$2.1B Red Flag: West Africa Logs Suspicious Crypto Transactions Calling For Proper Oversight

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In Brief

• Crypto scams exploit weak regulation and anonymity, flagging $2.1 billion in suspicious West African transactions in 2024.

• Regional coordination, ECOWAS-wide VASP licensing and intelligence-sharing, offers the best defense against cross-border fraud.

• AI analytics and investor-education campaigns, like Nigeria’s post-CBEX drive, strengthen AML/CFT enforcement and public awareness.

Alongside West Africa’s massive wave of adoption comes a significant rise in crypto scams, raising alarms regarding regulation and oversight.

Nigeria’s Securities and Exchange Commission, under Director General Dr. Emomotimi Agama, raised a stark truth regarding cryptocurrency: anonymity fueling criminal activities. Additionally, Africa’s fragmented oversight, inadequate safeguards and stagnant legal frameworks have greatly exacerbated the issue.

Crypto Scams Surge: West African Regulators Push for Tighter Controls

Exploiting the Gaps: The Fuel for Fraud

As sighted by the Inter-Governmental Action Group against Money Laundering in West Africa, approximately $2.1 billion in crypto have been flagged under suspicious activity in 2024 alone. This figure, presented at the recent West Africa Compliance Summit in Praia, Cape Verde, underscores the massive illicit financial flows facilitated by the anonymity and cross-border nature of digital assets.

At the Summit, Dr. Agama pinpointed the core vulnerabilities, including weak crypto regulation and persistent compliance gaps. The adoption of digital assets within Africa heavily hinges on utility, value retention and cheaper transaction costs. However, these prospects are heavily eroded by criminal actors exploiting lax regulatory frameworks and compliance gaps.

Within the past decade, the rate of DeFi rug pulls has steadily increased, with developers suddenly abandoning projects after draining investor funds. Blockchain adoption has shifted from merely using digital assets to creating exchanges ideal for native use. Prime examples include Busha, Quidax, and Yellow Card; however, their success has also led to a proliferation of fake crypto exchanges. Their goal is simple: lure users with promises of high returns or automated trades, only to vanish with deposited funds.

CHECK OUT: Nigeria SEC: Stablecoin Rules to Empower Users and Protect Markets

Dr. Agama noted how in Nigeria alone, more youths are turning to stablecoins like USDT and USDC as a hedge against local currency volatility. Businesses are now embracing solutions like Binance Pay and other local solutions to facilitate cross-border payments, pulling fiat currency down.

“The Naira’s depreciation, Ghana’s Cedi weakness, and persistent forex shortages have fueled this shift,

 

Traditional remittance channels charge up to 10 per cent in fees, while cryptocurrencies offer faster and cheaper alternatives. Over $20 billion in remittances flowed into West Africa last year through crypto channels.

While global solutions kick-started the shift, local platforms are most preferred, having direct solutions for easier conversions. The result: a growing number of unregistered crypto exchanges operating without oversight, skimming user assets with impunity. This might not apply to various startups; however, the concerns are legitimised given recent bold schemes like CBEX.

Some of these entities are operating illegally and are not registered in Nigeria or any of the countries within the sub-region.

 

We discovered that some of the activities taking place on these P2P platforms are not only illegal but also pose a serious risk to our economy.

Most suspicious transactions revolve around unregistered crypto exchanges, with some operating in a decentralised manner, offering ease of use and lower regulatory scrutiny.

The GIABA data confirms that the problem is systemic and regional, demanding a coordinated solution beyond any single nation’s borders.

Nigeria SEC’s Counter-Offensive and the Call for Unity

With concerns comes action, as noted from Nigeria’s recent Investment and Securities Act 2024, which classifies virtual assets(cryptocurrencies, stablecoins, utility tokens, and NFTs ) as securities. This law gives Nigeria complete oversight and regulation of digital assets. Unfortunately, there is only so much a single nation can do to tackle crypto scams. Dr Agama championed a powerful message of regional collaboration:

We must harmonise our regulatory frameworks, share intelligence, and adopt best practices to close loopholes exploited by bad actors.

From a practical standpoint, it makes sense; an exchange banned in Nigeria simply relocates to Ghana; the key to curbing this issue is a unified West African Approach.

The SEC has proposed a regional strategy focusing on implementing a comprehensive crypto licensing system and regulatory framework. Dr. Agama called for ECOWAS (Economic Community of West African States) to adopt a “Unified VASP Licensing System.” Such a system would establish consistent standards for licensing and supervising VASPs, including exchanges, wallet providers and brokers across member states.

CHECK OUT: Nigeria Crypto Boom: IMF Warns of FX Risks & Urges Tighter Regulation

With AI becoming a formidable tool, Nigeria plans to deploy AI surveillance tools for blockchain analytics to trace illicit activities. This falls in line with its recent Ponzi awareness campaign following the collapse of the CBEX scheme, which left an estimate 300,000 investors with losses of about $840 million (₦1.3 trillion).

The campaign has already been conducted across key locations in Abuja and Lagos, with plans to extend to other states.

Wrapping Up.

Crypto scams and illicit activities surrounding digital assets are a clear and present danger to economic stability and blockchain adoption. Closing existing compliance gaps requires the collaboration of multiple regulatory bodies and the adopting of a stringent crypto licensing system.

Africa requires a different approach; accomplishing it requires defeating investors, maintaining financial integrity and ensuring the promise of digital assets isn’t drowned by the rate of criminal exploitation.