Republic of Benin

Political Situation

Benin continues to enjoy relative political stability and democratic governance.1 Yet an attempt by the executive arm of government, with the support of allied members of the National Assembly, to extend the powers of the President by amending the Constitution threatened the stability of the country’s democratic progress. The arrest of a former cabinet minister, and the President’s niece and personal doctor for allegedly plotting to poison him raised concerns about potential instability. This was preceded by a series of crises, including a two-month strike by teachers in March 2012 that paralyzed the country’s education system. In 2012, the Republic of Benin had the goodwill of the international community, as President Thomas Yayi Boni, with the backing of the ECOWAS was elected Chairman of the African Union. However, there were several changes in the cabinet within the year, perhaps one of the reasons why despite efforts made by GIABA, members of the CENTIF whose tenure expired or who resigned could not be appointed.

Meanwhile, municipal and local elections, slated for the first half of 2013 are expected to generate a high level of enthusiasm among politicians and communities alike. However, some concerns have been expressed about the reliability of the electoral register, and this might generate controversy and undermine the peaceful conduct of the elections.

The Mo Ibrahim Foundation’s 2012 Ibrahim Index of African Governance (IIAG) ranked Benin 13th out of 52 countries in Africa, having scored 58 out of 100. This is a slight decline in the score of 59 in 2010 and 2011. In response, government adopted a national charter in February 2012 with the aim of addressing existing governance challenges. In particular, the charter seeks to revive the moral values and the spirit of statesmanship and create an enabling environment for sustainable human development.

Economic and Financial Situation

Benin’s economy was projected to grow by 4.2% in 2012, compared with 3% in 2011. This is slightly higher than the 3.5% growth rate projected by the International Monetary Fund (IMF) for 20129 The projected growth was attributed to the implementation of reform strategies by the Government of Benin, particularly the 2011-2015 SCRP and a three-year plan for growth, which seeks to modernize and diversify the country’s large agriculture sector and develop infrastructure10. Meanwhile, Benin’s attractiveness to business declined slightly, as it was ranked 176th out of 183 countries in 2012, compared with 175th in 2012 in the World Bank’s Doing Business table. This decline was consistent with the aforementioned declines in governance performance in various sectors. Furthermore, owing to the implementation of an import inspection program, among others, tax revenue was expected to increase slightly in 2012.

Benin continues to face a series of economic challenges, not least because agriculture and trade, the mainstay of its economy, remained vulnerable to external shocks. Poverty remained at 35% while high unemployment and underemployment, particularly among the youth, persists, notwithstanding the introduction of several job creation and poverty-reduction programs since 2006. Accordingly, the country is unlikely to attain most of the Millennium Development Goals (MDGs) by the 2015 timeline. With unemployment and underemployment twice as high among the youth and adults15, Benin remains particularly vulnerable to various criminal activities, which may be seen as an irresistible means of survival. Meanwhile, the drop in real household income, induced by increases in the price of oil in Nigeria, and the downturn in summer activities at the Cotonou Port offset the gains of increased cotton production in the 2011/2012 season.

The Financial sector of Benin is mainly dominated by banks. The 13 deposit money banks account for 90% of the sector’s total assets valued at 27.3% of GDP in 2010. Remittances inflows in 2012 were at USD189 million, which represents about 2.5% of GDP.

Prevalence of Predicate Crimes

Benin witnessed incidents of predicate crimes in 2012, particularly narcotics trafficking. The country remains a transit point for large consignments of cocaine from Latin America and heroine from Southwest Asia to Europe and other destinations. While the quantity of narcotics that transited through Benin’s shores was unclear, the country’s joint seizure of nearly 7.9 million kilos of narcotics with Ghana and Togo as part of an ECOWAS and INTERPOL-supported “Operation Atakora” in August 2012 was an indication of the extent of traffic, as well as the efforts and commitment of the authorities to deal with the problem. Benin also remains a regional hub in West Africa for the smuggling of used vehicles.

