Member States : Republic of Ghana
|Republic of Ghana|
In July 2012, His Excellency, John Evans Atta Mills, President of the Republic of Ghana died. His Vice, His Excellency, John Dramani Mahama was sworn in as president. The peaceful and orderly transition of power that followed his death testified to the country’s steady progress and relative maturity in democratic governance since returning to constitutional rule in 1992. Such progress and maturity was manifested by the aftermath of the keenly contested presidential and parliamentary elections in December 2012. In particular, while the presidential and – to a lesser extent
– the parliamentary results were rejected by the opposition New Patriotic Party (NPP) as having been doctored by the Electoral Commission (EC) and the ruling National Democratic Congress (NDC) in favor of the latter, it contested them in the law courts without resorting to nationwide violence.
The discovery of offshore oil reserves has raised the stakes and intensified the competition for political power due to an expected inflow of oil wealth. Indeed, the 2012 elections were adjudged the most expensive in Ghana’s history. The intense competition can be situated in the context of structural deficiencies in Ghana’s political system which permits winner-takes-all politics and vests near-complete control of resources in the Ghanaian state.
Notwithstanding the increasingly competitive and expensive nature of campaigns, Ghana lacks robust frameworks for regulating campaign finance and asset declaration. The 2000 Political Parties Act neither requires parties and candidates to reveal the sources of contributions to their campaigns, nor limits the contributions they can receive from individuals and businesses. Although the Act requires parties to submit audited financial reports to the Electoral Commission (EC) for publication, it does not provide sanctions for parties that fail to do so. Furthermore, while the 1992 Constitution requires public officials to submit their written asset declaration reports to the Auditor-General’s Office, it does not authorize the Office to publish them.
The 2011 Global Integrity Report revealed that Ghana scored 8 out of 100 on the effectiveness of its party financing regulations, and 0 out of 100 on regulations on individual candidate financing.
These legal gaps and the lack of state funding for parties have prompted fears of the potential influence of proceeds from predicate crimes on the electoral process. The 2012 elections, like those of 2008, featured allegations and counter-allegations between the NDC and the NPP, of both using drug money to fund their electoral campaigns. Indeed, former and current anti-drug officials, as well as some Ghanaian experts expressed suspicion that some politicians were influenced by drug barons and used drug money in the 2012 elections. The refusal of parties and candidates to reveal their sources of funding, and recent allegations that a foreign ICT company provided financial and material support to the ruling NDC in exchange for lucrative public contracts do little to assuage these fears.
The possibility of political parties and candidates relying on criminal proceeds in their quest for power has far-reaching implications as it could seriously corrupt Ghana’s political system and undermine AML/CFT efforts in the country.
Economic and Financial Situation
Ghana continued to make commendable advances in economic growth and maintained its image as a beacon of hope in the West African region. Ghana’s GDP growth was projected to be 8.3 percent in 2012. While this is lower than the 14.4 percent recorded in 2011, it is slightly higher than the 7.5 percent, 7.6 percent, and the 8.2 percent projected by the World Bank, Business Monitor International, and the IMF respectively. Contributing to the growth were increased oil production and mining activities, which resulted in 36.2 percent growth in the industrial sector, as well as 5.2 percent growth in agriculture. The Bank of Ghana (BoG) and the World Bank reported that Ghana maintained single digit inflation in 2012. Furthermore, Ghana remains a low-middle income country. It is also among the nine Sub-Saharan countries, and one of the two West African countries ranked in the medium category of the United Nation Development Program (UNDP)’s Human Development Index99.
Ghana’s oil receipts supported its budget and provided its government fiscal flexibility in financing development projects. Nonetheless, although the Government of Ghana projected to receive about $650 million in oil revenues in 2012, it only received $180 million for the first two quarters of the year. At the same time, the national budget was projected to increase to $9,842,066,957 against $8,117,228,113 in revenues and grants, as compared with $6,725,930,546 against $5,511,072,988 in 2011. The large shortfall in oil revenues has prompted concerns about risks to the implementation of the budget. A potential increase in public spending by the Government could also undermine the country’s progress, including maintaining low inflation rate.
