- Six African nations ranked among the top 10 globally for money laundering and terrorism financing risk by the 2023 Basel AML Index.
- Another 11 African countries are grey-listed by the Financial Action Task Force (FATF), including Kenya, Tanzania, and South Africa.
- The overall economic ramifications of these crimes are staggering, from lost FDI to widespread inequality.
Money laundering, corruption, and terrorism financing are no longer hidden threats—they are destructive forces ravaging Africa’s economies.
With six African nations ranked among the top 10 globally for money laundering and terrorism financing risk by the 2023 Basel AML Index, the scope of the problem is frightening. Add to this the 11 African countries grey-listed by the Financial Action Task Force (FATF), including Kenya, Tanzania, and South Africa, and the stakes become even more urgent. Mineral-rich South Sudan and the Democratic Republic of Congo stick out like a sore thumb on this dirty list.
The financial and economic ramifications of these crimes are staggering, from lost foreign investment to widespread inequality and erosion of public trust in governance structures, a new analysis by global audit and advisory giant PwC titled, Resilient Governance: Navigating Challenges while Shaping a Better Tomorrow, shows.
Money laundering: Here’s the price to pay
According to PwC, the direct impact of money laundering and terrorism financing manifests in diminished confidence in financial systems. For African nations, this translates to reduced foreign direct investment (FDI) and a heightened risk of economic sanctions.
Globally, potential investors avoid high-risk economies, leading to hefty losses in trade and development opportunities.
In addition, corruption, often a predicate offense to money laundering, imposes a high cost on African economies. Countries such as Kenya, Nigeria, and Angola have been flagged for bribery and graft, creating barriers for foreign trade.
According to the Africa Growth Initiative, an estimated $1.3 trillion in illicit financial flows left sub-Saharan Africa between 1980 and 2018, a sum that could have been invested in domestic development.
The social toll is equally severe. Rampant financial crimes exacerbate inequality and undermine public confidence in governance. Citizens lose faith in government systems, hindering effective governance and sometimes fueling political instability.
Read also: Lessons for Africa from Jersey on fighting money laundering
Terrorism financing: An ever-growing threat
Terrorism financing amplifies the problem by directly threatening lives and national security, PwC adds. African countries with inadequate anti-money laundering and counter-terrorism financing regimes inadvertently create environments conducive to corruption and terrorism.
This cycle not only destabilizes regions, but also damages economic performance and deters international partnerships.
Is there hope on the horizon?
Despite these grim realities, efforts to combat money laundering and terrorism financing are gaining traction across Africa. Uganda, for example, recently exited the FATF grey list after addressing deficiencies in its anti-money laundering framework, demonstrating that progress is possible.
“With many countries in Africa ranking among the highest risk globally, the ramifications extend beyond financial integrity to foreign investment and political stability. However, there is hope: a coordinated continental approach, along with strengthened national regimes, can effectively combat these threats,” explains Dr. Benson Okundi Partner, Government and Public Sector Leader, PwC, East Market Area.
Governments, intergovernmental organizations, and private sector players are working together to mitigate risks. Programs aimed at strengthening legal frameworks, enhancing technical capacity, and fostering international cooperation are steps in the right direction.
A continental call to action
Addressing financial crimes requires a unified approach. Money laundering, corruption, and terrorism financing are inherently cross-border issues, necessitating continent-wide strategies.
PwC notes that intelligence sharing, pooled resources, and a continental regulatory framework could significantly enhance Africa’s ability to combat these challenges.
Additionally, individual nations must invest in robust anti-money laundering and counter-terrorism financing regimes aligned with global standards such as the FATF recommendations. Political will and technical expertise are crucial to creating effective systems that address these risks comprehensively.
Turning challenges into opportunities
The fight against financial crime presents an opportunity for Africa to strengthen its economic resilience. By tackling these issues, countries can unlock billions in illicit funds for development, rebuild investor confidence, and foster a more equitable society.
The journey ahead is complex, but with sustained effort and collaboration, Africa can confront these challenges head-on and emerge stronger. The time to act is now, not only to safeguard the continent’s financial systems but also to shape a future free from the shadows of corruption and crime.
