By Sophia Kafui TEYE
Money laundering is a global financial crime that is frowned at by many states.
Money laundering has become a critical global challenge with far-reaching consequences, not only for the financial sector but for society at large.
It is the flow of illicit flow through complex financial channels often fuels criminal activities, including corruption, drug trafficking, and terrorism, destabilizing both local economies and international financial systems.
There are three stages in money laundering, the include the placement stage where illicit funds are introduced in the financial system and the layering stage where funds successfully placed at covered through complex transactions to give it some legitimacy.
The final stage of money laundering is the integration stage where the illicit funds are fully implanted in the financial system, making it difficult for people to trace its original source.
This article explores how money laundering activities contribute to global economic instability and how the illicit financial flow from such activities has led to increased property pricing, high inflation and has led to the scarcity of affordable houses in Ghana.
It would also explore the views of others who think that laundered funds when intercepted should be channelled into productive ventures, they could fuel economic growth and infrastructure development, particularly in emerging economies like Ghana considering Dubai as a proxy to illustrate how laundered funds have historically been used in certain ways that promote national growth.
The article would conclude by providing recommendations on how the sanctity of the financial sector can be protected by implementation of anti money laundering laws to reduce the incidence of money laundering on society as a whole.
Consequences Of money laundering
Money laundering is the process of disguising the origins of illegally obtained money, typically through a series of complex financial transactions designed to make the funds appear legitimate.
According to the Financial Action Task Force (FATF), money laundering is often linked to organized crime, corruption, tax evasion, and terrorism financing, among other illicit activities.
The consequences of money laundering are dire for the economy of any nation. It undermines the integrity of the financial system, encourages illegal trade, hampers legitimate businesses, and leads to the depletion of state resources.
Developing countries like Ghana, which are heavily reliant on foreign investment and remittances, are particularly vulnerable to the destabilizing effects of these illicit flows.
Obtaining accurate data on the total value or volume of laundered funds in Ghana is difficult due to the secretive and illegal nature of such activities.
However, insights can be gathered from reports by financial institutions and regulatory bodies like the Bank of Ghana and the Financial Intelligence Centre, which monitor financial stability and suspicious transactions.
International organizations such as the Financial Action Task Force (FATF), World Bank, International Monetary Fund (IMF), and the United Nations Office on Drugs and Crime (UNODC) also publish reports that provide valuable data and analysis on money laundering risks and trends in Ghana.
Increased property pricing
It is well-established that laundered funds in Ghana are often funneled into real estate and luxury vehicles, a fact supported by numerous media reports and investigations by state institutions. One such investigation involving a former government appointee, Adu Boahene, and his wife revealed they allegedly purchased 27 houses valued at US$295,000 each in Vertex Properties, Oyarifa.
The key issue with laundering money through real estate and luxury assets is that launderers are indifferent to whether prices are reasonable—they are primarily focused on concealing the origins of illicit funds.
This practice inflates property prices, making it increasingly difficult for middle- and working-class Ghanaians to afford housing, especially in cities like Accra, Kumasi, and Takoradi.
Real estate developers, recognizing this demand, continue to build for these buyers, who can acquire multiple properties without regard to cost.
While this may make business sense for developers, it negatively impacts ordinary citizens. Moreover, many of these houses remain unoccupied, yet rental prices remain prohibitively high for the average Ghanaian.
Inflation
Inflation is the rate at which the general level of prices for goods and services rises over a period of time, leading to a decline in the purchasing power of money.
Inflation is commonly measured using price indices such as Consumer Price Index (CPI) and the Producer Price Index (PPI). Moderate inflation is normal in a growing economy, but high inflation can erode savings, distort spending and investment decisions, and hurt those on fixed incomes.
Money laundering contributes in inflation in an economy in three ways, it leads to increased money supply, contributes to asset pricing inflation and distorted investments.
Laundered money often enters the economy through high-cash sectors (real estate, luxury goods, construction). This artificial influx of money increases the circulating money supply, which can drive up prices if not matched by an increase in goods/services.
Money launderers often invest in assets like real estate, art, or luxury items. Their demand can push up prices in these markets, making them unaffordable for average consumers and distorting real value. Laundered funds are not guided by normal profit motives. This leads to misallocation of resources, potentially driving inflation in specific sectors.