Furthermore, the Ghana Cedi continued to fall against major foreign currencies. In particular, the Bank of Ghana (BoG) reported that the Ghana Cedi depreciated by 18% against the US dollar, 17.3% against the Pound Sterling, and 13.1% against the Euro in the first 8 months of 2012. Accordingly, many local producers, particularly those in manufacturing, incurred higher production costs due to increases in duties on imports charged in foreign currencies. This fed into the already high cost of goods and services in the country, and further increased the prices of imported consumer products. Concerns about the resultant rise in the prices of commodities, as evidenced by the increases in the year-on-year rate for four consecutive months to 9.4% in the first half of 2012, prompted the BoG to raise interest rates three times to 15%. The BoG’s measures have undoubtedly increased the cost of borrowing, thereby constraining business activities. Significantly, the increase in the cost of goods and services has negative implications for the purchasing power and the general cost of living, and could push many Ghanaians into poverty.
Ghana’s high growth rates have not reduced its poverty rate, which remains at 28.5%. Despite the lack of reliable data on unemployment in the country, an estimated 25.6% of Ghanaians between ages 15-24, who constitute an estimated 20% of the population, are unemployed. The figure is twice that of the 25-44 age group and three times that of the 45-64 age group. The youth also account partly for 14% of formal sector employment, with many, including most university graduates and migrants from rural to urban areas, struggling to find work and mostly compelled to look for opportunities in the informal sector as apprentices, domestic or unpaid family workers, or as self-employed workers. Furthermore, growth hardly translated into development as Ghana continued to face serious development challenges, including widespread income inequalities. Many Ghanaian communities remained seriously deprived and had little or no access to basic social services.
The existence of many deprived communities and the pervasive lack of access to services means that Ghana remains vulnerable to a series of predicate crimes. Indeed, drug trafficking, cybercrime, and other criminal activities are often seen not only as legitimate sources of finance for development projects, but also for survival. This is evidenced by the legitimacy gained and sustained by drug dealers and other criminal dons who fund projects and provide basic services in deprived communities with criminal proceeds. The case of a former Ghanaian Member of Parliament (MP) who enjoys considerable support in his community for his philanthropic work, despite his arrest and conviction on drug trafficking charges in the US, is an indication that this could be happening. In communities where livelihood alternatives are limited, more people, as in the past, may resort to criminal activities as a means of survival. An increase in predicate crimes would undermine AML/CFT efforts in Ghana as criminals, often working with their corrupt appendages in the Ghanaian officialdom, will aim to disguise the sources of the proceeds they receive.
The Government of Ghana has resolved to double the size of the Ghanaian economy by 2015 as part of efforts to address, among others, the high levels of unemployment and poverty. In doing so, it aims to, among others, attract foreign direct investment by removing barriers to trade and investment, attract capital transfers from Ghanaians in the Diaspora, and enhance access to affordable credit to indigenous micro-, small-, and medium- scale enterprises. The government also aims to develop Ghana’s tourism industry as a means of job creation and revenue generation by attracting private investors and entrepreneurs for investment in high value accommodation.
The Financial sector of Ghana is mainly dominated by banks. There are 25 deposit money banks accounting for about 80% of the sector’s total assets, which represents about 24% of GDP in 2010. Remittances inflows in 2012 were at USD151 million (0.4% of GDP). Official remittances however, depict Ghana’s non-reliance on such inflows, unlike many West African countries.
Prevalence of Predicate Crimes
Drug trafficking remains the most prevalent predicate crime in Ghana. Consignments of cocaine from Latin America and heroin from Southeast and Southwest Asia transit through the country en route Europe, and to a lesser extent, the United States. Cannabis in particular, grown and consumed across Ghana continues to be trafficked to Europe. This is evidenced by the near simultaneous seizure of 1.5 tones of cannabis and 7.5 kilos of cocaine, with a combined value of £4.3 million, from Ghana by British law enforcement officials at London’s Heathrow Airport in September 2012. Foreign drug smuggling networks continue to have deep operational footholds in the country, including an elaborate distribution network overseen largely by Ghanaian and Nigerian criminals. Ghana’s premier airport, the Kotoka International Airport (KIA) in Accra, remains a major transit point for narcotics. Furthermore, despite the lack of reliable data, there are concerns that the consumption of cannabis and other hard drugs among wealthy individuals and small-time peddlers is on the rise in Ghana.
With regard to cybercrime, anecdotal evidence indicates an increased manifestation in different patterns. For example, two Ghanaian young men were arrested for defrauding a 54-year-old American-Canadian woman of USD37,000 through internet-related advance fee fraud (419 scam). Sakawa, a form of advance fee fraud blended with voodoo practices, remains particularly prevalent. This is evidenced by increasing reports of alleged murder and ritual activities by cybercriminals to fortify their operations. While the nature of individuals and networks involved remains unclear, there is a general sense within Ghana that poor and unemployed young males, particularly from the suburbs of Accra, continue to dominate cybercrime.
