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Press Release
August 10, 2011
Danquah Institute (DI)
PRESS STATEMENT ON TACKLING THE $1BN ILLEGAL MONEY TRANSFERS TO
GHANA
Ladies and Gentlemen, we are grateful to you for honouring our
invitation to attend this press conference. The purpose of
today’s gathering is to brief you and the general public on
findings of research undertaken on the growing industry of
illegal money transfers to Ghana from the Diaspora, its effects
on the Ghanaian economy, organised crime and the Ghanaians
involved one way or the other in it.
A transfer of funds is any transfer that the payer (sender)
makes through a Payment Service Provider (PSP) to make funds
available for collection at another PSP if at any stage in the
process the money is moved electronically, for example, by email
or fax. When a PSP (or Money Transfer Operator) transfers funds
they rules stipulate that they must normally send information on
the payer and payee (recipient/receiver) with the transfer. This
allows the authorities to trace payments if necessary and for
economic managers to be able to ascertain the impact of this
important area of financial activity on a nation’s economy.
Thus, from the records, some 31 million African migrants in 2010
remitted $40 billion, representing 3.4% of the continent’s total
GDP through such traceable transfer channels. Since the earlier
reforms of the 1980s and 1990s under the Financial Sector
Adjustment Programme (FINSAP), the 2001-2008 period brought in a
series of significant financial reforms, including the Foreign
Exchange Act 2006, aimed principally at liberalising Ghana’s
financial sector and deepening and widening its impact on the
nation’s economic activity. It is noteworthy that between
1990-2000, recorded total private remittances to Ghana increased
58.17%, from $410.5 million to $649.3 million. The next decade
witnessed a significant increase of 226.5%, with recorded
private remittances through the financial sector increasing from
$649.3 million in 2000 to $2,120 million in 2010.
OFF-SHORE BANKING AND ANTI-MONEY LAUNDERING
As some of you may recall, the Danquah Institute in March 2010
invited a leading legal expert on money laundering and offshore
banking, John Hardy QC, to Ghana to deliver a paper on the
subject. The objective of the lecture was to educate the
financial sector, the business community, policy makers, the
general public and the international community about the
exciting prospect of Ghana’s offshore status and measures that
needed to be taken to safeguard the status against money
laundering.
Indeed the Organization for Economic Cooperation and Development
(OECD), in January of 2010, issued a stern warning to Ghana that
her emergence as a tax haven could fuel corruption and crime in
the region. Jeffrey Owens, head of the OECD’s Tax Centre, said
at the time: “The last thing Africa needs is a tax haven in the
centre of the African continent.”
The Danquah Institute held the anti-money laundering seminar not
because it agreed with the ‘DON’T GO OFFSHORE’ posture of the
OECD, but rather because we appreciated their concerns and
wanted to educate the public about the opportunities and threats
of offshore banking and to interrogate the stakeholders to find
out what was being done to make sure that Ghana measured up to
the task of ensuring our offshore status was protected,
according to international standards, and that such a
significant, new business opportunity would not merely make us a
soft-touch magnet for a flood of “dirty money”.
The Anti Money Laundering Act of 2007 (in force from 22nd
January 2008), a primary legislative tool in anti-money
laundering was passed, together with the Banking Amendment Act
of 2007, to ensure our systems were in sync with the practices
and disciplines of other offshore banking centres across the
world. This AML Act also established a Financial Investigation
Centre whose mandate includes assisting in the identification of
proceeds of unlawful activity and the combat of money
laundering. It was obvious to us that the institutional
framework was being put into place in preparation for Ghana as
an emerging offshore banking centre.
However, Barclays Bank who in 2005 led the process to introduce
offshore banking into the country and was on the verge of
setting up Ghana’s first offshore bank suddenly pulled out. In
fact, the Government of Ghana had heeded to concerns of the OECD
abd felt the best way to respond to them was to discontinue the
process of establishing off-shore banking status in Ghana. This,
we are sad to say, was an important project which, if diligently
nurtured, could have transformed Ghana into a multibillion
dollar investments and savings destination.
THE $1BN ILLICIT INTERNATIONAL TRADE IN CASH
The Danquah Institute sees a similar opportunity in the
lucrative multi-billion area of international money transfer
becoming tainted and overwhelmed by the institutionalisation of
illegal international money transfer operations to Ghana and in
Ghana.
