BCEAO Instruction 007-2018 on Monetary Sanctions for Decentralized Financial Systems

The Governor of the Central Bank of West African States, Having regard to the Treaty of the West African Monetary Union (UMOA) dated January 20, 2007, particularly Article 34 thereof; Having regard to the Statutes of the Central Bank of West African States annexed to the UMOA Treaty dated January 20, 2007, particularly Articles 30 and 59 thereof; Having regard to the Annex to the Convention governing the UMOA Banking Commission, particularly Article 31 thereof; Having regard to the Uniform Act on the regulation of Decentralized Financial Systems, particularly Articles 44, 70, 71 and 147 thereof and its implementing texts; Having regard to the Uniform Act on the regulation of Credit Information Bureaus in the member states of the UMOA, particularly Article 63 thereof and its implementing texts, HEREBY DECIDES:

Article 1: Subject Matter The present Instruction aims to establish the implementation procedures for monetary sanctions imposed by the UMOA Banking Commission on Decentralized Financial Systems (hereinafter "SFD"), in addition to disciplinary sanctions. Avenue Abdoulaye FADIGA BP 3108 – Dakar - Senegal Tel. (221) 33 839 05 00 / Fax. (221) 33 823 93 35 courrier.bceao@bceao.int - www.bceao.int

INSTRUCTION NO. 007-05-2018 ESTABLISHING THE IMPLEMENTATION PROCEDURES FOR MONETARY SANCTIONS IMPOSED BY THE BANKING COMMISSION OF THE WEST AFRICAN MONETARY UNION ON DECENTRALIZED FINANCIAL SYSTEMS The Governor

Article 2: Classification of Infractions under the Regulation of Decentralized Financial Systems and Credit Information Bureaus The classification of infractions under the regulation of SFDs and Credit Information Bureaus depends, inter alia, on their nature and degree of severity. These infractions are grouped into three categories according to the underlying risk scale. First-category infractions involve breaches of provisions governing SFDs or Credit Information Bureaus, giving rise to administrative risks, primarily resulting from the failure to complete administrative formalities. Second-category infractions encompass breaches of provisions governing SFDs or Credit Information Bureaus, resulting from non-compliance with rules concerning accounting, information, and internal control. Third-category infractions relate to breaches of provisions governing SFDs or Credit Information Bureaus that are likely to affect the financial structure of the concerned institution. A classification grid for infractions under the regulation of SFDs or Credit Information Bureaus is attached as an annex to this Instruction.

Article 3: Maximum Amount of Monetary Sanctions The amount of the monetary sanctions referred to in Article 1 above shall not exceed ten percent (10%) of the required own funds for compliance with the capitalization standard for UMOA SFDs, and shall in no case exceed thirty million (30,000,000) FCFA. In the event of multiple infractions requiring the application of several monetary sanctions, the cumulative amount of said sanctions shall not exceed the ceiling amount specified in the first paragraph above.

Article 4: Quantum of Monetary Sanctions Within the limits defined in Article 3 above, the table annexed to this Instruction establishes the amount of monetary sanctions by type of infraction.

Article 5: Recovery of Monetary Sanctions The amounts corresponding to monetary sanctions are collected by the Central Bank of West African States (hereinafter "BCEAO"). SFDs against which the UMOA Banking Commission has imposed a monetary sanction shall pay the due amount by issuing a bank transfer order or a bank check in favor of the Central Bank, no later than upon expiration of the time limit specified in the notification decision. In case of non-payment, upon expiration of the two-month appeal period, the Central Bank instructs the credit institutions in which the SFD holds an account to automatically deduct the amount due as a monetary sanction.

Article 6: Entry into Force This Instruction, including its annexes which form an integral part thereof, repeals and replaces all prior contrary provisions dealing with the same subject matter. It shall enter into force as of May 28, 2018 and shall be published wherever necessary. Done at Dakar, on May 16, 2018 Tiémoko Meyliet KONE

GRILLE DE CLASSIFICATION DES INFRACTIONS ET DES SANCTIONS PECUNIAIRES APPLICABLES PAR LA COMMISSION BANCAIRE DE L'UNION MONETAIRE OUEST AFRICAINE AUX SFD

