Posted Monday, January 24 2011 at 00:00

http://www.theeastafrican.co.ke/news/-/2558/1094416/-/item/2/-/cjns8yz/-/index.html

How can African states contribute to the global fight against money laundering and the financing of terrorism?

In a world where illegally obtained funds can be channelled into the enormous daily volumes traded on world financial markets, and where the proceeds of East African maritime piracy can be laundered into the banking system, this is not an academic question.

Money laundering is a vast global enterprise that knows no boundaries, and preventing it is a priority for developing countries.

These matters came to the fore during a conference held in Cape Town late last year, where more than 200 delegates representing the primary policy, investigative and enforcement agencies in global financial intelligence met to consider recent developments and to strengthen international cooperation.

This historic meeting brought together the Egmont Group, an association of 120 financial intelligence units, and the Financial Action Task Force, the 36-member global anti-money laundering and countering the financing of terrorism standards-setting body, in a first-time Joint Experts Meeting.

Two African regional bodies played a central role in these deliberations — the 14-member Eastern and Southern Africa Anti-Money Laundering Group (which includes Kenya, Tanzania and Uganda, and a secretariat based in Dar es Salaam), and the Inter-Governmental Action Group against Money Laundering in West Africa.

A core objective of the week’s activities was to promote the formation and development of financial intelligence units (FIUs) on the African continent.

Globally, FIUs serve as the central national agencies responsible for receiving, analysing and transmitting disclosures on suspicious transactions to authorities.

Africa is of strategic importance in combating money laundering and terrorist financing.

Yet only eight African states – Cameroon, Côte d’Ivoire, Egypt, Malawi, Mauritius, Nigeria, Senegal and South Africa — have FIUs that presently meet global standards, which enables them to exchange information to fight these twin evils.

While many more African countries have set out to establish such units, signalling a political commitment to fight money laundering and terror financing, governments across the continent face particular challenges in securing the necessary resources.

And where FIUs are established, continuous work is required to ensure an effective and cooperative approach among all the players involved in combating money laundering.

This includes the banking sector and other industries and professions, which need to report on all manner of suspicious transactions, as well as a range of state agencies that need to work in unison, rather than in competition with one another.

The experts meeting in Cape Town discussed a range of global trends and ways to strengthen the international anti-money laundering network.

Two issues discussed are of particular interest to Africa.

First, Somali piracy is a flourishing and lucrative business. During 2009, there were 217 reported pirate attacks in the Gulf of Aden and beyond, nearly double the number in 2008 (111).

The attacks have grown both in sophistication and spread, reaching 1,300 nautical miles off the coast and encompassing a region of 2.6 million square miles, despite a large international naval presence.

The Joint Experts Meeting underlined the importance of tracking the money trail associated with the key players onshore.

It appears that real estate deals are being used to launder large volumes of cash obtained through piracy.

Given that the property industry is unregulated in much of the continent, the potential for money laundering is enormous.

There are also concerns that funds obtained through piracy may find their way to terrorist networks.

Second, human trafficking remains a vast global enterprise.

The International Labour Organisation estimates that annual turnover for trafficking in forced labourers alone is $30 billion.

Eastern and Southern Africa serve as sources of, transit points and destinations for human trafficking.

The lack of financial investigative skills in Africa is a risk to the continent’s economic growth and development, and the Joint Experts Meeting took several steps to address this challenge.

African representatives appreciated the role of the international network of organisations that combat money laundering and terror financing.

Egmont and FATF participants in turn gained insight into how their work is seen in the African context, where legal and operational frameworks need to promote the development of sovereign FIUs that can effectively contribute to the global network.

The exposure of more African FIUs to the global network will encourage national initiatives to develop the necessary legal and operational frameworks.

Technical assistance and international cooperation efforts are to be stepped up.

Doing this type of work requires skilled human, technical and financial resources — none of which is in abundant supply today.

To put this challenge in perspective, consider that the average daily global foreign exchange turnover in world markets amounts to about $4 trillion.

Determining what portion of that massive flow may represent laundered funds is no easy task.

Curtailing money laundering is one necessary precondition to ensure that Africa’s wealth is used for Africa’s development.

Phineas R Moloto is a staff of the Financial Intelligence Centre of South Africa seconded to ESAAMLG Secretariat based in Dar es Salaam. He is a technical advisor covering financial intelligence units and financial sector measures on combating money laundering and terrorist financing in ESAAMLG region.