Ladies and Gentlemen, let me take this opportunity to run by you
some figures as to the volume of remittances our compatriots in
the Diaspora in 2010 alone sent home and in the wider context of
global remittances. Globally, figures from the World Bank
indicate that some 215 million people, representing 3% of the
world’s population, live and work away from their countries of
origin. The total formal remittances worldwide in 2010 for these
215 million international migrants amounted to $440 billion with
$325 billion of this amount going to developing countries. 31
million African Migrants in 2010 remitted $40 billion with total
remittances to Ghana alone amounting to $2.12 billion, an
increase of 18.4% from the 2009 amount of $1.79 billion.
The total remittance to Ghana for 2010 constituted 7% of our
GDP, 24.8% as a percentage of Ghana’s total export value for
2010 of $7.9 billion and almost twice as large as Ghana’s total
foreign direct investment ($1.1 billion) for 2010. Remittances
are vital to developing countries and a crucial source of
foreign exchange for them. Thus, if treated with the necessary
attention it could be optimally leveraged for the greater goals
of accelerated development.
Generally, remittances can:
• impact on the economy through savings, investment, growth,
consumption, and poverty and income distribution;
• help in raising national income by providing foreign exchange
and raising national savings and investment as well as by
providing hard currency to finance essential imports thereby
curtailing any Balance of Payment crisis;
• improve sovereign creditworthiness by increasing the level and
stability of foreign exchange receipts;
• improve evaluations of African countries’ external debt
sustainability and creditworthiness. Remittances are now being
factored into sovereign ratings in middle-income countries and
debt sustainability analysis in low-income countries; and
• help African countries to use future remittances as
collateral, instead of the use of our oil, to raise additional
financing from international capital markets and to reduce
interest costs and lengthen the maturity of bonds for financing
development projects, including road works, power and water
supply.
Many economists are of the view that because of the scale of
undocumented migration within the African continent, the
prevalence of informal remittance channels within the region,
and the relatively weak official data in many African countries,
data on African remittance flows are likely to be understated.
It is also well documented that a large portion of remittances
to Ghana are transferred through informal channels, and this
method reduces the potential contribution of remittances to
development—through financial sector deepening, credit
multiplier effects, savings, and investment. Remittance flows
outside the formal financial sector also raise issues of money
laundering and other financial crimes.
Research suggests that an estimated 60% to 100% of total
remittances are sent through the illegal money transfer route.
This translates into anything between $1.2 billion and $2.12
billion, including laundered money from crime proceeds, passed
through illegal money transfer channels to Ghana in 2010 alone.
It is a very dangerous, growing industry that our authorities
must throw their focal lights on. Unfortunately, the lack of
proper attention has seen to the institutionalisation of this
illegal money transfer business. The situation, per our
findings, is almost beyond redemption in countries such as
Germany and the Netherlands. But, it is not late. Like the drug
trade, it involves demand and supply. The supply side is in
Europe and the demand side is here in Ghana. The solution is not
to discourage genuine people abroad from transferring money to
Ghana. Rather, the solution is to encourage them to use licensed
channels of transfer of funds, which, by themselves guarantee
them and their funds protection and efficiency.
The growing phenomenon of the underground money transfer
business represents a huge loss of direct revenue to the state
in unpaid taxes from profits made by these illegal MTOs and even
the capacity of the state to use these large incomes of foreign
exchange to, for example, buy crude oil, address our balance of
payment issues, enhance our creditworthiness and even use it as
collateral for external loans. We anticipate that if the current
underground phenomenon is not checked it could in ten years lead
to the collapse of independent formal MTOs, many of which are
owned and run by Ghanaians.
To get a clearer understanding of the illegal money transfer
operations, the Danquah Institute carried out a 3-month long
research to assess the extent of the operations with regards to
Ghana’s 3 largest European remittance corridors, namely the
United Kingdom, Germany and The Netherlands.
The research looked at the Ghanaian regulatory environment as
well as that of the 3 other sender host nations, the products
and services available on the market and the remittance
patterns. We interviewed money transfer operators, regulatory
authorities, senders and recipients. We also spoke to law
enforcement agencies, regarding the aspect of money laundering.
We conducted an in-depth survey of 300 Ghanaians living in the
UK and 103 Ghanaians living in Germany, and a smaller number in
the Netherlands. Our research revealed that despite the
increasing numbers of licensed MTOs over the last two decades,
the volume of cash transferred through illegal channels have
been growing during the same period. Beauty shops, candy stores,
food stores, spare parts shops, kiosks, churches, social groups,
homes, have become regular channels for remitting cash to and
receiving cash in Ghana.
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