Money laundering Undermines Monetary Policy. The Central Bank has the mandate to handle Monetary Policy. To do this, the Central banks rely on accurate data to manage inflation. Money laundering creates “off the books” or shadow economy activity, making it harder to assess real inflation drivers and control money supply effectively.
Scarcity of affordable houses
Money laundering contributes to the scarcity of affordable housing by distorting real estate markets in many ways. It leads to artificially inflated property prices. As Money launderers in their quest to cleanse their illicit funds may invest them in real estate.
This is often demonstrated in how they overpay for properties, buy multiple houses in a quick succession and they leave properties vacant, treating them as stores of value rather than homes. This artificially drives up demand and inflates prices beyond what average earners can afford, especially in desirable urban areas.
Reduced housing supply for residents
When properties are bought for laundering rather than living, the houses remain empty thereby reducing the number of homes available for people who actually want to live in them. Those who buy these properties convert residential units into high-end rentals or vacation properties (e.g., short-term rentals), pricing out local residents.
Gentrification and displacement
Money laundering can accelerate gentrification. Gentrification is a process in which a previously lower-income urban neighbourhood undergoes transformation due to an influx of wealthier residents, businesses, and investment.
This often leads to rising property values and rents, changes in the local culture, and the displacement of longtime, lower-income residents. Illicit investment in luxury developments leads to rising neighbourhood costs. Long-term residents are often pushed out due to unaffordable rents, taxes, or property values.
Distortion of housing policy and planning
When money laundering dominates real estate, governments may misinterpret the demand, thinking high-end properties are what the market needs. This can divert construction and investment away from affordable housing, deepening the shortage.
Real-world examples
London, Vancouver and Dubai have seen property markets impacted by illicit capital flows. These cities face high vacancy rates in luxury units and severe affordability crises for middle- and low-income residents.
The role of anti-money laundering laws in Ghana
Globally, Money Laundering is a crime, and it is often curbed through legislation and the enforcement of anti money laundering laws. Ghana has made some efforts in curbing anti money laundering.
Recognizing the detrimental impact of money laundering, Ghana has taken significant steps to align itself with global standards by establishing robust anti-money laundering laws.
The Anti-Money Laundering Act, 2020 (Act 1044) is a comprehensive legislative framework enacted on December 29, 2020, to strengthen Ghana’s efforts in combating money laundering and related financial crimes.
This Act replaced the previous Anti-Money Laundering Act, 2008 (Act 749), and its 2014 amendment (Act 874), addressing identified deficiencies and aligning Ghana’s legal framework with international standards.
Act 1044 represents a significant step in strengthening Ghana’s anti-money laundering framework by expanding the definition of unlawful activities to include crimes such as fraud, bribery, human trafficking, environmental offenses, and terrorism financing.
It introduces regulations for Virtual Asset Service Providers (VASPs) to ensure transparency in cryptocurrency transactions and empowers the Financial Intelligence Centre (FIC) to investigate suspicious activities and collaborate with local and international bodies.
The Act mandates rigorous customer due diligence by financial institutions, particularly in high-risk cases, and imposes heavy sanctions for non-compliance—ranging from 100% to 500% of illicit proceeds for individuals and no less than 300% for corporations. Overall, Act 1044 aims to align Ghana with global standards and reinforce the integrity of its financial system.
In addition to local laws, Ghana has also signed international agreements like the United Nations Convention Against Corruption (UNCAC), which mandates member countries to adopt measures that prevent and criminalize money laundering activities.
Despite these efforts, the implementation and enforcement of anti-money laundering laws in Ghana face challenges such as insufficient technical capacity, weak institutional frameworks, and the occasional lack of political will.
The argument of redirecting laundered funds into productive ventures
Some schools of thought argue that intercepted laundered funds should be redirected into productive sectors of the economy, such as agriculture, infrastructure, and public services. While money laundering is undeniably a criminal offense, the broader challenge of illicit financial flows also presents a unique opportunity.
Rather than allowing these funds to fuel the purchase of luxury properties, vehicles, and casinos, governments could repurpose them to support growth-driving areas like infrastructure development, healthcare, education, and innovation.
