Money Laundering, Drug Trafficking, Corruption

.....and their impact on the Ghanaian Economy

By Kwesi Atta Sakyi

18th November 2013

The IMF estimates that between 2% to 5% of money in the global economy is laundered. Gabriel Zuchman of LSE and UC (Berkeley), in an interview on Canal France 24 today, 18th November, states that 5.8 trillion Euros is the amount of money held by the rich people in the world in tax havens in offshore accounts, in places such as Singapore, Switzerland, Hong Kong, Cayman Islands, Bahamas, Monaco, among others.

Laundering is the process of washing something which is dirty for it to be clean. Money laundering involves the process of cleaning money from criminal proceeds, by moving it around from bank to bank to make it look legitimate and as genuine business, often associated with acquisition of real estates or investment in shares, bonds and blue chip assets.

Such monies are sent into offshore accounts to evade taxes, and the recipient banks invoke the bank secrecy act not to disclose the sources of these illegal proceeds or hot money, or high-powered monies. These accounts are kept as anonymous depositors and they are only recognized by secret codes. In Africa, there were several past political leaders who engaged in plundering their national coffers, spirited away huge sums of money into their secret bank accounts in Switzerland.

Some of such huge sums have been lost forever to Africa at the demise of those greedy leaders. Such leaders included Mobutu Sese Seko, Muamar Gadaffi, Sani Abacha, Emperor Bokassa, among others. Such past African leaders used intermediaries, some of whom were so crafty that they double-crossed their principals and in the process, enriched their own countries, which led to the impoverishment of many African countries.

The so-called tax havens ensconce their depositors from paying tax. However, France has proposed to tax such monies by 75%, and the USA has one of the robust and toughest laws on the planet, under their Drug Enforcement and Psychotropic substances Act. In Ghana, we look forward to inflow of foreign direct investment (FDI) from foreign private investors, as well as inflows from bilateral and multilateral institutions which provide official aid for government projects, balance of payments deficit support, and budget deficit support, among others.

Today, 19th November, 2013, the 2014 national budget will be read and presented in parliament. Many people are holding their breath for the unexpected, whether relief or imposition of a heavy burden. However, money laundering through an intricate maze of both official and unofficial channels adds to the foreign exchange inflow into Ghana.

It is really difficult to estimate or quantify the amount of forex which is received through the hidden channels. These are unofficial leakages and withdrawals in the circular flow of income. Drug dealers in different parts of the world make huge amounts of money from illegal drug dealings. In oil rich countries, we also have murky and clandestine oil deals involving politicians, businessmen and factors.

Add to the equation, the huge deals in small arms sales which go on through unofficial channels to supply arms to rebels and terrorist groups. Just a few days ago, the port authorities in Ghana arrested a small vessel from Guyana carrying 450 kilograms of cocaine worth 50 million dollars. This is a tip of the iceberg of the illegal trade going on, along our shores, fuelling the menace of money laundering and access to easy money. Had this haul evaded the security radar, you can imagine the amount of money which would have exchanged hands and caused inflation in our economy.

We in Ghana and other parts of West Africa face the challenge of cultural clash because many Muslims abhor saving money in the traditional banks such as Barclays, Stanchart, Stanbic, HSBC, Ecobank, among others. Muslims are banned by their religion from charging or receiving interest on loans and deposits, so they have developed their own clandestine and sophisticated unofficial money transfer systems, which transfer money across national borders.

Unfortunately, some of these monies are associated with terrorist activities. Recently, the Bank of Ghana (BOG) and Stanchart Bank hinted of opening Islamic banking in their branches, and it is work in progress. It is hoped that the increased visibility of Islamic banking will add tremendously to GDP growth in Ghana, as monies formerly transferred through underground channels will be made to enter the mainstream economy for investment mobilization.

The West African Coast, the Gulf of Guinea, has become a hotbed for drug dealing, as people use the large expanse of sea to carry out their activities, using both small and large vessels. The Ghana Navy and Air force are logistically challenged, patrolling our territorial waters. Most of the drugs which enter West Africa emanate from Central and South America.

It is suspected that the cartel or syndicate of drug dealers have their accomplices and agents among a wide spectrum of Ghanaian officials, including politicians, diplomats, high ranking church officials, Customs Officers, Airport Security officials, the police, among others, Others deal in the smuggling of precious metals such as gold, diamonds, among others. Drugs are smuggled into our entry points by sea, land and through the airports, for trans-shipment to their final destinations in Europe or North America. Mostly, women are used as couriers, as some conceal the stuff on their bodies or in their luggage.

