Madagascar -- AML/CFT Compliance Regulatory Overview

**Loi n° 2018-043 du 19 décembre 2018 relative à la lutte contre le blanchiment de capitaux et le financement du terrorisme (Law No. 2018-043 of December 19, 2018, on the Fight against Money Laundering and the Financing of Terrorism).**

This law is the cornerstone of Madagascar's AML/CFT framework. It defines the obligations of reporting entities, establishes the powers of the Financial Intelligence Unit (FIU), and outlines the criminalization of money laundering and terrorist financing.

While it may not explicitly name "Virtual Asset Service Providers," the broad definitions within such laws typically encompass entities that facilitate financial transfers, exchanges, or safekeeping of value, which can include virtual assets. VASPs are often implicitly or explicitly considered reporting entities under the "other financial institutions" or "designated non-financial businesses and professions" categories, especially regarding FATF Recommendation 15.

**For individuals:** Obtain and verify identity using reliable independent source documents (e.g., national ID card, passport), including full name, date of birth, address, and nationality.

**For legal persons/arrangements:** Obtain and verify legal name, legal form, proof of existence, powers that bind the legal person, and the identity of persons holding senior management positions.

**Beneficial Ownership:** Identify and verify the natural person(s) who ultimately own or control the customer, or the natural person(s) on whose behalf a transaction is being conducted.

**Purpose and Intended Nature of Business Relationship:** Understand the rationale behind the customer's transactions and the nature of their relationship with the VASP.

**Ongoing Monitoring:** Conduct ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions are consistent with the VASP's knowledge of the customer, their business and risk profile, including, where necessary, the source of funds.

**Risk-Based Approach:** Apply CDD measures on a risk-sensitive basis:

**Simplified CDD:** May be applied where the risks of money laundering or terrorist financing are identified as low.

**Enhanced CDD (EDD):** Required for higher-risk situations, such as:

Politically Exposed Persons (PEPs), their family members, and close associates.

Complex or unusually large transactions.

Transactions involving new technologies or anonymous transactions where the risks are deemed higher.

Source of funds and source of wealth verification may be required for EDD.

**Obligation to Report:** VASPs, as reporting entities, are legally obligated to report any suspicious transactions or activities to the Financial Intelligence Unit (FIU), regardless of the amount involved. This includes transactions that are unusual, lack clear economic rationale, or appear to be connected to money laundering or terrorist financing.

**Timeliness:** Reports must be made promptly, usually within a few days of the VASP becoming aware of the suspicion.

**No Tipping-Off:** Reporting entities and their employees are prohibited from disclosing to the customer or to third parties that a suspicious transaction report is being, or has been, submitted to the FIU.

**Customer Identification Data:** All records obtained through CDD processes (identification documents, beneficial ownership information, account opening forms).

**Transaction Data:** Records of all domestic and international transactions, including the nature of the transaction, amount, date, parties involved, and any associated messages or instructions.

**Business Correspondence:** Relevant business correspondence, including records of analysis performed for suspicious transaction reports.

**Duration:** Records must typically be kept for at least **five (5) years** after the business relationship has ended or after the date of an occasional transaction.

**SAMIFIN (Service d'Analyse et de Traitement du Renseignement Financier)**

**Role:** SAMIFIN is Madagascar's Financial Intelligence Unit (FIU). It is responsible for receiving, analyzing, and disseminating suspicious transaction reports (STRs) to law enforcement agencies. It also conducts oversight and monitors compliance with AML/CFT obligations across all reporting entities.

**Banque Centrale de Madagascar (BCM) URL:** https://www.bcm.mg/

**Absence of Crypto-Specific Laws:** There are no laws specifically regulating the issuance, trading, or use of cryptocurrencies in Madagascar.

**General AML/CFT Framework:** The primary legal framework for combating money laundering and terrorist financing is:

**Law No. 2004-020 on Combating Money Laundering and Terrorist Financing (and subsequent amendments).**

*Note:* While this law predates widespread crypto adoption, its general principles concerning suspicious transactions, customer due diligence (CDD), and reporting obligations are expected to apply to any financial activity, including those involving virtual assets, where a nexus to traditional finance or an underlying crime can be established.

