The African Export-Import Bank (Afreximbank) is intensifying its efforts to boost African trade, which has remained stubbornly below 3 percent of global commerce.

Mr. Jean Arsène Yerima, Regional Chief Operating Officer, Francophone West Africa, Afreximbank – in a speech on behalf of Dr. George Elombi, Executive Vice President of Corporate Governance and Legal Services – outlined a series of initiatives aimed at addressing the complex interplay between regulatory compliance and trade facilitation that has hindered the continent’s economic growth.

He was speaking at the opening ceremony of the 9th Afreximbank Compliance Forum in Dakar, Senegal, which was organised in partnership with the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA).

The forum was sponsored by some banks including Vista Bank, GCB Bank, Wave, Rawbank, SUNU Group and compliance system providers such as Lexus Nexis, Elucidate, Finanstra and Llyod’s List Intelligence, Consortix, and Vneuron.

The Forum focused on the Financial Action Task Force’s (FATF) requirements for identifying Ultimate Beneficial Owners (UBOs) and their far-reaching implications for trade facilitation.

The FATFsets international standards to prevent money laundering, terrorist financing, and other threats to the integrity of the global financial system. One of its critical recommendation is to identify and verify UBOs to ensure transparency and accountability in financial transactions.

Additionally, the Forum explored the transformative role of Artificial Intelligence (AI) in compliance processes, strategies for African countries to make the necessary reforms to be removed from the FATF’s grey list and showcased the latest compliance technologies.

“We are convinced that better compliance leads to better trade,” Mr. Yerima stated, emphasizing the bank’s commitment to finding a balanced approach.

“However, we must find ways to implement necessary regulations without stifling the growth potential of African economies.”

Central to Afreximbank’s strategy is the development of several key initiatives designed to reduce perceived regulatory and financial crimes risks while enhancing the image of African corporates and financial institutions.

These include the Intra-African Trade Fair (IATF) that serves as a dynamic platform that facilitates the exchange of trade and investment information, with the goal of increasing intra-African trade and investment. It provides a critical space for African businesses and investors to connect, fostering economic growth within the continent.

Additionally, the Afreximbank has introduced the Africa Quality Assurance Centers are state-of-the-art facilities that offer a wide range of services, including testing, certification, inspection, and training. These centers play a crucial role in ensuring the quality and safety of products, enhancing Africa’s global competitiveness.

The Africa Trade Gateway (ATG), a comprehensive suite of five digital platforms, also provide vital services to promote and support African trade. These platforms are essential to the successful implementation of the African Continental Free Trade Area (AfCFTA) agreement, helping to streamline trade processes and foster economic integration across the continent.

Despite these efforts, recent data paints a concerning picture of African trade performance. Intra-African trade has declined from 14.5percent in 2021 to 13.7percent in 2022, a downturn that comes despite the implementation of the AfCFTA agreement, which officially commenced on January 1, 2021.

“The envisaged changes in intra-African trade are yet to be fully appreciated,” Mr. Yerima noted, pointing to a broader issue of African countries continuing to trade more with the rest of the world than among themselves.

The situation is particularly dire in Sub-Saharan Africa, where trade growth has lagged significantly behind global averages. In the first quarter of 2024, while global goods trade saw a 1percent increase, exports from Sub-Saharan Africa grew by a mere 0.5percent quarter-over-quarter, according to the United Nations Conference on Trade and Development (UNCTAD).

Industry experts attribute this stagnation to a variety of factors, including infrastructure deficits, limited productive capacity, and trade frictions. However, an emerging concern is the impact of stringent compliance requirements, particularly those related to anti-money laundering (AML) and countering the financing of terrorism (CFT).

The Financial Action Task Force (FATF) requirements regarding the identification of Ultimate Beneficial Owners (UBOs) have added another layer of complexity to African trade. While these measures are crucial for maintaining the integrity of the global financial system, they have inadvertently created additional hurdles for African businesses seeking to participate in international trade.

