvement, and extends a requirement for banks to record and report to the authorities transactions suspected to relate to the financing of terrorism. Additionally, the law allows the Malagasy Financial Intelligence Service (SAMIFIN), Madagascar’s financial intelligence unit (FIU) to immediately block transactions from accounts suspected of association with terrorism. The penalty for those convicted of terror finance range from a sentence of five to twenty years of hard labor.
SAMIFIN is an independent institution. When SAMIFIN believes it has evidence of suspected money laundering, it is required to report the information to other authorities responsible for investigation and prosecution.
While the police sometimes investigate crimes related to money laundering and other financial crimes, they lack necessary training and expertise. Moreover, the judicial system does not have the sophistication, resources, or political will to successfully prosecute most money laundering offenses.
Underground finance and informal value transfer systems should be recognized and investigated. Madagascar should train police and customs authorities to proactively recognize money laundering at the street level and at the ports of entry. Additionally, prosecutors should be trained to manage complex financial crime and money laundering cases. Madagascar should pursue membership in an FSRB.