Risk Assessment Report on Money Laundering and Terrorist Financing Risks Related to Virtual Assets

Democratic and Popular Republic of Algeria
Cell for Identifying Money Laundering and Terrorist Financing Risks in the Context of Electronic Transactions or the Use of New Technologies

Risk Assessment Report on Money Laundering and Terrorist Financing Risks Related to Virtual Assets Algeria June 2025

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 2

Table of Contents:
Summary:.................................................................................................................................................. 5
I. Context .......................................................................................................................................... 8
Introduction......................................................................................................................................... 8
Work Methodology...................................................................................................................... 9
The different stages of the assessment: ............................................................................................ 11
The choice of the assessment model:..................................................................................................... 11
Data collection: .................................................................................................................. 12
Calculation and interpretation of results.......................................................................................... 12
Finalizing the drafting of the report......................................................................................... 12
Mobilization of public and private actors and analysis firms:......................................... 12
II. Ecosystem of VAs and VASP in Algeria......................................................................................... 13
Casinos and gaming platforms:.................................................................................................. 15
Payment methods and channels used: ................................................................................ 16
Legal and regulatory framework:....................................................................................................... 18
III. Assessment of Threats and Vulnerabilities .............................................................................. 19
III.1 – Assessment of Threats.......................................................................................................... 20
III.2 – Assessment of Vulnerabilities................................................................................................... 24
III.2.1 Inherent Vulnerabilities of VASP, Products, and VASP Clients........................... 24
Source: Cell for Assessing ML/TF Risks Related to NT and ET 2025 ......................................... 26
III.2.2 Vulnerabilities Due to Gaps in Money Laundering and Terrorist Financing Combating ........................................................................................................... 26
III.2.3 Cross-Border Vulnerabilities........................................................................................... 27
III.3 – Assessment of Mitigation Measures.................................................................................... 29
III.3.1 – Mitigation Measures Taken by Public Authorities..................................................... 29
III.3.2 – Mitigation Measures by the Private Sector.......................................................................... 32
III.4 – Assessment of Typologies........................................................................................................ 36
IV. Interactions with the Private Sector ................................................................................................. 38
IV.1 Interactions with Financial Institutions............................................................................. 38

1. Banks and Financial Institutions:................................................................................. 38
2. Algeria Post Financial Services: ........................................................................................ 40
3. Securities Companies:.............................................................................................. 41

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 3
4. Insurance:.............................................................................................................................. 42
IV.2 Interactions with DNFBPs....................................................................................................... 43

1. Notaries................................................................................................................................. 43
2. Real Estate Agents................................................................................................................ 43
3. Dealers in Precious Stones and Metals ........................................................................... 43
4. Accounting Professions.................................................................................................. 44
5. Tax Advisors ................................................................................................................. 44
6. Casinos and Gaming Platforms ............................................................................................. 44

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 4 List of Acronyms and Abbreviations ARCPE Postal and Electronic Communications Regulatory Authority VA Virtual Assets ML/TF Money Laundering and Terrorist Financing WB World Bank CGN National Gendarmerie Command COSOB Capital Markets Organization and Surveillance Commission CTRF Financial Intelligence Processing Unit DGSN General Directorate of National Security NRA National Risk Assessment DNFBP Designated Non-Financial Businesses and Professions FATF Financial Action Task Force GAFIMOAN Middle East and North Africa Financial Action Task Force KYC Know Your Customer AML/CFT Combating Money Laundering and Terrorist Financing ONS National Office of Statistics PEP Politically Exposed Persons VASP Virtual Asset Service Provider REM Mutual Evaluation Report

