Financial Crime World

Fraudulent Activities Rock Senegal’s Banking Sector: Country Takes a Hit as Money Laundering and Terrorist Financing Risks Soar

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Senegal has been placed on the grey list of countries by the Financial Action Task Force (FATF) due to its failure to comply with international standards on combating money laundering and terrorist financing. This move has raised concerns about the prevalence of fraudulent activities in its banking sector.

Money Laundering and Terrorist Financing Risks Soar

According to a recent report, Senegal is now ranked eighth in the world for money laundering and terrorist financing risks. The real estate and construction sectors have been identified as major hotspots for money laundering, with drug traffickers using these industries to launder their illicit proceeds.

The flexibility of the real estate sector makes it an attractive method for those seeking to move funds into the legitimate economy. The ease with which properties can be acquired in Senegal has made it a popular destination for drug traffickers looking to launder their money.

Construction Industry: A Hub for Illicit Trade Financing

Large projects suspected of being financed by money from illicit trade have been identified in the construction industry, including Akon City, a mega-project due for completion in 2029. This has raised concerns about the potential for money laundering.

Contributing Factors to Senegal’s Money Laundering Problem

Experts point out that several factors contribute to the country’s money laundering problem:

  • Widespread use of cash: The widespread use of cash hinders the detection of suspicious transactions.
  • Importance of informal sector: The informal sector, which is not subject to the same regulations as the formal sector, provides opportunities for money laundering.
  • Limited understanding of money laundering: A lack of technical means to train employees from financial businesses and limited understanding of money laundering hinder the state’s response.

Impact on Banking System

The country’s banking system has been affected by a lack of control over the flow of currencies and reliance on foreign currencies obtained through informal or illegal channels. This has made it difficult for individuals and companies to access loans from banks, pushing many to seek financial alternatives through illegal channels.

Urgent Measures Needed

To counter money laundering in the real estate and construction sectors and establish an environment that encourages legitimate business practice, urgent measures are needed:

  • Independence of CFA franc: Advocates are calling for the independence of the CFA franc, which would give Senegal greater flexibility and macroeconomic options.
  • Comprehensive approach: A comprehensive approach is needed to tackle the root causes of money laundering and terrorist financing.

As Senegal works to address its fraudulent activities, it is clear that a comprehensive approach is necessary to ensure the country’s financial system is transparent and secure.