Financial Crime World

Senegal’s Banking Sector Plagued by Fraudulent Activities, Experts Warn

Dakar - Senegal’s Efforts to Combat Money Laundering and Terrorist Financing Hampered

Senegal’s efforts to combat money laundering and terrorist financing have been hindered by the country’s lack of technical expertise and a legal framework that has yet to be fully implemented. As a result, Senegal remains on the grey list of the Financial Action Task Force (FATF), indicating its non-compliance with international standards against money laundering and terrorism.

Drug Trafficking: A Major Driver of Money Laundering in Senegal

According to experts, drug trafficking is one of the major drivers of money laundering in Senegal. Illegal funds are laundered through real estate and construction, which are attractive sectors for criminals seeking to conceal their illicit earnings. In 2011, the Observatoire français des drogues et des toxicomanies (OFDT) reported that European-based drug traffickers were using Senegal’s real estate market to launder money.

The Flexibility of Real Estate and Construction Sectors

  • The flexibility of these sectors makes them attractive for criminals seeking to conceal their illicit earnings.
  • In 2013, it was estimated that nearly 96% of investments in Senegal’s real estate sector came from dubious sources.
  • The lack of a central registry and the use of fake names by investors provide cover for these illegal activities.

Construction Industry Boosted by Cash from Drug Trade

  • The construction industry has reportedly been boosted by cash from the drug trade, with large building projects suspected of being financed through illicit means.
  • This has created a culture of corruption and lack of transparency in the sector.

Banking System Vulnerable to Money Laundering

The country’s banking system is also vulnerable to money laundering due to its reliance on foreign currencies obtained and moved through informal or illegal channels. The lack of independence of the Communauté Financière Africaine (CFA) franc currency, which is tied to the euro, makes it difficult for Senegal to control financial flows.

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

Government Pledges to Collaborate with International Organizations

Senegal’s government has pledged to collaborate with international organizations such as the Groupe Intergouvernemental d’Action Contre le Blanchiment d’Argent en Afrique de l’Ouest (GIABA) and the Groupe d’action financière sur le blanchiment de capitaux (GAFI) to combat money laundering. However, the country’s slow progress in addressing these issues has raised concerns about the effectiveness of its efforts.

Lack of Technical Expertise among Financial Business Employees

The situation is further exacerbated by the lack of technical expertise among financial business employees, such as bureau de change and money transfer services, which makes it difficult for authorities to identify and prosecute money laundering cases. As a result, the number of people prosecuted for financial crimes remains low compared to the number of infractions committed.

Consequences of Continued Presence on FATF Grey List

Experts warn that Senegal’s continued presence on the FATF grey list could have serious consequences for its economy, including:

  • Increased difficulties in accessing international markets
  • Higher costs for doing business