Senegal Struggles with Money Laundering and Terrorist Financing Risks
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Senegal has been placed on the Financial Action Task Force (FATF) grey list of countries that do not fully comply with international standards for combating money laundering and terrorist financing. The country has committed to working with the FATF to address deficiencies in its financial regulations, but it remains a major hub for money laundering and terrorist financing activities.
Money Laundering Risks
According to the National Risk Assessment, drug trafficking is one of the main risks for money laundering in Senegal, with an estimated annual value of $360 million (CFA 200 billion). Drug traffickers use various methods to launder their money, including real estate and construction. The flexibility of these sectors makes them attractive for those seeking to move funds into the legitimate economy.
Real Estate and Construction
The Observatoire français des drogues et des toxicomanies (OFDT) highlighted in 2011 that the easy acquisition of houses and buildings in Senegal was being exploited by European drug traffickers to launder money. In 2013, it was estimated that $460 million out of $480 million invested in real estate came from dubious origins.
Cash from the drug trade has also boosted construction across the country, with large projects often suspected of being financed by illegal means. For example, Akon City, a mega-project financed by American-Senegalese singer Akon, is due for completion in 2029 and many fear it will facilitate money laundering.
Public Policy Challenges
Senegal’s public policy indirectly nurtures these illicit financial flows, with a lack of technical means to train employees from financial businesses and a judicial system that does not allow law enforcement to obtain information on suspected beneficiaries of money laundering.
The country’s financial public policy may also indirectly encourage money laundering due to the widespread use of cash, the importance of the informal sector, and the limited control over the flow of its currency, the CFA. The CFA is tied to the Euro and printed in France, giving Senegal limited control over its own currency.
Urgent Measures Needed
To counter money laundering in the real estate and construction sectors, urgent measures are being advocated, including:
- De-linking the CFA from the Euro to give greater flexibility and macro-economic options for Senegal
- Improving technical means for training employees from financial businesses
- Enhancing judicial cooperation to allow law enforcement to obtain information on suspected beneficiaries of money laundering
By implementing these measures, Senegal can reduce its reliance on illegal channels and improve its overall compliance with international standards for combating money laundering and terrorist financing.