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Proceeds of Crime in Cash Based Proceeds of Crime in Cash Based EconomiesEconomies

ByByHumphrey P.B. MoshiHumphrey P.B. Moshi

University of Dar es SalaamUniversity of Dar es Salaam

A Presentation at A Presentation at 1010thth Pan- American Pan- American Congress on ML& TF, 29-Congress on ML& TF, 29- 30 July 2010, 30 July 2010,

Cartagena de Indias (Columbia)Cartagena de Indias (Columbia)

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Presentation OutlinePresentation Outline

• Introduction• Basic features of a cash-based economy

(CBEs)• Commonalities between CBEs & IS• Drivers of CBEs• Drivers of informality• Laundering of the proceeds• Tackling vulnerability

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IntroductionIntroduction

- Money laundering is a worldwide phenomenon. However, its scale and impact differ across countries

- Globalization and liberalization have scaled-up vulnerability

- Vulnerability is aggravated by transactions in some economies

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Basic Features of CBEsBasic Features of CBEs

- Dominance of cash transactions

- Narrow or shallow scope of financial institutions

- High levels of informality

- High levels of the unbanked

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Tanzania'07

Zambia'05

Kenya'06

Uganda'07

Botswana'04

Namibia'04

South Africa'06

Formal Bank Formal other Informal Financially excluded

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Commonalities CBEs vs ISCommonalities CBEs vs IS

- Non-transparency of transactions (record keeping and information deficiencies)

- Intensity of cash transactions

- Interaction with formal sector

- High vulnerability for tax invasion

- High vulnerability for money laundering

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Formal sector

Informal sector

Formal and Informal Sectors –Non Cash Based Economy

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Formal sectorInformal sector

Fusion

Formal and Informal Sectors in Cash Based Economy

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Drivers of CBEsDrivers of CBEs

- Low levels of financial sector outreach- Low population densities- High levels of poverty, coupled with low savings- Macro-economic instability- Inefficient services of financial institutions- Cumbersome documentation processes- Exorbitant costs of account opening- Adoption of AML systems- Informality factor

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Drivers of InformalityDrivers of Informality

- Adoption of SAPs- Rural-urban mobility / inequalities- Rising unemployment- Inefficiency of formal institutions- Instability of macro-economic indicators- Inadequate wages and salaries- Tax evasion SSA (41-44%) SLA (40-41%) CLB (39.1%)

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Typologies of Laundering of ProceedsTypologies of Laundering of Proceeds

- Smuggling and theft of bulk cash- Property acquisition and development- Investment in cash intensive businesses- Purchase of luxury motor vehicles and

high value goods- Bulk cash movements and cash couriers- Alternative remittance systems - Corruption

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Tackling Vulnerability in CBEsTackling Vulnerability in CBEs

- Awareness raising- Instituting a comprehensive AML regime- Bringing the unbanked on board- Improve the efficiency of financial sector

institutions- Revisit the mandate of FIUs- Intensify efforts on KYC- Improve governance: rule of law, transparency

and accountability

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Thank you