Financial Crime World

Senegal Struggles to Combat Money Laundering: Real Estate Sector Under Scrutiny

Despite being added to the Financial Action Task Force’s (FATF) grey list in February 2021, Senegal is making slow progress in combating money laundering and terrorist financing. The country’s real estate sector has emerged as a major concern, with drug traffickers using it to launder illicit funds.

The Problem

According to the National Risk Assessment, Senegal ranks eighth globally for money laundering and terrorist financing risks, driven largely by drug trafficking, which generates an estimated US$360 million annually. Real estate and construction have become preferred industries for money laundering due to their flexibility, allowing financial origins and owner identities to be concealed.

The Role of the Real Estate Sector

  • The sector’s lack of a central registry and the use of fake names by investors provide cover for illegal activities.
  • In 2011, the Observatoire français des drogues et des toxicomanies (OFDT) reported that Europe-based drug traffickers were exploiting Senegal’s real estate market to launder money.
  • By 2013, an estimated 96% of US$480 million invested in the sector came from dubious origins.

Recent Developments

  • Around 120 new real estate agencies have been established by drug traffickers in Dakar between 2011 and 2019.
  • The construction industry has also been boosted by cash from the drug trade, with some large projects suspected of being financed through illegal means.

Challenges in Combating Money Laundering

  • Senegal’s legal and institutional framework to combat money laundering has been strengthened in recent years, but progress is slow due to a lack of technical expertise and limited resources.
  • The government’s pledge to collaborate with international organizations such as GIABA (Groupe Intergouvernemental d’Action Contre le Blanchiment d’Argent en Afrique de l’Ouest) and GAFI (Groupe d’action financière sur le blanchiment de capitaux) has yet to yield significant results.

Solutions

  • Delinking the Communauté Financière Africaine (CFA) from the euro would grant Senegal greater flexibility and macro-economic options, allowing it to better combat money laundering.
  • Increasing liquidity in the banking system and providing more loans to legitimate businesses could be achieved by increasing liquidity in the banking system.

Conclusion

Until these measures are implemented, Senegal’s real estate sector will likely remain vulnerable to money laundering and illegal activities. The country’s slow progress on combating money laundering has significant implications for its economy and reputation, highlighting the need for urgent action to address this critical issue.