**Financial Intelligence Unit (FIU):** The **Cellule de Renseignement Financier de Madagascar (CEN-FIC)** is Madagascar's FIU responsible for receiving, analyzing, and disseminating suspicious transaction reports (STRs) or suspicious activity reports (SARs). VASPs or entities dealing with crypto in Madagascar, even without specific crypto regulation, would likely fall under CEN-FIC's purview for AML/CFT compliance if they interact with the formal financial system.

**FATF Grey List Status:** Madagascar's inclusion on the FATF Grey List means that it is actively working with the FATF to address strategic deficiencies in its AML/CFT regime. This necessitates enhanced due diligence by international financial institutions and VASPs when dealing with Madagascan entities or individuals.

**Obligation for Madagascar:** Madagascar is legally bound to enforce all UN Security Council (UNSC) sanctions regimes.

**VASP Compliance Requirements:** Any VASP, regardless of its location, that serves customers in Madagascar, processes transactions involving Madagascan entities or individuals, or operates in Madagascar, must:

**Screen against the UN Consolidated Sanctions List:** This list includes individuals and entities designated under various UN sanctions regimes (e.g., terrorism, proliferation, specific country regimes).

**Prohibit transactions with sanctioned entities/individuals.**

**Report any hits or suspicious activity** to relevant authorities (e.g., CEN-FIC).

**UN Security Council Resolutions:** Found on the UN website, e.g., via the Sanctions Committees: https://www.un.org/securitycouncil/sanctions/information

**UN Consolidated Sanctions List:** https://www.un.org/securitycouncil/content/un-sc-consolidated-list

**Extraterritorial Application:** Any VASP, globally, is subject to OFAC sanctions if it:

Is a U.S. person (citizen, permanent resident, entity incorporated in the U.S., or operating in the U.S.).

Engages in transactions that touch U.S. persons or entities.

Facilitates transactions for persons on OFAC's lists, regardless of their location.

**VASP Compliance Requirements:** VASPs with a U.S. nexus or those dealing with U.S. persons/systems must:

**Screen against the Specially Designated Nationals and Blocked Persons (SDN) List:** This is OFAC's primary sanctions list.

**Screen against other OFAC sanctions lists** (e.g., Sectoral Sanctions Identifications List, Non-SDN Menu-Based Sanctions List).

**Implement geographic restrictions:** Block transactions to comprehensively sanctioned jurisdictions (e.g., Cuba, Iran, North Korea, Syria, certain regions of Ukraine/Russia).

**Monitor transactions for red flags** indicative of sanctions evasion or illicit finance.

**OFAC Guidance on Virtual Currency:** OFAC has issued specific guidance on sanctions compliance for virtual currency:

**Extraterritorial Application:** EU sanctions apply to:

Persons or entities within the EU.

EU nationals, wherever they are located.

Entities incorporated or constituted under the law of an EU Member State.

Activities taking place, in whole or in part, within the EU.

Any person in respect of business done in whole or in part within the EU.

**VASP Compliance Requirements:** VASPs with an EU nexus or dealing with EU persons/systems must:

**Screen against the EU Consolidated List of Sanctions:** This list includes individuals and entities designated under various EU sanctions regimes.

**EU Sanctions Map (overview of all regimes):** https://www.sanctionsmap.eu/

**Council Regulations:** Specific EU regulations outlining sanctions regimes are published in the Official Journal of the European Union, accessible via EUR-Lex: https://eur-lex.europa.eu/homepage.html

**Customer Due Diligence (CDD):** Screen all new and existing customers (individuals and entities) against relevant sanctions lists during onboarding and on an ongoing basis.

**Beneficial Ownership:** Identify and screen ultimate beneficial owners (UBOs) of corporate customers.

**Transaction Monitoring:** Screen transactions in real-time or near real-time for direct or indirect involvement of sanctioned parties or sanctioned jurisdictions.

