VZCZCXRO0589
PP RUEHMA RUEHPA
DE RUEHDK #0125/01 0350859
ZNR UUUUU ZZH
P 040859Z FEB 08 ZDK NUMEROUS SVCS
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 9950
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHDC
RHMCSUU/FBI WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHMFIUU/HQ USAFRICOM STUTTGART GE
RHMFIUU/HQ USEUCOM VAIHINGEN GE//ECJ2//
RHMFIUU/HQ USEUCOM VAIHINGEN GE//ECJ3//
RHMFIUU/HQ USEUCOM VAIHINGEN GE//ECJ4//
RHMFIUU/HQ USEUCOM VAIHINGEN GE//ECJ5//

UNCLAS SECTION 01 OF 05 DAKAR 000125 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR S/CT, INL, AF/RSA, AF/W, EB/ESC/TFS AND INR/AA 
JUSTICE FOR AFMLS, OIA AND OPDAT 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KTFN PTER KCRM PREL SNAR PGOV SG
SUBJECT:  RESULTS OF FINANCIAL SYSTEMS ASSESSMENT TEAM VISIT TO 
SENEGAL (FIRST OF TWO CABLES) 
 
DAKAR 00000125  001.2 OF 005 
 
 
NOTE: This cable is Part I of two-part report.  Part II to be sent 
septel. 
 
SUMMARY 
------- 
¶1.  (SBU) This cable is largely derived from the initial report by 
an interagency Financial System Assessment Team (FSAT), which 
conducted an onsite visit to Senegal November 5-9, 2007.  The team 
met with a wide array of government and private sector entities in 
Senegal and came away with a nuanced understanding of the strengths 
and weakness throughout Senegal's financial system with regards to 
combating money laundering and terrorist financing.  Senegal has a 
comprehensive anti-money laundering (AML) framework, but there are 
components which could benefit from additional training to improve 
implementation.  There are significant gaps in countering potential 
financing of terrorism (CFT), including the lack of a terrorism 
financing law.  There is particular concern with respect to judges 
and prosecutors, who are perceived as lacking an understanding of 
AML laws or of related investigative requirements.  For two main 
reasons, Senegal is uniquely placed in West Africa to engage on AML 
and CFT.  First, it is a leader within both the West African 
Economic and Monetary Union (WAEMU), which comprises eight countries 
with a shared currency and common central bank.  Second, Senegal has 
established a functioning financial intelligence unit (FIU), the 
CENTIF.  The authorities and agencies with whom the FSAT spoke 
appeared to be motivated and organizationally prepared to make 
necessary changes to enhance its CFT regime, although resources 
constraints, and perhaps high-level political will, could restrict 
these efforts. 
 
LEGAL FRAMEWORK AND SENEGAL'S UNIQUE ROLE 
----------------------------------------- 
¶2.  (U) A Financial System Assessment Team (FSAT) consisting of Gary 
Novis (State S/CT-Head of Delegation), Valerie Silensky (State 
INL-Deputy), Suzanne Hayden (Department of Justice, Asset Forfeiture 
and Money Laundering Section), Lionel M. Peres (Federal Deposit 
Insurance Corporation), Mark Meinke (FBI -Terrorist Finance 
Operations Section), Heather Moye (Treasury - Financial Crimes 
Enforcement Network), and Mark Kellett (Department of Homeland 
Security-Immigration and Customs Enforcement) conducted an onsite 
visit to Senegal November 5-9, 2007.  The team met with a wide array 
of government and private sector entities in Senegal including:  the 
Customs Department and Port of Dakar, the Central Bank for WAEMU 
countries and for Senegal, Senegal's Financial Intelligence Unit -- 
the Cellule Nationale de Traitement des Informations Financiers 
(CENTIF), the Professional Bankers Association of Senegal, the 
Anticorruption Commission, the Civil Forum (which is the local 
representative of Transparency International), the Tax Department, 
the Inspector General Office, the Ministry of Interior, the Ministry 
of Finance, the Senegal office of the UNODC, Citigroup, the Ministry 
of Justice, and the Senegalese Housing Bank. 
 
