Financial Crime World

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Money Laundering Detection in Sierra Leone: A Growing Concern

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Sierra Leone, like many other countries around the world, is grappling with the menace of money laundering, a crime that undermines the economy, government, and social well-being. Money laundering destabilizes political economies, takes control of a government’s economic policy, increases the risk of bank failures, harms a country’s reputation, exposes people to drug trafficking, smuggling, and other criminal activities, and distorts business decisions.

The legal profession in Sierra Leone is particularly vulnerable to money laundering, as criminals use their services to conceal the origin of illicit funds. Legal professionals are required by law to comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations, but this can be a challenging task.

Red Flags and Ethical Obligations

To detect money laundering, legal professionals must be alert to red flags indicating that a client is seeking to involve them in criminal activity. They must also choose to abide by the law, their ethical obligations, and professional rules, and discern legitimate client wishes from transactions and structures intended to conceal or promote criminal activity or thwart law enforcement.

The Financial Action Task Force (FATF)

The FATF, an international organization established to develop a worldwide standard for AML and CFT, has set out key criteria for determining the extent of exposure to money laundering and terrorist financing risk. These criteria include:

  • Degree of full implementation of FATF standards
  • Extent to which compliance with international standards is regulated and supervised within the sector

Compliance Pillars in Sierra Leone

In Sierra Leone, legal professionals are required to comply with essential AML/ CFT compliance pillars, including:

  • Developing policies and programs
  • Conducting know-your-customer (KYC) and customer due diligence (CDD)
  • Appointing a designated AML compliance officer
  • Training staff
  • Maintaining records
  • Reporting currency and suspicious transactions

Money laundering is the process of concealing the illicit origin of proceeds from criminal activities, while terrorist financing involves soliciting, collecting, or providing funds with the intention that they may be used to support terrorist acts or organizations. Both money laundering and terrorist financing involve similar methods, including:

  • Use of shell companies
  • Anonymous accounts
  • Other financial structures

Corruption is also linked to money laundering, as it generates large amounts of proceeds that can be laundered. Corruption can enable the commission of a money laundering offense and hinder its detection by obstructing the effective implementation of a country’s judicial, law enforcement, and legislative frameworks.

Combating Corruption and Money Laundering

To combat corruption and money laundering, Sierra Leone needs to establish corruption as a predicate offense to a money laundering charge and empower authorities to investigate and prosecute corruption-related money laundering. When corruption is a predicate offense for money laundering, AML preventive measures can also be more effectively leveraged to combat corruption.

The FATF Secretariat’s Project

The FATF Secretariat is currently coordinating a project to draft a paper outlining the links between corruption and money laundering, which may facilitate the implementation of international AML/ CFT standards in Sierra Leone.