Urgent Need for Cross-Border Legal Frameworks to Combat Financial Crime
African nations are increasingly recognizing money laundering as a pervasive issue that necessitates cross-border solutions. This call for coordinated legal frameworks comes amid growing concerns over how money laundering fuels various forms of organized crime, including terrorism, drug trafficking, human trafficking, and poaching.
The 48th Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) Task Force of Senior Officials Conference, held this week in Nusa Dua, Bali, highlighted the integral role of money laundering in enabling these illicit activities. According to participants, money laundering involves not only concealing financial gains from criminal activities but also includes corruption and embezzlement of public funds. Launderers often use legitimate businesses, such as nightclubs or real estate, to obscure their tracks.
Kenya’s National Treasury Principal Secretary Chris Kiptoo emphasized that the interconnected nature of money laundering across the continent means that an issue in one region can impact others. He stressed the need for tailored solutions that address the unique challenges of each region rather than applying a one-size-fits-all approach. “The risk must be contextualized and mitigated from a regional perspective, as a threat to one country is a threat to others,” Dr. Kiptoo noted during the conference in Diani, Kenya.
The conference underscored that money laundering is part of the broader issue of illicit financial flows. The 2023 Tax Transparency in Africa Progress Report, published by the Global Forum on Transparency and Exchange of Information for Tax Purposes, the African Union Commission, and the African Tax Administration Forum, with support from the African Development Bank, reveals that African countries have saved up to $2 billion annually through enhanced disclosure and information sharing. However, the continent still loses approximately $60 billion to illicit financial flows.
Despite some progress, countries like Kenya and Namibia remain grey-listed among 12 African nations, signaling ongoing challenges. Dr. Kiptoo called for a reassessment of listing criteria to better support low-capacity countries, advocating for a process that strengthens national anti-money laundering (AML) and counter-terrorist financing (CFT) efforts without being counterproductive.
Countries on the grey list often face negative market responses, as institutions in the European Union and the United Kingdom, among others, treat transactions linked to these countries as higher risk. Over 60% of Eastern and Southern African nations have yet to fully address the strategic deficiencies identified in combating money laundering and terrorist financing, which impacts investor confidence.
In February, Kenya and Namibia were grey-listed due to their perceived inability to effectively manage AML/CFT risks, prompting global financial institutions to exercise caution. A National Risk Assessment in Kenya revealed that fraud, forgery, and drug trafficking are significant threats, although recoveries from these crimes are relatively low compared to those from corruption and misuse of resources.
Saitoti Maika, Director General of the Financial Reporting Centre and the ESAAMLG Task Force, reported mixed results from compliance with FATF recommendations. “The outcomes of the 2nd Round of Mutual Evaluations show a blend of successes and setbacks, with several ESAAMLG Member jurisdictions remaining under active monitoring,” Maika stated.
The week-long meeting will focus on follow-up reports from countries in the region, including Kenya, Madagascar, Mozambique, Tanzania, Uganda, and Zambia, which have requested re-evaluation. Lesotho, Malawi, Mauritius, Namibia, Seychelles, and Zimbabwe are also participating in the review process.
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