The idea of repurposing intercepted illicit financial flows for public benefit is gaining traction, as it offers the potential to transform “dirty money” into funding for vital sectors like infrastructure, healthcare, and education.
While the concept promises economic development, restorative justice, deterrence, and increased public trust, it is entangled with significant legal, ethical, and governance challenges, including due process, rightful ownership of funds, and the risk of further corruption.
To address these concerns, some governments and international institutions are exploring transparent, accountable mechanisms such as trust funds and earmarked budgets to ensure recovered assets are used effectively and equitably. Ultimately, while promising, the approach requires careful design to balance justice, legality, and impact.
International examples – Dubai as a proxy
Dubai offers a compelling case study of how laundered funds have been both a challenge and an opportunity. The emirate has long been a favorite destination for illicit financial flows, particularly in real estate and luxury goods, due to its relatively lax regulations around financial transparency.
A report by The International Consortium of Investigative Journalists (ICIJ) revealed that Dubai’s real estate market is one of the primary destinations for illicit funds, with luxury properties being used as a safe haven for money laundering activities.
However, Dubai has also leveraged these funds for developmental purposes, boosting its status as a global financial hub. Over the last two decades, Dubai has transformed itself into a modern city with world-class infrastructure, tourism, and business ecosystems.
While this has often been a result of both legal and illegal capital inflows, Dubai’s development of economic zones, real estate ventures, and luxury infrastructure can serve as a lesson for Ghana.
Developed country models – Singapore and Switzerland
In developed countries, the re-channeling of illicit financial flows into growth-enhancing initiatives is less common but still observable in certain jurisdictions.
Singapore, for example, has implemented rigorous anti-money laundering regulations while fostering a business-friendly environment that incentivizes foreign investment. Similarly, Switzerland, known for its secrecy laws in banking, has faced considerable criticism for being a haven for money laundering.
However, it has also contributed to global economic growth by leveraging its robust financial services sector and reinvesting funds into productive sectors, such as technological innovation and clean energy projects.
Both countries illustrate that by strengthening their legal frameworks and increasing financial transparency, nations can ensure that laundered funds are either blocked from entering their economies or redirected into productive sectors.
The potential for Ghana to embrace and transform laundered funds
In the context of Ghana, where the fight against corruption and illicit financial flows is ongoing, the potential to redirect illicit funds into national development exists.
A strategic approach to combating money laundering could ensure that the proceeds of illegal activities are intercepted before being used to fund luxury lifestyles or illicit businesses. Instead, the government and financial institutions could explore mechanisms to facilitate the reinvestment of intercepted funds into sectors such as:
- Infrastructure development: Funds could be used for building roads, bridges, airports, and energy projects.
- Entrepreneurship and innovation: By funding the burgeoning start-up ecosystem, illicit funds could help foster innovation and the creation of new businesses.
- Education and healthcare: Developing human capital by investing in education and healthcare could contribute to long-term national prosperity.
By reinforcing international AML standards and enforcing laws that seize the proceeds of crime, Ghana has the opportunity to create a transparent financial environment where illicit funds are repurposed for growth.
Moreover, an effective public-private partnership in tackling money laundering could stimulate local industries, create jobs, and increase public trust in the financial system.
Conclusion
From all that has been discussed above, we can conclude that money laundering has negatively affected the cost of properties in Ghana, further worsening the inflationary trends and leading to scarcity of properties for middle income earners.
The earlier this menace is curbed the better it is for the average Ghanaian worker. Despite the challenges money laundering presents, there exist an opportunity to explore to facilitate economic growth especially developing country like Ghana, to redirect illicit funds towards productive economic activities.
Ghana’s commitment to strengthening its AML framework is critical, and with more rigorous enforcement and transparency, illicit funds can be intercepted and channelled into national development.
Drawing lessons from jurisdictions like Dubai, Singapore, and Switzerland, Ghana could transform what is often a destabilizing force into a tool for sustainable growth, infrastructure development, and economic empowerment.
The time to act is now! by ensuring effective use of intercepted illicit funds, Ghana can chart a path towards a more transparent, prosperous, and economically resilient future.
>>>Disclaimer: Views expressed in this article are the personal views of the author and does not reflect the views of the organization she works for. Email Address: [email protected]
