Ghana

Political situation

The President of the Republic of Ghana, His Excellency John Evans Atta Mills, died in July 2012. The Vice-President, His Excellency John Dramani Mahama, was sworn in as President. The peaceful and orderly transfer of power testified to the steady progress and relative maturity of democratic governance since the country’s return to constitutional rule in 1992. This progress and maturity were also evident after the hotly contested presidential and parliamentary elections in December 2012. In particular, while the results of the presidential elections and, to a lesser extent, those of the parliamentary elections were challenged by the opposition New Patriotic Party (NPP), which considered them to have been rigged by the Electoral Commission (EC) in favour of the ruling National Democratic Congress (NDC), the opposition took the results to court without resorting to violence at national level.

The discovery of offshore oil reserves raised the stakes and intensified competition for political power because of the expected oil revenues. Indeed, the 2012 elections were considered the most expensive in Ghana’s history. This intense competition can be seen in the context of the structural deficiencies of Ghana’s winner-takes-all political system, which allows the winner to capture all power and gives the Ghanaian State almost total control over resources.

Despite increasingly competitive and costly campaigns, Ghana lacks robust frameworks to regulate campaign financing and ensure asset declaration. The 2000 Political Parties Act does not require parties and candidates to disclose the sources of their campaign funding, nor does it limit the contributions they may receive from individuals and companies. Although the Act requires parties to submit audited financial reports to the Electoral Commission (EC) for publication, it provides no sanctions against parties that fail to do so. In addition, while the 1992 Constitution requires public officials to submit asset declarations to the Auditor-General’s Office, it does not authorise the latter to publish them. The 2011 Global Integrity Report found that Ghana scored 8 out of 100 for the effectiveness of party financing regulations and 0 out of 100 for the regulation of individual candidates’ financing.

These legal gaps, combined with the lack of public funding for parties, have raised fears about the potential influence of the proceeds of predicate offences on the electoral process. The 2012 elections, like those of 2008, saw allegations and counter-allegations between the NDC and NPP about the use of drug money to finance their respective campaigns. Indeed, former and current drug law enforcement officers and some Ghanaian experts suspected that certain politicians were influenced by drug barons who financed their campaigns in the 2012 elections. The refusal of some parties and candidates to disclose their sources of funding, and recent allegations that a foreign ICT company had provided financial and material support to the ruling party in exchange for lucrative public contracts, only reinforce these fears.

The possibility that political parties and candidates may rely on the proceeds of crime in their quest for power has far-reaching implications, as it could seriously corrupt Ghana’s political system and undermine AML/CFT efforts in the country.

Economic and financial situation

Ghana continued to make considerable strides in economic growth and maintained its image as a model country in the West African region. Ghana’s GDP growth was expected to reach 8.3 percent in 2012. Although this is lower than the 14.4 percent recorded in 2011, it is slightly higher than the 7.5 percent, 7.6 percent and 8.2 percent forecast by the World Bank, Business Monitor International and the IMF respectively. Growth drivers included higher oil production and mining activities, which recorded growth of 36.2 percent in the industrial sector, compared with 5.2 percent in agriculture. The Bank of Ghana (BOG) and the World Bank reported that Ghana kept inflation in single digits in 2012. Ghana remains a lower middle-income country. It is also one of nine sub-Saharan African countries, and one of two in West Africa, classified in the medium category of the United Nations Development Programme (UNDP) Human Development Index.

Ghana’s oil revenues have supported its budget and given the government fiscal flexibility to finance development projects. Nevertheless, although the Government of Ghana was expected to receive about USD 650 million in oil revenue in 2012, it received only USD 180 million in the first two quarters of the year. At the same time, the national budget was expected to reach USD 9,842,066,957 against USD 8,117,228,113 in revenue and grants, compared with USD 6,725,930,546 against USD 5,511,072,988 in 2011. The large shortfall in oil revenues raised concerns about risks to budget execution. Any increase in government spending could also jeopardise the progress made by the country, including keeping inflation low.

