Regulation on the External Financial Relations of UEMOA Member States and Implementing Texts

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REGULATION ON THE EXTERNAL FINANCIAL RELATIONS OF UEMOA MEMBER STATES AND IMPLEMENTING TEXTS (December 2011 Edition)

REGULATION ON THE EXTERNAL FINANCIAL RELATIONS OF UEMOA MEMBER STATES AND IMPLEMENTING TEXTS

• 3 - TABLE OF CONTENTS REGULATION No. 09/2010/CM/UEMOA on the External Financial Relations of UEMOA Member States ... 5 INSTRUCTION No. 01/07/2011/RFE on the Execution of Regulations with Foreign Countries or Non-Residents ... 59 INSTRUCTION No. 02/07/2011/RFE on the Domiciliation and Settlement of Imports ... 65 INSTRUCTION No. 03/07/2011/RFE on the Establishment of Export Domiciliation Files and Their Settlement ... 69 INSTRUCTION No. 04/07/2011/RFE on Exchange Rate and Price Risk Coverage by Residents for Commercial and Financial Operations with the Outside World ... 73 INSTRUCTION No. 05/07/2011/RFE on the Issuance of Currency Allowances to Resident Travelers ... 79 INSTRUCTION No. 06/07/2011/RFE on the Conditions for Exercising the Activity of Manual Exchange Dealers ... 83 INSTRUCTION No. 07/07/2011/RFE on Foreign Currency Repurchase Operations with Clients by Sub-Delegates ... 93 INSTRUCTION No. 08/07/2011/RFE on the Conditions for Opening and Operating Foreign Accounts of Non-Residents, Domestic Currency Accounts of Residents, and Resident Accounts Abroad ... 97

• 4 - INSTRUCTION No. 09/07/2011/RFE on the Issuance of Authorization by the Authority in Charge of Regulating the External Financial Relations of UEMOA Member States to Non-Resident Entities Seeking Public Savings ... 109 INSTRUCTION No. 10/07/2011/RFE on Funds Held with Banks Located Outside the UEMOA for Credit Institutions' Current Needs ... 113 INSTRUCTION No. 11/07/2011/RFE on Periodic Reports to be Submitted to Authorities Monitoring Compliance with UEMOA External Financial Relations Regulations ... 117

• 5 - REGULATION No. 09/2010/CM UEMOA on the External Financial Relations of UEMOA Member States The Council of Ministers of the West African Economic and Monetary Union (UEMOA), Having regard to the UEMOA Treaty, particularly Articles 2, 6, 16, 21, 42, 43, 45, 76, 96, 97 and 98; Having regard to the West African Monetary Union (UMOA) Treaty, particularly Articles 2, 3 and 34; Having regard to the Statutes of the Central Bank of West African States (BCEAO), annexed to the UMOA Treaty, particularly Articles 42, 43 and 44; Considering that the uniform regulation of their external financial relations complements the monetary policy instruments of UEMOA member states; Considering that this regulation falls within the framework of the liberalization of economic and financial activities of UEMOA member states and must be compatible with international commitments undertaken by said states regarding external financial relations; On the joint proposal of the BCEAO and the UEMOA Commission; After the opinion of the Statutory Experts Committee dated September 24, 2010; ADOPTS THE PRESENT REGULATION, THE CONTENT OF WHICH FOLLOWS:

