Benin

Political situation

Benin continues to enjoy relative political stability and democratic governance. However, the attempt by the executive branch of government, with the support of allied members of the National Assembly, to expand the President’s powers by amending the Constitution threatened the country’s democratic gains. The arrest of a former Minister of State, the President’s niece and his personal physician for an alleged attempt to poison him raised concerns about potential instability. This came after a series of crises, including a two-month teachers’ strike in March 2012 that paralysed the country’s school system. In 2012, the Republic of Benin benefited from the goodwill of the international community when President Thomas Yayi Boni, with the support of ECOWAS, was appointed Chairperson of the African Union. However, there were several cabinet reshuffles during the year, which may be one of the reasons why, despite GIABA’s efforts, members of the CENTIF whose terms had expired or who had resigned could not be replaced.

Meanwhile, municipal and local elections scheduled for the first half of 2013 were expected to generate a high degree of enthusiasm among politicians and communities. However, some concerns were raised about the reliability of the electoral roll, which could cause controversy and jeopardise the peaceful conduct of the elections.

The Mo Ibrahim Foundation’s 2012 Ibrahim Index of African Governance (IIAG) ranked Benin 13th out of 52 African countries, with a score of 58 out of 100. This represents a slight decrease from 59 points in 2010 and 2011. The government therefore adopted a national charter in February 2012 to address current governance challenges. In particular, the charter seeks to revive moral values and a sense of responsibility and to create an environment conducive to sustainable human development.

Economic and financial situation

Benin’s economy was expected to grow by 4.2% in 2012, compared with 3% in 2011. This is slightly above the 3.5% growth rate forecast by the International Monetary Fund (IMF) for 2012. The growth was attributed to the implementation of reform strategies by the Government of Benin, in particular the Growth Strategy for Poverty Reduction (SCRP) for 2011-2015 and the three-year development plan, which aims to modernise and diversify the country’s large agricultural sector and to build infrastructure. Meanwhile, Benin’s attractiveness to business declined slightly, from 176th out of 183 to 175th in the World Bank’s Doing Business ranking for 2012. This decline was in line with the poor governance performance in various sectors mentioned above. In addition, owing to the implementation of an import control programme, among other things, tax revenues were expected to increase slightly in 2012.

Benin continues to face a series of economic challenges, in particular because agriculture and trade, the mainstays of its economy, remain vulnerable to external shocks. Poverty remained at 35%, while very high unemployment and underemployment, particularly among young people, persist despite the launch of several job creation and poverty reduction programmes since 2006. As a result, the country is unlikely to achieve most of the Millennium Development Goals (MDGs) by 2015. With unemployment and underemployment twice as high among young people and adults, Benin remains particularly vulnerable to various criminal activities that may be seen as an irresistible means of survival. Meanwhile, the fall in real household income due to higher oil prices in Nigeria, together with the slowdown in activity at the Port of Cotonou during the rainy season, overshadowed the revenues from increased cotton production in the 2011/2012 season.

Benin’s financial sector is dominated by banks. The 13 deposit money banks account for 90% of the sector’s total assets, estimated at 27.3% of GDP in 2010. Remittances in 2012 were estimated at USD 189 million (one hundred and eighty-nine million US dollars), or around 2.5% of GDP.

Prevalence of predicate offences

Benin recorded cases of predicate offences in 2012, in particular drug trafficking. The country remains a transit point for very large shipments of cocaine from Latin America and heroin from South-West Asia to Europe and other destinations. While the quantity of narcotics transiting through Benin’s coast is unknown, the seizure of an estimated 7.9 million kilos of narcotics nationwide, with the assistance of Ghana and Togo, under “Operation Atakora”, supported by ECOWAS and INTERPOL in August 2012, showed the scale of the trafficking as well as the authorities’ efforts and commitment to tackling the problem. Benin also remains a regional hub in West Africa for the smuggling of used vehicles.

The illicit import of various products, especially fuel from neighbouring Nigeria, remains widespread in the country. In addition, Nigerian criminal organisations have used the Port of Benin to commit various criminal acts such as the diversion of imports, violation of customs rules, falsification of import documents and the import of contraband and other illicit goods such as narcotics. This situation is due to poor port management. Corruption, extortion, embezzlement, mismanagement and misappropriation of public funds remain a major challenge in Benin, undermining the effectiveness of public institutions and of efforts to combat money laundering. Corruption remains widespread, particularly in customs, public procurement and the judiciary. The President of the country’s Supreme Court deplored the endemic corruption in Beninese society, citing various offences to which the authorities had not responded. According to Transparency International, Benin ranked 94th out of 174 countries, with a score of 36 out of 100 in 2012.

AML/CFT situation

Money laundering activities, although not easily detectable, continued in Benin last year. For example, the government expelled a foreign company that it said had served as a vehicle for money laundering. According to investigations by the Drug Enforcement Administration (DEA), the company was discreetly laundering money by selling used cars to finance Hezbollah, a political party on the United States list of terrorist organisations. In 2012, Benin was still striving to comply with international AML/CFT standards and to implement the recommendations of its Mutual Evaluation Report (MER). The country’s AML/CFT system faces significant challenges, including a weak (and untested) legislative framework and serious capacity and resource constraints in the competent institutions. In particular, not only do law enforcement and other staff lack expertise in financial crime, but there is also a considerable lack of coordination and collaboration, including information sharing, among the competent institutions. In Benin, the CENTIF still suffers from a shortage of staff, despite GIABA’s various attempts to work with the Beninese authorities to address the issue. The National AML/CFT Strategy drafted in 2011 with GIABA’s support has yet to be adopted, let alone implemented.

Nevertheless, GIABA’s sustained engagement with Benin’s political authorities led to the adoption of the Law on Terrorist Financing by the country’s National Assembly in May 2012. The law criminalises terrorist financing and extends the powers of the CENTIF. This was indeed a notable and welcome development in Benin in 2012, given the time and effort it took to have the law passed.

Technical assistance

In 2012, insufficient direct assistance was provided to Benin because of the CENTIF’s staff shortage, and there was also no formal request. GIABA supported Benin with copies of the AML/CFT Compliance Manual for distribution to DNFBPs. In addition, the authorities informed the GIABA Secretariat that the Government of Benin had received a two-year grant of USD 427,485 (four hundred and twenty-seven thousand four hundred and eighty-five US dollars) from the World Bank’s Institutional Development Fund to finance capacity building for ML and TF stakeholders through the CENTIF. Despite all this, Benin needs support to strengthen its AML legal framework. The FIU also needs to upgrade the skills of its analyst, IT specialist and other staff in order to improve the Unit’s performance. Public awareness of AML/CFT issues will also need to be raised.

Conclusion

Benin continues to enjoy relative peace, stability and democratic governance, despite the government’s attempts to expand the President’s powers and an attempt by members of his entourage to poison him. However, a series of governance and socio-economic challenges, in particular high levels of corruption, poverty and unemployment, continue to make the country vulnerable to various criminal activities, including money laundering. Despite the adoption of a law on terrorist financing, Benin is still striving to comply with international AML/CFT standards. The country’s AML/CFT legislative framework is weak and also suffers from a lack of staff, expertise and resources for AML/CFT. The national AML/CFT strategy developed in 2011 has yet to be adopted for implementation. Despite the CENTIF’s efforts to receive, analyse and disseminate STRs, much remains to be done to implement the recommendations of Benin’s MER. In particular, Benin needs to establish a mechanism consistent with FATF R6 for implementing UNSC resolutions 1267 and 1373; the country must also adopt and resource the implementation of its AML/CFT Strategy and ensure better coordination within the Inter-Ministerial Committee (IMC).