In West Africa, the fight against financial crime is a priority to enhance security and stability in the region. To effectively address this issue, particular attention needs to be given to microfinance institutions (MFIs). MFIs are numerous in West African countries, where they play a crucial role in financial inclusion and poverty alleviation. However, they also pose high risks in terms of money laundering and terrorist financing (ML/FT). To enhance their capacity to combat these crimes, the OCWAR-M project has provided training to MFIs and their supervisory authorities in seven ECOWAS countries.
In February and March 2023, the OCWAR-M project held its final workshops for MFIs and their supervisors in Lomé and Cotonou. These workshops marked the completion of a training cycle aimed at strengthening the capacity of these stakeholders in anti-money laundering and counter terrorist financing (AML/CFT). These trainings “allowed to assess the progress made by MFIs and their supervisors since their initial training sessions, gather feedback on the challenges faced in implementing AML/CFT measures, and outline future actions to further strengthen the fight against financial crime within these institutions”, as explained by Samuel Diop, a key expert of the OCWAR-M project responsible for technical assistance programs targeting financial institutions.
Between December 2020 and March 2023, the project organized sixteen training sessions in seven ECOWAS countries: Benin, Burkina Faso, Côte d’Ivoire, Guinea, Niger, Togo, and Senegal. These sessions benefited over 320 representatives from MFIs and around a hundred representatives from their supervisory authorities. In a context where several countries in the region are on the Financial Action Task Force (FATF) grey list, and where mutual evaluations conducted by the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) have highlighted the vulnerabilities of MFIs to ML/FT risks, it was crucial for OCWAR-M to focus on this particularly sensitive sector.
Microfinance Institutions: Prime Targets for Criminals
MFIs, which are numerous in West African countries, play a crucial role in poverty alleviation and financial inclusion by providing financial services to previously underserved individuals. Due to their aim of being accessible to a large number of people, certain regulations may be less strictly enforced compared to banking institutions. The majority of MFIs are small-scale structures with limited resources, resulting in inadequate knowledge and application of AML/CFT regulations. In the absence of effective client identification and profiling systems, they can become attractive targets for criminals seeking to launder their funds and terrorist financiers.
Practical Training for MFIs and their Supervisors
To enhance the ability of MFIs to prevent their exploitation by criminals, the OCWAR-M project worked with directors, employees, and representatives of professional associations of these institutions. The objective of these training sessions was highly operational, aiming to help participants understand the legal obligations related to AML/CFT and guide them step-by-step in establishing an effective and compliant framework.
Supervisors of MFIs were also involved in these training sessions to enable them to exchange ideas with representatives of these institutions. This engagement allowed supervisors to identify weaknesses in the AML/CFT frameworks of MFIs and gain a better understanding of the challenges they are facing to improve these frameworks. This is an important aspect, as emphasized by the Director-General of the supervisory authority in Benin (1), Mr. Rafiou Bello, stating that their action “aims not only to sanction but also to support”. Supervisors also received specific modules on conducting controls to ensure the compliance of MFIs with AML/CFT laws.
Demonstrated commitment of MFIs and Supervisors in the Fight against Financial Crime
The exchange and evaluation sessions held in early 2023 confirmed the awareness and commitment of MFIs and their supervisors in AML/CFT efforts. Many institutions reported appointing AML/CFT officers and implementing internal procedures to monitor suspicious financial operations and exercise due diligence in identifying high-risk clients and transactions. Supervisors also expressed their determination to continue their efforts in strengthening controls.
Although there is still a long way to go, as highlighted by Samuel Diop, who reminds that “these institutions face the challenge of balancing their mission of financial inclusion with the implementation of effective AML/CFT measures, along with a lack of financial resources to strengthen their framework”, these results serve as encouragement to pursue the initiatives aimed at enhancing the capacity of West African MFIs in combating financial crime!
- In Benin, the supervisory authority is the National Agency for Surveillance of Decentralized Financial Systems (ANSSFD), which is attached to the Ministry of Finance. In West Africa, the term “decentralized financial system” is used to refer to Microfinance Institutions (MFIs).