Economist warns on proliferation of money laundering

FUNDS from intricate money-laundering schemes could be flooding into the Tanzanian financial markets, as the country continues to rely on a cash based transaction economy, a continental forum heard in Dar es Salaam yesterday.

The forum, organised by the Institute of Security Studies revealed findings by international security agencies that had discovered that millions of dollars reaped from drug trafficking, tax evasion, embezzlement and cyber crime are finding their way into countries like Tanzania and the East African region through intricate money-laundering schemes.

Money-laundering is any process that conceals the source of illegal income and disguises that income, to make it appear legitimate.

The recent money laundering trends show that out of the 1,000 billion US Dollars laundered worldwide in 2009, so far Africa accounts for approximately 21 billion US Dollars in the same period.


The global trend has been upward from 900 bn US Dollars in 2004 to 1,000 bn US dollars in 2009.

Tanzania with a financial system that is largely informal, gives way to untraceable cash, thus creating more chances for money laundering, resulting in massive financial losses, the forum warned.

According to the findings, activities of money laundering include smuggling, drug trafficking, other organized crime, embezzlement and white collar crime.

The industries used as the medium include banks, brokerage and investment firms, insurance firms, credit cards and money services.

Prof Humphrey Moshi, a University of Dar es Salaam economist, noted that the fact that the country was largely a cash based economy, the risk to money laundering was high.

He said since majority of people did not use the formal financial system, the cash intensive businesses became dominant, leaving loopholes for integration of illicit proceeds into Tanzania's financial system.

"Using cards and cheques allows banks to trace and monitor money flow and they may find signs of money laundering", said Prof Moshi.

The executive secretary of Eastern and Southern Africa Anti- Money Laundering Group, Dr Eliawony Kisanga, told the forum that successful money laundering disguised the proceeds as legitimate funds or assets, which in essence rewarded the criminals with apparently clean profits from the crimes.

He cited predicate offences such as fraud, counterfeiting, cyber crime, corruption and crimes against insurance and capital markets.

"Tanzania being a cash transaction economy, the ultimate aim of the launderer could be to pump the proceeds into the clean financial system.

"But we can stop them from using our institutions like the Stock Exchange.
This will leave them with other options where they can 'clean' their money by putting strong financial assets. They are a danger to the economy because they won't be accountable to anyone," he said.


The findings come some 6 months after the Controller and Auditor General (CAG) report released in May this year called on the Bank of Tanzania (BoT) to be particularly vigilant on issues related to both money laundering and terrorist funding.