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Algerian Economy Suffers from Money Laundering in Dubai and Istanbul

Last updated on April 29th, 2019

A few days after the first demonstration in Algeria on February 22, the price of the euro, stable for nearly a year around 213 dinars, jumped suddenly reaching 217 dinars in Algiers. At the origin of this sudden outbreak, information of money laundering in Dubai and Istanbul- or a rumor – circulated like a wildfire.

Prices then stabilized and demand also, traders say. It is unclear if the customer was real or if it was a “market rumor”. But for several years now, the government and the Bank of Algeria have been regularly questioned about an Algerian anomaly: the parallel foreign exchange market.

In their rare comments on this sensitive subject, members of the government have emphasized the need to have such a market in a country where the currency is not convertible and where the population needs foreign currency for traveling to the country. The tourist allowance is very low (just over 100 euros), so the traveler chooses to make the exchange in the parallel market.

In October 2012, the subject had given rise to a controversy between Karim Djoudi and Dahou Ould Kablia, who were respectively Minister of Finance and the Interior.

For Dahou Ould Kablia, Algerians “find their account” in the black market currency that should not be banned. “The government will fight the informal market of the currency,” said the finance minister. The case remained there and the government did nothing.

Bank of Algeria

The Bank of Algeria, regularly questioned about the absence of bureaux de change, provides a more vicious answer. It takes refuge behind two arguments: the dinar is not convertible and the IMF, with which Algeria is bound by an agreement, prohibits double parity. The Central Bank pretends to ignore that the problem is not at this level but in the fact that these transactions on the parallel market, which concerns between 8 and 10 billion euros per year, are not traced. Today, you can change millions of euros without providing any documents.

Concretely, even if the dinar is not convertible, nothing prevents the authorities from forcing traders to have a trade register and trace the transactions, as is the case in all countries of the world. In addition to the traceability of operations, legalizing this market will allow the state to tax the activity. By its size, it is the second market after hydrocarbons.

Because the sums circulating on the parallel market pose a real problem. In addition to being the main factor that promotes import over billing, this market is also a hotbed of money laundering for corruption and drugs. And of course, it favors the flight of capital.

Where does the money come from?

Often, when we talk about a parallel market, Algerians think of travelers, students and patients who go abroad for treatment. But these sums represent only a small part of the transactions. Most of the transactions involve larger amounts that transit through companies in Dubai, Istanbul, Hong Kong, and intended for money laundering through real estate acquisitions in Europe, investments in tax havens.

Money laundering done through the Algerian informal market involves funds partly from the emigrants’ pensions (they withdraw them in foreign currency from their bank in Algeria), from the money of the emigrants who visit Algeria and the sums emanating from the various trades.

These sums are collected and then transferred to two main destinations: Dubai and Istanbul, where are located free zones. “A financial company in Dubai receives between 40 and 50 million euros a week in shopping bags. Money goes through airports and land borders via Tunisia and Libya, “says one speaker.

Generously paid mules

These sums are transported by “mules”. Like those who use drugs elsewhere in the world, they are people who are responsible for laundering money in large amounts of foreign currency abroad, against a high return.

Before the outbreak of the Oran cocaine case, which was followed by an increase in the number of foreign currency seizures and arrests of traffickers, for every 100,000 euros transferred, the mules received about 500,000 Algerian dinars. But since the last measures and the tightening of controls at the borders, the risk to the mules being greater, their compensation followed. Illegal currency smugglers now receive up to 1.50 million dinars for every 100,000 euros transported, enough to lure many other mules to these networks.

Transfer millions of euros: instructions for use

Dubai and Istanbul, thanks to their free zones, their banking institutions with little regard for the origin of funds and favorable taxation, offer an ideal environment for those who operate in this market.

First of all, there are the importers. When they want to under-invoice a commodity to pay less customs taxes, they use the parallel market to supplement the amount paid through the bank. This market is also solicited by all those who want to transfer large sums of money without taking the risk of being intercepted at the airport.

It’s very easy. The person gives the equivalent in dinars to the Algerian correspondent. Once the remittance has been confirmed, a transfer is made from one of the companies in Dubai or Istanbul. Sometimes the transfers involve millions of euros.

Source: https://www.tsa-algerie.com/marche-parallele-des-devises-un-haut-lieu-du-blanchiment-de-largent-sale/

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