Member States : Togolese Republic
Togo’s democratic transition since the end of the 38-year rule of Gnassingbe Eyadema in 2005 remains work in progress. The country’s tense political situation was manifested by the violent clashes between opposition demonstrators and security forces and the mass arrests that accompanied the introduction of electoral reforms perceived to be favorable to the ruling party. The situation was compounded by an unexpected resignation of the country’s prime minister and government ahead of parliamentary elections in October 2012, provoking concerns of possible insecurity and instability.
According to the Bertelsmann Transformation Index 2012, Togo scored 5 out of 10 points for political transformation, against 6 out of 10 in 2011, indicating the country is on a regressing trend. Nonetheless, Togo registered notable improvements in its governance indicators. For instance, Togo was ranked 79th out of 179 countries in the 2011-2012 freedom rankings by Reporters without Borders. This represents a 19-point improvement from the previous ranking.
Economic and Financial Situation
Notwithstanding Togo’s tense political situation, the country’s economy continued to expand. Togo’s GDP growth rate was projected by the African Development Bank (AfDB) to rise slightly from 3.9% in 2011 to 4.2% in 2012 and 4.4% in 2013. The expected rate in 2012 was less than the 5% and the 5.2% projected by the International Money Fund and the World Bank respectively. Growth is largely attributable to high government spending, new investments in infrastructure, recovery of the cotton sector, among others. More importantly, agriculture, the focus of the economy, contributed to this growth performance. Cash crop production in particular increased by 22.2% to 153,400 tons, compared with an increase of 20.9% in 2011. Although cocoa production declined by 40%, cotton production rose by more than 70%, after declining by 68.5% in 2010.
The Financial sector of Togo is dominated by 12 deposit money banks that makes up for over 80% of the sector’s total assets valued at 31.4% of GDP in 2010. Remittances inflows in 2011 amounted to USD337 million, which represents about 9.4% of GDP. These calls for close monitoring of remittances inflows as they have AML/CFT implications.
To deal with existing economic challenges, the Government of Togo has resolved to consolidate progress in fiscal management in the last IMF Extended Credit Facility (ECF 2008-11) by improving performance in medium-term expenditure. It also aims to finalize a medium-term plan for rationalizing the public expenditure chain, decentralizing expenditure and financial control, and creating a Single Treasury Account. Togo seems to be achieving this, according to the IMF. During its mission to Togo in October 2012, the IMF reported that Togo’s economic situation was on a positive path. The average rate of inflation was 2.6% in September. It continues to decline due to the low prices of food products and improvements in agricultural production. The average inflation rate for 2012 is estimated at 2.5%. The GDP remains strong, although it declined marginally from the level in previous projections. It was projected to reach about 5% in 2012. The current account deficit is expected to remain unchanged at about 8% of GDP in 2012 and 2013. The performance of income under the 2012 budget has been good, especially in terms of customs revenue. Meanwhile, fuel subsidies have exceeded budgeted amounts, and there were shortfalls in the receipts from privatization arrangements and budget support from donors.
The IMF and Togolese authorities are having fruitful discussions to re-start the once-delayed structural reform programme. It is particularly important to consolidate the progress made in public finance management and improve debt management capacity while striving to have appropriate funding. The Togolese authorities have decided to embark on a major reform to reorganize revenue services by merging the General Directorate for Taxes with the General Directorate of Customs as one body, and by establishing a National Revenue Service (Fr. Office Togolais des Recettes - OTR). It seems that by setting up the OTR, Togo would have a basis for future discussions in early 2013 on a new program supported by the Extended Credit Facility.
Economic growth, however, has not translated into decreased poverty and increased employment. In spite of the promising economic growth in Togo, 61.7% of the population is still poor. The majority are in the rural areas (74.3% against 35.7% in urban areas). Togo is ranked 162 out of 187 countries on the UNDP Human Development Index. The human development report suggests that 38.7% of Togolese are living on less than $1.25 per day. Such an alarming figure is the result of long years of social and political crises that have been rocking the country and stifling its efforts for development. The literacy rate is 56.9%; while life expectancy stands at 57.1 and infant mortality at 6.6%. The World Bank’s Doing Business report 2012 indicates that Togo has 53 different types of taxes, against an average of 37 in sub-Saharan Africa. In terms of regulations for starting a business, Togo is at the 174th position, down by five points in the previous year.
The socio-economic situation dires in the face of growing youth unemployment. In addition, growing corruption and dwindling economic opportunities for the population mean widening social inequality and increasing exclusion of youths. This scenario opens the country up to predicate offences whose proceeds can easily be used for ML/TF.
Prevalence of Predicate Offences
Togo is a crime-prone environment similar to the situation in the other countries of the WAEMU zone. In fact, the country report that the Togolese authorities submitted to GIABA in 2012 underlines the predominance of the following offences: drug trafficking, bank fraud, fraud (cybercrime), corruption in public procurement, and the use of forgery and false documents. With respect to corruption, the report specifically points out the influential role of PEPs in the acquisition of public contracts, non-compliance with procedures and overcharging. As for bank fraud, it originates particularly from the lack of customer due diligence (CDD) procedures, the poor enforcement of the law and the absence of banking supervision. Togo continues to be vulnerable to human trafficking, which is still not criminalized in Togolese substantive law (except child trafficking and prostitution). Transparency International ranks Togo 128th, with a score of 30/100 points, out of 174 countries around the world in 2012. Similarly, the World Bank’s Doing Business Report 2012 ranks Togo 162nd out of a total number of 183 countries, down from 158th where it was in 2010. Togo receded because of constraints such as declining ability to protect investments.
