Sub-Saharan Africa encompasses a large number of jurisdictions, each with its unique challenges and vulnerabilities. As a region, it faces significant and systemic risks related to money laundering, largely driven by weak anti-money laundering frameworks, widespread corruption, and insufficient enforcement mechanisms. Many countries in the region struggle with limited resources, political instability, and high levels of informal economies, making them more susceptible to exploitation by criminal networks.
Despite some progress in specific jurisdictions prompted by international oversight, such as FATF grey listing, the region as a whole remains highly vulnerable, requiring substantial and sustained efforts to address these issues effectively.
Of the 41 countries included in the Basel index Sub-Saharan region, the average score is around 6.28, which highlights the serious and pervasive money laundering, terrorist financing and proliferation financing risks across the region.
Understanding national money laundering risks
Money laundering risks refer to the vulnerabilities within a country’s systems that criminals can exploit to integrate illicit financial gains into the legitimate economy. These risks stem from systemic weaknesses such as insufficient legal frameworks, corruption, lack of transparency, ineffective enforcement measures such as a weak police or judiciary, and political corruption.
At its core, money laundering enables crimes ranging from drug trafficking and fraud to terrorism financing. The interconnected nature of global financial systems means that these risks often transcend borders, impacting not just individual countries but the global economy at large.
Risks in one country can easily spill over into connected jurisdictions, as criminals exploit weaker systems to hide the profits of criminal enterprise into the legitimate economy. It is important for any firm which has the potential to be exploited for money laundering to understand the risks for each jurisdiction linked to transactions or clients they work with.
How should money laundering risks be categorised?
The Basel AML index provides a holistic view of country risks. It categorises risks based on five different areas, with different weighting given to each:
Quality of AML/CFT/CPF framework (50%): This includes compliance with international standards such as the Financial Action Task Force (FATF) Recommendations. Factors assessed include customer due diligence, reporting suspicious transactions, and the implementation of financial sanctions.
Corruption and fraud risks (17.5%): Transparency International’s Corruption Perceptions Index and indicators of financial crimes and cybercrimes provide a snapshot of the level of corruption and fraud in a jurisdiction.
Financial transparency and standards (17.5%): Indicators like the Financial Secrecy Index assess the openness of financial systems and the risk of financial institutions being exploited for illicit purposes.
Public transparency and accountability (5%): This domain evaluates public access to budget information, transparency of political financing, and accountability mechanisms in public institutions.
Political and legal risks (10%): Key indicators include judicial independence, the rule of law, media freedom, and political rights. Weaknesses in these areas can significantly exacerbate money laundering risks.
To measure a country’s risk level, the Basel AML Index uses a composite scoring methodology that integrates data from 17 publicly accessible indicators. These scores are summarised on a scale from 0 to 10, where 10 represents the highest risk.
The highest risk countries in Sub-Saharan Africa for money laundering
Democratic Republic of the Congo (Score: 7.73)
The Democratic Republic of the Congo (DRC) experiences significant AML risks driven by systemic corruption and political instability. Weak institutions and limited regulatory oversight make the country highly vulnerable to money laundering, particularly from illicit activities tied to the exploitation of natural resources like gold and cobalt. These issues are further compounded by widespread poverty and a lack of transparency, which hinder effective enforcement of AML measures. Any transactions related to the country are exposed to financial crimes and illicit capital outflows. The DRC’s challenges are amplified by its informal economy, where financial transactions often go unmonitored, creating opportunities for laundering proceeds from corruption and illegal mining.
Chad (Score: 7.6)
Chad faces substantial AML risks, with corruption and political instability at the core of its challenges. A weak legal framework and inadequate enforcement capacity leave the country vulnerable to financial crimes, particularly those linked to the mismanagement of public funds and proceeds from natural resource exploitation. The informal sector dominates the economy, limiting the effectiveness of oversight and regulatory compliance. International organisations have urged Chad to strengthen its institutions and improve transparency, but progress has been slow due to governance challenges and limited resources.