¶3.  (U) In Senegal, the AML/CFT framework and regulations must 
acknowledge the unique economic and legal arrangement of the West 
African Economic and Monetary Union (WAEMU), which includes Senegal, 
Burkina Faso, Niger, Mali, Benin, Guinea-Bissau, Cote d'Ivoire and 
Togo, as well as Senegal's role within the Union.  There is a single 
central bank known as the Banque Centrale des Etats de l'Afrique de 
l'Ouest/Central Bank of West African States (BCEAO), a single 
currency (the CFA franc) and a single monetary policy.  Laws 
governing monetary and economic policy are passed by this body and 
binding on all members, who are required to submit and pass 
implementing legislation through national legislative action.  There 
is no latitude to amend the law for local considerations. 
 
¶4.  (U) Senegal has traditionally taken a leading role in the 
sub-region on financial management derived from its strategic 
location and relatively sophisticated institutions.  Senegal was the 
first country to pass enabling legislation for the 2004 WAEMU 
Anti-Money Laundering Uniform Law (No. 2004-09), the "Uniform Law." 
However, the WAEMU legislation, although fairly comprehensive, does 
not meet the international standard (set by the Financial Action 
Task Force) with respect to AML compliance for non-bank financial 
sectors and politically exposed persons. 
 
 
DAKAR 00000125  002.2 OF 005 
 
 
¶5.  (U) As Senegal's AML law is a BCEAO common law, there is little 
latitude to tailor it to Senegal.  Regulations tailored to Senegal's 
risk profile could be implemented, but implementing regulations are 
rarely customized.  However, Senegal takes an "all crimes" approach 
to enacting the Uniform Law and pursuing money laundering. 
Self-launderers may be prosecuted and it is not necessary to have a 
conviction for the predicate offense.  Intent may be inferred from 
objective factual circumstances.  Criminal liability applies to all 
legal persons as well as natural persons. 
 
¶6.  (SBU) Although Senegal has not passed a CFT law, the penal code 
was amended in March 2007 to incorporate the United Nations Security 
Council Resolutions (UNSCRs) requirements for terrorist financing. 
In July 2007, the WAEMU released guidance on terrorist financing for 
the sub-region:  Directive No. 04/2007/CM/UEMOA "Relative to the 
Fight Against Terrorist Financing Among WAEMU Member States" 
obliging member states to pass domestic CFT legislation.  Senegalese 
authorities will likely present WAEMU CFT legislation to the 
National Assembly for approval in 2008. 
 
UNSCR 1267 COMPLIANCE 
--------------------- 
¶7.  (SBU) The Central Bank, WAEMU, CENTIF, and the U.S. Embassy 
distribute the UN 1267 Sanctions Committee lists to financial 
institutions.  Citigroup and BHS confirmed that they receive 
designations from the Central Bank.  Senegalese institutions have 
not yet identified any assets related to the 1267 consolidated list. 
 The BHS bank also receives from the CENTIF the U.S.-generated lists 
distributed pursuant to Executive Order 13224, but it is unclear 
whether every bank does. 
 
COMMON CHALLENGES 
----------------- 
¶8.  (SBU) There was near-unanimity among all entities regarding the 
major issues and challenges Senegal faces.  Officials describe 
Senegal, and West Africa in general, as "weak links" in the 
international efforts to combat money laundering.  Officials 
acknowledge a lack of the investigative skills needed for effective 
AML casework.  Money is moved in and out of the country in a variety 
of methods and with increasing degrees of sophistication, making it 
very difficult to detect money laundering.  Representatives from the 
Inspector General's office described some of these, including 
complex transactions in the formal banking system, cash couriers, 
vehicle imports, trade-based money laundering, hawala or similar 
informal transfers, and real estate schemes.  Officials predict that 
money laundering in Senegal will rapidly become more complex, such 
as schemes using untraceable phone codes.  Senegal lacks the 
expertise to address more complex problems. 
 
¶9.  (SBU) Senegal's strategic location, relatively porous borders, 
and a lack of export enforcement make it a possible transshipment 
point for criminal organizations looking to export all types of 
contraband throughout Africa, Europe, and the Middle East.  The 
United Nations Office of Drug Control (UNODC) expressed particular 
concern regarding Senegal vis-a-vis the transit of goods, money, and 
people from Cap Vert, Guinea-Bissau, and Gambia, as well as from the 
Sahel region:  Mauritania, Niger, and Mali.  The steady migration 
that takes place throughout the Sahel exacerbates vulnerabilities. 
 
