Senegal’s Struggle Against Money Laundering: A Growing Concern in West Africa
A Move in the Wrong Direction
In February 2021, Senegal was added to the Financial Action Task Force (FATF) grey list, raising concerns about the country’s ability to combat money laundering and terrorist financing. As an intergovernmental body, the FATF sets global standards for combating these financial crimes.
A Major Conduit for Money Laundering
According to the FATF, Senegal is one of the world’s top eight countries at risk of money laundering and terrorist financing. The country’s real estate sector has been identified as a major conduit for money laundering, with drug traffickers using it to launder their ill-gotten gains.
Lack of Transparency and Regulation
The lack of a central registry and the use of fake names by investors have made it difficult for authorities to track the origin of funds flowing into the sector. In 2013, it was estimated that nearly 96% of US$480 million invested in the real estate sector came from dubious sources.
Construction Industry Impacted
Senegal’s construction industry has also been impacted by the influx of cash from drug trafficking. According to the Groupe d’action financière sur le blanchiment de capitaux (GAFI), 30% of confiscated criminal goods between 2011 and 2013 were houses and buildings.
Government Efforts
The government has taken steps to strengthen its legal and institutional framework to combat money laundering, but progress has been slow. The country’s lack of technical expertise and limited resources have hindered efforts to prosecute financial crimes.
Expert Insights
Experts say that Senegal’s current financial public policy may even indirectly nurture these illicit money flows. The widespread use of cash, the extent of the informal sector, and a judicial system that does not allow police to get information on suspected beneficiaries of money laundering all contribute to the problem.
Currency Control
The country’s currency, the Communauté Financière Africaine (CFA), is tied to the euro, which means that Senegal has limited control over its own currency. This lack of control has led to a vicious cycle, with the country’s banking system indirectly relying on informal or illegal channels for foreign currencies.
Recommended Measures
To counter money laundering in real estate and construction, experts advocate for measures to delink the CFA from the euro. This would give Senegal greater flexibility and macro-economic options, especially regarding fiscal and monetary policies.
- Fiscal independence would allow Senegalese banks to provide loans more easily, which could help reduce the country’s dependence on ill-gotten gains.
- Delinking the CFA from the euro could shift the current pattern of dependence on illegal activities.
Regional Cooperation
Senegal’s struggle against money laundering and terrorist financing highlights the need for greater cooperation between governments and financial institutions in West Africa. With the region’s economy growing rapidly, it is essential that countries take proactive measures to prevent the misuse of their financial systems by criminal networks.