Central African Republic (Score: 7.49)
The Central African Republic (CAR) ranks among the highest-risk countries for money laundering, largely due to pervasive corruption and chronic political instability. Armed conflicts and weak governance structures have created a lawless environment where illicit financial activities thrive. The exploitation of natural resources, including diamonds and gold, provides significant opportunities for money laundering, with proceeds often funneled through unregulated channels. Efforts to implement AML frameworks are undermined by a lack of institutional capacity and a fragile political climate, making the CAR particularly susceptible to financial crimes.
Gabon (Score:7.48)
Gabon’s money laundering risks are driven by widespread corruption and a lack of political accountability. While the country benefits from considerable oil wealth, weak governance and limited transparency in public financial management increase its vulnerability to illicit financial activities. Proceeds from corruption and embezzlement frequently flow through unregulated financial systems, both domestically and internationally. Despite Gabon’s efforts to align with international AML standards, enforcement remains inadequate, and significant reforms are needed to combat systemic risks effectively.
Republic of the Congo (Score: 7.28)
The Republic of the Congo faces elevated money laundering risks due to entrenched corruption and weak institutional frameworks. The country’s economy, heavily reliant on oil exports, is vulnerable to financial crimes such as embezzlement and illicit capital outflows. Limited judicial independence and poor oversight of financial transactions further exacerbate the risks. Although some AML measures have been introduced, the lack of political will and accountability undermines their effectiveness. Strengthening governance and improving regulatory enforcement are essential steps to mitigate money laundering vulnerabilities.
The lowest risk countries in Sub-Saharan Africa for money laundering
Ghana (Score: 5.28)
Ghana faces moderate AML risks, reflecting vulnerabilities primarily tied to corruption and weaknesses in regulatory enforcement. While Ghana has made strides in improving its anti-money laundering framework, gaps persist in the effectiveness of measures to combat illicit financial activities. Key challenges include a significant informal economy and underreporting of suspicious transactions, which hinder oversight. Additionally, corruption in public procurement and the mismanagement of state resources provide opportunities for financial crimes. Ghana’s financial sector has faced scandals in recent years, underscoring the need for stronger governance and accountability mechanisms to mitigate these risks.
Namibia (Score: 4.89)
Namibia’s main challenges are in financial transparency and institutional capacity. Corruption, while not as pervasive as in some neighbouring countries, remains a significant issue, particularly in public procurement and natural resource management. Namibia’s economy is heavily dependent on sectors such as mining, where the movement of funds can be difficult to monitor. Although Namibia has adopted legislative measures in line with FATF recommendations, enforcement is inconsistent, and the country struggles with limited resources to combat financial crimes effectively. Strengthening institutional capacity and enhancing transparency in financial systems are key to addressing these vulnerabilities.
Seychelles (Score: 4.76)
Seychelles faces AML risks tied to its role as an international financial hub. While the country has worked to align with global standards, including FATF recommendations, vulnerabilities remain in areas such as beneficial ownership transparency and the regulation of offshore financial activities. The use of Seychelles-based shell companies for tax evasion and money laundering has drawn international scrutiny. Despite progress in implementing AML reforms, enforcement mechanisms need further strengthening to address risks effectively, particularly in the offshore sector and high-risk financial transactions.
Mauritius (Score: 4.61)
Mauritius has a relatively low AML risk score, reflecting its efforts to strengthen its regulatory framework and align with international standards. As a major financial centre in Africa, Mauritius has introduced reforms to address vulnerabilities in beneficial ownership transparency and cross-border financial transactions. However, risks persist in areas such as the misuse of trust and corporate services for money laundering purposes. The country’s removal from the FATF grey list in 2021 was a positive step, but continued vigilance is required to ensure sustained compliance and effectiveness in combating financial crimes.
Botswana (Score: 4.36)
Botswana’s low risk is a testament to its reputation for good governance and low levels of corruption compared to other countries in the region. The country has a robust legal and regulatory framework for combating money laundering, and its institutions are relatively effective. However, challenges remain in areas such as customer due diligence and the oversight of designated non-financial businesses and professions (DNFBPs). Botswana’s reliance on diamond exports also creates potential vulnerabilities in the financial system. Continued efforts to strengthen institutional capacity and regulatory enforcement will be essential to maintaining its low-risk status.
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