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Senegal Plagued by Financial Crimes: Real Estate and Construction Sectors Under Scrutiny
Senegal has been listed on the grey list of countries by the Financial Action Task Force (FATF) due to its failure to fully comply with international standards on combating money laundering and terrorist financing. The country has committed to working with the task force to address deficiencies, but experts warn that Senegal’s financial public policy may be indirectly nurturing these illicit flows.
Vulnerability of Real Estate and Construction Sectors
The real estate and construction sectors are particularly vulnerable to money laundering, with drug traffickers using these industries to launder their profits. According to a National Risk Assessment, one of the major risks for money laundering in Senegal is drug trafficking, which generates an estimated US$360 million annually.
Risks and Challenges
- Real estate and construction offer flexibility and anonymity, making them attractive methods for money laundering
- Absence of central data or registries makes it difficult to detect illegal activities
- Investors registering property under fake names adds to the complexity
The Construction Industry: A Prime Example
The construction industry has also been boosted by cash from drug trafficking, with large projects often suspected of being financed by illicit trade. The Akon City project, a mega-project financed by American-Senegalese singer Akon, is a prime example, sparking fears that it will facilitate money laundering.
Challenges in Combating Money Laundering
Senegal’s lack of technical means to combat money laundering and its reliance on foreign currencies also hinder its efforts. The country’s banking system indirectly relies on informal or illegal channels for foreign exchange, making it difficult to control financial flows. This lack of liquidity in the banking system has led to a shortage of loans available to individuals and companies, pushing many to seek alternative financing through illegal means.
Solutions
- De-linking the CFA from the Euro to establish greater flexibility and macro-economic options for Senegal
- Giving banks more leeway to provide loans, potentially shifting the pattern of dependence on ill-gotten gains
Urgent Action Required
The Senegalese authorities must take urgent measures to address these issues and create an environment that encourages legitimate business practices. The country’s presence on the FATF grey list serves as a warning sign, highlighting the need for concrete action to combat financial crimes and restore its reputation as a stable and secure economic hub in West Africa.