With regard to drug trafficking, the U.S. State Department274 reports that Togo is not a major producer of drugs. Cannabis is the only drug cultivated in large quantities in Togo and it is cultivated solely for local consumption, despite claims that small retailers sell the drug across the national borders. Togo also became a transit point for heroin and cocaine, thus playing an increasingly important role in the trafficking of narcotic drugs at the regional level. Togo’s ability to deal with the transnational flow of drugs is hampered by its extreme poverty, lack of resources and training, long porous borders and inability to control corruption. Record seizures of illicit drugs made by law enforcement agencies have been observed in recent years. In July 2012, a joint anti-drug drive by the police services of Togo, Benin and Ghana was carried out together with Interpol, seizing a total of eight (08) tons of drugs including cannabis, cocaine, heroin and synthetic drugs. The biggest catch, however, was made in Togo with seven (07) tons of psychotropic substances. This regional operation, conducted as part of the ECOWAS Regional Plan for preventing and combating the illicit trafficking of drugs, culminated in the arrest of seventy four (74) traffickers.
Togo submitted the first follow-up report on its mutual evaluation at the GIABA Technical Committee and Plenary meeting in May 2012. Upon review, it was clear that Togo had made little progress in improving the national AML/CFT system. It had mainly improved the legal and regulatory framework by adopting Law Nr. 2011-009 of 12 May 2011 on the regulation of decentralized financial systems and the Statistics Act of 9 May 2011. The Ministry of Economy and Finance also signed Circular Nr. 015/MEF/ CENTIF on February 8, 2012, prohibiting banks formally from maintaining transactions with shell banks and opening anonymous accounts in order to reinforce customer due diligence for AML/CFT.
Togo now has an Ad hoc Inter-ministerial Committee made up of officials from the Ministries of Foreign Affairs and Cooperation, Defence, Security and Civil protection, Economy and Finance, Trade, and Justice. Its mission is to ensure that Togo implements the Security Council resolutions, including Resolutions 1267 and 1373, prepares a list of terrorist individuals or entities, and files periodic reports as required by the above resolutions and other Security Council Resolutions. However, the effectiveness and/or efficiency of these measures are yet to be assessed.
Regarding the activities of the FIU, a model Suspicious Transaction Report (STR) form is now available on the websites of the FIU for use by reporting entities. Furthermore, awareness seminars have been organized on the general AML/CFT obligations of legal persons, as well as work sessions with the focal points of some entities (internal auditors and compliance officers in banks). With regard to STRs, the FIU points out that it received nine (9) between January and September 2012, but none has yet been forwarded to prosecutors. However, the FIU has been exchanging information with three FIUs, namely TRACFIN in France, the Côte d’Ivoire FIU, and the Ghana FIU.
On operational matters, simpler procedures for accessing FIU funding allocations are in place and the Unit’s resources have been increased with a budget allocation that it used to: purchase four (4) more vehicles, six (6) computers and accessories; recruit an analyst, an IT specialist and two secretaries; and engage a police detective on assignment. Also, a blueprint has been designed for a database management information system.
In 2012, Togo took part in several training exercises funded by development partners, especially on financial analysis and fraud detection. GIABA organized several regional training activities in which Togo took part, such as the financial sector training workshop in Niger and the journalists training workshop in Cape Verde. Apart from these regional programs, GIABA provided support during several training and awareness activities that took place in Togo on AML/CFT, as well as on drug control and the prevention of organized crime under the Integrated National Program funded by UNODC. The UNODC program also organized a seminar on strengthening the legal and institutional framework for AML/CFT as part of its activities. The FIU is receiving support from UNODC to purchase a server and finalize a draft law on trafficking in persons. Likewise, FIU members will go on a study trip to the U.S.A with funding from the U.S. Department of State. At the end of June 2012, the World Bank had a portfolio of sixteen funded projects totalling USD 189 million. All these developments constitute a positive economic outlook necessary for facilitating human development in the country. Other needs of Togo include:
- Capacity building: providing training to magistrates on the categorization of money laundering and terrorist financing offences, as well as the recovery of criminal assets; providing training to journalists in order to involve them in efforts to create awareness and disseminate information on AML/CFT; providing training to analysts; and providing training to investigators;
- Helping the Togo FIU to become a member of the Egmont Group in order to expand the country’s network for AML/CFT intelligence; and
- Providing more material resources: for the security of FIU premises by installing a CCTV system, and setting up an information system and a secure database.
Togo, like the other West African countries, is affected by the illicit trafficking and re-exportation of drugs to Europe for the Colombian and Mexican cartels. The amount of drug seizures and the growing number of drug users in the past year are indicators of the security challenge that this phenomenon poses today. This drug trafficking could, in turn, amplify the resurgence of crime in Togo, particularly money laundering.
The review of Togo’s first follow-up report shows that progress made has been marginal. There were no statistics from which to assess the effectiveness of anti-money laundering and counter terrorist financing efforts. Togo has been trying without success to adopt a national AML/CFT strategy since 2009. On national coordination of AML/CFT, very few initiatives were taken mainly because the inter-ministerial committee was not working. The Togolese authorities should be encouraged therefore to make more effort in implementing the recommendations in the country’s mutual evaluation report so that they can pursue regular follow-up, as has been the case since May 2011.