New foreign exchange regulation quietly adopted in the West African Economic and Monetary Union (WAEMU), giving greater control to the Union’s central bank (BCEAO) but adding complex red tape

The West African Economic and Monetary Union (WAEMU, also known by its French acronym UEMOA) has introduced a new foreign exchange regulation marking a major step in modernising its regulatory framework. Introduced without fanfare at the end of 2024, the reform gives the BCEAO tighter control of financial flows as part of the region’s drive to counter money laundering and the financing of terrorism (AML-CFT). The new rules also introduce new, more complex administrative formalities for investors and residents of the regional bloc.

A more complex environment for investments and loans

Adopted on 20 December 2024, the regulation on foreign exchange replaces the previous 2010 regulation. It enshrines the principle of freedom for direct and portfolio investments, while requiring transactions to be reported and domiciled in a locally approved intermediary (i.e. a local bank).

The new rules define direct investment as the acquisition of non-financial assets or a stake of at least 10% of a company’s capital. Portfolio investments are defined as involving transactions on debt securities or equity securities up to 10% of the capital.

Investments must be declared to the Ministry for Finance and to the BCEAO within 30 days. Transactions must be domiciled in local banks, except for those under a threshold to be set by the central bank.

Investments that involve transferring funds to a company resident in the WAEMU, such as cash subscriptions to a capital increase, are the main target of the new foreign exchange regulation. Income from investments must be domiciled with an authorised intermediary and transferred to the BCEAO. Although some investments, such as the acquisition of a company domiciled in the WAEMU region by a non-resident, do not necessarily involve financial flows into or out of the region, they must still be declared for data gathering purposes.

The regulation imposes more stringent administrative formalities for investments and loans in the WAEMU region. All investments or loans above a threshold to be set by the BCEAO must be domiciled with a local bank. Domiciliation, which previously only applied to imports and exports, has been extended to investments, lending, borrowing, acquisition of receivables, sureties and guarantees. Resident beneficiaries are required to submit specific documents to the central bank in support of their application.

When an investment is liquidated, the supporting documents must be submitted to the authorised intermediary, which may transfer the proceeds of the liquidation on presentation of these supporting documents. However, since the BCEAO has yet to publish the exact requirements, the region’s commercial banks may find the new rules difficult to apply.

Stricter rules governing repatriation and foreign currency transfers

The reform clarifies and strengthens the repatriation and foreign currency transfer requirements. WAEMU residents must repatriate income from foreign investments and loans and deposit it in their local bank accounts.

Repatriation is a two-stage process:

• the beneficiary receives the income in foreign currency from the investment or loan in a local bank;
• the receiving bank transfers the funds to the BCEAO according to the central bank’s instructions.

Although the local banks play a key role, the BCEAO has yet to issue clarification regarding the exact supporting documents required.

Each WAEMU member state will establish a national monitoring committee responsible for supervising the repatriation of funds, promoting awareness of the new measures and ensuring that export companies and authorised intermediaries comply with the rules on domiciliation and repatriation of export earnings. It is important to note that the committees’ remit extends only to repatriation of export earnings and does not include borrowings from non-residents.

Uncertainty surrounding foreign currency accounts

For WAEMU residents

WAEMU residents require prior approval from the Ministry of Finance, after confirmation by the BCEAO, to open a foreign currency account either within or outside the region. The new regulation governing foreign exchange does not stipulate the terms and conditions for opening foreign currency accounts. We think that some of the measures in Instruction 08/07/2011 of 13 July 2011 will continue to apply pending updated instructions from the BCEAO, notably the rules on foreign currency accounts held by residents, as well as the conditions for renewing authorisation for such accounts.

Foreign currencies held abroad by WAEMU residents must be repatriated, which ultimately narrows the value of foreign currency accounts to specific transactions or transiting funds.

For non-residents

The region’s local banks must obtain prior authorisation from the BCEAO to open CFA franc accounts for non-residents. The new measures render obsolete the provision in Instruction 08/07/2011 allowing non-residents to open these accounts under the local banks’ responsibility.

Non-residents’ right to hold a foreign currency account was also time-bound under the previous rules. After two years they were required to renew residency and reapply to continue to operate the account. Until the BCEAO defines the new terms and conditions, we expect that these conditions will continue to apply to CFA franc accounts opened in local banks by non-residents.

Conclusion

The reformed foreign exchange regulation aims to update the regulatory framework and to strengthen the region’s AML/CFT drive, but it also burdens economic players with additional red tape. Companies and local banks must adjust to the new requirements to avoid disruption to their transactions.