The Oxford Business Group has named Ghana as the regional leader in Financial Action Task Force (FATF) compliance which focuses on Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF).
According to the Oxford Business Group, stakeholders in Ghana understand money-laundering practices and large banks actively mitigate the practice. It further highlighted that the country has a comprehensive framework that addresses asset freezing and confiscation.
However, the Group noted that the country’s efforts to clamp down on AML are not yet robust and must be improved. “In fact, foreign jurisdictions’ failure to respond to Ghana’s outreach initiatives are a key reason why AML efforts are not more robust”, the Group stated.
Discussions about governance, risk management and compliance (GRC) in Africa has become increasingly important in line with moves to better observe AML and CTF regulations. Aside Ghana, Nigeria also remains on track in terms of compliance of AML and CTF regulations.
“Ghana and Nigeria, for example, have been largely successful in rolling out robust AML/CTF frameworks. They have also emphasized ESG standards, with initiatives such as Ghana’s sustainable banking agenda and Nigeria’s national energy efficiency action plans that include a system for monitoring and enforcing renewable energy rules. In addition, some Ghanaian and Nigerian companies with operations abroad have rolled out ambitious GRC-related frameworks”.
Oxford Business Group
Oxford Business Group stated that illicit financial flows (IFFs) hurt the reputation of African economies as a safe place to do business and deprive governments of the revenue they require to maintain stability, raising risk profiles and compliance costs in the process.
Indeed, while sub-Saharan Africa received nearly $2trn in foreign direct investment and official development assistance between 1980 and 2018, an estimated $1.3trn left the region in IFFs, according to a 2020 study by the Brookings Institution. An estimated $50bn in IFFs departs annually from West Africa alone, primarily as a result of misinvoicing trade transactions.
The Brookings noted that the top-four emitters of IFFs accounted for more than 50% of sub-Saharan Africa’s total, and these included the DRC and Nigeria. Efforts to tackle IFFs should be viewed in a Pan-African and global context because such funds often cross multiple borders, the Oxford Business Group highlighted.
Compliance frameworks
Compliance frameworks are built on three key initiatives: The Financial Action Task Force (FATF), which focuses on AML and CFT; the Global Forum on Transparency and Exchange of Information for Tax Purposes; and the Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
“In regards to the Global Forum on Transparency and Exchange of Information for Tax Purposes, Ghana, Nigeria and Senegal have led regional implementation in committing to dates for the automated exchange of information requested from other member tax jurisdictions. Countries that have yet to sign up include Angola and Guinea”.
Oxford Business Group
According to the Oxford Business Group, BEPS compliance is more piecemeal and efforts to coordinate an intergovernmental African response to the framework appear to have stalled in part, because current negotiations demand a unified approach to the extractive sectors.
The sheer amount of revenue stemming from mining and associated activities on the continent means that coordinating a Pan-African policy is difficult. De-risking efforts are typically handled by regional central banks, as well as GIABA, which is an ECOWAS initiative, and the Action Group Against Money-Laundering in Central Africa, which operates under the Communauté Economique et Monétaire de l’Afrique Centrale (CEMAC) and promotes FATF-style policies.
The Oxford Business Group indicated that as it stands, national monitoring bodies often lack human capital, placing the onus on overstretched central banks. The rise of financial technology (fintech) in West and Central Africa has both pros and cons when it comes to financial compliance.
Many platforms are open to manipulation because they have less robust compliance measures and are less well regulated. This is particularly problematic when they are providing services to high-profile customers like politically exposed persons who have been de-risked from large institutions.
Data privacy and cybersecurity are other concerns. That said, fintech and mobile banking solutions can reduce compliance costs by embedding regulatory requirements into IT protocols and allowing for real-time compliance monitoring, the Group suggested in a report titled ‘West and Central Africa Governance, Risk Management and Compliance’.
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