 
¶10.  (SBU) A primary threat appears to be the relatively recent 
shift in the flow of contraband and illicit proceeds in the form of 
bulk cash through Senegal and on to a multitude of destinations 
throughout Europe, Asia, and the Americas.  WAEMU states enforce 
common external tariffs, but allow the free flow of goods and 
citizens among member countries.  Senegal is also a member of the 
Economic Community of West African States (ECOWAS) which offers 
member states free trade zone and common market system.  Senegal has 
free trade agreements with Libya and Mauritania.  The growing 
narcotics trafficking through Guinea-Bissau on its southern border 
is also a particular concern for Senegal. 
 
¶11.  (SBU) According to knowledgeable Senegalese officials, Dakar 
and the sub-region have become a major distribution and logistical 
hub for international drug smuggling.  UNODC research indicates that 
 
DAKAR 00000125  003.2 OF 005 
 
 
nearly half of Latin American drugs passing through West Africa are 
re-exported to Europe.  The UNODC noted that recently two Latin 
American citizens were arrested with 500,000 USD and 500,000 euro in 
their possession, and were also linked to unexplained cash flows 
between Senegal and Pakistan.  The UNODC is concerned that a portion 
of the proceeds were used to support terrorist organizations, 
perhaps including the FARC or other groups.  South American and 
European senior drug traffickers may also be establishing bases in 
Senegal where drug proceeds may be mixing with other investments 
into Dakar's fast-growing real estate market.  There is also concern 
that traffickers are establishing front companies in the region. 
 
¶12.  (SBU) There was broad agreement that Senegal's real estate 
sector is a potential point of access for individuals to launder the 
proceeds of crime, including corruption.  The FATF-style regional 
body to which Senegal belongs, the Inter-Governmental Action Group 
against Money Laundering and Terrorism Financing in West Africa 
(GIABA), which is an agency of the sixteen member country Economic 
Community of West African States (ECOWAS) has noted this 
vulnerability.  The Senegalese Tax Authority advised that real 
estate schemes incorporating questionable proceeds transferred into 
Senegal through the purchase of property were prevalent.  Lebanese, 
many of them second generation residents, control much of Senegal's 
real estate sector.  There are indications that significant funds 
are flowing into Dakar's real estate market that are tied to the 
preparations for the March 2008 Organization of Islamic States 
summit. 
 
SPECIFIC CHALLENGES 
------------------- 
¶13.  (SBU) Particular challenges identified by the FSAT include 
Senegal's mostly cash-based economy, coupled with the depth, 
breadth, and prevalence of alternative remittance systems in the 
informal sector.  Since so many transactions are conducted in cash, 
determining the source and destination of the proceeds is difficult. 
 Alternative remittance systems such as hawala are very common in 
Senegalese communities, and are also used by other groups residing 
in the country, including Middle East and North African nationals, 
Chinese, Lebanese, Mauritanians, Malians, Tuaregs, and perhaps Latin 
Americans.  (Authorities spoke about their concerns that Tuaregs 
coming from Mali could be implicated in terrorist financing 
schemes.) 
 
¶14.  (SBU) Senegal also has a wide range of informal currency 
exchange outlets, which are illegal, but largely tolerated by the 
authorities.  Law enforcement entities face universal issues 
regarding underground banking systems:  they are difficult to detect 
and to disrupt, so authorities are dependent on informants.  In one 
example, Ministry of Interior agentsconducted an investigation of 
an illegal hawala hich resulted in the arrest of only one low-level 
member of the organization; the arrest was based on informant 
information.  The hawala process was not examined as a part of the 
investigation.  The Financial Intelligence Unit, CENTIF, is 
reportedly working on an overview of alternative remittance systems, 
which should be a first step toward a reporting and enforcement 
regime vis-`-vis these entities. 
 