In addition, the Ghanaian cedi continued to fall against major foreign currencies. In particular, the Bank of Ghana (BOG) reported that the cedi depreciated by 18% against the US dollar, 17.3% against the pound sterling and 13.1% against the euro in the first 8 months of 2012. The cedi was the worst-performing currency against the US dollar in 2012 among all ECOWAS Member States’ currencies, falling by more than 30%. As a result, many local producers, particularly in manufacturing, incurred higher production costs owing to higher duties on imports invoiced in foreign currencies. This has already pushed up the cost of goods and services in the country and further raised the prices of imported consumer goods. Concerns about the resulting rise in commodity prices, reflected in annual rate increases of up to 9.4% in the first half of 2012, prompted the BOG to raise interest rates to 15%. The BOG’s measures undoubtedly increased the cost of borrowing, which restricts business activity. Rising costs of goods and services have harmful effects on purchasing power and the cost of living in general, and could push many Ghanaians into poverty.

Ghana’s high growth rates have not reduced the level of poverty, which remains at 28.5%. Despite the lack of reliable unemployment data, an estimated 25.6% of Ghanaians aged 15 to 24, who make up about 20% of the population, are unemployed. This rate is twice that of the 25 to 44 age group and three times that of the 45 to 64 age group. Young people also account for 14% of formal sector employees; many young people, including most university graduates and rural-urban migrants looking for work, are therefore forced into the informal sector as apprentices, unpaid family workers or self-employed. Moreover, growth has barely translated into development, as Ghana continues to face serious challenges, including large-scale income inequality. Many Ghanaian communities remain very deprived and have almost no access to basic social services.

The existence of many deprived communities and the widespread lack of access to services mean that Ghana remains vulnerable to a range of predicate offences. Indeed, drug trafficking, cybercrime and other criminal activities are often seen not only as a legitimate source of funding for development projects but also as a means of survival. This is shown by the legitimacy gained and sustained by drug traffickers and other barons who fund projects and provide basic services in deprived communities with the proceeds of crime. The example of a former Ghanaian Member of Parliament (MP) who enjoys considerable support in his community for his philanthropic activities, despite his arrest and conviction for drug trafficking in the United States, shows that this may be the case. In communities with limited survival alternatives, many more people, as in the past, may turn to criminal activities as a means of survival. An increase in predicate offences could undermine AML/CFT efforts in Ghana, as criminals, often working with accomplices in high places in the Ghanaian government, will try to conceal the origin of their assets.

The Government of Ghana has decided to double the size of its economy by 2015 as part of efforts to tackle, among other things, high levels of unemployment and poverty. In doing so, it aims, among other things, to attract foreign direct investment by removing barriers to trade and investment, to attract capital transfers from Ghanaians in the diaspora, and to improve access to credit for indigenous small and medium-sized enterprises. The government also aims to develop the tourism industry as a means of creating jobs and generating income by attracting private investors and entrepreneurs to invest in high-value accommodation.

Ghana’s financial sector is mainly dominated by banks. There are 25 deposit banks, which account for about 80% of the sector’s total assets, equivalent to about 24% of GDP in 2010. In 2012, remittances were estimated at USD 151 million (0.4% of GDP). Official transfers nevertheless show that, unlike many other West African countries, Ghana is not dependent on these inflows.

Prevalence of predicate offences

Drug trafficking remains the most widespread predicate offence in Ghana. Shipments of cocaine from Latin America and heroin from South-East and South-West Asia transit through the country to Europe and, to a lesser extent, the United States. Cannabis in particular, grown and consumed throughout Ghana, is still trafficked to Europe. This is shown by the almost simultaneous seizure of nearly 1.5 tonnes of cannabis and 7.5 kilos of cocaine, with a combined value of GBP 4.3 million, from Ghana by British officers at London Heathrow Airport in September 2012. Foreign drug smuggling networks continue to operate openly in the country, including an elaborate distribution network largely overseen by Ghanaian and Nigerian criminals. Ghana’s main airport, Kotoka International Airport (KIA) in Accra, remains a major transit point for drug traffickers. Moreover, despite the lack of reliable data, there are fears that the use of cannabis and other hard drugs among wealthy individuals and casual peddlers is rising in Ghana.

With regard to cybercrime, anecdotal evidence points to a wide variety of cases. For example, two young Ghanaian men were arrested for defrauding a 54-year-old American-Canadian woman of USD 37,000 over the Internet (419 scam). Sakawa, a form of fraud associated with voodoo practices, is particularly widespread, as shown by persistent reports of alleged killings and ritual activities by cybercriminals seeking to strengthen their operations. While the nature of the individuals and networks involved is unknown, there is a general feeling in Ghana that poor and unemployed young men, particularly from the suburbs of Accra, still dominate cybercrime.