**FATF Recommendations:** FATF Recommendation 15 specifically addresses virtual assets and VASPs, requiring them to implement AML/CFT measures, including sanctions screening, similar to traditional financial institutions.

**Madagascar itself is not a comprehensively sanctioned jurisdiction** by the UN, OFAC, or the EU.

However, VASPs must implement geographic restrictions that block transactions to and from individuals or entities located in **sanctioned countries** (e.g., Cuba, Iran, North Korea, Syria, certain regions of Ukraine/Russia) as dictated by OFAC, EU, and UN sanctions programs.

**Madagascar (Domestic):** While there are no crypto-specific penalties, violations of Madagascar's AML/CFT Law No. 2004-020 can result in:

**Imprisonment:** For individuals involved in money laundering or terrorist financing.

Loss of business licenses or ability to operate.

**OFAC Violations:** Penalties can be severe:

**Civil Penalties:** Can range from thousands to millions of U.S. dollars per violation, often determined by a base penalty amount multiplied by factors like egregiousness and cooperation.

**Criminal Penalties:** For willful violations, individuals can face significant prison sentences and fines up to millions of dollars, while corporations can face fines in the tens of millions.

**EU Violations:** Penalties for breaches of EU sanctions are determined by individual Member States but are required to be "effective, proportionate and dissuasive." They can include:

**Imprisonment:** For individuals, particularly for serious or willful breaches.

**Reputational Damage:** Significant negative impact on a company's standing.

**None.** Madagascar does not maintain its own specific sanctions list that explicitly targets crypto entities or individuals involved in virtual asset transactions. Its compliance obligations stem from its domestic AML/CFT law (which applies broadly to financial crimes) and its adherence to international (UN) sanctions.

**Overall Status:** Madagascar has made progress in some areas of its AML/CFT framework as required by the FATF Action Plan. However, the comprehensive regulation and supervision of Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs), including the implementation of the Travel Rule, is **not yet effectively in place.** Madagascar's Mutual Evaluation Report was published in 2018, prior to the significant updates to FATF Recommendation 15 and the issuance of the Interpretive Note on VAs/VASPs in June 2019, which introduced the Travel Rule. Subsequent Follow-Up Reports indicate that addressing risks associated with new technologies and developing a regulatory framework for virtual assets remains an area requiring significant work.

**Whether Adopted:** The FATF Travel Rule requirements (which necessitate VASPs to obtain, hold, and transmit required originator and beneficiary information for virtual asset transfers) **have not been formally adopted or effectively implemented** within Madagascar's legal and regulatory framework for virtual assets. Madagascar's AML/CFT framework likely lacks the specific legislation or regulations necessary to govern VASPs and mandate Travel Rule compliance.

**Effective Date:** Given the lack of formal adoption, there is **no specific effective date** for the FATF Travel Rule in Madagascar.

**Threshold Amounts:** As the Travel Rule is not adopted, there are **no established threshold amounts** for its application in Madagascar.

**Which VASPs are Covered:** Without specific legislation or regulations, there is **no clear definition or coverage** of VASPs for the purpose of the Travel Rule in Madagascar. The existing AML/CFT law may generally apply to financial institutions, but a specific framework for virtual asset service providers is absent or nascent.

**Technical Implementation Requirements:** Since the Travel Rule is not implemented, there are **no defined technical implementation requirements** for VASPs in Madagascar.

**Penalties for Non-Compliance:** Without specific laws or regulations governing the Travel Rule or defining VASP obligations in this regard, there are **no specific penalties** for non-compliance with the Travel Rule. Any penalties would fall under general AML/CFT legislation for unregistered financial activities, if virtual asset activities are deemed to fall under existing financial services definitions, which is often ambiguous without specific VA legislation.

**FATF Jurisdictions under Increased Monitoring (Grey List):** Madagascar is listed here, indicating ongoing strategic deficiencies.

FATF Website - Jurisdictions under Increased Monitoring

FATF Website - Madagascar's Mutual Evaluation Report (2018) (You'll find the 2018 ME report and subsequent follow-up reports here, which would indicate the state of R.15 implementation).

FATF Website - Guidance for VA and VASPs (Updated 2021)