The banking sector is stepping up to address these challenges. Several financial institutions, including GCB Bank, Vista Bank, SUNU Group, and Rawbank, have collaborated with Afreximbank to promote a compliance culture across the continent while facilitating trade.

As Africa grapples with these complex issues, the role of regional cooperation cannot be overstated. Mr. Yerima called for harmonizing regulations and standardizing trade processes, especially in financial services, as a means to boost intra-African trade.

Afreximbank’s multifaceted approach to addressing trade stagnation while maintaining robust compliance standards represents a potential turning point for African commerce. By combining innovative digital solutions with strategic partnerships and targeted initiatives, the bank aims to create an environment where African businesses can thrive in the global marketplace.

The coming years will be crucial in determining whether these efforts can successfully bridge the gap between regulatory compliance and economic growth, potentially reshaping Africa’s position in the global trade landscape. As Mr. Yerima concluded, “It is time to change the African narrative. With the right tools and a commitment to both compliance and growth, we can create a thriving, interconnected African economy that is fully integrated into global trade networks.”

GIABA reiterates the relevance of FATF

Mr. Madicke Niang, Principal Research Assistant, GIABA, in his address touched on the importance of the work of the Financial Action Task Force (FATF), which in 2003 established a transparency standard on Ultimate Beneficial Owners (UBO), subsequently reinforced in 2012 and 2022.

“This is Recommendation 24. It should be noted that the current provisions of this standard require, on the one hand, the assessment of Money Laundering and Terrorism Financing (ML/TF) risks of legal entities, including those created abroad and having significant links with the host country and; on the other hand, the collection of satisfactory, accurate and up-to-date information on the beneficial owners of legal entities, which must be made available and consultable in a timely manner by the competent authorities.

Better still, to facilitate implementation by stakeholders, the FATF also produced guidelines in 2014 which it updated in 2023 following the revision of the standard, to provide clear and practical guidance on how to manage the issue,” he added.

BCEAO lauds exchange of ideas, sharing of best practices

Mr. Yaye Aminata Seck Mbow, Director General of Financial Stability and Financing of Economies at The Central Bank of West African States (BCEAO), in her address emphasized the significance of collaboration in enhancing compliance practices across the region.

She praised Afreximbank’s initiative of bringing together experts to exchange and share best practices on compliance control.

“The Central Bank welcomes Afreximbank’s approach of bringing together experts and practitioners to exchange and share best practices on compliance control issues. This forum also contributes to joint efforts to combat money laundering, the financing of terrorism and the proliferation of weapons of mass destruction in our region.

It is within this context that, in response to the major shortcomings in national systems identified by GIABA during the mutual evaluations, BCEAO has undertaken several regulatory reforms to ensure the technical compliance of the regional legal corpus with the FATF recommendations.

These reforms also aim to avoid the cessation of correspondent relations or restrictions, better known as de-risking, which can adversely affect trade in our countries.” This collaboration between BCEAO, Afreximbank, and other stakeholders is a significant step towards strengthening financial stability and promoting sustainable trade across Africa.

Senegal on its way out of grey list

Mr. Mamadou Ndiaye, Technical Advisor at the Minister of Finance and Budget of Senegal, in his address on behalf of the Minister highlighted the significance of the Afreximbank/GIABA partnership in raising awareness about compliance. He proudly shared that Senegal has elevated its legal framework to meet international standards in transparency and the fight against financial crime by adopting Law no. 2024-08 on February 14, 2024.

“I would like to highlight the relevance of this beautiful illustration of the Afreximbank/GIABA partnership in working together to meet the challenge of raising awareness of compliance.

“Senegal has brought its legal framework up to international standards in terms of transparency and the fight against financial crime by adopting Law no. 2024-08 of February 14, 2024 on the fight against money laundering, the financing of terrorism and the proliferation of weapons of mass destruction.

This new regulatory framework aims to guarantee the availability and accessibility of information concerning natural persons with a decision-making role or who are beneficiaries of commercial legal entities. Senegal aims to harmonize regulations between African countries, thereby facilitating trade and reducing administrative and technical barriers.”