Sometimes, some young girls become innocent victims as they are sponsored to deliver parcels which may contain concealed drugs. Some people suspect that some top politicians are involved in drug dealings as they use surrogates and fronts. These have their luggage pass through VIP lounges at the entry points with ease, thus evading search.

This is seen as abuse of immunity privileges. Unfortunately, some unlucky ones have been apprehended, prosecuted and gaoled outside our shores, and they are languishing in foreign jails. In Islamic countries, culprits of drug trafficking are given the death sentence. Ghana took a proactive stance in 2008 by enacting the anti-money laundering Act 749, in the face of the growing menace of drug trafficking in Ghana through cross-border trade.

The use of modern ICT facilities has made money transfer across borders easier, at the click of a button. However, the internet is these days heavily policed and monitored by many sophisticated means. To reduce the high risks involved in money laundering in Ghana, we need a comprehensive national ID system in place to enhance customer identification and verification.

These ideals may sound utopian, but then they are needed to rein in the rot and to prevent the menace of Ghana becoming a failed state with a few islands of opulence in a wide ocean of penury, indigence and abject destitution. Right now, we have in place, the following regulations and institutions which to some observers are paper tigers:- (a) Economic and Organised Crime Office Act 2010 (b) Anti-Money Laundering Regulations 2011 (c) Anti-Terrorism Regulation 2012 (d) Criminal Offences Amendment Act 2012 (e) Inter-Governmental Agency Against Money Laundering in the West (GAIBA) (f) Narcotics Board (NACOB) These pieces of legislation have demonstrated to the outside world that Ghana is serious in fighting the scourge of money laundering, drug trafficking, corruption and associated crimes. It is known that proceeds from illegal dealings are used to finance political party campaigns or to use in bribing the electorate, in crimes such as vote-buying, giving of gifts (treating), gerrymandering, impersonation, double voting, double counting, among others.

This is why it is imperative for all prospective politicians to declare their assets before they assume office, and we should find a way whereby the government will fund political parties to obviate the need to rely on secret funding from money launderers.

Some politicians borrow so much money to finance their campaigns, so much so that when they lose the elections, they are driven to the wall, and some take to illicit activities such as drug trafficking. There is a danger that if politicians in Ghana are financed by drug cartels and syndicates outside the country, then these drug barons outside our country will call the shots and derail the national agenda, posing a threat to national security. Dr Kwesi Aning of the Kofi Annan International Centre has alluded to this imminent and looming threat.

Some of the numerous private TV and radio stations which spew garbage 24/7 may be funded by money launderers and drug dealers. Many politicians have become suddenly rich overnight, putting up luxurious mansions and buying expensive cars. Some of these are deeply connected to the clandestine network of money launderers. Some have bought mansions abroad and they send their children to the most expensive schools and universities abroad.

No one knows the genuine business they do to obtain so much wealth. They lead ostentatious and lavish lifestyles which are funded not only by their salaries, loans and allowances, but also from some secret sources. Their ill-gotten wealth gets into their heads so much so that they disrespect education and educated people. Most people in Ghana who have integrity and passion for developing the nation have been marginalized or they have voluntarily decided to stay aloof.

Today, we have many rotten tomatoes and rotten eggs in our political arena as some politicians throw decorum to the winds by going on air and raining heaps of insults and lies on their adversaries. Today, some political leaders have bought the police, judiciary and security agents in their pockets. A bad precedent has been set by our leaders who put money first before service to their constituents. The activities of some greedy, selfish and amoral citizens have created a small class or enclave of nouveau-riche, some of whom have no critical thinking faculties. Some of these talk before they think.

Despite rigid tender procedures, contracts are awarded to political party cronies, leading to sub-standard civil works, inflated government works, among others. Incompetent people are appointed to superintend sensitive and lucrative state outfits such as IRS, Passport Office, Tema Harbour, National Airport, Customs, ECG, TOR, among others. Some of these institutions have become albatrosses on our necks, instead of being money-spinning institutions. If these institutions mentioned here are operating at full capacity, then the government would not need to worry its head over increasing VAT from 12.5% to 15% or 17%.

In conclusion, and from the foregoing, it is clear that money laundering breeds corruption, loose morals, nepotism, tribalism, unprofessionalism, mediocrity and low productivity. Socially and politically, it creates instability. Those who work hard within the law get demotivated. Well, it is said that money is something, but not everything. The Akan will tell you, ‘Sika y3 mogya.’ Money is the blood which runs in your veins and arteries. I hope Ghana is not gradually turning from the Gold Coast that it was to the Drug Coast that it has the tendency to become, say by 2020 or 2030.

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