TITLE I TERMINOLOGY Article 1: Definitions For the purposes of this Regulation, the following terms shall apply: Manual Exchange Dealer: any natural or legal person established on the territory of a UEMOA member state and having received approval from the Minister in charge of Finance for the execution of manual exchange operations. AMAO: West African Monetary Agency. BCEAO or Central Bank: the Central Bank of West African States. ECOWAS: Economic Community of West African States. Foreign Accounts in Francs: accounts held by non-residents in CFA francs or in the currency of a country whose issuing institute holds an operations account with the French Treasury. CREPMF: Regional Council for Public Savings and Financial Markets. Directorate in charge of External Finance: the Department or Service responsible for the external financial relations of the concerned UEMOA member state. Credit Institutions: banks and banking-type financial institutions. Foreign/Outside World: countries other than those of the Franc Zone. The term "foreign" refers to all countries outside the UEMOA for controlling credit institutions' positions vis-à-vis foreign entities, as well as for processing the following operations: export domiciliation abroad and repatriation of proceeds, issuance and sale of foreign securities, import and export of gold, investment and borrowing operations with foreign entities, material export of payment instruments and securities by postal parcels or mail. For statistical purposes related to the balance of payments of a UEMOA member state, all countries other than the concerned state are considered foreign. CFA Franc: the Franc of the African Financial Community, the legal monetary unit of UEMOA member states. Approved Intermediary: any credit institution established on the territory of a UEMOA member state and having received the status of approved intermediary, by approval from the Minister in charge of Finance. Authorized Intermediaries: approved intermediaries and manual exchange dealers. Direct Investment: – the purchase, creation or extension of businesses, branches or any other enterprise with a personal character; – all other operations when, alone or multiple, simultaneous or successive, they have the effect of enabling one or more persons to take or increase control of a company engaged in industrial, agricultural, commercial, financial or real estate activities, regardless of its form, or to ensure the extension of such a company already under their control. However, mere shareholding not exceeding ten percent (10%) of a company's capital is not considered "direct investment". Minister in charge of Finance: the Finance Minister of the concerned UEMOA member state. Non-Residents: natural persons whose principal center of interest is abroad, foreign officials posted in a UEMOA member state, and national or foreign legal persons for their establishments abroad. Principal Center of Interest: the place where a natural person exercises its main economic activity. Consequently, no one may possess more than one principal center of interest. This criterion, in addition to the notion of habitual residence, requires an assessment of the economic activity of the agent considered. Repatriation of Export Proceeds: the actual receipt in the country of origin of export proceeds, evidenced by a currency exchange certificate issued by the domiciliary bank or any other corresponding document related to settlement, originating from abroad for the export operation. Repatriation is effective when the concerned bank surrenders the corresponding currencies to the BCEAO. Residents: natural persons whose principal center of interest is in a UEMOA member state, national officials posted abroad, and national or foreign legal persons for their establishments in a UEMOA member state. However, residents of other Franc Zone member states are assimilated to UEMOA residents, except for the processing of the following operations: export domiciliation and repatriation of proceeds, issuance and sale of foreign securities, import and export of gold, investment and borrowing operations. SGI: Management and Intermediation Company. UEMOA: West African Economic and Monetary Union. UMOA: West African Monetary Union. Foreign Securities: securities issued abroad by a public or private legal entity, as well as securities issued in a UEMOA member state by a public or private person when denominated in foreign currencies. National Securities: securities issued in a UEMOA member state by a public or private legal entity and denominated in CFA francs. Franc Zone: – UEMOA member states; – French Republic and its overseas departments and territories. The Principality of Monaco is assimilated to France; – Other states whose issuing institute holds an operations account with the French Treasury (Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea, Chad, Comoros).

• 6 - TITLE II INTERMEDIATION AND CURRENCY CESSION Article 2: Intermediaries responsible for executing financial operations with foreign entities Exchange operations, capital movements (issuance of transfers and/or receipt of funds), and settlements of any nature between a UEMOA member state and foreign entities, or within the UEMOA between a resident and a non-resident, may only be carried out through the BCEAO, the Administration or the Post Office, an approved intermediary, or a manual exchange dealer, within the framework of their respective competencies defined in Annex I. Article 3: Currency Cession Foreign currencies held in a UEMOA member state must be surrendered or deposited with an authorized intermediary or, where applicable, at the BCEAO, whether such assets belong to a resident or a non-resident. Residents are required to surrender to an approved intermediary bank all revenues or proceeds in foreign currency received abroad or paid by a non-resident. The operations referred to in the preceding paragraph must be executed within a maximum period of one (1) month from the due date of payment, which, in export matters, is the date stipulated in the commercial contract. This date should not, in principle, exceed one hundred twenty (120) days after the shipment of goods.

