By Hayam El Hadi
Algerian laws were tightened up another notch earlier this month, with a new order designed to prevent and control money laundering and terror financing.
President Abdelaziz Bouteflika set the tone, telling the Council of Ministers that “Algeria’s commitment to fight terrorism is a reality. The same should also be true of the prevention of money laundering, as part of the fight against corruption and organised crime.”
The ordinance, issued February 13th, puts the banks in the front line, giving them the task of detecting any attempt to use their channels for terrorist purposes. The financial institutions will now be obliged to play a monitoring role, reporting any suspicious activity that could serve the terrorists’ interest.
Banks, public and private, and other financial institutions conducting transactions for the benefit of their customers now need to exhibit much greater vigilance. If they do not, then they might be seen as participating in money-laundering.
Under Article 7 of the order, banks must conduct thorough checks before opening a bank or passbook account, holding shares or bonds, allocating a strongbox or agreeing to any other financial operations or relationships.
The article stipulates that banks must have a “suitable risk management system in order to determine whether a potential customer, actual customer or beneficiary is politically exposed, and to take any measures to allow the identification of the origin of the capital, and to provide enhanced on-going surveillance of the business relationship”.
Any failure to abide by the new regulations could result in a fine of between 10 million and 50 million dinars.
The new order also empowers courts to seize or freeze assets being directed towards terrorist activities for a renewable term of one month. A specialist body, the state prosecutor or international authorities can request the seizure, which is subject to an appeal.
“Banks are emerging as important players in the fight against money-laundering and all forms of financial crime,” said Abderrahmane Benkhalfa, the chief representative of the Association of Banks and Financial Institutions. “That task is already being taken on by banks through the general laws on the world of finance and the regulatory instructions issued by the Central Bank.”
“Banks have a responsibility to manage, control and balance all cross-border flows of capital into and out of Algeria,” Benkhalfa added.
However, the Governor of the Bank of Algeria admitted when his institution’s annual report was brought before MPs that some inadequacies have been seen in some private banks.
According to the report, the results of checking operations “have highlighted loopholes at the organisational level, and particularly in the accounting department, a concentration of its activities on foreign trade operations whose revenues are the main component of profits, along with discrepancies between its statements on shared risk and reality”.
The same report, drafted by the Bank of Algeria, which is responsible for enforcing regulations, said the arrangements put in place by banks “vary from one institution to another, accentuating differences in how far they comply with the current requirements and standards”.
Nevertheless, the Bank of Algeria conducted 52 inspections across financial institutions in 2010, compared with 30 in 2009. Among those operations, 23 missions were conducted under the arrangements for the fight against money-laundering and the funding of terrorism.