Financial Crime World

Senegal’s Grey Listing by FATF: A Look into Money Laundering, Real Estate, and Drug Trafficking

Senegal, a country known for its vibrant culture and tourism, found itself on the grey list of the Financial Action Task Force (FATF) in February 2021. This list signifies that Senegal does not fully comply with international standards against money laundering and terrorism financing. In this article, we delve into the primary drivers of money laundering in Senegal, focusing on real estate and drug trafficking.

Senegal’s Money Laundering Risks

  • Senegal ranks eighth globally in terms of money laundering and terrorist financing risks (Money Laundering National Risk Assessment).
  • Drug trafficking is a leading driver of money laundering in Senegal, generating approximately US$360 million (CFA 200 billion) annually.

Real Estate: A Preferred Choice for Money Laundering

  • Real estate’s flexibility makes it an attractive place for laundered money to enter the legitimate economy.
  • Lack of a central registry and the prevalent use of false names by investors further facilitate money laundering in the real estate sector.
  • Approximately 96% of the US$480 million invested in the real estate sector from 2011 to 2013 came from questionable origins.

Efforts to Combat Money Laundering in Senegal

  • The government has taken steps to strengthen its legal and institutional framework to combat money laundering.
  • However, implementation remains slow, and Senegal’s presence on the FATF grey list indicates limited progress in meeting international standards.

Challenges and Solutions

  • GIABA reports reveal that money laundering is enabled by the widespread use of cash, the prevalence of the informal sector, and a slow, ineffective judicial system.
  • Lack of control over the local currency, the CFA, and its ties to the euro create an indirect reliance on foreign currency inflows obtained through informal or illicit channels.
  • To tackle money laundering in real estate and construction, some advocates suggest delinking the CFA from the euro.

Conclusion

Senegal must continue its efforts to fortify its legal and institutional framework and improve technical expertise in addressing financial crimes, while also considering the suggested steps to delink the CFA from the euro to reduce dependency on ill-gotten funds.

Sources

  1. ENACT organised crime project interview with Muazu Umar, Policy and Research Director, GIABA.
  2. ENACT article: “Senegal’s Real Estate Boom: Drug Money, Corruption, and the CFA”, by Abdelkader Abderrahmane.
  3. OFDT report: “Sénégal: La construction illégale et le blanchiment d’argent”, 2011.
  4. GAFI report: “Analyse des risques dans le secteur immobilier sénégalais”, 2013.