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 5 Summary:
This first targeted assessment aims to identify and evaluate risks related to the use of new technologies and virtual services in money laundering and terrorist financing. It falls within the framework of implementing actions recommended by GAFIMOAN experts contained in the mutual evaluation report of May 2023, particularly those related to FATF Recommendation 15 and Immediate Results 1, 3, and 4. Although cryptocurrencies have been prohibited since the promulgation of Law No. 11-17 of December 27, 2017 (Finance Law 2018), Algeria has more than 1.74 million users, with a predominance of USDT (Tether)1 due to its stability and transactional utility, and $9.7 billion (1,309.5 billion dinars2) in value received. Furthermore, a worrying rise in online gambling platforms has been observed, despite the strict prohibition imposed by Article 612 of Ordinance No. 75-58 of September 26, 1975, as amended (Civil Code), as well as the provisions of Articles 165, 166, 167, 168, and 169 of Ordinance No. 66-156 of June 8, 1966, as amended and supplemented (Penal Code). This situation represents a considerable risk in terms of non-compliance with current legislation and exposes individuals to increased dangers regarding money laundering and terrorist financing (ML/TF). The assessment of virtual asset risks was based essentially on the World Bank's "intermediate" tool, which is structured around three axes:

• Threats measured by the entry of criminal proceeds into VASPs, terrorist financing, darknet, fraud, scam, and hacking;
• Vulnerabilities linked to the characteristics of these providers and their products, as well as weaknesses in cross-border cooperation;
• Mitigation measures put in place by both public authorities and private sector actors.
  The assessment exercise was conducted in close collaboration with law enforcement authorities, regulatory and supervisory authorities, and private sector actors including financial institutions and designated non-financial businesses and professions, as defined by Law No. 05-01 of February 6, 2005, relating to the combating of money laundering and terrorist financing, modified and supplemented by Law No. 23-01 of February 7, 2023. The assessment methodology relied on the sending of about ten questionnaires combining quantitative and qualitative data, followed by a series of analysis and interpretation meetings for consolidated results. Furthermore, the assessment benefited from the assistance of analysis firms "Crystal Intelligence"3 and "Chainalysis"4 through online meetings allowing the collection of useful information and statistics for the exercise.

1 USDT, a stablecoin indexed to the US dollar, is particularly appreciated for its stability. It constitutes a reliable solution for storing value, facilitating international payments, and supporting cross-border commercial exchanges. 2 Average exchange rate end of 2024: 1 USD = 135 DA. 3 "Crystal" is a French company founded in 2016, specialized in blockchain intelligence, providing financial institutions, law enforcement, and regulators with the means to analyze the blockchain in real time and implement investigation and compliance solutions. 4 "Chainalysis" is a company founded in 2014, it develops tools to track financial flows on blockchains (decentralized public ledgers of transactions) to help

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 6 The threat analysis reveals an average exposure to money laundering risk, primarily fueled by various underlying infractions of internal origin. Conversely, terrorist financing and darknet risks are considered low. The main identified threats concern rather fraud, scam, and hacking, which represent the most significant risk vectors. These results are corroborated by investigations and inquiries conducted by law enforcement authorities, statistics communicated by analysis firms "Chainalysis" and "Crystal Intelligence," as well as information from open sources. The analysis of vulnerabilities inherent to Virtual Asset Service Providers (VASP), their products, and their clientele highlighted exposure levels ranging from low to medium. This assessment is explained notably by the predominance of centralized finance activities (63.5%), the absence of circulation of privacy-focused crypto-assets (such as Monero, Zcash, or Dash), and the limitation of the use of cryptocurrency ATMs abroad. Conversely, cross-border vulnerability presents a very high exposure, due to the absence of effective international cooperation mechanisms, and the establishment of several providers (VASP) in jurisdictions rated as non-compliant or partially compliant with FATF Recommendation 15. The analysis of mitigation measures was structured in two parts: those implemented by public authorities, on the one hand, and those relevant to the private sector, on the other hand. On the side of public authorities, mitigation measures remain very limited, primarily due to the absence of a complete and adapted legal framework for virtual assets. This lack forced law enforcement authorities and competent courts to rely on alternative legal texts, such as Ordinance No. 96-22 and Law No. 18-05, to address offenses related to virtual assets. Furthermore, this situation also hindered the development of effective international cooperation with foreign counterparts. Regarding the private sector (financial institutions and DNFBPs), existing measures include notably:

• the adoption of internal policies and procedures governing activities related to VAs and VASPs,
• the implementation of identification and risk assessment systems,
• training and awareness actions for staff,
• as well as the establishment of alert indicators and mechanisms for detecting and blocking suspicious transactions.
  However, the impact of these measures remains very limited, particularly regarding the significant volume of transactions transiting through banking and postal channels, representing respectively 37% and 42% of daily flows. Inherent and residual risks, by VASP, are established by comparing identified threats, observed vulnerabilities, and evaluated mitigation measures, as follows:

governments, companies, and financial institutions to identify, track, and prevent illegal activities such as money laundering, fraud, and terrorist financing.

