PAPSS Expansion Raises AML Compliance Concerns as Central Africa Joins Instant Payments Network

The expansion of Africa’s instant cross-border payment infrastructure into Central Africa is creating new opportunities for trade and financial inclusion, but the rapid movement of funds is also raising concerns about the ability of anti-money laundering and counter-terrorist financing controls to keep pace.

 The Bank of Central African States (BEAC) joined the Pan-African Payment and Settlement System (PAPSS) recently, expanding the reach of the payment network across the continent. PAPSS was established to facilitate instant cross-border payments in local currencies and support intra-African trade under the African Continental Free Trade Area.

 The Institute for Security Studies said the expansion could reduce the cost and complexity of cross-border transactions. However, it warned that payments completed within seconds could create compliance challenges in jurisdictions where financial regulations require supporting documentation, declarations and approvals before transactions are concluded.

 PAPSS transactions are designed to be fast and, once completed, effectively irrevocable. This creates a potential compliance gap where suspicious transactions may only be identified after funds have already moved through the financial system.

 The concern is particularly relevant within the Central African Economic and Monetary Community, where foreign-exchange regulations can require supporting documents, transaction declarations, authorisations and other compliance procedures.

 PAPSS has recorded substantial growth in transaction activity, with transaction volumes increasing significantly in 2026. Following Central Africa’s inclusion, the system covers 30 African countries and about 200 banks and fintech companies.

 The expansion offers businesses a faster alternative to traditional correspondent banking arrangements and could help reduce dependence on informal channels for cross-border transactions.

 However, the Institute for Security Studies identified several potential financial-crime vulnerabilities, including false or inflated invoices, transaction splitting, mule accounts, shell companies, capital flight and attempts to conceal beneficial ownership.

 The analysis also highlighted risks associated with payment providers operating with inadequate controls and the rapid movement of funds between jurisdictions.

 Limited access to formal financial services presents another challenge. The analysis noted that fewer than 13 per cent of adults in Central Africa use formal financial services such as bank accounts, mobile money or credit.

 Funds originating from informal financial networks could subsequently enter regulated institutions without adequate know-your-customer controls, potentially making suspicious transactions appear legitimate.

 The Institute for Security Studies said PAPSS will need stronger links with anti-money laundering and counter-terrorist financing institutions to ensure transaction information can be monitored and acted upon quickly.

 It recommended common minimum compliance standards among participating countries, including customer identification, beneficiary verification, enhanced due diligence, transaction screening and secure mechanisms for sharing financial intelligence.

 The analysis also called for a risk-based approach that considers not only the payment and customer involved but also the underlying economic purpose of transactions.

 For regulators and financial institutions, the expansion of PAPSS therefore presents a dual challenge: enabling faster and cheaper intra-African trade while ensuring that payment speed does not outpace the capacity to identify and prevent financial crime.

 The effectiveness of PAPSS in Central Africa will depend in part on the strength of regulatory cooperation, transaction traceability, customer due diligence and the ability of participating institutions to detect suspicious activity across borders.