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Senegal’s Fight Against Financial Crime: A Long Way to Go

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The Financial Action Task Force (FATF) added Senegal to its grey list in February 2021, citing the country’s lack of compliance with international standards against money laundering and terrorism financing. This move has raised concerns about the country’s vulnerability to financial crimes, particularly drug trafficking and real estate fraud.

Money Laundering Risks

According to a recent report by the Groupe d’Action Financière sur le Blanchiment de Capitaux (GAFI), Senegal is ranked eighth in the world for money laundering and terrorist financing risks. The report highlights the ease with which drug traffickers can launder their money through real estate and construction, with many large building projects suspected of being financed via illegal means.

Real Estate Sector Vulnerabilities

The flexibility of the real estate sector, which allows the financial origins of investments and the identity of owners to be concealed, makes it an attractive industry for those seeking to move illicit funds into the legitimate economy. In 2013, it was estimated that nearly 96% of US$480 million invested in the real estate sector came from dubious sources.

Challenges Facing Senegal

Senegal’s lack of a central registry and the use of fake names by investors have provided cover for money launderers. The country’s banking system is also vulnerable to illegal foreign exchange markets, with many firms struggling to access loans due to liquidity issues.

Limited Resources and Technical Expertise

Experts argue that Senegal’s lack of technical expertise and limited resources have hindered efforts to train financial business employees to identify money laundering. Additionally, the widespread use of cash, the extent of the informal sector, and a judicial system that does not allow police to access information on suspected beneficiaries of money laundering have all contributed to the problem.

Government Efforts

To combat financial crime, Senegal has strengthened its legal and institutional framework in recent years. However, progress has been slow, and the country’s presence on the FATF grey list indicates that more needs to be done.

Collaboration with International Organizations

The Senegalese 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 GAFI to address these issues. However, some experts argue that the country’s current financial public policy may even indirectly nurture illicit money flows.

Way Forward

Experts believe that a combination of legislative reforms, improved regulatory oversight, and increased international cooperation will be necessary to effectively combat money laundering and terrorist financing.

CFA Currency Independence

The independence of the Communauté Financière Africaine (CFA) currency from the euro is seen as a key step in addressing these issues. This would give Senegalese banks greater flexibility and macro-economic options, allowing them to provide loans and finance legitimate businesses rather than relying on illegal channels.

Conclusion

As Senegal works to address its financial crime problems, it is clear that a long way still needs to be traveled. However, with the right combination of efforts and international cooperation, it is possible for the country to effectively combat money laundering and terrorist financing.