Author : Abdelkader Abderrahmane
Affiliated organization: ENACT
Type of publication : Article
Date of publication : 17, December 2021
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In February 2021, the Financial Action Task Force (FATF) put Senegal on its grey list of countries. This list indicates that the country does not fully comply with the FATF international standards on combating money laundering and the financing of terrorism and proliferation.
According to the money laundering National Risk Assessment, one of the major risks for money laundering in Senegal is drug trafficking, an illegal economy that generates nearly US$360 million (CFA 200 billion) every year.
As far back as 2011, the Observatoire français des drogues et des toxicomanies (OFDT) highlighted that the easy acquisition of houses and buildings in Senegal was being exploited by drug traffickers based in Europe to launder money.
Cash from the drug trade has reportedly also boosted construction across the country and in the coastal cities of Dakar, Saly and Mbour. Large construction projects are often suspected of being financed by money from illicit trade.
The Senegalese authorities are caught in a vicious cycle because of this lack of control over the flow of currencies within and across its territory
Senegal has strengthened its legal and institutional framework to fight money laundering in recent years. However some of the provisions of the laws have yet to be fully implemented.
Currently, it appears that Senegal’s financial public policy may indirectly nurture these illicit financial flows. For GIABA, some of the drivers of money laundering in Senegal are the widespread use of cash, the importance of the informal sector, and a judicial system that doesn’t allow law enforcement to obtain information on the suspected beneficiaries of money laundering.
The independence of the CFA would mean greater flexibility and macro-economic options for Senegal, especially in terms of fiscal and monetary policies
The Senegalese authorities are caught in a vicious cycle because of this lack of control over the flow of currencies within and across its territory. Senegal’s banking system therefore indirectly (and helplessly) relies on the flow of foreign currencies obtained and moved through informal or illegal channels. Consequently, the lack of liquidity pushes many Senegalese to seek financial alternatives through illegal channels.
To counter money laundering in the real estate and construction sectors and establish an environment that encourages legitimate business practice, urgent measures to de-link the CFA from the Euro are being advocated.
The independence of the CFA would mean greater flexibility and macro-economic options for Senegal, especially in terms of fiscal and monetary policies. Such fiscal independence would give more leeway to the Senegalese banks to provide loans to individuals and companies more easily.