Furthermore, despite the lack of reliable data, there is mounting concern about the extent of illicit Small Arms and Light Weapons (SALW) proliferation and trafficking within and through Ghana. The National Commission on Small Arms recently expressed worry about reports of illegal SALW being smuggled to Ghana from neighboring countries. Ghanaian police in Accra recently seized a consignment of arms and ammunition including 10 pump-action guns, 20 double-barreled guns, and hordes of AAA cartridges bound for Nigeria and arrested three Ghanaians and two Nigerians. Reports of increased gun violence as a result of clashes between ethnic and religious groups and violent incidents that accompanied biometric registration exercises during the 2012 election further underline the threat posed by SALW.
Ghana’s large deposits of gold and other minerals continue to underpin widespread illegal mining, locally known as ‘galamsey’. The phenomenon is underpinned by sheer greed, high levels of poverty and unemployment especially among the youth, lack of economic opportunities, financial and material benefits of illegal mining, and widespread community acceptance and glorification of the wealth that successful miners can plough back into their local communities. While the extent to which galamsey is controlled by transnational networks is unclear, there is increasing evidence that it is promoted by foreigners, mostly Chinese migrants, who often collude with local leaders in accessing mining areas. Chinese migrants continue to operate in the country, using local Ghanaian labor. This is evidenced by the recent arrest of 27 Chinese migrants for their involvement in galamsey in Ghana’s western region.
The relative development of Ghana’s financial sector in the past few years has deepened its vulnerability to money laundering activities. Trade-based money laundering, mainly in the form of manipulation of import and export transactions to lower or avoid payment of custom and excise duties, and repatriation of profits through informal channels, remains unabated. Despite the lack of reliable data, Ghanaian judicial and law enforcement officials reported that considerable amounts of illicit money have been laundered through investments in banking, insurance, real estate, automotive import, general import businesses, and religious institutions. Between January and May 2012 alone, the Economic and Financial Crimes Court authorized the freezing of more than 250 bank accounts on suspicion of money laundering, often related to cybercrime. This represents more than 80% of the 300 accounts frozen in the whole of 2011. Corruption, however, remains a major challenge, as Ghana scored 45 out of 100 and ranked 64th out of 176 countries in the 2012 Transparency International Corruption Perception Index. This is hardly different from 2011 when Ghana ranked 69th out of 183 countries.
Following the adoption of Ghana’s MER in November 2009 and as a result of its poor ratings on all the Core and Key FATF Recommendations, Ghana was placed on the expedited regular follow-up process. Following a high level advocacy visit to Ghana by the Director General of GIABA in February 2012, during which Ghanaian authorities were reminded of the implications of the country’s slow implementation of the Action Plan agreed upon with the Regional Review Group (RRG) of the Middle East and Africa, Ghana made initial efforts to address deficiencies identified in its AML/ CFT framework. Even so, the FATF’s February 2012 Public Statement identified Ghana as a high risk ML/TF jurisdiction and placed it under review for non-compliance with AML/CFT standards. Ghana responded by taking steps to improve its AML/CFT framework, and submitted its third Follow-Up Report prior to GIABA Plenary in Abidjan, Cote d’Ivoire, in May 2012. The follow-up report indicated significant steps taken to address the identified deficiencies, including the passage by the Ghanaian Parliament of the Anti-Terrorism Regulations (Legislative Instrument 2181) and Economic and Organized Crime (EOCO) Regulations (Legislative Instrument 2183), both of which spell out AML/CFT guidelines for bank and non-bank institutions, in July 2012. The former criminalized terrorist financing in the context of the FATF Recommendation 6 and broadened the scope of measures to be used to freeze, seize and confiscate criminal proceeds131. The parliament also ratified the UN Convention against Transnational Organized Crime, and amended the 1960 Criminal Offences Act (Act 29) by passing the 2012 Criminal Offences (Amendment) Act (Act 849). The Act criminalizes the remaining predicate offence, including unlawful use of human parts, sexual exploitation, illicit trafficking in explosives, firearms and ammunition, and racketeering. The Anti-Terrorism Act was amended to empower the Minister of Finance and Economic Planning to issue instruction for its effective implementation. The new Immigration Amendment Act of 2012 (Act 848), which criminalizes migrant smuggling and human trafficking, was signed into law in June 2012. Ghana also issued compliance manuals for capital market operators and insurance companies and intermediaries, and endorsed the AML/CFT National Strategy/Action Plan.
