Money laundering taints economic growth

Faced with a growing number of drug trafficking, money laundering and organised crime investigations, the head of Cape Verde’s judiciary police told IRIN his agents may know who the traffickers and money launderers are, but do not have enough resources to catch them all.

Oscar Silva dos Reis Tavares, who directs high-level crime investigations at the judiciary police, told IRIN his agents are handling 150 investigations, including 10 money laundering cases. But the police should be looking into more, he said: “We can’t just go up to someone on the street and use what they say as evidence in a court of law. This is a small community. People may know who earns money illegally, but we need proof.”

In the past five years, the islands have increasingly been used as a transit point for drugs coming from Latin America, destined for Europe and West Africa, according to the UN Office on Drugs and Crime (UNODC).

Minister of Justice Marisa Morais told IRIN Cape Verde’s geography has left it open to transatlantic traffickers: “Our geographical location is both a privilege and a threat.”

Based on government records, Cape Verde, with a growing tourist economy, controls more than 700,000sqkm of water that include 10 islands and eight islets with 1000km of volcanic, at times difficult to access, coastline.

But despite a recent jump in tourism dollars, the government reported about 10 percent of its population living in extreme poverty as of May 2008. Illegal housing settlements continue spreading out in northern Praia neighbourhoods like Safende, Calabaceira, and San Pedro, which lack drainage, roads and easy access to water.


Photo: Phuong Tran/ IRIN
Illegal housing settlements accommodate the growing urban population, Praia

Mirage of economic growth

In a recent UNODC report, researchers wrote that what appears as legitimate economic growth in some West African countries may be explained through the drug trade: “Once the channels for disguising drug money have been established,” wrote UN researchers, “they can be used for concealing all manner of criminal proceedings.”

According to the 2008 African Development Bank and Organization of Economic Development report for Cape Verde, its economy grew more than 10 percent in 2006, in large part from tourism investments, which increased more than tenfold from 2004-2006 to $509 million. Since then, the government has passed legislation to attract additional foreign investment.

Josep Coll, European Commission ambassador in Cape Verde, told IRIN legitimate foreign investments can be undermined by money laundering: “Yes, we can have the mirage of a booming economy, but this is false if there are illegal investments, condemned by international law, in the mix which lead to unfair competition.”

Coll said Cape Verde’s economic growth reflects legitimate investments. But if the government is not careful, he added, money laundering can force these businesses to fight against much more well-financed illegal business fronts funded by drug dollars: “If an economy is based on businesses with questionable [illegal] funding sources, then growth is not sustainable.”

Economists call this the “Dutch disease” effect, when illicit businesses generate more money and jobs than the legal economy.

Proof missing

Police chief Tavares told IRIN the country’s crime lab has limited chemical analysis capabilities and relies on analyses conducted in Portugal for investigations. But it is more than lab improvements that are needed, said Tavares. “It has been impossible to pin down one of the most well-known traffickers here [Cape Verde] when we don’t have phone recording equipment to investigate."

IRIN spoke with several Cape Verdeans who described an arts patron, businessman and alleged local drug baron, “Joy.” The problem, said Tavares, is catching him: “We can’t dismantle organised crime based on rumours. But we do what we can.”

Iceberg?

The number of organised, drug and money laundering cases jumped from 19 to 60 between 2007 and 2008. There may be more, said Tavares: “We don’t know if we are addressing 10 percent or 90 percent of the problem. It may be the tip of the iceberg, or we may be at the base.”

Tavares said in the last four years, the government has frozen 12 accounts worth more than US$1 million as a part of ongoing high-level crime investigations. He added that since 2007, the government has seized $1 million worth of land and homes, and cars worth more than $622,000.

The Ministry of Justice created a money laundering investigation unit January of 2008, and on 31 October passed legislation to make it easier to prosecute such cases.

Though legislation criminalised money laundering in Cape Verde in 2002, the most recent amendment requires for the first time that those working in financial transactions, including lawyers, bill collectors, auditors and accountants, report any suspicion of money laundering.

In passing the amendment, Cape Verde’s Council of Ministers wrote that money laundering in Cape Verde is “connected to a circuit of organised crime, such as traffic of arms, people, drugs.”

When asked to quantify trafficked contraband circulating in Cape Verde, Justice Minister Morais pointed to the Atlantic Ocean behind the Praia hotel where she spoke at a recent high-level ministerial conference on drug crimes: “How big is our problem? Well, how big is the ocean?”

pt/np