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 7
Table No. 01: Inherent and Residual Risks by VASP
Source: Cell for Assessing ML/TF Risks Related to NT and ET 2025 Furthermore, the assessment of interactions between VAs, VASPs, as well as the financial and non-financial sectors, allowed identifying different levels of risks related to money laundering and terrorist financing, presented in the table below:
Table No. 02: ML/TF Risks Associated with VAs and VASPs in the Private Sector
Source: Cell for Assessing ML/TF Risks Related to NT and ET 2025 VASP INHERENT RISKS % RESIDUAL RISKS % VIRTUAL ASSET WALLET PROVIDERS 51% 46% VIRTUAL ASSET EXCHANGES 51% 46% VIRTUAL ASSET BILL DISPENSERS (ATMs) 51% 46% VIRTUAL ASSET BROKERS / INVESTMENT SERVICE PROVIDERS 52% 48% VIRTUAL ASSET PAYMENT SERVICE PROVIDERS 51% 48% INITIAL COIN OFFERING (ICO) PROVIDERS 41% 39% VALIDATORS / MINERS / ADMINISTRATORS 51% 48% ENTIRE VASP SECTOR 51% 46% LABELS IF/DNFBP RISK LEVEL ALGERIA POST IF VERY HIGH CASINOS AND GAMING PLATFORMS DNFBP VERY HIGH BANKS AND FINANCIAL INSTITUTIONS IF HIGH SECURITIES COMPANIES IF LOW INSURANCE IF LOW NOTARIES DNFBP LOW ACCOUNTING PROFESSIONALS DNFBP LOW TAX ADVISORS DNFBP LOW REAL ESTATE AGENTS DNFBP LOW DEALERS IN PRECIOUS STONES AND METALS DNFBP LOW

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 8
I. Context
Introduction
Algeria, officially the Democratic and Popular Republic of Algeria, is a country in North Africa bordered by the Mediterranean Sea to the north, Tunisia to the northeast, Libya to the east, Niger and Mali to the south, Mauritania and the Western Sahara territory to the southwest, and Morocco to the west. With an area of approximately 2.38 million km², it is the largest country on the African continent. Its capital is Algiers, its national currency is the Algerian dinar (DZD), and its official languages are Arabic and Tamazight. On January 1, 2024, the population reached 46.7 million inhabitants, and under the hypothesis of maintaining the growth rate of 2023, the total population would reach 47.4 million inhabitants on January 1, 20255 with a median age of 27.8 years6, placing Algeria among the youngest countries globally. The Gross Domestic Product (GDP) of Algeria for the third quarter of 2024 stands at 9,072.1 billion dinars ($67.2 billion USD) with a growth of 4% and an inflation rate of 4.3%7. However, the informal sector represents a significant share of national economic activity, estimated at 8,030.8 billion dinars8 ($59.48 billion USD) in 2023, representing 24% of the GDP recorded in the same exercise (33,638 billion dinars). Algeria is administratively divided into (58) Wilayas (provinces). Each wilaya is divided into Daïra (districts) (553 Daïra) and each Daïra is in turn divided into communes (1,541 communes) across the national territory. In 2022, Algeria underwent a mutual evaluation of its national system for the prevention and combating of money laundering and terrorist financing, which resulted in its placement in the enhanced follow-up process from the date of validation of the REM in May 20239. The mutual evaluation was based on the 2013 FATF methodology, which evaluates both technical compliance and the effectiveness of the AML/CFT systems of evaluated countries. The evaluation carried out by the Middle East and North Africa Financial Action Task Force (GAFIMOAN) also covered the aspect of virtual assets (VA) and virtual asset service providers (VASP), for which gaps were noted at the level of Recommendation 15 and Immediate Results 1, 3, and 4. Consequently, recommended actions were formulated focusing notably on the following aspects:

