Financial Crime World

Senegal Grapples with Financial Crime Investigation Techniques Amid FATF Grey List

Senegal, despite efforts to strengthen its legal and institutional framework, remains vulnerable to money laundering and terrorist financing risks. The country’s grey listing by the Financial Action Task Force (FATF) in February 2021 highlights its failure to fully comply with international standards on combating financial crimes.

Major Risks and Vulnerabilities

According to a National Risk Assessment, drug trafficking is one of the major risks for money laundering in Senegal. The illegal economy generates nearly US$360 million annually, with drug traffickers using real estate and construction as preferred methods to launder their proceeds.

  • Drug traffickers use real estate and construction to launder their proceeds, taking advantage of the sector’s flexibility and lack of transparency.
  • The ease with which investors can acquire properties without revealing their identities or financial sources has made this sector attractive for those seeking to move illicit funds into the legitimate economy.

Real Estate Market Concerns

In 2011, the Observatoire français des drogues et des toxicomanies (OFDT) warned that drug traffickers based in Europe were exploiting Senegal’s real estate market to launder money. The Akon City project, a mega-development by American-Senegalese singer Akon, has raised concerns about its potential role in facilitating money laundering.

Construction Industry Linkages

The construction industry has also been linked to money laundering, with large projects suspected of being financed by illegal means.

Public Policy Challenges

Experts point out that Senegal’s public policy indirectly nurtures these illicit financial flows. The country’s lack of technical means to train employees from financial businesses and the widespread use of cash have limited its ability to tackle money laundering.

  • Limited technical means to train employees from financial businesses.
  • Widespread use of cash has limited the country’s ability to tackle money laundering.

Currency Concerns

Senegal’s reliance on the Euro-backed Communauté Financière Africaine (CFA) currency has left it with limited control over foreign exchange flows. This has led to a vicious cycle where the country’s banking system is forced to rely on informal or illegal channels for foreign currencies.

Recommendations for Improvement

To counter money laundering in the real estate and construction sectors, experts advocate for:

  • De-linking the CFA from the Euro.
  • Increasing access to banking loans for individuals and companies.
  • Giving Senegalese banks more flexibility to provide loans and reduce the need for illicit financial flows.

Urgent Action Needed

Until tangible results are achieved, Senegal remains vulnerable to money laundering and terrorist financing risks. The country’s continued presence on the FATF grey list underscores the need for urgent action to strengthen its financial crime investigation techniques and institutions.