International banks are increasingly withdrawing from Africa because they consider doing business on the continent too risky and not sufficiently profitable, according to Idrissa Diop, Director of Compliance at Afreximbank.

Speaking to journalists ahead of the Legacy Conference and Investiture in Cairo, Diop explained that the withdrawal of global financial institutions reflects growing concerns about risk management and profitability.

He said Afreximbank’s role is to bridge this gap by demonstrating that Africa is not as risky as it is perceived to be, provided that investors understand and comply with the continent’s diverse regulatory frameworks.

“Across Africa, there are thousands of regulations that we constantly monitor to ensure that our operations and those of our partners are not disrupted. When we lend money to a bank or an institution, we want to ensure that those funds are used responsibly, do not distort the bank’s capital ratios, and are not directed toward sectors vulnerable to money laundering or terrorist financing,” Diop said. “It’s not enough to talk about money; it’s equally vital to ensure that money is channeled through secure and compliant systems. That is the essence of compliance.”

He noted that Afreximbank established the Afreximbank Compliance Forum to strengthen regulatory collaboration and promote understanding of compliance across the financial sector. “Compliance is both the entrance and exit door of an organization. Everything we do is framed by regulation just as journalists must ensure that what they write aligns with the reality of the facts they report. Similarly, banks must ensure that all their transactions comply with the rules,” he said.

According to him, every transaction carried out by Afreximbank across 54 African countries must adhere to regulatory standards. “We realized that we cannot talk about trade without framing it around security, and compliance is the foundation of that security,” he said. “Security means being able to trace the source and destination of funds, knowing that the money coming from China was sent by a specific person or company and that the funds going into Africa are destined for a particular country, bank, and customer. This level of traceability ensures transparency and trust in financial flows.”

HSBC Holdings plc – The UK-based bank announced in September 2024 that it would withdraw from South Africa, where its presence dated back to 1995.

Société Générale S.A. – The French bank has been gradually exiting a number of African subsidiaries. For example, in May 2024, it announced its exit from Ghana after about 20 years of operations.

Barclays plc – Barclays’ retreat from Africa has been underway for some time. For example, it reduced its shareholding in South Africa’s Absa Group to a non-controlling stake and exited the region more comprehensively.

This year marks the tenth edition of the Afreximbank Compliance Forum, which has previously been hosted in South Africa and Senegal. The 2025 edition will take place in Kigali, Rwanda, in partnership with the Central Bank of Rwanda (Rwanda National Bank).

Diop explained that “Afreximbank does not want to be perceived as negligent or complicit by providing financing without understanding who is ultimately behind a transaction. When money is misused, whether for terrorism, money laundering, or other illicit purposes, it damages the economy and tarnishes the reputation of institutions like ours,” he said.

He added that Afreximbank ensures that every financial institution or corporate entity receiving its funding is properly organised, adheres to regulations, and manages the funds responsibly for the wider benefit of the economy.

This year’s forum in Kigali will be organised in collaboration with the Central Bank of Rwanda and ESAAMLG (Eastern and Southern Africa Anti-Money Laundering Group), a regional body under the Financial Action Task Force (FATF). Last year’s edition in Dakar was hosted in partnership with GIABA, which performs a similar role in West Africa. These partnerships, Diop said, demonstrate Afreximbank’s commitment to strengthening countries’ anti-money laundering (AML) frameworks and supporting them in exiting FATF’s grey list.

“We have seen countries such as South Africa, Nigeria, and Senegal dealing with gray-listing challenges, and our collaboration with these entities helps them improve their regulatory systems. As the African Trade Bank, part of our mandate is to promote intra-African trade under the African Continental Free Trade Area (AfCFTA). However, this mandate must be built on a foundation of security and compliance,” he said.

At the Kigali conference, discussions will cover topics such as artificial intelligence in transaction monitoring, sanctions, regulations, beneficial ownership, and illicit financial flows. Diop said these discussions will complement the upcoming trade finance seminar in Abidjan and further strengthen the framework for secure trade and responsible finance across Africa.

The event will bring together central bankers, financial intelligence units, commercial banks, and traders to explore how intra-African trade can be made more secure. “For instance, if someone wants to export groundnuts from Mali or Burkina Faso to Kenya, they must understand the export requirements of Kenya’s central bank. That understanding is compliance, it ensures trade is protected and prevents banks from being accused of facilitating money laundering or terrorism financing,” Diop said.

Despite the ongoing de-risking trend that has seen international banks withdraw from Africa, Diop emphasised that Afreximbank remains committed to bridging the gap and connecting African economies to global finance. He cited examples such as the financing of the Dangote Refinery, explaining that all related transactions must be properly monitored to comply with international sanctions and financial regulations.

He noted that recent global developments, such as new sanctions on Russia, underscore the importance of navigating complex international rules carefully. “Africa continues to engage with countries like Russia, but such engagements must be conducted transparently and within regulatory limits,” he said.

The Afreximbank Compliance Forum, he added, also aims to address the technology gap in African banking. “Out of 600 to 700 banks on the continent, many remain under-equipped in compliance technology. Through this forum, we are inviting global providers of compliance technologies to showcase their solutions and help African banks strengthen their systems, protect their economies, and become eligible for partnerships with international financial institutions,” he said.

Diop emphasised that the Compliance Forum provides a vital platform to discuss regulation, sanctions, anti-money laundering measures, and the role of compliance in advancing intra-African trade. “We will also engage the African Union on how the AfCFTA should be implemented, as it is essentially a regulatory framework that must be understood and driven by banks. Without understanding the rules, banks risk violating regulations, facing sanctions, and losing correspondent relationships,” he said.

He said that Afreximbank’s compliance efforts form part of a broader strategy to enhance trust, transparency, and responsible finance across Africa. “Trade cannot happen without compliance. That is why we say: Better Compliance, Better Trade. Every dollar that comes in or goes out must be monitored from entry to exit, to ensure transparency, security, and accountability,” Diop stated.

Responding to a question on whether the Pan-African Payment and Settlement System (PAPSS) eliminates the need for correspondent banking, Gwen Mwaba, managing director of Trade Finance and Correspondent Banking at Afreximbank, said correspondent banking remains necessary.

“The short answer is yes, we still need correspondent banking,” she said. “Africa is still a net importer of goods such as petroleum products. Even though countries produce crude oil, they import refined products. Exporters may not have country limits or sufficient confidence in African counterparties, so they need intermediaries, correspondent banks to guarantee payments. If an Australian exporter of wheat is sending goods to Africa, they may not know who they are dealing with or may not be comfortable with the country’s risk, so correspondent banks step in to facilitate that trade.”

Mwaba added that correspondent banks also play a key role in ensuring trade integrity and trust between importers and exporters. “People are selling goods far away, and their main concern is to get paid. At the same time, the importer wants to make sure they receive the correct quantity and quality of goods. Correspondent banking provides that assurance. You can send money and not get your goods, or get inferior ones, so correspondent banks make trade more secure,” she explained.

However, she said PAPSS helps fill an important gap by supporting intra-African trade. “PAPSS enables two African counterparties in different countries to trade in their local currencies. If someone in Malawi buys goods from Kenya, they can pay in Malawian kwacha through PAPSS, and the Kenyan supplier will receive Kenyan shillings. This makes trade seamless and reduces pressure on the US dollar,” she said.

Mwaba stressed that Africa suffers from a shortage of US dollars, and local currency trading through PAPSS could help stabilize exchange rates. “If more people trade in local currencies, we can preserve dollars for transactions that truly require them. Ultimately, this will make trade more efficient under the AfCFTA,” she added. (BUSINESS DAY)