The General Body of the Inter-governmental Action Group against Money Laundering in West Africa (GIABA) has highlighted concerns regarding the increasing use of mobile money and virtual currencies poses new challenges for potential money laundering (ML) and terrorist financing (TF) activities in the region.
The group also noted that emerging risks of proliferation financing are also observed, especially through inadequately monitored trade routes and the movement of dual-use goods.
“The growing adoption of mobile money and virtual currencies, in the absence of robust regulatory frameworks, presents new avenues for both Money Laundering and Terrorists Financing activities in the West African region,’ GIABA 2024 report, launched last in Dakar, Senegal indicates. “Proliferation of financing risks are also emerging, particularly through under-monitored trade routes and transshipment of dual-use goods.”
Mobile money has become a key tool in West Africa’s financial inclusion journey.
According to Connecting Africa, a continental financial publication outlet, over the past ten years, West Africa has emerged as a key mobile money player with the number of registered mobile money accounts doubling between 2013 and 2023.
That’s according to the GSMA’s 2024 State of the Industry Report on Mobile Money which shows that sub-Saharan Africa remains a key driver of mobile money’s success and has the highest levels of global mobile money adoption.
GSMA is a trade association that represents the interests of mobile network operators worldwide. More than 750 mobile operators are full GSMA members and a further 400 companies in the broader mobile ecosystem are associate members.
Over 500 million active mobile money accounts in West Africa as of 2023. It has boosted GDP by an estimated $600 billion in countries using these services; helps with sending money, paying bills, saving, and supporting small businesses. Growth driven by more smartphones and focused financial inclusion efforts.
While it is making a huge difference in helping to enhance economic activities, it has a huge downside. Challenges include regulatory hurdles, cybersecurity risks, and digital literacy gaps.
The GIABA report, which was presented to regional stakeholders at the gathering last Tuesday, reveals that the West African region continues to face evolving money laundering (ML), terrorist financing (TF), and proliferation financing (PF) risks that impact on effective implementation of Anti Money Laundering (AMLML/CFT/CPF measures.
The report revealed Key vulnerabilities, including the misuse of virtual assets and weak regulatory oversight, prompted strategic priorities aimed at enhancing regulatory frameworks, cross-border intelligence sharing, and the capacity of law enforcement agencies.
Key vulnerabilities include illicit financial flows largely from the extractive sector, increased terrorist financing activity, misuse of virtual assets, and weak regulatory oversight of the Designated Non-Financial Businesses and Professions (DNFBP) sector.
Terrorist organizations operating in parts of the Sahel and Lake Chad Basin exploit unregulated financial channels and border weaknesses to sustain their operations—a situation GIABA describes as worrisome.
“The region continues to face evolving money laundering, terrorist financing, and proliferation financing risks that impact on effective implementation of Anti money laundering, and counter terrorists financing measures,” the report reveals. “The growing adoption of mobile money and virtual currencies, in the absence of robust regulatory frameworks, presents new avenues for both ML and TF activities. Proliferation financing risks are also emerging, particularly through under-monitored trade routes and transshipment of dual-use goods.”
In response to these challenges, GIABA says member States have undertaken several key measures, including the strengthening of Financial Intelligence Units (FIUs), completion of National Risk Assessments (NRAs) to enhance their understanding of their ML/TF/PF risks, enhancement of regulatory frameworks to cover virtual assets and DNFBPs, and the increased application of targeted financial sanctions. Regionally, the GIABA Secretariat continues to play a central role in promoting compliance with FATF standards, conducting mutual evaluations and supporting capacity building and development.
Steady Progress Against ML, TC, but more needs to be done
Despite the enormous challenges, GIABA said that ECOWAS member states are making steady progress in the fight against ML and TF. The group describes 2024 as a “generally a good year” but not without its flip of challenges. GIABA executed substantially its activities.
Last year, the report says, the region witnessed several emerging ML/TF/PF issues with attendant implications for improved measures.
“GIABA’s dedication to advancing AML/CFT measures in West Africa and addressing challenges reflects a commitment to regional security and financial integrity,” DG Harris said, adding that GIABA saw progress and challenges in anti-money laundering, terrorist financing, and proliferation financing efforts.
While the region faced ongoing risks from illicit financial flows and inadequate oversight, the report says member states took steps to strengthen regulatory frameworks and combat financial crimes.
Noteworthy achievements included the successful conclusion of the Second-Round mutual evaluations and the improved compliance with AML/CFT standards in West Africa.
The 2nd outcomes of the 2nd round of mutual evaluations reveal that the region of West Africa has seen an improved level of AML/CFT compliance. Apart from the improved ratings, particularly on Technical Compliance, the year under review saw visible demonstration of improved member States engagement in the discussion of their mutual evaluation reports (MERs) and follow-up reports (FURs) during GIABA statutory meetings.
In addition, member States witnessed accelerated implementation of their Action Plans culminating in Senegal’s completion of its Action Plan and exit from the ICRG process in August, while Mali and Burkina Faso inched very close to completing their Action Plans.
The annual report provides insights into 2024 achievements, policy and research activities, technical assistance delivery, cooperation efforts, financial matters, and monitoring and evaluation activities.
As recounted by GIABA’s Director General Edwin W. Harris when he officially presented the report to regional stakeholders in Dakar, Senegal last week, the report highlights the organization’s collaborative efforts with partners and member states in protecting regional economies and combating financial crimes.
It also highlights collaboration with international partners and capacity-building initiatives further supported national efforts to combat financial crimes.
Amid organizational changes within the West African region, including the exit of three member states (Mali, Niger, and Burkina Faso) from the ECOWAS regional bloc, efforts were made by GIABA to ensure continued regional cooperation and effective implementation of AML/CFT measures.
Recruitment and training initiatives aimed to bolster the Secretariat’s capabilities for future evaluations and operational effectiveness. Despite funding challenges for non-ECOWAS evaluations, engagement with development partners sought to address financial burdens collectively.
Despite facing challenges, GIABA’s commitment to fight illicit financial flow remained steadfast.
The organization said it ensured a shift in program delivery to enhance member state capacities, especially those under the FATF ICRG process, resulting in positive outcomes like Senegal exiting the FATF Grey List. Furthermore, the report underscores GIABA’s role in addressing emerging financial risks in the region and promoting compliance with AML/CFT/CPF measures.
Measures included strengthening FIUs, completing NRAs, regulating virtual assets, and improving enforcement mechanisms. The report also notes the completion of the Second-Round mutual evaluations and the impending Third-Round evaluations commencing in 2026.
Despite challenges, GIABA remains dedicated to advancing its goals and fostering sustainable cooperation among member states in the fight against financial crimes.
