Financial Crime World

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Senegal’s Grey List Status: A Wake-Up Call to Combat Financial Crime

Senegal has been placed on the grey list of countries by the Financial Action Task Force (FATF) due to its inadequate compliance with international standards on combating money laundering and terrorist financing. The country has committed to addressing deficiencies, but the lack of progress in implementing laws and policies is a major concern.

Money Laundering Risks

  • Senegal is ranked eighth globally for money laundering and terrorist financing risks.
  • Drug trafficking, which generates an estimated $360 million annually, is a significant risk factor.
  • Real estate and construction are popular methods used to launder drug proceeds, taking advantage of the sector’s flexibility and lack of transparency.

Real Estate Sector at Risk

  • The real estate sector in Senegal has been exploited by drug traffickers based in Europe since 2011.
  • The easy acquisition of properties under fake names and the absence of central data or registries have made it difficult to detect illegal activities.
  • In 2013, it was estimated that $460 million out of $480 million invested in real estate came from dubious sources.

Construction Sector Also Affected

  • Cash from drug trade has boosted construction projects across Senegal, including coastal cities like Dakar and Mbour.
  • Large-scale construction projects are often suspected of being financed by illicit funds, such as the Akon City project.

Lack of Technical Means

  • Despite strengthened legal and institutional frameworks to fight money laundering, Senegal’s presence on the FATF grey list indicates that more needs to be done.
  • The lack of technical means, including training for financial sector employees, hinders the country’s response to financial crimes.

Public Policy Nurtures Illicit Flows

  • Senegal’s public policy indirectly encourages illicit financial flows due to widespread use of cash, an informal economy, and a judicial system that limits law enforcement’s ability to obtain information on suspected beneficiaries.
  • The lack of control over the CFA franc currency also enables illegal foreign exchange markets.

Solutions

  • To counter money laundering in real estate and construction, urgent measures are needed to unlink the CFA from the Euro.
  • This would give Senegalese banks more flexibility to provide loans to individuals and companies, reducing reliance on ill-gotten gains.