NO SOLUTIONS TO CROSS BORDER MONEY LAUNDERING

No solutions to cross border money laundering
By Oluwaseyi Bangudu
March 19, 2010 03:11AM
Cash transactions in West Africa boost money laundering. Photo: FEMI ADEBESIN-KUTI

It will be difficult to find a solution to the problem of money laundering in ECOWAS (Economic Community of West African States) countries until their economies stop being cash-driven, experts have said.

Sunday Salako, a member of the Nigerian Economic Management Team (NEMT), said there is no lasting solution to the crisis as most of the affected nations, including Nigeria, are still predominantly cash driven economies.

“There is nothing you can do about that. The mode of transaction here is majorly cash,” he said, adding that only a small percentage of the people use their debit/credit cards for transactions.

“It is the liquidity level of an economy that determines cash activities across borders. If you go to the border now, you would see a lot of money there, but there is hardly anything we can really do about it now,” he said.

Mr. Salako explained that economies that are not cash based would find it easier to address such issues.

International concerns
The ECOWAS Council of Ministers had expressed serious concern about the movement of cash across borders in the region despite the relative availability of cross border banking services.

The concerns were raised at the council's 63rd Session on 20 – 21 November, 2009 in Abuja, Nigeria after which it decided to hold a conference to address the issue in Abuja, last week.

The Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) has suggested ways forward from the menace, which include increasing awareness among stakeholders on the problem of cash transactions and cash laundering in west Africa, examining payments and monetary management on cash transactions in financial institutions, and examining the existing framework, including legal arrangements for the control of cash movement in the region.

The challenges
According to the West African Asset Regulation and Finance Commission Action Unit of the West African Security Control Unit (WAARFCU), all the available information from desk research, survey questionnaire responses, and anecdotal evidence presented at the typologies workshop confirm the strong preference for cash in the settlement of financial transactions and obligations in all the countries of the region.

The cash used in transactions encompasses not only national currencies issued by the region's various monetary authorities, but also convertible foreign currencies, especially the US dollar, the pound sterling and the Euro.

“Against this backdrop, the preference for cash over non-cash instruments in payment and settlement obligations, arising from both national and intra-regional transactions, makes the region highly vulnerable to money laundering, more so as most transnational organised crimes are cash-based. This is largely because of the anonymity and ubiquity provided by cash which makes it the preferred medium for the receipt and deployment of criminal proceeds,” a statement on the unit's website says.

The statement added that the major factors reinforcing the dominance of cash transactions in West Africa include the high level of illiteracy, currencies' legal tender status as a medium of exchange as well as their ubiquitous nature, convenience, speed and certainty in settling financial obligations, inadequacy of the available banking services, especially in the rural areas and the large size; and continued growth of the cash-oriented informal sector in all the regional economies.

Way forward
GIABA is a specialised institution of the ECOWAS and a Financial Action Task Force (FATF)-Style Regional Body (FSRB), which mandate includes ensuring the adoption of measures against money laundering and the financing of terrorism in accordance with acceptable international standards and practices.

While highlighting the dangers of the menace, the institution suggested that affected economies should review the implementation of the FATF recommendations with regard to cash transactions and cash couriers. It added that, in particular, they should assess its implications for the region, identify the roles and responsibilities of various stakeholders in dealing with the problem, propose future strategies for coordination and sustaining efforts aimed at dealing with the problem, and make recommendations and propose policy options for improving the AML/CTF regimes with a view to minimising the prevalence of cross border cash movements and transactions.

Mohammed Abdullahi, the spokesperson of the Central Bank of Nigeria (which also participated in the conference last week), could not be reached on steps taken by the institutions to address the nation's vulnerability to the problem.