Financial Crime World

SENEGAL’S FINANCIAL UNDERBELLY: EXPOSING THE DRUG TRAFFICKING AND MONEY LAUNDERING EPIDEMIC

A Country at Risk

In a move that has sent shockwaves throughout the international community, Senegal was added to the Financial Action Task Force’s (FATF) grey list in February 2021. The decision highlights the country’s failure to comply with international standards against money laundering and terrorism financing.

Senegal is currently ranked eighth in the world for money laundering and terrorist financing risks, with an estimated $360 million in illicit funds generated annually from drug trafficking alone. The ease of acquiring property in Senegal has made it an attractive destination for Europe-based drug traffickers looking to launder their money.

Real Estate: A Haven for Money Launderers

The real estate sector has been identified as a major driver of money laundering in Senegal, with 96% of investments coming from dubious sources. The lack of a central registry and the use of fake names by investors have provided cover for traffickers looking to conceal their illicit funds.

  • Lack of transparency: The absence of a central registry makes it difficult to track property ownership and identify potential money laundering activity.
  • Fake identities: Investors often use fake names or aliases to purchase properties, making it challenging to verify the true identity of owners.
  • Dubious sources of funding: A significant proportion of investments in the real estate sector come from unknown or unverified sources.

Construction Boom Fueled by Ill-Gotten Gains

The construction industry has also been impacted by money laundering, with large building projects suspected of being financed through the drug trade. Akon City, a mega-project bankrolled by American-Senegalese singer Akon, is one such example.

  • Large-scale projects: The construction of massive projects like Akon City raises suspicions about the source of funding and potential involvement in money laundering.
  • Lack of oversight: Insufficient regulatory scrutiny has allowed these projects to move forward with little transparency or accountability.
  • Potential for diversion of funds: Illicit funds may be diverted from legitimate businesses to finance large-scale construction projects.

Limited Response from the Government

Despite efforts to strengthen its legal and institutional framework to fight money laundering, Senegal’s progress has been slow. The government’s lack of technical expertise and limited capacity to train financial business employees have hindered its ability to effectively combat financial crimes.

  • Inadequate training: Financial institutions and businesses often lack the necessary training to identify and report suspicious transactions.
  • Insufficient resources: The government’s limited budget and personnel constraints have hindered its ability to implement effective anti-money laundering measures.
  • Limited technical expertise: Senegal lacks the specialized skills and knowledge needed to effectively combat complex financial crimes.

A Vicious Cycle of Money Laundering

The lack of control over the Communauté Financière Africaine (CFA) currency, which is tied to the euro, has created a vicious cycle for Senegalese authorities. The country’s banking system indirectly relies on the flow of foreign currencies obtained and moved through informal or illegal channels.

  • Dependence on euros: The CFA’s tie to the euro creates a reliance on foreign currency flows, which can be influenced by illicit activities.
  • Informal channels: Illicit funds may be laundered through informal channels, such as cash-based transactions, to evade detection.
  • Limited control: Senegal’s limited ability to regulate and monitor these flows perpetuates the cycle of money laundering.

Freedom from the Euros: A Step Towards Macro-Economic Options

Delinking the CFA from the euro is being advocated as a solution to counter money laundering in real estate and construction. The independence of the CFA would give more leeway to Senegalese banks to provide loans, shifting the current pattern of dependence on ill-gotten gains.

  • Increased autonomy: A delinked currency would allow Senegal to pursue its own monetary policy and reduce its reliance on foreign currencies.
  • Improved financial stability: The independence of the CFA could lead to more stable and sustainable economic growth, reducing the appeal of money laundering.
  • Enhanced transparency: A more transparent financial system would make it easier to track transactions and identify potential money laundering activity.

A Call to Action

The situation in Senegal highlights the need for greater vigilance and cooperation among international authorities to combat money laundering and terrorism financing. It is imperative that governments, financial institutions, and civil society organizations work together to expose and disrupt the networks of illicit funds and bring those responsible to justice.