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Senegal Struggles with Financial Crime as Money Laundering Risks Rise

The Senegalese government has been warned that its failure to address money laundering and terrorist financing risks could have severe consequences for the country’s economy. The Financial Action Task Force (FATF) added Senegal to its grey list in February 2021, citing deficiencies in the country’s anti-money laundering and combating the financing of terrorism regulations.

Money Laundering Risks

According to the FATF, Senegal is now ranked eighth in the world for money laundering and terrorist financing risks. The report highlights drug trafficking as a major driver of these crimes, with an estimated annual revenue of $360 million (CFA 200 billion). Real estate and construction are favored industries for laundering illicit funds, thanks to their flexibility and lack of transparency.

Drug Trafficking and Money Laundering

The ease with which property can be acquired in Senegal has long been exploited by Europe-based drug traffickers seeking to launder money. The lack of a central registry and the use of fake names by investors provide cover for these illegal activities. In 2013, it was estimated that nearly 96% of investments in the real estate sector came from dubious sources.

Construction Industry and Money Laundering

Senegal’s construction industry has also been boosted by cash from the drug trade, with large building projects suspected of being financed through illicit means. The country’s financial authorities have strengthened their legal and institutional framework to combat money laundering, but progress has been slow.

Challenges in Combating Money Laundering

The government’s lack of technical expertise in identifying money laundering is a major obstacle, as is the widespread use of cash and the informal sector. Senegal’s judicial system also hinders efforts to combat money laundering, with police often unable to obtain information on suspected beneficiaries of these crimes.

Currency Control and Money Laundering

Furthermore, the country’s currency, the Communauté Financière Africaine (CFA), is tied to the euro, giving France control over the printing of CFA francs. This lack of control has led to a vicious cycle, where Senegalese authorities are forced to rely on informal or illegal channels for foreign currencies.

Delinking the CFA from the Euro

Experts argue that delinking the CFA from the euro would provide greater flexibility and macroeconomic options for Senegal, allowing it to combat money laundering more effectively. Fiscal independence would also give banks more leeway to provide loans, reducing the country’s dependence on ill-gotten gains.

Consequences of Inaction

Unless action is taken to address these issues, Senegal risks being unable to fully comply with international standards against money laundering and terrorist financing, jeopardizing its economic stability and growth.