DJIBOUTI COUNTRY RISK HAS BEEN ESCALATED >
DIFFERENT POINT OF VIEW by Monte Friesner >
Financial Crime Consultant for WANTED SA >
Sunday November 07, 2010 >
WANTED SA has just learned today that the unusual financial activity in the Republic of Djibouti should be examined in the context of country risk. Djibouti with 50% unemployment and few exports does not appear to support an expanding financial structure at this time.
So why is there a flurry of foreign banks opening in that tiny Red Sea nation? Could it be Iran sanctions evasion activity is occurring?
Here are the red flags that trouble us at WANTED SA:
- A major Iraqi financial institution has recently opened up a branch there. This bank has correspondents in 87 foreign banks, by our analysis count, including a number in Turkey, Lebanon, China, Egypt, and Syria and all countries where suspected Iran sanctions evasion activity has been reported.
- A new local bank is owned by a Swiss entity.
- Russian private investors have requested a license from the Central Bank to operate a bank in the capital.
- I am concerned that the small economy does not support these new foreign banks. Is there something else we are missing?
Add these new events to the existing situation:
- Djibouti imposes no restrictions upon foreign currency and the Djiboutian Franc [DJF] is pegged to the US Dollar.
- The proximity of the ongoing civil war in Somalia has reportedly resulted in arms smuggling through Djibouti.
- The country, a crossroads between Africa, Asia and Europe, is reportedly a transit zone for smuggling of both drugs and counterfeit goods.
- Unrest in the interior was more pronounced this summer; and remember this is a country which endured a lengthy civil war not too many years ago.
All in all, the above factors justify in our humble opinion, raising the levels of country risk for Djibouti to a major high.
The facts and opinions stated in this article are those of the author and not those of WANTED SA. WANTED SA does not warrant the accuracy of any facts and opinions stated in this article; does not endorse them, and accepts no responsibility for them.