BC-FT Risk Assessment Report in the Securities Sector March 2025

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Democratic and Popular Republic of Algeria
Securities Market Organization and Surveillance Commission Regulatory Authority for the Securities Market Working Group for the Sectoral Risk Assessment of Entities Subject to Regulation in the Securities Sector for AML/CFT/FP Purposes

SECTORAL ANALYSIS OF
MONEY LAUNDERING AND
TERRORIST FINANCING RISKS
March 2025

DISCLAIMER
The sectoral risk assessment of entities subject to regulation in the Algerian securities sector for money laundering and terrorist financing purposes was conducted as a self-assessment by the working group dedicated to this mission, drawing inspiration from the money laundering and terrorist financing risk assessment tool developed by the World Bank. The data, statistics, and information introduced into the models of the risk assessment tool for entities subject to regulation in the securities sector for money laundering and terrorist financing purposes, as well as any other findings, interpretations, and judgments within the framework of the risk assessment process for entities subject to regulation in the securities sector for money laundering and terrorist financing purposes, belong entirely to the Algerian authorities and do not reflect the views of the World Bank.

Table of Contents
DISCLAIMER.................................................................................................................... 2
Table of Contents ........................................................................................................ 3
List of Acronyms............................................................................................................ 5
List of Tables.................................................................................................................. 6
List of Graphs .................................................................................................................. 7
Preamble :...................................................................................................................... 8
Chapter I : General Context ............................................................................................ 9

1. Context and justification of the report :.................................................................... 9
   1.1. Presentation of the COSOB : .................................................................................. 9
   1.2. Missions of the COSOB :....................................................................................... 10
   1.3. Areas of intervention of the COSOB :...................................................................... 10
2. Mapping of entities subject to control and supervision by the COSOB in the
   framework of the fight against ML/TF........................................................................ 10
3. Statistics of the securities market............................................................ 16
   3.1. Market Capitalization.......................................................................................... 16
   3.2. Evolution of the IOB Market ................................................................................... 17
4. Evolution of SCI participations ........................................................................... 18
5. Activities of other actors........................................................................................ 20
   Chapter II : Sectoral Evaluation of the Securities Sector ......................................... 21
6. Compliance with FATF standards on risk assessment related to ML/TF ..... 21
7. The methodology of the sectoral evaluation :.............................................................. 22
   2.1. The different steps of the evaluation : ................................................................... 22
   2.2. Objectives of the evaluation : ....................................................................................... 24
   2.3. Methodological approach :.................................................................................... 25
   2.4. Data sources .............................................................................................. 26
   Chapter III : Evaluation of threats and vulnerabilities of the securities sector..... 27
8. Evaluation Process ..................................................................................................... 28
   1.1. Identification of entities subject to regulation .................................................................................... 28
   1.2. Development and dissemination of questionnaires............................................................. 29
   1.3. Collection of statistical data via standardized templates ..................................... 29
   1.4. Analysis of collected data.............................................................................. 29
   1.5. Application of the World Bank evaluation grid .................................... 30
9. Threat Evaluation............................................................................................. 31
   2.1. Typology of identified threats.......................................................................... 31
   2.2. Potentially threatening actors................................................................................. 32
   2.3. Most exposed products and services ....................................................................... 32
   2.4. Threats by access channel or mechanism............................................................... 32
   2.5. Assessment of threat intensity..................................................................... 32
10. Evaluation of inherent vulnerabilities .................................................................... 33
11. Evaluation of mitigation measures ........................................................................ 36
    4.1. Status of implementation of AML/CFT obligations......................................................... 36

4.2. Customer Due Diligence (KYC).................................................................... 36
4.3. Suspicious Transaction Reporting (STR) ................................................................................... 37
4.4. Supervisory activities and risk-based approach applied by the COSOB..... 37
5. Sectoral risk level.......................................................................................... 39
5.1. Cross-analysis Threats × Vulnerabilities...................................................................... 39
5.2. Overall sector risk level.......................................................................... 40
5.3. Graphical visualization of the risk level............................................................ 40
6. Conclusions ............................................................................................................... 42
6.1. Summary of results.............................................................................................. 42
6.2. Points of vigilance and elements to monitor ............................................................. 42
6.3. Strategic importance of the sector (despite low volume) ................................. 43
7. Recommendations..................................................................................................... 43
7.1. Strengthening the regulatory framework .................................................................... 43
7.2. Empowerment of entities subject to regulation...................................................................................... 44
7.3. Strengthening supervision and coordination mechanisms ....................... 44
7.4. Improvement of the data collection system .................................................... 44
7.5. Risk prioritization for upcoming supervision cycles.................................. 45
CHAPTER IV : TERRORIST FINANCING AND FINANCING OF THE PROLIFERATION OF
WEAPONS OF MASSIVE DESTRUCTION « TF-FP » ..................................................................................... 46

