Financial Crime World

Title: Senegal’s Grey Listing by FATF: Addressing Money Laundering and Terrorist Financing in Drugs, Real Estate, and Construction

Background

  • The Financial Action Task Force (FATF) added Senegal to its grey list in February 2021.
  • Senegal faces concerns over its role in the global illicit economy, particularly in relation to drug trafficking and money laundering.
  • Senegal ranks eighth in the world in money laundering and terrorist financing risks.

Drivers of Money Laundering in Senegal

Drug Trafficking

  • Drug trafficking generates nearly US$360 million (CFA 200 billion) annually in Senegal.
  • Real estate and construction are popular methods for money laundering.

Real Estate Sector

  • Approximately 96% of US$480 million investment came from dubious origins between 2011 and 2013.
  • About 30% of confiscated criminal goods were houses and buildings, and over 120 new real estate agencies were established by drug traffickers in Dakar since 2009.

Construction Sector

  • Megaprojects financed by drug money, such as Akon City and shopping malls, have raised suspicions.
  • Insufficient implementation of legal and institutional frameworks.

Challenges in Addressing Money Laundering

  • Limited technical expertise for financial business employees to identify and report money laundering activities.
  • Widespread use of cash and an extensive informal sector.
  • A judicial system that doesn’t provide necessary information on suspected money launderers.
  • Lack of control over the CFA currency, which is linked to the euro.

Solutions for Countering Money Laundering

Decoupling the CFA from the Euro

  • Fiscal independence would grant West Africa greater control over its macro-economic policies and fiscal measures.
  • Decreased attractiveness for illicit financial flows.

Encouraging Legitimate Business Practices

  • Greater loan availability to local businesses through Senegalese banks.
  • Shift in reliance away from illicit financial sources.

Conclusion

  • Senegal’s future economic trajectory will heavily depend on its actions to address money laundering.
  • A multifaceted approach incorporating decoupling the CFA from the euro and promoting more legitimate business practices is crucial.