Financial Crime World

Senegal’s Money Laundering Problems: A Threat to Financial Stability

Senegal has recently been added to the Financial Action Task Force (FATF) grey list, ranking eighth globally in terms of money laundering and terrorist financing risks. This reputation as a hub for money laundering is driven by drug trafficking, which has led to a significant increase in construction projects across the country.

Real Estate: A Haven for Money Laundering

The real estate sector in Senegal is particularly vulnerable to money laundering due to:

  • Ease of purchasing properties anonymously
  • Lack of a central registry
  • Use of fake names by investors

In 2011, it was estimated that 96% of investments in Senegal’s real estate sector came from dubious sources.

Construction Projects: A Concern

The construction industry is also suspected to be financed through illegal means. For example, Akon City, a mega-project bankrolled by American-Senegalese singer Akon, has raised concerns about its potential role in facilitating money laundering.

Challenges to Combating Money Laundering

Despite efforts to strengthen Senegal’s legal and institutional framework, progress remains slow due to:

  • Lack of technical expertise in training financial sector employees to identify money laundering
  • Slow implementation of key provisions

The widespread use of cash, informal sector, and judicial system limitations also hinder efforts to prosecute financial crimes.

Macro-Economic Options for Senegal

Experts argue that delinking the CFA from the euro would provide greater flexibility and macro- economic options for Senegal, particularly in terms of fiscal and monetary policies. This could help shift the current pattern of dependence on ill-gotten gains and encourage legitimate business practices.

Conclusion: A Threat to Financial Stability

Senegal’s money laundering problems pose a significant threat to financial stability in the country and beyond. Urgent action is needed to address these issues and prevent further erosion of trust in the financial system.

References

  • [1] FATF Grey List (February 2021)
  • [2] Real Estate Investment Trends in Senegal (2011)