THE RISE OF REMITTANCES IN AFRICA AND ITS INTRICACIES

By Mohamed Foday Conteh

The cubicle is a bit hot although a fan whirled at its maximum. A young man poked his head from a laptop computer to glance at a piece of paper with numbers. Abdul systematically typed the digit on the paper on the computer screen. Adjacent to him stood a fair young lady who issued a piece of paper to a group of people that were outside the cubicle. The décor of the room was graced with crimson paint, two wall fans and a security light displaying the name of the bureau. Three plastic chairs served as an accommodation for the people that visited the small shop that stood on a busy highway at the east part of the capital, Freetown.

“When business is good, especially during holidays, this place is jam-packed with customers,” said the fair lady. But that day business didn’t seem good because there were only four customers. “In fact, business has been slow since the inception of COVID-19,” Daphne continued.

The Remittance industry in Sierra Leone is on the surge. Along the streets of Freetown, one will find a spate of new outlets being tagged with logos of western union, Money gram, and Ria to name a few. Mobile money is also popular; orange and Africell money wallets serve as a swift, trusted and an efficient method of sending and receiving money.

The surge in the presence of Remittance companies in Africa is in tandem with the massive migration of Africans to Europe, the US and other continents in search of greener pasture. According to the United Nations Conference on Trade and Development (UNCTAD), in 2017, there were about 41 million international migrants from, to, or within Africa. Of these, 19 million resided in Africa, 17 million were resident outside of the continent, and 5.5 million were immigrants from the rest of the world. In lucid terms, Pew Research placed the figure of Sub-Saharan Africans living outside the continent at 25 million.

UNCTAD categorised African countries, with regards to immigration, into net-sending and net-receiving countries. 37 of the 54 countries in Africa were classified as net-sending countries. Net-sending countries are those where citizens travel out of their countries to other countries. Sierra Leone was categorised as a net-sending country. This statistics positions Sierra Leone to be among countries with the most mobile population.

The World Bank, in 2018, calculated the growth of the Remittance industry close to 10% with revenue of $46 billion.

Although the Remittance industry in Africa is on the rise, there are challenges that might serve as impediments.  Money laundering and terrorist financing tops the list of challenges that might continue to stall the pace of remittance growth in Africa.

The Financial Action Task Force (FATF) defines money laundering as “the processing of […] criminal proceeds to disguise their illegal origin” in order to legitimise the ill-gotten gains of crime. In 2018, MoneyGram was asked to pay $125 million owing to their failure to increase their anti-money laundering controls.

The US Department of Justice found loopholes in MoneyGram’s anti-fraud and anti-money laundering programme. Similarly Western Union was forced to pay $153 million to 109,000 consumers affected by fraudulent transactions that were processed via western union platform.

Initially, the Federal Trade Commission in the US ordered western union to pay the hefty sum of $586 million in monetary relief. As outlets increase and remitting enlarges in Africa especially Sierra Leone, the possibility for scammers to use it as a means to an end seemed inevitable since countries and continents that have more organised financial systems than Sierra Leone and Africa are finding difficulties in ameliorating the malaise of money laundering.

International money transfers are also being used as a conduit by terrorist funneling money to one another. The FATF defines terrorist financing as the “financing of terrorist acts, and of terrorists and terrorist organisations. Terrorist financing has been made possible because of the risks involved in using other means of transferring money and similar assets.

Terrorist activities are on the increase in the North, the Horn and Sahel regions of Africa. Al-Qaeda in the Maghreb (AQIM), Boko Haram and Al-Shabab have been the dominant terrorist organisations for a decade now. These terrorist organisations operate often through splinter groups or cells.  AQIM’s activities, for instance, have been focused in the North of the continent, but they are also active in the Sahel regions of Mali and Niger through splinter groups.

The Financiers are aware that these organisations need money to carry out their callous and clandestine operations.

The Remittance industry has been labeled as one of the most, if not the most suitable means of transferring money to cells and splinter groups. In starker terms, in Somalia, a country in which the Remittance industry contributes almost 50% to their economy, Al-Shabab uses the Hawala service to funnel money to splinter groups.

A long standing or glaring problem that has been in existence for a while is the fee charged by remittance companies.

The fee charged for remittance in Africa is heftier than the one charged for other continents. For instance, a $200 transaction to Africa costs $9. The cost for the same in Asia is $8. The difference might be slight but it is huge a huge amount of money when one doubles the zeros.

Experts believe that the reason for such in Africa is the lack of competition and failure of remittance companies to record a return on investment that is commensurate to that of other continents.

However, there has been an array of remittance companies in Africa. The likes of Ria, Warri, Transfast, world remit to name a few have extended operations to Africa.

The Organisation for Economic Co-operation and Development (OECD) believe that remittance companies need to devise prudent steps as solutions to ameliorate the challenges accompanied with terrorist financing and fraudulent transactions.

One significant method remittance companies could use is intensive training of staff and staff of sub-agents. This could be done either through interpersonal communication or webinars. These staffs could serve as a first step approach in adhering to the compliance code of the remittance company and similarly report or document fraudulent transactions.

Irrespective of the surge of the remittance industry in Africa and indeed Sierra Leone, the glaring challenges might see it spiral in to the doldrums. Sierra Leone, a nation with a staggering rate of unemployment, might see a young man like Abdul lose his job. Until those challenges are ironed out, the progress of the remittance industry in Sierra Leone, and Africa at large is as uncertain as the weather.

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