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West Africa’s Battle Against Money Laundering and Terrorist Financing

As of 2021, West Africa has been grappling with significant weaknesses in anti-money laundering and combating the financing of terrorism (AML/CFT) supervision. A recent assessment by the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) revealed important deficiencies in the AML/CFT supervisory regimes of most member states.

Consequences of Deficiencies

According to a report by the International Monetary Fund (IMF), three countries - Burkina Faso, Mali, and Senegal - have been placed under increased monitoring by the Financial Action Task Force (FATF) due to their range of deficiencies. This development has significant implications for the region’s financial sector, as correspondent relationships may become more difficult and expensive to maintain.

The consequences of being under enhanced monitoring can be severe, including:

• Reputational risk
• Difficulties in maintaining correspondent relationships
• Increased customer due diligence requirements by banks in other countries
• Challenges in fulfilling domestic and international trade payment requirements, potentially raising costs and posing other challenges

Efforts to Address Deficiencies

In an effort to address these issues, the West African Economic and Monetary Union (WAEMU) has implemented key reforms. In 2015, the Council of Ministers adopted a new Uniform Law on AML/CFT, which aimed to integrate the FATF Recommendations adopted in 2012. The law has since been transposed into the national legal frameworks of all member states.

Gaps and Deficiencies

However, the report notes that the law is not fully aligned with FATF standards, limiting the ability of the BC (Banking Commission) to monitor and enforce compliance with preventive measures. Specifically, the Uniform Law contains deficiencies in customer due diligence requirements and lacks a legal requirement for the BC/GSBC to review the ML/TF risk profile of an FI or financial group.

Additionally, AML/CFT assessors have observed clear gaps in the effectiveness of the region’s AML/CFT framework, including:

• Lack of a legal requirement for FIs to identify and verify the beneficial owners of their legal person customers
• Limited customer due diligence requirements

Regional Progress

As the region continues to navigate these challenges, it is essential that WAEMU member states prioritize the implementation of effective AML/CFT measures to protect their financial sectors and prevent illicit activities.

Table: WAEMU Member States’ MER Status as of December 2021

Source: International Monetary Fund (IMF)

Note: MER stands for Mutual Evaluation Report, which is a comprehensive assessment of a country’s AML/CFT framework. The report provides an overview of the region’s efforts to combat money laundering and terrorist financing.