International financial institutions are increasingly retreating from the African market, citing concerns over high risks and limited profitability, according to Idrissa Diop, Afreximbank‘s Director of Compliance.
Addressing the media ahead of the Legacy Conference and Investiture in Cairo, Diop highlighted that this withdrawal trend stems from apprehensions about managing risks effectively and achieving sustainable returns.
He emphasized Afreximbank’s mission to counter these perceptions by proving that Africa’s risk profile is manageable, provided investors thoroughly understand and adhere to the continent’s complex regulatory environments.
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“Africa’s regulatory landscape is vast and varied, with thousands of rules that we vigilantly track to ensure smooth operations for ourselves and our partners,” Diop explained. “When we extend credit to banks or institutions, we prioritize responsible use of funds, safeguarding capital adequacy, and preventing exposure to sectors vulnerable to illicit activities such as money laundering or terrorism financing. Compliance is not just about moving money; it’s about ensuring that financial flows are secure and transparent.”
To foster stronger regulatory cooperation and deepen compliance awareness, Afreximbank launched the Afreximbank Compliance Forum. “Compliance acts as both the gateway and the safeguard for any institution. Just as journalists must verify facts before publishing, banks must ensure every transaction aligns with regulatory standards,” Diop noted.
He stressed that Afreximbank’s operations across 54 African nations strictly follow regulatory mandates. “Trade cannot be discussed without embedding security at its core, and compliance is the bedrock of that security. It means tracing funds from origin to destination-knowing precisely who sent money from China and confirming that it reaches the intended bank, country, and client in Africa. This traceability builds trust and transparency in financial transactions.”
Several major global banks have recently scaled back their African presence:
- HSBC Holdings plc announced in September 2024 its exit from South Africa, ending nearly three decades of operations there.
- Société Générale S.A. has been systematically withdrawing from various African markets, including Ghana, where it ceased operations in May 2024 after about 20 years.
- Barclays plc has been reducing its footprint, notably decreasing its stake in South Africa’s Absa Group and retreating from the continent more broadly.
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The upcoming 2025 Afreximbank Compliance Forum, marking its tenth edition, will be hosted in Kigali, Rwanda, in partnership with the Central Bank of Rwanda. Previous forums have taken place in South Africa and Senegal.
Diop underscored Afreximbank’s commitment to due diligence, stating, “We refuse to be seen as negligent or complicit by financing transactions without fully understanding the ultimate beneficiaries. Misuse of funds for illicit purposes harms economies and damages institutional reputations.”
He added that Afreximbank ensures all recipients of its financing are well-structured, compliant with regulations, and accountable in managing funds to support broader economic growth.
This year’s forum will be organized alongside the Central Bank of Rwanda and ESAAMLG (Eastern and Southern Africa Anti-Money Laundering Group), a regional body affiliated with the Financial Action Task Force (FATF). Last year’s event in Dakar was held in collaboration with GIABA, which serves a similar role in West Africa. These partnerships highlight Afreximbank’s dedication to reinforcing anti-money laundering frameworks and assisting countries in exiting FATF’s grey list.
“Countries like South Africa, Nigeria, and Senegal have faced challenges related to grey-listing. Our cooperation with regulatory bodies helps them enhance their compliance systems. As the African Trade Bank, our role is to facilitate intra-African trade under the African Continental Free Trade Area (AfCFTA), but this must rest on a foundation of security and regulatory adherence,” Diop explained.
The Kigali conference agenda will include discussions on leveraging artificial intelligence for transaction monitoring, sanctions compliance, regulatory updates, beneficial ownership transparency, and combating illicit financial flows. These conversations will complement the forthcoming trade finance seminar in Abidjan, further fortifying secure trade and responsible finance across Africa.
The event will convene central bankers, financial intelligence units, commercial banks, and traders to explore ways to enhance the safety of intra-African commerce. “For example, an exporter shipping cashew nuts from Côte d’Ivoire to Tanzania must understand Tanzania’s central bank export regulations. This knowledge is crucial for compliance, protecting trade, and preventing banks from inadvertently facilitating money laundering or terrorism financing,” Diop said.
Despite the ongoing trend of international banks pulling back from Africa, Afreximbank remains steadfast in bridging the gap between African economies and global finance. Diop cited the Dangote Refinery project as an example, where all financial transactions are meticulously monitored to ensure compliance with international sanctions and financial regulations.
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He pointed out that recent geopolitical developments, such as new sanctions on Russia, highlight the necessity of navigating complex global regulations carefully. “Africa continues to engage with countries like Russia, but these interactions must be transparent and compliant with regulatory frameworks,” he said.
The Compliance Forum also aims to address technological gaps in African banking. “Out of approximately 600 to 700 banks on the continent, many lack advanced compliance technology. This forum invites global compliance technology providers to present solutions that can help African banks enhance their systems, safeguard their economies, and qualify for partnerships with international financial institutions,” Diop explained.
He emphasized that the forum serves as a critical platform to discuss regulations, sanctions, anti-money laundering strategies, and the pivotal role of compliance in advancing intra-African trade. “We will also engage with the African Union on implementing the AfCFTA, which essentially functions as a regulatory framework that banks must understand and uphold. Without this knowledge, banks risk regulatory breaches, sanctions, and loss of correspondent banking relationships,” he added.
Diop concluded by affirming that Afreximbank’s compliance initiatives are integral to fostering trust, transparency, and responsible finance across Africa. “Trade cannot thrive without compliance. That’s why we say: Better Compliance, Better Trade. Every dollar entering or leaving the continent must be tracked from start to finish to guarantee transparency, security, and accountability,” he stated.
When asked about whether the Pan-African Payment and Settlement System (PAPSS) eliminates the need for correspondent banking, Gwen Mwaba, Afreximbank’s Managing Director of Trade Finance and Correspondent Banking, affirmed that correspondent banking remains essential.
“Simply put, correspondent banking is still necessary,” Mwaba said. “Africa remains a net importer of refined goods like petroleum products. Even countries that produce crude oil often import refined versions. Exporters may lack country-specific limits or sufficient confidence in African counterparties, so correspondent banks act as intermediaries to guarantee payments. For instance, an Australian wheat exporter shipping to Africa might not be familiar with the buyer or comfortable with the country’s risk profile, so correspondent banks facilitate the transaction.”
She further explained that correspondent banks play a vital role in ensuring the integrity and trustworthiness of trade. “Sellers want assurance of payment, while buyers want to receive the correct quantity and quality of goods. Correspondent banks provide this security, preventing scenarios where money is sent but goods are not delivered or are substandard,” Mwaba said.
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However, Mwaba noted that PAPSS fills a crucial gap by enabling intra-African trade in local currencies. “PAPSS allows two African trading partners in different countries to transact in their own currencies. For example, a buyer in Malawi purchasing from Kenya can pay in Malawian kwacha, and the Kenyan seller receives Kenyan shillings. This streamlines trade and eases pressure on the US dollar,” she said.
She emphasized that Africa’s shortage of US dollars makes local currency trading through PAPSS vital for stabilizing exchange rates. “If more transactions occur in local currencies, we can conserve dollars for transactions that truly require them, ultimately enhancing trade efficiency under the AfCFTA,” Mwaba concluded.