Senegal

Senegal is a member of the UEMOA, a formal treaty linking seven French-speaking West African countries and Guinea-Bissau, by virtue of its Law authorizing ratification of the Treaty signed on January 10, 1994. This Treaty governs all monetary and financial matters among its members.

The banking sector in Senegal is quite extensive and prosperous, despite an overall population to banking ratio that is relatively low (estimated at 20–25%). Confidence in the banking system remains somewhat limited, in this essentially cash-based economy. Yet regionally, among UEMOA countries, Senegal is second only to Côte d’Ivoire in its banking ratio. The use of cheques as a payment instrument seems to be progressing, and slowly but surely, the use of debit cards, which it is hoped would help increase reliance on the banking system. The widespread use of microfinance by small investors has already had a positive impact on the banking system by encouraging the opening of accounts. But more remains to be done. Better and more flexible financial tools need to be offered to a wider variety of customers over the next few years. The lack of dynamism leads to what is perceived by many as institutional blockage, which in turn encourages parallel banking, a prime source of money laundering.

The Central Bank (BCEAO) remains the principal guarantor of fiscal management and financial stability in the country and in the UEMOA sub-region. In spite of a strongly cash-based economic system, the BCEAO manages to maintain effective oversight over the banking sector, which has largely self-regulated over the years. In fact, of the 17 banks operating in Senegal at present (following a partial consolidation exercise a few years ago), most are closely linked or are directly part of foreign-owned banking operations. The few locally owned banks are smaller and limited in scope. The challenge right now is how to attract a wider and more diversified customer base and increase services beyond the Capital City. This will require a concerted effort to sensitize the public to banking as a more secure method of doing business and by offering more attractive and flexible products in the market. Better publicity will also be required, on a larger scale. The location of GIABA in Dakar is further incentive for sensitizing the public and mobilizing local stakeholders to deal with issues more rapidly.

The insurance sector is also quite vibrant in the country. Government oversight is assured by a Directorate for Insurance, headed by a Commissioner, Comptroller of companies, whose task it is to regulate and ensure the stability of the business. Correspondents are designated in each company and a manual of operations has been produced and distributed. A single Insurance Code exists for all 14 CFA countries (West and Central Africa), which facilitates information-sharing and transactions.

There exists a Federation of Insurance Companies, which represents the interests of the sector in general in the country. It cooperates closely with the CENTIF, as do other players in the financial sector generally. The Federation says that it asks clients to indicate the origin of funds to be invested, as required by law. But it also states that there is far too much liquidity in the market at present and that a lot of these funds end up in unregulated investments. Most banks are investing heavily in real estate and the bond market, and are slow to introduce new and attractive products with a view to attracting customers and thus increasing the percentage of formal banking in the country – and reducing the prevalence of ML.

As for the formal bureaux de change, they operate legally and normally, alongside the money transfer entities, and are well regulated by the central banking authorities. They have been sensitized through workshops and training offered by the CENTIF and have begun to forward regular suspicious transaction reports. The 40+9 FATF Recommendations are available in booklet form and are provided to all staff; reporting to the central authorities takes place each month. There is a bureau de change association, but it seems to be dormant at this time. The real problem lies more with the informal sector, or the DNFIs. There is thus a special need to establish some form of institutional oversight for the informal sector, in order to reduce the risks for ML activities in the country. According to the US International Narcotics Control Strategy Report of 2007, Senegal is vulnerable to ML where most of the ML reportedly involves domestically generated proceeds from corruption and embezzlement. The report adds that the booming real estate business is largely financed by cash, and that ownership of properties is non-transparent.

According to the same report, there is some evidence of increasing criminal activity in Senegal As the first WAEMU (UEMOA) country to enact the WAEMU Uniform Law on money laundering and in a bid to curtail the level of ongoing ML in the country, Senegal has entered into bilateral criminal mutual assistance agreements with France, Tunisia, Morocco, Mali, The Gambia, Guinea Bissau, and Cape Verde.

The Senegal CENTIF has also signed an MOU to exchange information with the FIUs of Belgium and Lebanon, and is working on other agreements. The CENTIF has made tremendous progress in raising the awareness of the threat of money laundering in the country.

It is hoped that the Government of Senegal would continue to work with GIABA, WAEMU and ECOWAS to move to the next level in the fight against ML and TF, particularly towards criminalization of terrorist financing. Senegal is working on achieving transparency in its financial and real estate sector as well as establishing better control of cross-border currency transfers in collaboration with its partners in the region. The Senegalese law enforcement and customs authorities need to take the initiative to identify and investigate money laundering at the street level and in the informal financial sector.