¶15.  (SBU) An overarching backdrop to all of this is the issue of 
corruption - a persistent, acknowledged and, to some extent, 
accepted problem in Senegal.  The culture of corruption pervades 
throughout the country, from placements in primary schools to a 
judiciary subject to political influence.  According to the 
nongovernmental organization (NGO) Forum Civil, there is serious 
lack of commitment or will to fight corruption.  While an 
anticorruption law has been enacted, most people do not know how to 
recognize corruption in its many forms and are resistant to change, 
so they accept it.  Corruption concerns are also raised by 
significant recent investments by countries that do not have 
effective anti-corruption controls, including, Saudi Arabia, Iran, 
the UAE, Libya, China, and India. 
 
BANKING/REGULATORY FRAMEWORK 
---------------------------- 
¶16.  (SBU) On the regulatory side, the Team visited and spoke with 
representatives from the BCEAO, and two agencies of Senegal's 
 
DAKAR 00000125  004.2 OF 005 
 
 
Finance Ministry:  the Department of Money and Credit and the Office 
of Assistance of Microfinance and Credit.  The Team also spoke with 
Senegal's Professional Banking and Finance Association (APBEF), 
Citigroup, and the Senegal Housing Bank (BHS), who are 
representative of the entities obliged to report Suspicious 
Transaction Reports (STRs). 
 
¶17.  (U) The BCEAO's functions include banking sector supervision in 
member States.  The BCEAO has national representation and a national 
director in all member countries, including Senegal (representation 
in Dakar, Kaolack and Ziguinchor).  Banks and financial institutions 
must be authorized and registered in order to operate.  This 
authorization is granted by the Minister of Finance after the BCEAO 
has examined the application and the WAEMU's Banking Commission (BC) 
has certified its conformity with applicable laws.  In Senegal, the 
BCEAO supervises 17 banks, is actively chartering two new 
institutions, and oversees 834 microfinance institutions. 
 
¶18.  (SBU) The Banking Commission, (BC), based in Abidjan, is 
responsible for direct regulation and supervision of WAEMU banks. 
In addition to inspections, it opines on authorization requests from 
financial institutions and takes administrative and disciplinary 
measures.  The examination cycle is typically two years; however, 
banks experiencing financial difficulties are subject to at least 
semi-annual examinations.  The BC's approximately 102 bank examiners 
have a range of educational and professional backgrounds, including 
economics, law, accounting, financial analysis, but little 
specialization or knowledge of AML/CFT standards. 
 
¶19.  (U) The BCEAO has developed a training policy that includes 
AML/CFT for its staff members, and is providing this program through 
its West African Centre for Banking Studies and Training (COFEB) to 
Senegalese banks and financial institutions, as well as counterparts 
from other countries in the sub-region. 
 
¶20.  (U) Both banks and the APBEF identified the same 
vulnerabilities and challenges within the sector.  The first relates 
to the universal problem of cash transactions in Senegal, and the 
massive informal sector.  In order to more adequately regulate the 
financial system in Senegal, the BCEAO and the APBEF are attempting 
to reduce cash transactions through consciousness-raising and 
encouraging the population to move away from a cash-based society 
and into the formal financial systems.  The second issue is the 
disparity in AML/CFT training received by the different financial 
institutions in Senegal. 
 
¶21.  (SBU) The FSAT identified two primary vulnerabilities during 
the assessment review.  First, each safety and soundness examination 
includes a basic procedural review of AML/CFT, however, complete 
safety and soundness examination should include full AML/CFT 
examinations.  Second, and of particular concern, BCEAO officials 
maintain that financial institutions are only required to file STRs 
when a violation of law has occurred.  Obliged entities should file 
STRs when the circumstances regarding a transaction appear 
suspicious in nature, regardless of perceived actual violation. 
 
¶22.  (SBU) As Senegal's AML law is a BCEAO common law, there is 
little latitude to tailor it to Senegal.  Regulations tailored to 
Senegal's risk profile could be implemented, but implementing 
regulations are rarely customized.  Banks are required to send STRs 
to the CENTIF, including from wire transfer services such as Western 
Union, which banks execute.  According to Citigroup, which sent a 
case to CENTIF last year, and BHS, which has filed 30-40 STRs so far 
this year, the FIU acknowledges when an STR is received; however, 
the banks do not learn what actions the CENTIF takes or does not 
take on the reports. 
 