Furthermore, an AML/CFT unit was established in the Bank of Ghana. The unit sensitized banks, financial institutions and bank managers on the risks, threats and vulnerabilities related to ML/TF, as well as the essential pillars of AML/CFT; trained compliance officers on ML/TF risk assessment; and finalized a manual for off-site analysis and on-site examination of banks and financial institutions. The Bank, in collaboration with the Financial Intelligence Center (FIC), also sensitized compliance officers on the legal requirements regarding cash transactions. The FIC increased its personnel by seven; and participated in, and facilitated anti-money laundering workshops for mortgage and other financial operators.
Having reassessed Ghana’s AML/CFT regime and steps taken by the country to address the strategic deficiencies identified, the FATF agreed to conduct a country visit to confirm the steps taken prior to the delisting of Ghana from the list of countries under monitoring. The FATF noted the high-level of political commitment to work on addressing the deficiencies identified and the “…important steps [taken] towards improving its AML/CFT regime, including by enacting legislation to criminalize money laundering, establishing and implementing adequate measures for the confiscation of funds related to money laundering, improving customer due diligence measures and enhancing the effectiveness of the Financial Intelligence Unit.”
Nonetheless, considerable challenges remain as there was non-compliance with existing regulatory frameworks. In particular, corruption continues to thwart effective implementation of anti-money laundering efforts, not least because legislative frameworks are being undermined by very corrupt state officials. Fake addresses are provided when opening bank accounts and easily corruptible compliance officers allow for funds to be swiftly transferred out of banks when suspicion is raised. Indeed, a recent investigation by Ghanaian law enforcement officials revealed that banking officials allowed cybercriminals to withdraw €58,000 which they had received from a German citizen through internet fraud. The officials also continued to allow deposits of vast amounts without requesting proof of origin of the funds, and without processing STRs as per Ghana’s commitments under its AML/CTF Action Plan.
More importantly, although the FIC has relayed information on hundreds of bank accounts suspected to be used for ML to EOCO. The Anti-Money Laundering Act stipulates that when accounts are frozen, owners can launch an appeal after one year. However, frozen accounts are often unfrozen after only one week. The EOCO, the Economic and Financial Crimes Court (EFCC), and the FIC all continue to face serious resource and capacity constraints.
In addition to holding various training programs to augment the skills of relevant officials, GIABA installed AML/CFT analytical software in the FIC of Ghana. User training on the software was provided to the FIC by GIABA. Even so, other challenges persist. In particular, the Ghanaian judiciary and law enforcement personnel also benefitted from some capacity enhancement program from GIABA. That notwithstanding, the expertise and capacity to detect, prevent, investigate, prosecute, and punish money laundering and related crimes remained relatively low. Financial players, particularly insurance companies, remained generally unfamiliar with AML/CFT issues. The Ghana Police Service (GPS) still lacks the skills or equipment to investigate and prosecute major predicate crimes, especially drug trafficking. This is compounded by a painstakingly slow legal process, as trials drag on for years, mostly due to poor preparation of cases.
Accordingly, Ghana has identified the need to develop and strengthen the analytical, investigative, and prosecutorial capacities of its specialized law enforcement agencies. In particular, it has requested financial analysis and investigations training for FIC and other law enforcement personnel.
Ghana’s AML/CFT efforts are in danger of being undermined, not least because of a highly expensive electoral process, practically unregulated campaign finance, and the consequent temptation to divert State funds into campaigns or tap into criminal sources of funding. Indeed, corruption on the part of State and banking officials, as reported in the media continues to undermine effective implementation of AML/CFT measures. The existence of numerous deprived communities and high levels of poverty, inequality, unemployment and underemployment particularly among the urban youth continue to offer a fertile ground for predicate crimes and, by extension, ML/TF.
Notwithstanding the provision of a series of training and sensitizing workshops for judiciary, law enforcement, and banking and financial officials, there remains a considerable gap in skills and expertise on AML/CFT issues. Hence, Ghana and its partners should focus on developing specific courses on the nature and dynamics of money laundering and related crimes. Training and courses on financial analysis, criminal investigations and prosecutions with particular focus on Ghana’s socio-cultural realities is critical. Timely participation of law enforcement and judicial personnel in such courses is critical in building sustainable capacities.