Financial Crime World

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Senegal’s Grey Listing: A Recipe for Money Laundering and Financial Crimes

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In February 2021, the Financial Action Task Force (FATF) placed Senegal on its grey list of countries that do not fully comply with international standards on combating money laundering and financing terrorism. The country has been warned to work with the task force to address deficiencies in its legal and institutional framework.

A Recipe for Money Laundering

Despite efforts to strengthen its anti-money laundering measures, Senegal remains a major hub for drug trafficking and terrorist financing. According to the National Risk Assessment, one of the primary risks is the illegal economy generated by drug traffickers, estimated at nearly US$360 million annually.

Real Estate and Construction: Preferred Methods for Money Laundering

Real estate and construction are preferred methods for money laundering due to their flexibility and lack of transparency. The country’s real estate sector has been exploited by drug traffickers based in Europe, with properties being acquired under fake names and without any central data or registry.

  • In 2013, it was estimated that US$460 million out of the total US$480 million invested in the sector came from dubious origins.
  • Construction projects across the country have also been linked to illegal funds, with large-scale developments suspected of being financed by money from illicit trade.

Akon City Project: A Concern for Money Laundering

The Akon City project, a mega-development by American-Senegalese singer Akon, is set for completion in 2029 and has raised concerns about its potential role in facilitating money laundering.

Public Policy and Judicial System: Nurturing Illicit Financial Flows

Senegal’s public policy has indirectly nurtured these illicit financial flows, with the widespread use of cash, an important informal sector, and a judicial system that hinders law enforcement. The country’s currency, the CFA franc, is tied to the Euro, limiting control over foreign exchange flows within and across its territory.

Urgent Measures Needed

To counter this, urgent measures are needed to unlink the CFA from the Euro and promote fiscal independence. Greater flexibility in monetary policy would enable Senegalese banks to provide loans more easily, reducing reliance on ill-gotten gains. While not a complete solution, this step would shift the country’s pattern of dependence on illegal funds and encourage legitimate business practices.

  • Unlinking the CFA from the Euro would give the Central Bank of West African States (BCEAO) greater control over monetary policy.
  • Promoting fiscal independence would enable Senegal to make its own decisions about taxation, public spending, and economic development.