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Ghana: up enforcement to avoid EU money-laundering blacklist

By David Whitehouse
Posted on Thursday, 14 May 2020 14:04

Ghana's President Nana Akufo-Addo in Berlin, Germany November 19, 2019. John MacDougall/Reuters

Raising the game on enforcement is the only way for Ghana to escape the EU’s money-laundering blacklist.

The EU Commission said on 7 May that Ghana is among 12 countries which now pose “significant threats” to the EU’s financial system, due to deficiencies in anti-money laundering and counter-terrorist financing strategy.

“The key challenge, as with most legal matters in Ghana, is enforcement,” says Elikem Nutifafa Kuenyehia, a Ghanaian lawyer and entrepreneur in Accra. Kuenyehia says that while lawyers are supposed to file suspicious transaction reports, he has not come across a single report showing this has ever happened.

READ MORE: Former Goldman Sachs banker accused by US of bribery in Ghana

The same applies to estate agents, he says. “It does not seem that there is any motivation for such persons to report possible money-laundering activities.”

  • Blacklisting is subject to approval by the European Parliament and would come into force in October.
  • Being on the blacklist won’t make it impossible to do business with these countries. But it will make it harder and more time-consuming.
  • Banks and other financial institutions will have to apply extra checks, leading to delays in transactions.
  • Botswana, Mauritius and Zimbabwe were the other African countries added to the list.

Kuenyehia fears a significant reputational impact for Ghana.

“A lot of businesses and governments in the EU would be uncomfortable dealing with businesses from countries which may create future complications for them under EU law,” he says. “There are some investors who will not look at any country that feature on any kind of blacklist.”

Regulatory bodies need to do more to compel compliance, which may require enhancing their capacity, Kuenyehia says. The Bank of Ghana and the Financial Intelligence Centre are the two main institutions that are leading the fight, but more regulatory institutions should be empowered to assist, he argues.

“Hypocrisy”

Some progress has been made.

The Companies Act passed last year creates a more transparent regime for beneficial ownership and it is almost impossible to open a bank account without proper “know your customer” procedures, says Kuenyehia.

READ MORE: Ghana Stock Exchange targets futures and options, dual London listings to deepen market

Likewise, Ghana’s revenue authority has implemented significant reforms that ensure that many transactions, for example at the registrar of companies, require tax payer identification numbers.

But Ghana still has a long way to go to get off the blacklist “because its deficiencies are not quick technicalities but serious policy and implementation issues,” says Nathanael Tilahun, assistant professor at Erasmus University in Rotterdam.

Tilahun points to the unfair, political nature of the process under which Ghana has come to the brink of being blacklisted.

  • The US territories Guam, Puerto Rico, US Virgin Islands and American Samoa, as well as Saudi Arabia, have escaped blacklisting.
  • The UK, Denmark, Estonia, Sweden, France and Germany have all been shown to be fertile territories for money laundering, Tilahun says.
  • The EU blacklist “appears to be a hypocritical tool,” he argues. “The internal market itself is riddled by significant money laundering problems.”

Transparency and Deterrence

Kuenyehia agrees that the decision is unfair, but points to the failings which have made Ghana a convenient target.

  • These include gaps in relation to non-bank financial institutions which “appear to have more lax systems.”
  • There are challenges in regulating ancillary sectors that feed into the financial system, most notably real estate and mobile money, he argues.

Ghana also needs to provide more visibility on what is being done. The relevant agencies should be seen by the public and potential money launderers as being committed to the fight. This could be through regular public reports on instances where such activities have been investigated and resolved, says Kuenyehia.

It is almost impossible to locate accurate and timely reports on asset seizures and prosecutions, he argues. “Government needs to scale up on the publicity around the fight as a form of deterrence.”

  • Tilahun says that the political will to comply exists, but doubts that there is the capacity to do so.

Bottom line: Without increased regulatory capacity, Ghana will remain exposed to the skewed politics of the fight against money-laundering.

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