THE DEPARTMENT OF MONEY AND CREDIT 
---------------------------------- 
¶23.  (SBU) The Ministry of Finance's Department of Money and Credit 
(DMC) is responsible for monitoring and supervising banks and other 
financial institutions.  Since the creation of the Banking 
Commission, the role of this DMC has shifted to monitoring the 
non-bank financial sector.  The DMC noted the magnitude of Senegal's 
informal sector and estimated that only about 5 percent of financial 
 
DAKAR 00000125  005 OF 005 
 
 
activity takes place through formal financial institutions.  Because 
of concerns about possible financial crimes, the DMC is currently 
conducting a study of the informal financial sector at the behest of 
CENTIF. 
 
¶24.  (SBU) The DMC has authority over currency exchange houses 
which, under the law, are required to register, submit STRs, and 
provide periodic reports back to the DMC.  Prior to the enactment of 
the AML Uniform Law, there were approximately two hundred currency 
exchangers; currently there are less than 50 registered currency 
exchange entities.  DMC representatives acknowledge the problematic 
existence of unregistered currency exchange houses.  Successful law 
enforcement action has taken place against unregistered currency 
exchangers, resulting in arrests.  However, those arrested have been 
of relatively low-level employees. 
 
¶25.  (SBU) Only two DMC staff members have received any AML 
training, and with the BEACO guidance on terrorist financing 
released only in July 2007, no one from the DMC has had training on 
its provisions.  As a result, DMC officials expressed a need for 
basic AML/CFT training for most of the staff as well as in detecting 
suspicious transactions, and in conducting AML examinations. 
 
MICROFINANCE SECTOR 
------------------- 
¶26.  (U) Housed in the Ministry of Finance, the Cellule d'Assistance 
Technique aux Caisses Populaires d'Epargne et de Credit (AT-CPEC) 
registers, supervises, controls and investigates the 834 
microfinance institutions (MFIs) and their projects, associations, 
and organizations (including NGOs) that populate the sector and loan 
money at the microenterprise level. 
 
¶27.  (U) The Inspections Division in AT-CPEC handles financial 
investigations including AML, although all Inspections Division 
employees were in the field conducting investigations at the time of 
the Team's visit.  AT-CPEC maintains a database of all MFIs that 
includes financial information, annual reports and financial 
statements, names associated with each MFI including donors, 
targeted sectors, and substantive activities.  All organizations, 
including charitable organizations and NGOs, that aim to have a 
program with any kind of microfinance assistance, must be licensed 
and on the registry.  This database is accessible by request to 
donors, the Central Bank, Professional Association of 
Microfinanciers, the CENTIF, and the Ministry of Finance.  When a 
MFI registers, AT-CPEC conducts due diligence using a guide from the 
Central Bank, which includes examination of the MFI's 
identification, financial information, and a basic guide to 
identifying money laundering.  Before granting a license, the 
inspection team completes a site visit to see the MFI at work and 
get references from the MFI's operating area.  AT-CPEC routinely 
re-inspects licensed MFIs. 
 
¶28.  (SBU) Wary of remittances from overseas to MFIs, AT-CPEC 
acknowledges AML/CFT vulnerability in this sector.  Although it has 
not found cases of terrorism financing or money laundering within 
the microfinance sector, AT-CPEC recognizes the potential of the 
sector to be used as such a vehicle.   When AT-CPEC has a suspicion 
about or finds a problem with an MFI or project, it files an STR or 
reports its findings to the CENTIF, with whom it has worked for two 
years. 
 
¶29.  (U) AT-CPEC investigators have advanced degrees in economics, 
accounting, and business; however, the only AML-specific training 
that they have taken has been through the CENTIF.  AT-CPEC needs to 
better identify and assemble cases and reports, and share its 
database and information with other government entities (and obtain 
information from them).  As microfinance is by definition small in 
scale, and the microfinance sector is not normally a component of an 
AML/CFT regime, AT-CPEC is easily overlooked as an important 
institution for consideration of assistance. 
 
NOTE:  THIS CABLE IS CONTINUED SEPTEL. 
 
SMITH