IMPLICATIONS OF CASH-DOMINATED TRANSACTIONS FOR MONEY LAUNDERING

The report argues that traditional anti-money laundering (AML) efforts, which focus on the banking sector, are insufficient in cash-based economies where over 50% of transactions occur in cash. In these environments, the conventional phases of money laundering—placement, layering, and integration—are often bypassed because proceeds of crime can be integrated into the economy without ever entering the formal financial system. The author identifies several drivers of this vulnerability, including low bank penetration, onerous documentation requirements, and systemic corruption. Key laundering typologies highlighted include the use of unregulated bureaus de change, real estate acquisition (notably in Tanzania), and alternative remittance systems like hawala. The report concludes that FATF recommendations are often poorly adapted to these realities and calls for a pragmatic approach to increasing bankability, regulating mobile money, and empowering Financial Intelligence Units to engage with the informal sector.

• Cash-based economies, defined as those where more than 50 per cent of economic transactions are conducted in cash and the majority of the population is unbankable, are highly vulnerable to money laundering. In these settings, the traditional three-stage process of placement, layering, and integration is often inapplicable because criminal proceeds can be integrated without ever entering the formal financial system.
• Financial exclusion in Africa is driven by several factors: low ATM and branch penetration, high collateral requirements (averaging 135 per cent of loan value), and onerous documentation requirements. For example, in South Africa and Namibia, 30 per cent and 35 per cent of adults respectively cannot provide the proof of physical address required by AML legislation.
• The informal sector is disproportionately large in sub-Saharan Africa (excluding South Africa), contributing an average of 41 per cent of GDP, with informal employment accounting for 78 per cent of non-agricultural employment. This informality is driven by Structural Adjustment Programmes (SAPs), rural-urban migration, and unemployment.
• Real estate is a preferred vehicle for money laundering in cash-based economies due to a lack of audit trails and the ability to purchase property in others' names without triggering suspicion. In Tanzania, it is estimated that over 99 per cent of homes are built using cash.
• Unregulated bureaus de change and alternative remittance systems (such as hawala or hundi) facilitate money laundering through a lack of vetting, the absence of centralized identity databases, and a reliance on trust rather than documentation.
• The report argues that FATF recommendations are designed for high- or medium-income countries and are often adopted by cash-based economies without being adapted to their specific realities of unbankability and informality.

APA

MOSHI, H. P. (2012). IMPLICATIONS OF CASH-DOMINATED TRANSACTIONS FOR MONEY LAUNDERING. Institute for Security Studies. https://issafrica.s3.amazonaws.com/site/uploads/SitRep2012Oct.pdf

Chicago

MOSHI, HUMPHREY PB. IMPLICATIONS OF CASH-DOMINATED TRANSACTIONS FOR MONEY LAUNDERING. Institute for Security Studies, 2012. https://issafrica.s3.amazonaws.com/site/uploads/SitRep2012Oct.pdf.

Wikipedia

{{cite report |last1=MOSHI |first1=HUMPHREY PB |title=IMPLICATIONS OF CASH-DOMINATED TRANSACTIONS FOR MONEY LAUNDERING |publisher=Institute for Security Studies |date=19 October 2012 |url=https://issafrica.s3.amazonaws.com/site/uploads/SitRep2012Oct.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{moshi2012implications, author = {MOSHI, HUMPHREY PB}, title = {{IMPLICATIONS OF CASH-DOMINATED TRANSACTIONS FOR MONEY LAUNDERING}}, institution = {Institute for Security Studies}, year = {2012}, month = oct, url = {https://issafrica.s3.amazonaws.com/site/uploads/SitRep2012Oct.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }