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Press Release

August 10, 2011



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.

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 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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