W/African nations need robust risk assessment measures to meet FATF standards – Report

For countries in West Africa to meet the global compliance level with the Financial Action Task Force’s (FATF) standards, there is a need for them to develop robust risk assessment measures in their operations, Global South Dialogue on Economic Crime (GSDEC) Report, has advised.

The report authored by Nkechikwu Azinge-Egbiri and Kolawole Ebire examined 99 countries globally with a core focus on West Africa in relation to countries’ compliance with the Financial Action Task Force’s (FATF) standards.

It is an 83-page report titled, ‘An Analysis of Compliance and Effectiveness Status of Assessed Countries under the fourth round and its FRSB Equivalent,’ that looked at 99 countries empirically and narrowed down to West African countries.

According to the report, countries that conduct robust risk assessments have a deeper understanding of their risks and comply strongly with the FATF standards.

It, however, pointed out that the much-improved FATF methodology still has challenges as its applicability has unintended consequences for developing countries.

The report also explored the factors that determine the compliance outcomes of countries, including the influence of factors such as the FATF methodology, the composition of assessment experts, and language.

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Commenting on the report, Joy Malala, assistant professor at the University of Warwick and founding member of GSDEC, said the report was timely and demonstrates the challenges Global South countries face with transplantation.

Malala said that 2020 was a turning point for digital financial services across the globe as a result of the Covid-19 pandemic yet it brought on challenges.

“FATF digital identities directive brought in to address the challenges associated with digital financial services is something the developing countries will struggle with due to the likely unintended consequences such as its exclusionary nature,” Malala said.

She said that the FATF’s directive can be effectively adapted to the cybercrime landscape of developing countries if carefully assessed.

“The impact of the digital identification rollout on vulnerable population segments needs to be explored on a regional basis in order to maintain the secure and inclusive provision of financial services,” she added.

During Azinge-Egbiri and Ebire’s research, the FATF commenced an ‘unintended consequences’ project which prompted the GSDEC to host a conference themed ‘Global Anti-Money Laundering Standards: Errors of Transplantation and Unintended Consequences in April 2022’.

The conference brought academics and stakeholders together to discuss pertinent issues that cut across the implications of the FATF’s standards on implementation, civil societies, financial inclusion, and technology. The dynamics of blacklisting and de-risking were also discussed.

Eminent participants include Louis de Koker, of La Trobe University Australia, who delivered the keynote speech and said, the Global South, through expert research findings, has a role to play to prevent the unintended consequences of the FATF standards.

Anthony Idigbe, the senior partner of PUNUKA Associates, said that beyond representation within global bodies, the Global South needs to focus on expertise to ensure that the global norms suit their terrain.