1. Introduction ..................................................................................................................... 46
2. Sectoral evaluation methodology .............................................................................. 47
3. Evaluation of threat factors.................................................................................... 47
4. Analysis of structural vulnerabilities............................................................................. 49
5. Evaluation of the quality of control mechanisms (CFT).................................................... 50
6. Consolidated results and risk mapping .................................................................. 52
7. Governance indicators and human factors ............................................................... 52
8. Conclusions ...................................................................................................................... 53
9. Recommendations............................................................................................................ 54
   General Conclusion................................................................................................................. 55
   General Recommendation ...................................................................................................... 57

List of Acronyms
ML Money Laundering
WB World Bank
FIU Financial Intelligence Processing Unit
COSOB Securities Market Organization and Surveillance Commission DGSI General Directorate of National Security STR Suspicious Transaction Report TF Terrorist Financing IOB Securities Market Intermediary FATF Financial Action Task Force MENAFATF Middle East and North Africa Financial Action Task Force AML Anti-Money Laundering MND Ministry of National Defense MJ Minister of Justice ICV Investment Capital Company CSD Central Securities Depository (Account Keepers) UCITS Undertakings for Collective Investment in Transferable Securities SGBV Securities Market Management Company (Algiers Stock Exchange) AC Algeria Clearing (Central Depository) CIP Participatory Investment Advisors CNER National Risk Assessment Committee NRA National Risk Assessment SRA Sectoral Risk Assessment FPADM Financing of the Proliferation of Weapons of Mass Destruction

List of Tables
No. Table Title
01 Typology and number of entities subject to control and supervision by the COSOB as of 31-12-2024 02 Evolution of Market Capitalization over the period 2022–2024 03 Evolution of IOB activity over the period 2022–2024 04 Evolution of ICV participations over the period 2022–2024 05 Number of entities subject to regulation as of 31-12-2024 06 Evolution of entity activity 07 Graphical visualization of the risk level

List of Graphs
No. Graph Title
01 Number of entities subject to control and supervision by the COSOB as of 31-12-2024 02 Evolution of Market Capitalization over the period 2022–2024 03 Evolution of IOB activity over the period 2022–2024 04 Evolution of ICV participations over the period 2022–2024 05 Evolution of entity activity 06 Inherent vulnerability of IOBs and ICVs 07 Evaluation of mitigation measures for IOBs 08 Evaluation of mitigation measures for ICVs 09 Final vulnerability of IOBs and ICVs 10 Result of Threat x Vulnerability cross-analysis for IOBs and ICVs

Preamble :
This report is part of Algeria's continuous efforts to strengthen the transparency, integrity, and resilience of its financial system, in accordance with the recommendations formulated by the Financial Action Task Force (FATF) regarding the fight against money laundering and terrorist financing (AML/CFT). More specifically, this sectoral evaluation responds to the requirement to identify and analyze risks specific to the securities sector, considered a strategic link in the national financing and economic regulation framework. The approach adopted relies on the sectoral evaluation methodology developed by the World Bank, which proposes a structured and risk-based approach. This method is based on the identification of threats and vulnerabilities specific to the sector, the evaluation of existing prevention measures, and the analysis of the exposure of various actors to ML/TF risks. It allows for the production of an updated and empirically based risk map, while integrating quantitative and qualitative criteria. The results highlight a low maturity of the securities sector, characterized by a limited number of actors, modest market capitalization, low depth of the secondary market, and the predominance of bank financing. However, certain segments, such as investment capital companies or participatory financing platforms, although nascent, present significant development potential and require increased vigilance in terms of supervision and AML/CFT compliance. The sectoral analysis also highlights several vulnerability factors in the following areas:

• Harmonized customer due diligence (KYC) procedures;
• Detection and suspicious transaction reporting capabilities;
• Technical and human capacities of actors;
• Gaps in the risk assessment of certain financial products.
  In conclusion, this report formulates operational recommendations aimed at:
• Strengthening the regulatory and institutional framework of the securities sector,
• Improving coordination between supervisory authorities,
• Strengthening the technical and human capacities of actors,
• And establishing a compliance culture based on continuous risk assessment.
  This evaluation thus constitutes an essential step in aligning the Algerian securities sector with international standards and an important lever for its modernization and progressive integration into regional and global financial markets.

Chapter I : General Context

1. Context and justification of the report :
   Within the framework of its duties as the regulatory authority for the securities market, the Securities Market Organization and Surveillance Commission (COSOB) is required to ensure the compliance of its supervised entities with international standards established by the Financial Action Task Force (FATF) regarding the fight against money laundering (ML), terrorist financing (TF), and the financing of the proliferation of weapons of mass destruction. In this regard, COSOB must have a comprehensive and updated view of the level of compliance of sector actors with AML/CFT requirements. This responsibility implies the conduct of sectoral evaluations aimed at identifying shortcomings and potential failures in the implementation of these requirements. The objectives of this report are:

