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CBN's Anti-Money Laundering Fight Triggers Fresh BVN Race In Banks

To enhance the fight against money laundering in Nigeria, the Central Bank has mandated that all bank customers connect their Bank Verification Number (BVN) and/or National Identification Number (NIN) to their bank accounts by March 1, 2024.

This directive places added responsibility on bank employees.

During the Financial Action Task Force plenary in late October in Paris, France, Nigeria faced setbacks in the review of its Money Laundering and Terrorism Financing Risk conducted by the global financial intelligence agency.

The global agency criticized Nigeria’s efforts in the anti-money laundering campaign, leading to the country’s placement on the international grey list in February, alongside South Africa and 20 other nations.

Despite assertions from the Nigerian Financial Intelligence Unit about actively addressing FATF recommendations on money laundering and terrorism financing, it fell short in the review conducted at the last plenary.

Countries on the FATF grey list are identified as having strategic deficiencies in their anti-money laundering, terrorist financing, and proliferation financing systems. According to KPMG, the repercussions of greylisting two of Africa’s largest economies could have significant and far-reaching consequences.

Concerning Nigeria, KPMG said that “FATF noted that although Nigeria had made some progress since the adoption of its Mutual Evaluation Report in August 2021 it is required to implement FATF’s action plans. This FATF greylisting adds another layer of risk and complexity to businesses that already perceive Nigeria as a high-risk country for anti-corruption and other financial crime risks. This may put businesses with connections to Nigeria under more regulatory scrutiny, as regulators may expect them to implement more stringent AML/CFT compliance measures to mitigate the risks associated with greylisting.”

Also, the greylisting may result in higher compliance costs and increased due diligence requirements for businesses, making transactions with Nigerian counterparties more difficult.

A key component of the anti-money laundering requirement of FATF is Know Your Customer, which helps financial institutions verify the identity of new and existing customers.

In a bid to get the country off the greylist, the Central Bank of Nigeria on Friday directed all commercial banks to bar customers without Bank Verification Numbers and National Identity Numbers from having access to their accounts from March 1, 2024, by putting a ‘Post No Debit or Credit’ restriction on such accounts.

The circular with reference PSM/DIR/PUB/CIR/001/053 was jointly signed by the Director of the Payments System Management Department, Chibuzo Efobi, and the Director of Financial Policy and Regulation Department, Haruna Mustapha.

The apex bank said the directive was part of efforts to promote financial system stability and strengthen the ‘Know Your Customer’ procedures in all financial institutions.

It also amended Section 1.5.3 of the Regulatory Framework for Bank Verification Number to ensure mandatory registration of all Tier-1, 2 and 3 bank accounts and wallets with BVN or NIN.

The circular read, “As part of its efforts in promoting financial system stability, it becomes necessary to strengthen the Know Your Customer procedures in financial institutions under the purview of the Central Bank of Nigeria.

“Accordingly, the CBN hereby issues an amendment to Section 1.5.3 of the Regulatory Framework for Bank Verification Number Operations and Watch List for the Nigerian Banking Industry.

“In this regard, it is mandatory for all Tier-1 bank accounts and wallets for individuals to have BVN and/or NIN. It remains mandatory for Tiers 2 & 3 accounts and wallets for individual accounts to have BVN and NIN.”

The BVN has been an integral part of identity verification in Nigeria, especially for financial services businesses, since it was introduced in February 2014.

The CBN further directed all executive compliance officers, chief compliance officers, or heads of the compliance functions to acquaint themselves with the attached guidance notes to ensure full and uniform compliance with the threat of sanctions hanging on them.

The circular said, “Also, a comprehensive BVN and NIN audit shall be conducted shortly and where breaches are identified, appropriate sanctions shall be applied. Finally, all financial institutions regulated by the CBN are required to apply strict compliance on restrictions on Tier-1 accounts/wallets as they relate to limits on transaction values and cumulative balances.”

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