Annex No. 1 CLASSIFICATION OF INFRACTIONS UNDER THE REGULATION OF SFDs OR CREDIT INFORMATION BUREAUS

N°	1st CATEGORY INFRACTIONS (Breaches notably of provisions governing SFDs and Credit Information Bureaus giving rise to administrative risks).	2nd CATEGORY INFRACTIONS (Infractions under provisions governing SFDs and Credit Information Bureaus resulting, in particular, from non-compliance with rules on accounting, information and internal control).	3rd CATEGORY INFRACTIONS (Infractions under provisions governing SFDs and Credit Information Bureaus, which are likely to primarily affect the financial structure of the concerned institution).
1	• Non-communication of statutes to the Minister in charge of Finance and non-filing with the registry of the competent court, as well as irregular maintenance of the list of administrators and executives, and non-compliance with related obligations (Article 27 of the law applicable to SFDs) • Non-compliance with the obligation to include in their signs, advertising panels or other materials, their corporate name followed by references to the governing text, authorization and registration in the SFD register, in the category where they were authorized (Article 20 of the law applicable to SFDs) • Non-transmission to the Central Bank or Banking Commission, within thirty (30) days of its issuance, of a copy of the report from the audit conducted with external technical assistance requested by the SFD (Article 39 of the law applicable to SFDs) • Non-communication to the Minister and, for decentralized financial systems under Article 44, to the Central Bank or Banking Commission, of internal verification or inspection reports (Article 40 of the law applicable to SFDs) • Non-transmission, to the Minister and, for decentralized financial systems under Article 44, to the Central Bank and Banking Commission, within six (6) months after fiscal year-end, of annual financial reports and statements along with annexed documents (Article 51 of the law applicable to SFDs) • Non-certification of financial statements (Article 53 of the law applicable to SFDs)	• Non-compliance with the obligation to include corporate name and authorization references on all acts and documents intended for third parties, including letters, invoices, announcements and various publications (Article 21 of the law applicable to SFDs) • Non-compliance with the obligation to retain client consent (Article 42, point 2 of the law regulating Credit Information Bureaus) • Non-designation or non-approval of an auditor (Article 53 of the law applicable to SFDs) • Non-publication of financial statements (Article 54 of the law applicable to SFDs) • Non-compliance with rules on internal control and governance functioning contained in current texts • Breaches of obligations to consult the Credit Information Bureau (Article 60 of the law regulating Credit Information Bureaus) • Breaches of obligations to inform clients regarding adverse actions and provide them with a copy of the credit report underlying the decision (Article 43, point 4 of the law regulating Credit Information Bureaus) • Non-compliance with the rule on non-opposability of professional secrecy to monetary and supervisory authorities as well as judicial authorities (Article 58 of the law applicable to SFDs) • Non-compliance with prudential standards (Articles 35, 36, 85, 115, 123 and 124 of the law applicable to SFDs) • Non-constitution of special or general reserves (Articles 85 and 124 of the law applicable to SFDs)	• Exercise of administrator or executive functions without exemption from nationality requirements (Article 29 of the law applicable to SFDs) • Actions aimed at opposing supervision by supervisory authorities (Ministry in charge of Finance, Central Bank and Banking Commission) (Article 44 of the law applicable to SFDs) • Refusal by the SFD to submit to supervision by the Banking Commission or Central Bank during liquidation (Article 138 of the law applicable to SFDs) • Non-compliance with professional secrecy (Article 28 of the law applicable to SFDs) • Unauthorized execution by a duly authorized SFD of operations not provided for in the authorization decision (deposit collection, etc.) (Article 6 of the law applicable to SFDs) • Breaches of obligations to declare information to BCEAO on behalf of the Credit Information Bureau (Article 42, points 6 and 7 of the law regulating Credit Information Bureaus)
2	[Continues]	• Violation of prohibitions on exercising activities due to conviction, bankruptcy, dismissal, suspension or resignation (Articles 30, 31 and 32 of the law applicable to SFDs) • Non-communication of documents and information to supervisory authorities (Ministry in charge of Finance, Central Bank and Banking Commission) (Articles 55, 56 and 57 of the law applicable to SFDs)	• Non-compliance with UMOA rules setting rates and conditions for customer operations as well as transparency obligations in financial service pricing (Article 60 of the law applicable to SFDs) • Non-adherence to a deposit guarantee system (Article 69 of the law applicable to SFDs) • Non-constitution by an SFD network of a security fund (Article 114 of the law applicable to SFDs) • Non-compliance with the obligation to provide Credit Information Bureaus with information on clients' credit history who have consented to sharing and consultation of their credit information (Article 42, point 5 of the law regulating Credit Information Bureaus) • Non-compliance with confidentiality rules within the credit information sharing system (Article 42, point 3 and Article 43, points 1, 2, 5 and 6 of the law regulating Credit Information Bureaus) • Non-signature of the service contract with the Credit Information Bureau or non-adherence to the Code of Conduct and Ethics (Article 42, point 4 and Article 43, point 3 of the law regulating Credit Information Bureaus) • Non-compliance with rules on modalities and purpose of collection and sharing of personal information (Articles 55 and 62 of the law regulating Credit Information Bureaus)

Annex No. 2 QUANTUM OF MONETARY SANCTIONS Table No. 2.1: Monetary Sanctions Applicable to SFDs

Infraction Categories	Quantum of Monetary Sanctions
First Category	Seventy-five thousand (75,000) to three (3) million FCFA
Second Category	Three million five hundred thousand (3,500,000) to fifteen (15) million FCFA
Third Category	Sixteen (16) to thirty (30) million FCFA