• To identify and analyze vulnerabilities specific to the securities sector;
• To assess the degree of exposure to risks related to money laundering and terrorist financing;
• And to propose appropriate corrective and preventive measures, intended to strengthen vigilance and detection mechanisms within entities subject to COSOB supervision.
  1.1. Presentation of the COSOB :
  The Securities Market Organization and Surveillance Commission (COSOB) constitutes the regulatory authority for the securities market in Algeria. It was established by Legislative Decree No. 93-10 of May 23, 1993, as amended and supplemented, relating to the securities market. As an independent body, COSOB enjoys legal personality as well as financial autonomy. COSOB is headed by a President, appointed by presidential decree for a four-year term, and by a Council composed of six (06) members representing various ministries and agencies. These members are designated by decision of the Minister of Finance, upon proposal from their respective supervising ministries. This Council is responsible for examining and adopting all questions related to the functioning of the market, including the approval of regulatory texts, the issuance of visas for securities issuances, as well as the granting of approvals, authorizations, accreditations, and registrations of market actors. COSOB has an organization that helps it carry out its missions. It comprises a General Secretariat, two (02) operational directorates, and one (01) support directorate.

1.2. Missions of the COSOB :
In accordance with the provisions of Article 30 of the aforementioned legislative decree, COSOB's missions are to organize and supervise the securities market. In this regard, it ensures in particular:

• The protection of savings invested in securities and any other financial instrument involving a public offering;
• The transparency and regularity of operations carried out on the market, including the field of fighting money laundering and terrorist financing;
• Market stability and the prevention of unfair, abusive, or illegal practices.
  As a supervisory body, COSOB also acts to strengthen investor confidence, ensure fair competition among actors, and contribute to the progressive integration of the Algerian financial market into its regional and international environment.
  1.3. Areas of intervention of the COSOB :
  COSOB exercises extensive supervision over all components of the securities sector. Its scope of intervention covers the institutional, regulatory, operational, and technical aspects of the market. COSOB thus contributes to the establishment of a regulated, reliable financial environment aligned with good governance practices in the securities sector.

2. Mapping of entities subject to control and supervision by the
   COSOB in the framework of the fight against ML/TF Within the framework of the sectoral risk assessment for money laundering and terrorist financing (ML/TF), a mapping of entities falling within the competence of the Securities Market Organization and Surveillance Commission (COSOB) has been established. This mapping aims to identify entities subject to compliance obligations regarding the fight against ML/TF and subject to COSOB's control and supervision mechanisms. These entities may adopt various legal forms, in accordance with the legislation and regulations in force in Algeria (joint-stock companies, SARL, etc.). Their categorization is based on their nature, their role in the financial system, as well as the type of activity carried out. This mapping allows for defining the scope of evaluation, identifying the specificities of each type of entity regarding ML/TF risks, and calibrating surveillance actions according to the risk profile of each category. The legal framework defining the entities subject to control by the Commission

of Organization and Surveillance of Securities Market Operations (COSOB) in matters of fighting money laundering and terrorist financing (AML/CFT) is established by the provisions of Article 10 bis 3 of Law No. 05-01 of February 6, 2005, amended and supplemented, relating to the prevention and fight against money laundering and terrorist financing. This article specifies the categories of entities subject to the competence of the COSOB within the framework of the national AML/CFT framework. These latter carry out essential activities on the securities market and, as such, are subject to specific obligations regarding vigilance, reporting, compliance, and cooperation with competent authorities. The entities concerned by this framework are as follows:
Securities Market Intermediaries (IOBs): Legislative Decree No. 93-10 of May 23, 1993, amended and supplemented relating to the securities market, has defined the status of Securities Market Intermediaries to whom it has entrusted the monopoly of negotiating securities on the stock exchange. IOBs are legal entities approved by COSOB to carry out one or more of the following activities:

• Negotiation for third-party accounts;
• Negotiation for own account;
• Securities placement advice;
• Individual portfolio management under a written contract;
• Management of UCITS portfolios;
• Placement of securities and financial products;
• Performance guarantee and firm commitment to securities issuance;
• Conservation and administration of securities (securities account keeping);
• Corporate advice on capital structure, mergers, and acquisitions.
• Stock exchange intermediation can only be carried out by commercial companies
  created primarily for this purpose, banks, and financial institutions.
  To be approved, IOBs must present sufficient guarantees, particularly regarding:
• The composition and amount of their capital;
• Their organization and technical means;
• The honorability and experience of their managers and agents;
• The security of their clients' operations.
  Account Keepers (TCC): Securities account-keeping and conservation consists of registering securities in the name of their holders and conserving the corresponding assets, according to modalities specific to each securities issuance.

Entities authorized or potentially accredited by COSOB are:

• Banks and financial institutions;
• Securities market intermediaries;
• Issuing companies for the securities they issue and manage directly, and;
• Institutions authorized to carry out banking operations provided for by the legislative and regulatory provisions governing them.
  The activities of TCCs consist of:
• Ensuring the custody and administration of securities entrusted to them in the name of their holders;
• Executing received instructions (pledge, transfer, assignment...);
• Carrying out operations on securities (payment of dividends, interest, transfer of rights...);
• Informing holders about operations affecting their securities.
  Investment Capital Companies (ICVs): Investment capital companies (ICVs) constitute a structuring actor in the financing of the economy, particularly in supporting non-listed companies with high growth potential. They are governed by the provisions of Law No. 06-11 of June 24, 2006, amended and supplemented...