Senegal: Drugs, real estate and money laundering in Senegal

Cooperation with the Financial Action Task Force could get the country off the gray list and strengthen its economy.

In February 2021, the Financial Action Task Force (FATF) added Senegal to its gray list, indicating that the country does not fully comply with international standards against money laundering and the financing of terrorism and proliferation. This decision confirms, however, that Senegal is committed to working with the working group to remedy the shortcomings within the agreed deadlines and subject to additional checks.

Senegal is currently ranked eighth in the world for money laundering and terrorist financing risks. According to the National Money Laundering Risk Assessment, one of the country’s main drivers is drug trafficking, an illegal economy that generates nearly 360 million US dollars (200 billion CFA francs) a year. . Drug traffickers use a variety of operations to launder their money, with real estate and construction being the industries of choice.

The flexibility of real estate, which allows the financial origins of the investment and the identity of the owner to be concealed, makes the sector attractive to those who inject illicit funds into the legitimate economy. As early as 2011, the French Observatory for Drugs and Drug Addiction (OFDT) said the ease of acquiring property in Senegal was being exploited by Europe-based drug traffickers to launder money. The lack of a central registry and the use of false names by investors provide cover.

In 2013, it was estimated that around 96% of the US$480 million invested in the real estate sector came from dubious origins. According to the Financial Action Task Force on Money Laundering (FATF), 30% of criminal assets confiscated between 2011 and 2013 were houses and buildings. And in 2019, about 120 more real estate agencies had been set up by drug traffickers in Dakar than in the previous decade, giving traffickers a channel to launder their ill-gotten gains.

Senegal is currently ranked eighth in the world for money laundering and terrorist financing risks

Money from the drug trade is also said to have spurred construction across the country and in the coastal towns of Dakar, Saly and Mbour. Some major construction projects are suspected of being funded through the illicit trade – for example Akon City, a mega-project funded by American-Senegalese singer Akon, which is due to be completed in 2029. Many in Senegal fear that the program will only facilitates money laundering. Similarly, a French drug trafficker wanted by Europol has invested heavily in land and built shopping centers and offices.

Senegal has strengthened its legal and institutional anti-money laundering framework in recent years. But some provisions have not yet been fully implemented. Despite the government’s commitment to collaborate with the Intergovernmental Action Group against Money Laundering in West Africa (GIABA) and the FATF in the fight against money laundering, the presence of Senegal on the list FATF gray indicates that progress is slow.

The state’s response is also limited by its lack of technical expertise to, for example, train employees of financial businesses (such as currency exchanges and money transfer services) to identify money laundering. Thus, the number of people prosecuted for financial crimes compared to the number of offenses committed remains low.

Senegal’s current public financial policy may even indirectly fuel these illicit money flows. GIABA reports that money laundering is made possible by the widespread use of cash, the extent of the informal sector and a judicial system that does not allow the police to obtain information on the alleged beneficiaries of the money. money laundering.

Senegal’s current public financial policy could even indirectly fuel these illicit money flows

This is compounded by the fact that the local currency – the African Financial Community (CFA) – is pegged to the euro. As a result, Senegal and the countries of the West African Economic and Monetary Union zone cannot control the flow of their own CFA franc currency printed in France.

This lack of control means that the Senegalese authorities are caught in a vicious circle, according to Muazu Umar, director of policy and research at GIABA, who spoke to the ENACT project on organized crime. Thus, the Senegalese banking system depends indirectly (and impotently) on the flow of foreign currency obtained and channeled through informal or illegal channels.

Umar asserts that “the lack of sufficient foreign currency to meet legitimate demand is a major catalyst and enabler of illegal foreign exchange markets across West Africa”. The restrictions of the official foreign exchange counter, coupled with the cost of foreign exchange and the slowness of transfers to meet foreign transaction obligations, mean that monetary and state authorities have very few options in their quest to control financial flows.

Independence from the CFA would mean greater flexibility and macro-economic options for Senegal

This lack of liquidity in the banking system to finance the construction industry can encourage money laundering. Nearly 40% of Senegalese companies struggle to obtain loans from banks, compared to 14% elsewhere in the world. This situation pushes many Senegalese to seek financial alternatives through illegal channels.

To combat money laundering in real estate and construction, and encourage legitimate business practices, measures to decouple the CFA from the euro are advocated. The independence of the CFA would mean greater flexibility and macro-economic options for Senegal, particularly in terms of fiscal and monetary policies.

Fiscal independence would give more leeway to Senegalese banks to grant loans. And while this is not a complete solution to the problem of money laundering, it is likely to change the current pattern of reliance on ill-gotten gains.

Abdelkader Abderrahmane, Senior Researcher, Regional Observatory of Organized Crime in West Africa, ENACT Project, ISS Dakar

This article was first published by ENACT. ENACT is funded by the European Union (EU). The contents of this article are the sole responsibility of the author and can in no way be taken to reflect the position of the EU.

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