In addition, despite the lack of reliable data, the proliferation and trafficking of small arms and light weapons (SALW) in Ghana are of growing concern. The National Commission on Small Arms recently expressed concern about reports of illicit SALW smuggled into Ghana from neighbouring countries. Ghanaian police in Accra recently seized a consignment of weapons and ammunition, including 10 pump-action shotguns, 20 double-barrelled guns and large quantities of AAA cartridges bound for Nigeria, and arrested three Ghanaians and two Nigerians. Reports of increased gun violence following clashes between ethnic and religious groups, and the violent incidents that accompanied biometric registration for the 2012 elections, further illustrate the threat posed by SALW.

Ghana’s large deposits of gold and other minerals continue to sustain widespread illegal mining, known locally as galamsey. The phenomenon is driven by sheer greed, high levels of poverty and unemployment, especially among young people, the lack of economic opportunities, the material and financial benefits of illegal mining, and community acceptance and the myth surrounding the wealth that miners can reinvest in their local community. While it is not clear to what extent galamsey is controlled by transnational networks, there is growing evidence that it is run by foreigners, mainly Chinese, who often team up with local chiefs to gain access to mining areas. Chinese immigrants increasingly operate in the country using Ghanaian labour. This is shown by the recent arrest of 27 Chinese immigrants for their involvement in galamsey in Ghana’s Western Region.

The relative development of Ghana’s financial sector in recent years has increased its vulnerability to money laundering. Trade-based money laundering, mainly in the form of manipulating import and export transactions to reduce or avoid customs duties and indirect taxes, and the repatriation of profits through informal channels, remain unchanged. Despite the lack of reliable data, law enforcement officials have reported that considerable sums of illicit money have been laundered through investments in banking, insurance, real estate, vehicle imports, imports in general and faith-based institutions. Between January and May 2012 alone, the Economic and Financial Crimes Court authorised the freezing of more than 250 bank accounts on suspicion of money laundering, often linked to cybercrime. This represents more than 80% of the 300 accounts frozen in the whole of 2011. However, corruption remains a major challenge, as Ghana scored 45 out of 100 and ranked 64th out of 176 countries on Transparency International’s 2012 index. This is hardly different from 2011, when Ghana ranked 69th out of 183 countries.

AML/CFT situation

Following the adoption of Ghana’s MER in November 2009, and because of its poor ratings on all FATF core and key Recommendations, Ghana was placed under the regular follow-up process. After a high-level advocacy visit to Ghana by GIABA’s Director General in February 2012, during which the Ghanaian authorities were reminded of the implications of poor implementation of the action plan agreed with the FATF International Cooperation Review Group (ICRG) for the Middle East and Africa, Ghana initially made efforts to address the deficiencies identified in its AML/CFT framework. Even so, the FATF Public Statement of February 2012 identified Ghana as a high-risk jurisdiction for AML/CFT and placed it under review for non-compliance with AML/CFT standards. Ghana responded by taking action to improve its AML/CFT framework and submitted its third follow-up report ahead of the GIABA Plenary in Abidjan, Côte d’Ivoire, in May 2012. The follow-up report indicated that significant action had been taken to address the deficiencies identified, including the passing by the Ghanaian Parliament in July 2012 of the Anti-Terrorism Regulations (Legislative Instrument 2181) and the Economic and Organised Crime Office (EOCO) Regulations (Legislative Instrument 2183), both of which set out AML/CFT guidelines for banks and non-bank institutions. The former criminalises terrorist financing in line with FATF Recommendation 6 and broadens the scope of measures that can be used to freeze, seize and confiscate the proceeds of crime. Parliament also ratified the United Nations Convention against Transnational Organized Crime and amended the Criminal Offences Act of 1960 (Act 29) by passing the Criminal Offences (Amendment) Act of 2012 (Act 849). The law criminalises the remaining predicate offences, including the illegal use of human body parts, sexual exploitation, illegal trafficking in explosives, firearms and ammunition, and fraudulent schemes or racketeering. The Anti-Terrorism Act was amended to empower the Ministry of Finance and Economic Planning to issue instructions for its effective implementation. The Immigration (Amendment) Act of 2012 (Act 848), which criminalises illegal migration and human trafficking, was enacted in June 2012. Ghana also issued compliance manuals for capital market operators and for insurance companies and brokers, and approved the National AML/CFT Strategy and Action Plan.