Illegal importation of various commodities, particularly motor fuel from neighboring Nigeria, remains prevalent in the country. Furthermore, criminal groups from Nigeria used the Port of Benin to perpetuate various forms of criminal activities such as diversion of imports, manipulation of duties, falsification of import documents, importation of contrabands and other illegal commodities, such as drugs. This situation is due to the poor management of the port. Corruption, extortion, embezzlement, mismanagement, and misappropriation of public resources remain a major challenge in Benin, thereby undermining the effectiveness of public institutions and efforts against money laundering. Corruption in particular remains prevalent in the customs service, government procurement, and the judicial system. The head of the country’s Supreme Court lamented entrenched corruption in Beninese society, citing various offences without expected responses from authorities. Benin was ranked 94th out of 174 countries, having scored 36 out of 100 in Transparency International’s 2012 Corruption Perception Index (CPI).

The AML/CFT Situation

Money laundering activities, while not easily detectable, continued in Benin in the past year. For instance, the government expelled a foreign company from Benin for purportedly serving as conduit for money laundering. According to investigations by the Drug Enforcement Administration (DEA), the company was covertly laundering money through the sale of used cars to finance Hezbollah, a political party on the list of terrorist groups classified by the United States. In 2012, Benin continued to struggle to comply with international AML/CFT standards, as well as implementation of recommendations contained in its Mutual Evaluation Report (MER). The country’s AML/CFT regime remains fraught with significant challenges, including a weak legislative framework (which has not been tested) and serious capacity and resource constraints in competent institutions. In particular, not only do law enforcement, judicial, and other relevant personnel lack expertise on financial crimes, but also coordination and collaboration, including information sharing among relevant institutions remains considerably poor. Benin’s CENTIF continue to lack adequate personnel, notwithstanding various attempts by GIABA to work with Beninoi officials to address it. The National AML/CFT Strategy, drafted in 2011 with support from GIABA, is yet to be adopted, not to talk of implementation.

Nonetheless, sustained engagement by GIABA with Benin’s political authorities resulted in the passage of the Terrorist Financing Act in May 2012 by the country’s National Assembly. The law criminalizes terrorist financing and extends the powers of the CENTIF. Indeed, this was a remarkable and commendable development in Benin in 2012 considering the time and efforts that it took to get the law passed.

Technical Assistance

In 2012, not much direct assistance was provided to Benin due to the insufficient personnel in the CENTIF and besides, there was no formal request. GIABA supported Benin with copies of the Manual on AML/CFT Compliance for distribution to DNFBPs. Apart from that, the authorities informed the GIABA Secretariat that the Government of Benin obtained a two-year grant, amounting to four hundred and twenty-seven thousand, four hundred and eighty-five United States dollars (US$ 427,485.00) from the Institutional Development Fund of the World Bank to finance the capacity building of stakeholders in the fight against ML and TF, through the CENTIF. Despite all these, Benin needs support to strengthen its AML legal framework. In addition, the FIU needs an upgrading of the skills of its analyst, IT officer and other staff members in order to improve the performance of the Unit. It needs also to raise public awareness on AML/CFT issues.

Conclusion

Benin continues to enjoy relative peace, stability, and democratic governance, notwithstanding attempts by the government to extend the president’s powers and an attempt to poison the president by some members of his inner circle. Yet, a series of governance and socio-economic challenges, particularly high levels of corruption, poverty, and unemployment continue to make it vulnerable to various criminal activities, including money laundering. Despite its passage of a Terrorist Financing Act, Benin continues to struggle to comply with international AML/CFT standards. Not only is the country’s AML/CFT legislative framework weak, but it also lacks the requisite personnel, expertise, and resources for AML/CFT. The national AML/CFT strategy, drafted in 2011, is yet to be adopted for implementation. Despite the efforts of the CENTIF to receive, analyze and disseminate STRs, there is still much to be done with regard to the implementation of the recommendations contained in the MER of Benin. In particular, Benin needs to develop a mechanism consistent with the FATF R6 for the implementation of the UNSCRs 1267 and 1373; adopt and provide resources for the implementation of its AML/CFT Strategy; and ensure more coordination within the framework of the Inter-Ministerial Committee.