The issue of money laundering has gained in importance over the past few years, with the increased currency influx into the market, from various sources. The Senegalese Diaspora consistently sends home very large amounts of money in foreign currency, very often outside of the formal channels and through informal money remitters. These funds are often speculative in nature. The increased investment in the construction sector is also notable, in particular since the unfortunate political events that took place in Côte d’Ivoire and which encouraged many firms to relocate to Dakar, thus prompting a building boom. Large investments in public works (roads, buildings, sanitation, transportation networks) have added to the flow of cash into the economy. The formal flows normally transit the official financial institutions and are thus regulated to a large extent. However, very many smaller investors remain outside these institutions and their monetary flows largely escape the vigilance of regulatory bodies.

There seems to be a somewhat positive consideration of ML in many quarters that is based on a misperception of the facts. Money laundering is often considered acceptable, since it appears to bring money into a country that otherwise would not have access to it. The reality of ML, its true impact and its consequences, are not widely understood, even by some persons directly involved in the financial sector. Thus, there appears to be a fairly urgent need for public information and sensitization on a large scale, in order to correct misperceptions and to help stabilize the currency markets. Once the costs and impact of dirty money on a society are well explained and understood, AML activities become much more feasible and successful. The same holds true for CFT activities, where illicit funds may be used to finance terrorist activities both at home and abroad.

The economy of Senegal however remains vibrant and the financial institution sector is well regulated. Banks and other financial institutions regularly report all suspicious transactions to the CENTIF and are fully supervised by the central banking authorities. Professionals of the financial institutions are well trained and undergo refresher training regularly.The financial sector is quite competently run and is stable. The internal stability of Senegal, a powerful attraction for investors, should continue to increase in the future, as well as the competence and the leadership being exercised in the financial arena. In particular, the strong presence of the CENTIF has added to the sense of trust and confidence in the local market, and is consolidating an already strong marketplace. The future looks bright. What is now required is a parallel increase in surveillance of the DNFI sector, through adequate institutional means, both preventive and repressive, and a maintenance of the sense of confidence that the law will be applied and that there is no impunity with regard to this whole issue. “Good business requires good security.”

Money laundering has been criminalized in Senegal in accordance with the uniform UEMOA law, which was ratified by the National Assembly and formally promulgated on February 6, 2004 as Law No. 2004-09, adopting the single UEMOA Law Pertaining to the Fight against Money Laundering. This crime is further governed by Community Regulations no. 7/2002/CM/UEMOA, which regulates the fight against ML in member States; no.14/2002/CM/UEMOA, which regulates the freezing and seizure of assets; and no. R09/98/CM/UEMOA, which regulates external financial relations among member States, in addition to Instruction no. 06/99/RC of February 1, 1999 relating to manual exchange operators. This law reinforces the July 1981 Law 81-53, against Illicit Accumulation of Wealth.

With regard to the financing of terrorism, at this time there is no stand-alone legislation dealing with it. However, the BCEAO has formulated a Common Directive based on GIABA’s draft Model Legislation. On July 14, 2007 the UEMOA Council of Ministers adopted the draft model law and issued a Directive to all members to be domesticated in their respective countries. Proposed legislation is being considered.

It is also important to note that Senegal is signatory to several international conventions relating to ML, as indicated in Table 1 below and Table 2 in Chapter 3. It also recognizes Security Council Resolutions 1267 (1999) and 1373 (2001) on ML, in addition to officially adhering to the FATF 40+9 Recommendations.

Primary authority for dealing with AML/CFT issues is exercised by the Ministry of the Economy and Finance (MEF). Also an Inter-Ministerial Commission on AML/CFT has been created but is not at present active. The Ministry of the Interior (Police Service) and the Ministry of Defence (Gendarmerie) also play a significant role. The Governmental Decree creating the CENTIF, which is included in the AML law itself, was issued under no. 2004-1150 on August 18, 2004. Its directors and staff have all been appointed and are fully operational. The CENTIF is the principal repository and source of financial intelligence in Senegal, empowered to receive requisite information from all financial institutions and other sources and to generate intelligence in order to allow prosecution of economic and financial crimes by the competent authorities.

The CENTIF has now been operational for close to two years; its staff complement has increased and its influence has heightened considerably in this short time. It has now reviewed hundreds of reports and introduced nearly 50 cases to the courts for adjudication. The fact that it has become operational and highly functional is to the credit of Senegal, which now has the essential tool to ensure the country’s capacity to fight ML and FT, in addition to corruption and drug trafficking. It is also serving as a tool to galvanize public opinion in favor of AML/CFT action, and is providing a guarantee for the maintenance of good governance in the country, without which its reputation, and thus its prosperity, would suffer.

At the regional level, Senegal contributed to the establishment of GIABA, including the nomination of the DeThe CENTIF of Senegal, along with its sisters in Niger and Nigeria, is fully functional. CENTIF Senegal could serve as a role model for other Francophone/WAEMU countries in the region.

However, as noted, the DNFI sector is not formally regulated at present and seems quite difficult to control, as is the case in the other countries of the region. Before effective regulation can occur, it is necessary to set up a mechanism to approach these informal DNFIs in order to encourage them to coordinate their activities and to institutionalize a reporting system by which they also forward suspicious transaction reports to the CENTIF, in the same way the financial institutions are now doing.