TITLE III CURRENT OPERATIONS Article 4: Current payments to foreign entities Current payments to foreign entities are executed according to the principle of freedom, by the intermediaries cited in Article 2. In this regard, subject to the presentation of supporting documents to the concerned intermediary, the following are generally authorized:

1. the issuance of tourist allowances to resident travelers;
2. the opening, operation and closure of foreign accounts in francs or euros, strictly complying with the rules governing these accounts;
3. the execution of transfers not exceeding five hundred thousand (500,000) CFA francs. In this case, no supporting document for the operation is required. Approved intermediaries must verify the identity of the applicant and the beneficiary;
4. payments to foreign entities related to the following operations: a) payments resulting from the delivery of goods; b) port, warehouse, storage, customs clearance fees, customs duties and all other ancillary freight charges; c) foreign ship call revenues in a UEMOA member state or call expenses abroad for ships of a UEMOA member state; d) fees and profits resulting from transit trade; e) commissions, brokerage, advertising and representation expenses; f) insurance and reinsurance (premiums and indemnities); g) salaries, wages and fees, social insurance contributions and allowances, pensions and annuities resulting from an employment or service contract or having a public debt character; h) patent, license and trademark fees, copyright royalties, cinema exploitation royalties and others; i) taxes, fines and legal costs; j) study, hospitalization, maintenance and alimony expenses; k) interest and dividends, shares and profits of capital or personal companies, mortgage or security interests, rents and leases, business profits, pensions and annuities arising from life insurance contracts as well as any other periodic remuneration of a capital; l) transfers by emigrants and repatriates, estates and dowries; m) all other current payments that, by nature, can be assimilated to the categories listed above. Article 5: Operations subject to domiciliation Residents are required to domicile import and export operations with an approved intermediary, under the conditions indicated in Annex II of this Regulation.

• 7 - TITLE IV CAPITAL OPERATIONS Article 6: Operations within the UEMOA Investment, borrowing, placement operations and, in general, all capital movements between UEMOA member states are free and unrestricted, in accordance with Articles 76(d), 96 and 97 of the amended UEMOA Treaty and Article 3 of the UMOA Treaty. Article 7: Payments to foreign entities Approved intermediaries are authorized to execute payments to foreign entities, under their responsibility and upon presentation of supporting documents: – the transfer of sums necessary for contractual debt amortization as well as for the repayment of short-term credits granted for financing commercial and industrial operations; – the transfer of proceeds from the liquidation of investments or the sale of foreign securities by non-residents; – required settlements, either for transactions on foreign exchange derivative instruments, or for transactions on commodity and base metal derivative instruments. Payments to foreign entities for capital operations, other than those provided in the preceding paragraph, must be subject to a currency authorization request submitted to the Minister in charge of Finance. Each authorization request must be accompanied by supporting documents attesting to the nature and reality of the operation. Article 8: Issuance, sale of securities, solicitation of foreign placements, subscriptions to construction operations located abroad Prior to authorization by the Regional Council for Public Savings and Financial Markets (CREPMF) regarding public savings calls within the UEMOA, the following operations are subject to BCEAO authorization acting on behalf of the Authority in charge of regulating external financial relations:

1. the issuance, exhibition and sale of securities, regardless of nature, by foreign states, public authorities or companies and international institutions;
2. solicitation of residents to establish fund deposits with individuals and establishments abroad;
3. any advertising by display, press release or announcement in publications issued in a UEMOA member state aimed at placing funds abroad or subscribing to construction operations located abroad. A BCEAO instruction specifies the procedure for issuing said authorization. Purchases by UEMOA residents of foreign securities whose issuance or sale in UEMOA member states has been authorized by the CREPMF must be carried out in accordance with the provisions of the first paragraph of Article 10 of this Regulation.