• Identify and evaluate money laundering and terrorist financing risks arising from virtual asset activities and activities or operations of virtual asset service providers;

5 Document published by ONS: www.ons.dz/IMG/pdf/Demographie_Alg2020_2023.pdf 6 https://fr.statista.com/statistiques/787397/age-median-de-la-population-algerie/ 7 ONS Bulletin No. 1049: www.ons.dz/IMG/pdf/Comp3T2024.pdf 8 https://www.bank-of-algeria.dz/stoodroa/2024/08/Rapport-annuel-2023-Fr.pdf 9 Mutual Evaluation Report published in July 2023 and available on the official FATF website (http://fatf-gafi.org/fr/publications/Evaluationmutuellealgerie.html).

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 9

• Establish a legal framework either to prohibit all forms of virtual assets and virtual asset service provider activities (as defined by the FATF methodology), or to regulate and supervise them;
• Activate joint working mechanisms to identify unregistered or unlicensed virtual asset service providers, and provide the necessary legal basis for sanctioning them.
  It should be recalled that GAFIMOAN rated Algeria as "non-compliant" with Recommendation 15 and "weak" with respect to Immediate Results 1, 3, and 4.
  Furthermore, Algeria's National Risk Assessment (NRA), finalized in June 2024, highlighted in its report that the future use of cryptocurrencies and virtual assets represents a real and emerging threat, likely to strengthen in the coming years.10 Work Methodology Creation of the Working Group In order to comply with the aforementioned GAFIMOAN recommended actions, the sub-committee for combating money laundering and terrorist financing was equipped with five (05) technical working cells, in accordance with the interministerial decree of 06/08/2022 fixing the number, composition, missions, and operating procedures of technical sectoral working cells of the AML/CFT sub-committee. A cell for identifying money laundering and terrorist financing risks in the context of electronic transactions or the use of new technologies was set up, designated in this document as the "cell". It is chaired by a representative of the Bank of Algeria and composed of representatives from:
• Ministry of National Defense
• Ministry in charge of the Interior;
• Ministry in charge of Finance;
• Ministry in charge of Post and Telecommunications;
• Ministry in charge of Commerce;
• Ministry in charge of Communication;
• Ministry of Justice;
• National Gendarmerie Command;
• General Directorate of National Security;
• Financial Intelligence Processing Unit;
• Capital Markets Organization and Surveillance Commission;
• Postal and Electronic Communications Regulatory Authority;
• National Body for Prevention and Combating Infractions Related to Information and Communication Technologies;
• Monetic Economic Interest Group;
• Interbank Transactions and Monetic Automation Society;
• Professional Association of Banks and Financial Institutions.
• Algeria Post;

10 National Risk Assessment Report, June 2024, page 15

Risk Assessment Report on ML/TF Risks Related to VAs June 2025 Page 10

• General Directorate of Taxes;
• General Directorate of Customs.
  The cell representatives were designated due to their roles within their respective bodies, their knowledge and skills related to the use of new technologies for electronic transactions and financial services. This cell is responsible for:
• proposing any appropriate measure to limit the risks of using new technologies or virtual financial services in money laundering and terrorist financing operations;
• identifying vulnerabilities and assessing money laundering and terrorist financing risks resulting from electronic transactions or services using new technologies, notably those related to games and lotteries;
• proposing measures likely to reduce the risks of using new technologies in money laundering or terrorist financing in the banking and financial services sector, notably those using bank payment cards and online sales;
• proposing any legislative, regulatory, or administrative measure to organize the activity of virtual service providers and to prohibit terrorists and/or entities or organizations from benefiting from these services;
• drawing up the list of authorities controlling the activities of virtual service providers;
• proposing any legislative or regulatory measure likely to organize the activity of fund transfer service providers to and from abroad.