Imagine a trader in Bamako, Mali, who needs to pay a supplier in Dakar, Senegal. Despite both countries belonging to the Economic Community of West African States (ECOWAS), the transaction may require multiple intermediaries, foreign currency conversions and several days before reaching its destination.

Ironically, in some situations, sending money from Mali to Europe can be easier than sending it to a neighbouring West African country.

While these payment inefficiencies increase costs for businesses, they also create opportunities for money laundering, terrorist financing, sanctions evasion and fraud.

As digital payments continue to expand across Africa, cross-border payments have become one of the region’s most important compliance challenges.

Why Cross-Border Payments Matter

West Africa is experiencing rapid growth in digital finance.

Several trends are reshaping the regional payment landscape:

• Growth in intra-African trade
• Expansion of mobile money
• Increasing financial inclusion
• Digital banking adoption
• The implementation of the African Continental Free Trade Area (AfCFTA)

For businesses, efficient cross-border payments are essential for regional commerce. However, moving money between neighbouring countries remains surprisingly complex.

Why Are Payments Still So Difficult?

Multiple Currencies

Unlike the Eurozone, West Africa operates with several different currencies.

Examples include:

• CFA Franc (WAEMU)
• Nigerian Naira
• Ghanaian Cedi
• Gambian Dalasi
• Liberian Dollar
• Sierra Leonean Leone
• Guinean Franc

Every currency conversion introduces additional foreign exchange costs, operational complexity and compliance obligations.

Different Regulators

Each country maintains its own:

• Central Bank
• Financial Intelligence Unit (FIU)
• AML legislation
• Licensing framework
• Payment regulations

For example:

For payment providers operating across multiple jurisdictions, complying with different regulatory frameworks significantly increases operational complexity.

Limited Correspondent Banking

Historically, many African banks have relied on correspondent banking relationships with institutions outside the continent to settle international payments.

A payment between two neighbouring African countries may therefore travel through correspondent banks in Europe or North America before reaching its final destination.

This creates:

• Higher costs
• Longer settlement times
• Greater dependence on foreign currencies
• Additional compliance checks
• Increased operational risk

In recent years, some African banks have also lost correspondent banking relationships because of global “de-risking” initiatives, making cross-border payments even more difficult.

Why Criminals Exploit Fragmented Payment Systems

Every additional intermediary creates another opportunity for financial crime.

A simplified payment journey might look like this:

Customer in Mali
        │
Local Bank
        │
Correspondent Bank
        │
Foreign Exchange Conversion
        │
Another Correspondent Bank
        │
Receiving Bank
        │
Supplier in Senegal

Each additional step increases the opportunities for criminals to disguise illicit funds, manipulate documentation or exploit weaknesses in the payment chain.

Key AML Risks

1. Informal Value Transfer Systems

Where formal banking channels are expensive or slow, businesses and individuals may rely on informal remittance networks.

These systems often operate outside traditional banking oversight, making customer identification and transaction monitoring significantly more difficult.

2. Cash Couriers

Cash still plays an important role in regional trade.

Examples include:

• Senegal ↔ Gambia
• Guinea ↔ Mali

Large amounts of physical currency crossing borders increase the risk of money laundering and terrorist financing.

3. Trade-Based Money Laundering (TBML)

Trade remains one of the largest money laundering risks globally.

Common techniques include:

• Over-invoicing
• Under-invoicing
• Multiple invoicing
• False invoices
• Phantom shipments

Because trade transactions involve multiple countries, currencies and intermediaries, detecting suspicious activity can be particularly challenging.

4. Foreign Exchange Arbitrage

Different exchange rates and parallel currency markets create opportunities for criminals to exploit pricing differences.

These schemes may involve:

• Currency manipulation
• Unlicensed FX dealers
• Layering transactions across multiple currencies

5. Mobile Money Abuse

Mobile money has transformed financial inclusion across Africa.

However, criminals may exploit these platforms through:

• Mule accounts
• Structuring
• Wallet-to-wallet layering
• Identity fraud
• Synthetic identities

6. Sanctions and Terrorist Financing Risks

Financial institutions operating in West Africa must also manage:

• UN sanctions
• OFAC screening
• EU sanctions
• Regional terrorist financing risks
• Cross-border payments involving conflict-affected areas in the Sahel

Effective sanctions screening has therefore become an increasingly important component of AML compliance.

The Compliance Challenge

For compliance teams, cross-border payments involve far more than screening transactions.

Institutions must manage:

• Different KYC requirements
• Customer verification standards
• Beneficial ownership transparency
• Sanctions screening
• PEP screening
• Transaction monitoring
• Data-sharing limitations between jurisdictions
• Real-time fraud detection

Balancing financial inclusion with effective financial crime controls remains one of the sector’s biggest challenges.

A Practical Example

Consider a Gambian importer purchasing agricultural equipment from Senegal.

Instead of making a simple domestic-style transfer, the payment may require:

• Currency conversion
• Multiple banking intermediaries
• Additional compliance checks
• Longer settlement times

Each additional participant increases operational costs while creating more opportunities for financial criminals to conceal illicit activity.

A New Direction: PAPSS

One of Africa’s most significant payment initiatives is the Pan-African Payment and Settlement System (PAPSS).

Developed by Afreximbank in collaboration with the AfCFTA Secretariat, PAPSS aims to enable businesses, banks and payment providers to make cross-border payments in local currencies without routing transactions through multiple overseas correspondent banks. The system also incorporates validation, compliance and sanctions checks as part of the payment process.

Instead of the traditional route:

Local Bank
↓
Correspondent Bank
↓
USD / EUR Conversion
↓
Correspondent Bank
↓
Receiving Bank

PAPSS aims to simplify the process:

Local Bank
↓
PAPSS
↓
Receiving Bank

The objective is straightforward:

• Faster settlement
• Lower costs
• Reduced reliance on hard currencies
• Greater transparency
• Stronger regional financial integration

Looking Ahead

Cross-border payments in West Africa are becoming increasingly important as regional trade expands.

Initiatives such as PAPSS, AfCFTA and greater regulatory cooperation have the potential to transform how money moves across the continent.

However, payment innovation alone will not eliminate financial crime.

As payment systems become faster and more interconnected, financial institutions must continue investing in:

• Risk-based AML frameworks
• Advanced transaction monitoring
• Artificial intelligence
• Network analytics
• Digital identity verification
• Public-private information sharing

Conclusion

West Africa’s payment ecosystem is evolving rapidly, but fragmented regulatory frameworks, multiple currencies and limited correspondent banking continue to create significant AML vulnerabilities.

As digital payments expand and regional trade accelerates, the challenge for banks, fintechs and regulators will be ensuring that greater financial integration is matched by equally robust financial crime controls.

The future of cross-border payments in Africa depends not only on faster infrastructure, but also on smarter compliance.