GIABA, an Intergovernmental Action Group Against Money Laundering is urging Ghana to adopt new and modern ways of fighting illicit money transfer to control crimes related to it.
The group is calling for a relook of new methods of money transfers including mobile money across countries in the West African sub-region to detect money laundering quickly.
General Manager of GIABA Kimelabalou Aba provides some explanations in the questions and answers below.
Q.How has financial crime evolved in West Africa these last years?
Answer: Criminal methods are changing in response to several factors including advancement in technology and communications. For instance, although advancement in technology are revolutionizing business delivery process within the financial & DNFBPs sectors with positive impact on access and delivery of financial services to customers, it has also created new opportunities for criminals with new criminal trends such as cyber crime (Internet fraud, identity theft, and credit card account thefts, etc) emerging. This coupled with existing vulnerabilities in member States such as weak institutional capacity, large informal economy, preponderance of cash transactions, and porous borders have compounded the criminal environment in the region and open new ways in which financial crimes are perpetrated. Overall, the improved application of Anti Money Laudering (AML ) measures in the financial sector is shifting criminal activities, especially money laundering to the designated non-financial business and professions (DNFBP) sector due to poor compliance with AML measures and weak supervision.
Over the years, member States have made efforts to implement robust AML/CFT measures, including the establishment and/or strengthening of frameworks (legal, regulatory and institutional), regulatory and enforcement actions that have put some checks on financial crimes, The level of effectiveness and impact of these actions on the level of financial crime is yet to attained the desired level. As a way forward, member States should implement effective AML measures, including investing more in preventing, detecting and disrupting financial crimes. In practical terms, this will include improving capacities of relevant institutions, effective monitoring and supervision of reporting institutions, strong inter-agency and international cooperation, and above all, the political will to drive it.
Q. What is the impact on West African economies? Which sectors are most affected by money laundering?
Answer: Its effects on regional economies are devastating, cutting across socio-economic, and political spheres. They include sudden inflows and outflows of illicit funds – which can cause macroeconomic distortions; loss of government revenue to criminals through corruption, fraud, tax evasion, etc, thus depriving governments of the financial resources needed for investment in public goods, such as health, education and infrastructure. Il also contributes to poverty, growing unemployment and their negative consequences, conveys a negative national image (e.g corruption perception index), with an adverse impact on international economic relations.
Today, substantial progress has been made in the regional compliance environment due to GIABA’s activities in the areas of technical support, mutual evaluations/compliance monitoring and research/typologies studies. In particular, with support from GIABA, member States have established relevant legal and institutional frameworks to address the technical deficiencies identified in their AML/CFT systems.
Country reports submitted to GIABA in 2017 and 2018 by member States generally indicate that the Designated Non-Financial Businesses and Professions sector (DNFBPs), especially the real estate agents, is the most affected by money laundering compared to the financial sector. This may largely be due to improved implementation of AML measures by financial institutions.
Q. To what extent did the rise of mobile money foster money laundering in the
Answer: Mobile money services in West Africa has evolved rapidly in recent years due largely to expansion of mobile networks to underserved communities, increasing affordability of services and device costs; government policy of financial inclusion, and the deliberate efforts to reduce cash transactions as part of AML measures. Beyond in-country peer-to-peer transfers, some of the mobile money operators offer international remittances and other products and services. The nature of services/products provided make them to be vulnerable to abuse or risks of money laundering /terrorist financing. Cognizance of this, member States have put in place regulations, and brought operators in the sector under AML/CFT regime, with requirements to implement a broad range of measures such as customer due diligence while they are being monitored for compliance. It is also important to mention that, some of the mitigation measures in place include the low transaction values (a ceiling which could limit amounts that can be laundered). For instance, in Francophone countries, there is a daily transfer limit of CFA 200,000. Anything above this will require authorization and higher level of due diligence.
Notwithstanding the vulnerabilities, to date there has been no evidence in the region of money laundering through mobile money systems. Although some member States such as Liberia, Senegal, have received some suspicious transaction reports from mobile money operators, so far there is no evidence or reported cases in any member State of mobile money agents involved in money laundering. Overall, member States acknowledged the vulnerabilities but do not think the rise in mobile money is fostering money laundering in their countries. On the country, the rise in mobile money has rather improved access to formal financial services in the region, and in particular, has contributed to the enhancement of financial inclusion with attendant positive impact on regional AML/CTF regime compared to cash. Other economic contributions include employment generation, poverty alleviation, public funding through taxes, and the boosting of commerce and trade between several countries through cross-border money transfers by some of the operators.
Q.What are GIABA’s priorities to fight money laundering in the context of mobile money transactions?
Answer: While the direct responsibility to fight money laundering in the context of mobile money transaction lies with member States, GIABA’s priority will include to undertake a typologies study on the misuse of mobile money transaction for money laundering and based on findings provide appropriate policy options and necessary interventions and support, including capacity building for relevant regulators and mobile money operators, as well as working with national authorities to strengthen or develop appropriate legal and regulatory frameworks.