Home Organization Conferences and Events Collaborators Consultancy Contact Español
News Legislation OFAC Interviews Cases Documents Resources Risks Prevention and Control Typologies Organizations Videos


Tontines: How can be misused for informal micro-finance schemes

A tontine is an age-old traditional system of financing small projects such as small retail businesses, small farming, health and education schemes. The system consists of a group of people, generally women, coming together and agreeing on how much to contribute and when each member benefits from the scheme. The arrangements are very flexible in that they allow those with legitimate reasons, e.g. critical financial constraints, to swap turns with those who have less urgent need for funds. The group meets at an agreed time – once a month, week or day, depending on the kind of activities being carried out by the members of the group – where the agreed amount is paid down. The total amount of funds collected is then paid to one member of the group. Members of the group benefit from the operation in turns, at each meeting and collection day. This scheme has been particularly helpful for women and makes up for the lack of banking facilities in rural and suburban areas. It has given women the opportunity to boost their businesses and build houses for their families. These schemes have been helpful for most women in West and Central Africa because in Benin, Côte d’Ivoire, Cameroon, Ghana, Nigeria and Togo it gave them more financial independence and the ability to provide for their families.

The process of becoming a member of the scheme does not entail the requirements that a regular bank would demand. The scheme is based on trust and most of the participants know each other because they are often members of the same market or trade. Generally, no records are kept because of the high level of illiteracy among the members. This is not a problem because each person knows when they are due for collection, as would have been agreed at the outset.

Because of the lack of CDD requirements, a tontine could be abused by criminals or their partners, who might use the system to launder the proceeds of their criminal activities. Tontines are officially recognized as a genuine transaction in countries where they are practiced. Therefore the funds of any individual wanting to invest bulk cash in construction of a property can be regarded without suspicion if s/he is able to show that the amount is from a tontine. Funds collected could be directly injected into the financial system through the real estate sector.

As in the case of corporate vehicles, apart from obscuring the identity of the beneficial owner and the origin and destination of funds, tontine schemes can be used by criminals as a source of cleaning dirty money.


       
 
       
Institute for Professional Studies INC: Calle 50, Torre Global Bank, Piso 33, Oficina 03, Ciudad de Panamá, Panamá.
Phone: (507) 832-52.47
info@antimoneylaundering.us

 
© 2007 Insitute for Professional Studies. All rights reserved