In addition, an AML/CFT unit has been set up at the Bank of Ghana. The unit has raised awareness among banks, financial institutions and bank directors of ML/TF risks, threats and vulnerabilities, as well as of the essential pillars of AML/CFT; trained compliance officers in ML/TF risk assessment; and finalised a manual for off-site analysis and on-site inspection of banks and financial institutions. The bank, in collaboration with the Financial Intelligence Centre (FIC), has also raised compliance officers’ awareness of the legal requirements for cash transactions. The FIC has increased its staff by seven members and has taken part in and facilitated money laundering workshops for mortgage and other financial operators.

Having reassessed Ghana’s AML/CFT system and the actions taken by the country to address the deficiencies identified, the FATF agreed to conduct an on-site visit to confirm the actions taken before removing Ghana from the list of countries under monitoring. The FATF noted the high level of political commitment to addressing the deficiencies identified and the significant steps taken towards improving its AML/CFT regime, including enacting legislation to criminalise money laundering, establishing and effectively implementing adequate procedures for the confiscation of funds related to money laundering, enhancing customer due diligence and strengthening the effectiveness of the Financial Intelligence Centre (FIC).

Nevertheless, major challenges remain, as non-compliance with existing legislative frameworks persists. Indeed, corruption continues to hinder the effective implementation of anti-money laundering efforts, not least because legal frameworks are undermined by highly corrupt officials. False addresses are provided when opening bank accounts, and easily corruptible compliance officers allow funds to be moved rapidly out of banks when there are suspicions. In fact, a recent investigation by law enforcement officers revealed that bank officials allowed cybercriminals to withdraw EUR 58,000 that they had received from a German citizen through internet fraud. Bank officials still allow large cash deposits without requiring proof of the origin of funds and without processing STRs in accordance with Ghana’s commitments under its AML/CFT Action Plan.

Moreover, this happens even though the FIC has passed on intelligence on hundreds of bank accounts suspected of being used for ML to the Economic and Organised Crime Office (EOCO). The anti-money laundering law provides that, when accounts are frozen, their owners may appeal after one year. However, frozen accounts are often unfrozen after only a week. The EOCO, the Economic and Financial Crimes Court and the FIC continue to face serious resource and capacity constraints.

Technical assistance

In addition to several training programmes organised to build the capacity of the competent authorities, GIABA installed AML/CFT analytical software at Ghana’s FIC, and organised user training for the FIC. Even so, challenges remain. In particular, Ghana’s judicial officers and law enforcement officers have also benefited from some GIABA capacity-building programmes. Nevertheless, expertise and capacity to detect, prevent, investigate, prosecute and punish money laundering and related crimes remain weak. Financial actors, particularly insurance companies, are generally unaware of AML/CFT issues. The Ghana Police Service (GPS) still lacks the capacity and equipment to investigate and prosecute the main predicate offences, particularly drug trafficking. This is compounded by painfully slow judicial proceedings, with trials lasting up to four years, mostly because of poor case preparation.

Consequently, Ghana has identified the need to develop and strengthen the analytical, investigative and prosecutorial capacity of its specialised law enforcement agencies. In particular, the country has requested training in financial analysis and investigation for its FIC and other law enforcement personnel.

Conclusion

Ghana’s efforts risk being undermined at least by a costly electoral process, virtually unregulated campaign financing and the temptation to divert public funds to election campaigns or to seek funding from criminal sources. Indeed, corruption on the part of State and bank officials, as revealed by the media, continues to undermine the effective implementation of AML/CFT measures. The existence of many deprived communities and high levels of poverty, inequality, unemployment and underemployment, particularly among urban youth, continue to provide fertile ground for predicate offences and, by extension, ML/TF.

Notwithstanding a series of training and awareness workshops for judicial and law enforcement officers and banking and finance officials, there are still gaps in skills and expertise on AML/CFT matters. Ghana and its partners should therefore focus on developing specific courses on the nature and dynamics of money laundering and related crimes. Training and courses on financial analysis, criminal investigations and prosecutions, with particular emphasis on Ghana’s socio-cultural realities, are needed. The participation of law enforcement and judicial personnel in such courses is essential for sustainable capacity building.