• 8 - Article 9: Import and export of gold The import and export of gold from and to foreign entities are subject to prior authorization by the Minister in charge of Finance. The following are exempt from the prior authorization procedure:

1. gold imports or exports carried out by the Public Treasury or the BCEAO;
2. import or export of Articles in whose manufacture a small quantity of gold enters, notably gilded or plated objects, woven with metal thread, etc.;
3. import or export by travelers of gold objects up to a maximum weight of five hundred (500) grams. Article 10: Investment operations Any investment abroad carried out by a resident is subject to prior authorization by the Minister in charge of Finance. It must be financed at least seventy-five percent (75%) by foreign loans. This authorization must be requested by the interested party, in the form of a letter whose model is reproduced in Annex VII of this Regulation, designating the chosen approved intermediary to proceed with settlement. The investment operations referred to consist notably in subscribing to the initial capital upon company creation, taking or extending participation in an existing company, creating, acquiring or extending a non-legal-person establishment, granting loans, advances, guarantees or sureties, and acquiring claims. Purchases of foreign securities whose issuance or sale in UEMOA member states has been authorized by the CREPMF are exempt from the authorization referred to in the first paragraph. The liquidation of a resident's investments abroad must be declared for information purposes to the Minister in charge of Finance. Reinvestment of liquidation proceeds is subject to prior authorization by the Minister in charge of Finance. If reinvestment abroad has not been authorized, liquidation proceeds must be effectively repatriated to the country of origin within one (1) month, through an approved intermediary. The establishment of foreign investments in a UEMOA member state and the transfer of investments between non-residents are free. These operations are declared for statistical purposes to the Directorate in charge of External Finance and to the BCEAO, when they are direct investments. Any liquidation of foreign investments, direct or otherwise, taking the form of a transfer between non-residents and residents, must be presented to the approved intermediary responsible for settlement, along with supporting documents for this liquidation. In any case, currency purchases or credits to foreign accounts in francs or euros must only occur when funds are made available to the non-resident beneficiaries of the settlement. Article 11: Borrowing operations Loans contracted by residents with non-residents must, unless otherwise decided by the Minister in charge of Finance, be carried out through approved intermediaries whenever borrowed sums are made available to the borrower in the country. The approved intermediaries, thus called upon to intervene, will ensure the regularity of operations. All foreign loans are subject to a statistical declaration obligation to the Directorate in charge of External Finance and the BCEAO; The repayment, by purchase and transfer of currencies or by credit to foreign accounts in francs or euros, of any foreign loan must be declared for statistical purposes to the Directorate in charge of External Finance and the BCEAO and carried out through an approved intermediary. Currency purchases or credits to foreign accounts must only occur on the date when funds are to be made available to the non-resident creditor. Maturity extensions and early loan repayments must be notified to approved intermediaries by resident borrowers.

• 9 - Article 12: Foreign exchange derivative instruments Residents are authorized to carry out transactions on foreign exchange derivatives markets with approved intermediaries or foreign banks. Authorized transactions must be backed by commercial or financial operations, subject to compliance with other regulatory provisions governing said operations. The nature of authorized transactions is specified by a BCEAO Instruction. Article 13: Commodity derivative instruments Residents are authorized to carry out transactions on commodity derivatives markets. Transactions must be backed by imports or exports of commodities and base products carried out by residents. The nature of authorized transactions is specified by a BCEAO Instruction.

TITLE V ACCOUNTS, RESPONSIBILITIES AND SANCTIONS Article 14: Accounts/Reports Authorized intermediaries must report to the Directorate in charge of External Finance and the BCEAO, for control purposes, payments issued or received from foreign entities. Article 15: Responsibilities of authorized intermediaries Authorized intermediaries are responsible for ensuring compliance with the provisions established by this Regulation concerning operations carried out through them or placed under their control. Article 16: Sanctions Infractions to the provisions of this Regulation, committed by credit institutions, are established in accordance with the provisions of the law on disputes concerning infractions to external financial relations regulations currently in force in each UEMOA member state and sanctioned by the BCEAO and the UMOA Banking Commission regarding relevant provisions of the banking regulation law currently in force in each UEMOA member state. Infractions committed by natural or legal persons other than credit institutions are established, prosecuted and punished according to the legislative and regulatory provisions currently in force in each UEMOA member state, concerning disputes over infractions to external financial relations regulations. Without prejudice to the sanctions referred to in the preceding paragraphs, infractions to the provisions of this Regulation committed by an approved intermediary or a manual exchange dealer may result in the withdrawal of their approval.

TITLE VI FINAL PROVISIONS Article 17: Compliance with legislation on combating money laundering and terrorist financing The implementation of the provisions of this Regulation...