Guidelines No. 04/2025 of March 27, 2025 on the Self-Assessment of Entities Subjected to Money Laundering, Terrorism Financing, and Proliferation Financing Risks

People's Democratic Republic of Algeria

Commission for the Organization and Supervision of Stock Market Operations - COSOB -

Cellule de Lutte Contre le Blanchiment des Capitaux le Financement du Terrorisme et le Financement de la Prolifération des Armes de Destruction Massive

GUIDELINES NO. 04-2025 OF MARCH 27, 2025
ON THE SELF-ASSESSMENT OF ENTITIES SUBJECTED TO MONEY LAUNDERING, TERRORISM FINANCING, AND PROLIFERATION FINANCING RISKS V 1.0

COSOB - MARCH 2025

Introduction

This document provides a methodological framework for entities subject to the securities sector to assess their compliance with legal and regulatory requirements regarding the prevention and fight against money laundering, terrorism financing, and the financing of proliferation of weapons of mass destruction. The objective is to ensure that these entities have adequate policies, procedures, and systems to identify, mitigate, and manage financial risks.

The fight against money laundering consists of preventing and detecting any attempt to conceal or legitimize funds obtained illegally. This includes activities such as recycling proceeds from organized crime, corruption, or other serious offenses.

Terrorism financing refers to the provision of financial resources (directly or indirectly) to support terrorist acts. Unlike money laundering, funds used in terrorism financing may come from legal sources, but their destination is illicit.

The financing of the proliferation of weapons of mass destruction concerns any activity that facilitates the development, production, or acquisition of nuclear, chemical, or biological weapons. This is a critical area for international sanctions and financial controls.

These three areas are interdependent and require a comprehensive and proactive approach.

Legal and Regulatory References

• Ordinance No. 66-156 of 18 Safar 1386, corresponding to June 8, 1966, establishing the Penal Code, as amended and supplemented;

• Law No. 05-01 of 27 Dhou El Hidja 1425, corresponding to February 6, 2005, on the prevention and fight against money laundering and terrorism financing, as amended and supplemented;

• Executive Decree No. 25-101 of 12 Ramadhan 1446, corresponding to March 12, 2025, on the procedure for freezing and/or seizing funds in the context of the prevention and fight against terrorism financing and the financing of proliferation of weapons of mass destruction;

• Executive Decree No. 23-429 of 15 Joumada El Oula 1445, corresponding to November 29, 2023, on the public register of beneficial owners of legal persons under Algerian law;

• Executive Decree No. 25-102 of 12 Ramadhan 1446, corresponding to March 12, 2025, fixing the composition, organization, and functioning of the committee for monitoring targeted international sanctions;

• Executive Decree No. 25-103 of 12 Ramadhan 1446, corresponding to March 12, 2025, fixing the procedures for inscription and removal from the national list of terrorist persons and entities and the effects resulting therefrom;

• COSOB Regulation No. 24-01 of 11 Moharram 1446, corresponding to July 17, 2024, on the prevention and fight against money laundering, terrorism financing, and the financing of proliferation of weapons of mass destruction;

• COSOB Instruction No. 24-07 of November 21, 2024, on vigilance measures towards clients in the context of the prevention and fight against money laundering, terrorism financing, and the financing of proliferation of weapons of mass destruction.

1. Objectives of the Self-Assessment

The objectives of this self-assessment are:

a. To understand the specific threats related to activities, products, clients, and geographic zones. A risk here refers to the probability that an activity or event will lead to negative consequences, such as regulatory violation or financial loss.

b. To analyze the effectiveness of mechanisms put in place to mitigate these risks. Internal controls are procedures and systems designed to monitor and reduce operational, financial, or legal risks.

c. To verify that practices comply with applicable laws and regulations. Regulatory compliance means the adequacy between the actions of a subject and the legal requirements imposed by competent authorities.

d. To implement corrective measures to fill gaps and strengthen organizational resilience.

2. Applicable Regulatory Framework

Entities must comply with the following texts:

• Regulations on money laundering and terrorism financing: Regulatory texts that impose specific obligations on subjects to prevent money laundering and terrorism financing. This includes provisions on customer knowledge, transaction monitoring, and reporting obligations.

• Recommendations of the Financial Action Task Force (FATF): The FATF is an international organization that establishes global standards for the fight against money laundering and terrorism financing. Its recommendations serve as a reference for national regulators.

• KYC/CDD Obligations: The term KYC (Know Your Customer) refers to the obligation of a subject to know its clients, including their identity, economic activity, and sources of income. Customer Due Diligence (CDD) is an essential component of KYC, involving the collection and verification of client information.

• International Sanctions: Restrictive measures imposed by organizations such as the UN or FATF to limit financial activities with countries, entities, or individuals involved in illicit activities.

3. Key Steps of the Self-Assessment

3.1. Identification and Assessment of Risks

a) Analysis of Products and Services

The products and services offered by an entity directly influence its exposure to risks. For example, complex products such as derivatives or cryptocurrencies often present higher risks due to their opacity and ease of rapidly transferring funds.

• Complex products: Those that are difficult to understand or evaluate, thereby increasing the risk of manipulation or abuse.
• Product risk: The probability that a product will be used for illicit activities, such as money laundering.

b) Analysis of Clients

Clients constitute a major source of risk. High-risk profiles include:

• Politically Exposed Persons (PEPs): Individuals holding important public functions or influential positions, likely to be involved in corruption or misappropriation of funds.
• Clients under sanctions: Entities or individuals listed on international sanctions lists.

c) Analysis of Geographic Zones

Certain geographic zones are considered high-risk due to their low cooperation with international authorities or political instability. For example, countries on the FATF blacklist or grey list require increased vigilance.

3.2. Review of Policies and Procedures

a) Documentation

Written policies are formal documents that define the internal rules and directives of an organization. They must be clear, accessible, and regularly updated to reflect regulatory developments.

b) Alignment with Regulations

A regulatory gap occurs when a subject does not fully comply with legal or regulatory requirements. Identifying these gaps is essential to avoid sanctions or reputational loss.

3.3. Compliance with KYC/CDD Obligations

a) Initial Identification

Initial identification consists of collecting and verifying client information when establishing the business relationship. This includes verifying official documents such as passports or identity cards.

b) Continuous Verification

Continuous verification involves the regular updating of client data and monitoring of significant changes, such as a change in economic activity or unusual financial behaviors.

3.4. Transaction Monitoring

a) Detection Tools

Automated tools use algorithms to analyze transactions and detect anomalies. For example, an unusually high transaction may trigger an alert.

b) Reporting to Authorities

A report is a notification sent to competent authorities (Financial Intelligence Unit) when suspicious activity is detected. Reports must be submitted within the prescribed time limits to avoid sanctions.

5. Documentation and Final Report

The final report must include:

1. Summary of results: A synthesis of identified strengths and weaknesses.
2. Corrective action plan: Precise measures to correct gaps, accompanied by deadlines.
3. Documentary evidence: Concrete examples (screenshots, internal audits) to support conclusions.

6. Monitoring and Continuous Improvement

Monitoring consists of supervising the implementation of corrective actions. Continuous improvement involves regular review of policies and procedures to adapt to new threats and regulations.