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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