Criminal Networks Thrive as Governments Fail to Enforce Financial Accountability
A Growing Money Exchange Business in East Africa Creates a Convenient Cover for Money Laundering
A thriving money exchange business in Kenya and Uganda has created a convenient cover for money laundering, allowing criminal networks to evade accountability and perpetuate corruption. The illicit flows of funds from South Sudan have undermined the financial legitimacy of neighboring countries and threaten to destabilize the entire region.
Lack of Effective Measures Leads to Widespread Corruption
The lack of effective anti-money laundering and counter-terrorism financing measures has led to widespread corruption, with government officials and business elites complicit in illegal activities. The black market for US dollars has become a major concern, with 1 dollar traded for nearly 400% more than its legal value. This has created shortages of currency, leading to inflation and further economic deprivation.
FATF Places South Sudan on Grey List
The Financial Action Task Force (FATF) has placed South Sudan on its grey list due to the country’s failure to implement effective counter-measures against money laundering and terrorist financing. This decision is likely to reduce foreign investment in the country and exacerbate its economic woes.
Corruption Exploits COVID-19 Pandemic
Corrupted political circles have taken advantage of the COVID-19 pandemic, creating profiteering schemes and exploiting large amounts of foreign aid that has flowed into the country. The FATF’s monitoring of these activities will influence future large-scale cash-based aid decisions, further undermining South Sudan’s economic development and stability.
Weak Anti-Corruption Framework
South Sudan’s anti-corruption and anti-money laundering framework is still in its infancy, with little effect from countermeasures implemented so far. The country has not signed any international conventions against corruption, which weakens its path towards political and economic development.
Recommendations for Addressing the Issues
- Gradually adapt to international standards, such as the 1988 Vienna Convention, the 1999 Terrorist Financing Convention, and the 2000 Palermo Convention.
- Engage with regional organizations like the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG) and work with international financial institutions like the IMF and World Bank.
- Establish a solid legislative framework, including mandatory compliance measures for anti-corruption and anti-money laundering laws.
- Increase oversight and transparency around officials’ asset declarations and military procurement processes to curb corruption.
Additional Recommendations
- Independent audits and whistleblower provisions would help identify and prosecute corrupt officials.
- Establish an overarching national anti-corruption and money laundering authority to ensure effective financial regulation and verification of all financial transactions.
- Normalize the dual currency exchange system to reduce uncertainty around the currency market and eliminate rent-seeking opportunities for corrupt officials.
Conclusion
The Counterterrorism Group (CTG) will continue to monitor developments in South Sudan’s policies and report on any terrorist threats linked to corruption ties established in the country and nearby region. It is essential that the government takes immediate action to address these issues and strengthen its anti-corruption and anti-money laundering framework to ensure financial accountability and stability.