Financial Crime World

Senegal Struggles to Combat Money Laundering Despite Strengthened Legal Framework

A Persistent Challenge for the Country’s Financial Integrity

Senegal has strengthened its legal and institutional framework to fight money laundering, but despite these efforts, it remains on the Financial Action Task Force’s (FATF) grey list of countries that do not fully comply with international standards on combating money laundering and the financing of terrorism.

The Challenge of Detecting and Preventing Illegal Activities

Senegal ranks eighth in the world for money laundering and terrorist financing risks. The country’s National Risk Assessment highlights drug trafficking as a major risk, with drug traffickers using various methods to launder their profits, including real estate and construction.

Real Estate: A Preferred Method for Money Laundering

Real estate has emerged as a preferred method for money laundering due to its flexibility, allowing investors to conceal financial origins and identities. The Observatoire français des drogues et des toxicomanies (OFDT) warned in 2011 that easy access to houses and buildings in Senegal was being exploited by European drug traffickers to launder money.

The Scale of the Problem

In 2013, it was estimated that nearly US$460 million out of US$480 million invested in the real estate sector came from dubious sources. The Groupe d’Action Financière sur le Blanchiment de Capitaux (GAFI) reported that 30% of confiscated criminal goods between 2011 and 2013 were properties in the real estate sector.

Construction: A Sector Susceptible to Money Laundering

Cash from the drug trade has also boosted construction across the country, with large projects often suspected of being financed by illicit funds. The Akon City project, a mega-project financed by American-Senegalese singer Akon, is among those raising concerns about money laundering.

Factors Contribute to Senegal’s Struggles

Experts argue that Senegal’s public policy may be inadvertently nurturing these illicit financial flows. The lack of technical means to train employees from financial businesses, as well as the widespread use of cash and the importance of the informal sector, all contribute to the country’s struggles in combating money laundering.

Limited Control Over the Currency

Senegal’s local currency, the Communauté Financière Africaine (CFA), is tied to the Euro, giving the country limited control over its own currency. This lack of control has led to a vicious cycle where the banking system relies on informal or illegal channels for foreign currencies.

Recommendations for Urgent Action

Experts recommend that urgent measures be taken to de-link the CFA from the Euro, which would grant greater flexibility and macro-economic options for Senegal. Such fiscal independence would allow banks to provide loans more easily, reducing the reliance on illegal financial flows.

  • De-linking the CFA from the Euro would give Senegal greater control over its currency.
  • Improving liquidity in the banking system would reduce the need for informal or illegal channels for foreign currencies.
  • Providing accessible loans for construction projects would reduce the incentive to engage in money laundering.

Conclusion

Until Senegal addresses these challenges, it is unlikely that the country will make significant progress in combating money laundering and terrorist financing risks. The lack of liquidity in the banking system to finance construction projects may be linked to encouraging money laundering. Banking loans for construction should be more accessible to individuals and companies.