Bank of Algeria: Forthcoming Instruction Requiring Banks to

The Bank of Algeria is preparing a landmark instruction that will require all licensed financial institutions to implement comprehensive "Know Your Customer" (KYC) standards across their operations. This move represents a significant regulatory pivot toward international anti-money laundering (AML) compliance and positions Algeria to strengthen its standing within the Financial Action Task Force (FATF) framework.

## Why is Algeria enforcing KYC now?

Algeria's central bank is responding to both domestic and international pressure. The country has faced repeated scrutiny from the FATF regarding AML/CFT (Counter-Terrorist Financing) effectiveness, particularly in informal money transfer channels and cross-border remittance corridors. The Algerian diaspora remits approximately $2.5–3 billion annually, much of which historically bypassed formal banking channels due to weak customer identification protocols. By mandating KYC, the Bank of Algeria aims to funnel diaspora capital through regulated banking infrastructure while reducing illicit financial flows tied to terrorism and narcotics trafficking in the Sahel region.

The timing aligns with Algeria's broader financial modernization agenda and its integration into African capital markets. Strengthening AML frameworks also improves Algeria's creditworthiness and reduces compliance costs for Algerian banks seeking to establish correspondent relationships with international lenders and payment networks.

## What will the instruction require?

The forthcoming instruction is expected to establish:

- **Customer Identification**: Mandatory collection of full legal names, dates of birth, national ID numbers, and residential addresses at account opening.
- **Beneficial Ownership Verification**: Enhanced due diligence (EDD) for corporate and high-net-worth clients, requiring disclosure of ultimate beneficial owners and source of funds.
- **Ongoing Monitoring**: Continuous transaction screening against FATF blacklists, UN sanctions registers, and national terrorist watchlists.
- **Risk Segmentation**: Tiered KYC protocols based on customer risk profiles (e.g., politically exposed persons, cross-border remitters, cash-intensive businesses).
- **Documentation Retention**: Five-year record-keeping mandates aligned with FATF Recommendation 10.

Digital identity verification systems will likely be encouraged to reduce manual processing and accelerate account opening for low-risk segments.

## How will this affect market participants?

**Fintech and Digital Banks**: Compliance costs will rise in the short term, but digital-native fintechs with API-driven KYC systems may gain competitive advantage over legacy banks still reliant on paper-based processes.

**Diaspora Remittance Flows**: Formal remittance channels (Western Union, MoneyGram, bank transfers) will become more attractive relative to informal hawala networks. This should increase fee transparency but also raise transfer costs for low-value transactions.

**Corporate Banking**: M&A activity and cross-border transactions will face longer due diligence cycles. Investors should expect 30–60 day delays in fund transfers and account setup, particularly for non-resident entities.

**SME Access**: Small businesses without formal accounting records may face barriers to credit facility access if they cannot demonstrate compliant KYC documentation.

The instruction will likely be phased in over 12–18 months, with commercial banks receiving priority deadlines before microfinance institutions and money services businesses.

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