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Steve Udoh: NIN, BVN for Tier-1 accounts imperative to combat fraudulent activities

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When the Central Bank of Nigeria (CBN) in December 2023, mandated the linkage of Bank Verification Numbers (BVN) and National Identification Numbers (NIN) across all tiers of accounts in Nigeria, this brought a wave of panic amongst customers who had run their accounts without BVN or NIN.

The apex bank in a circular, signed by the Director, Payment System Management Department at the CBN, Mr Chibuzo Efobi and Director, Financial Policy and Regulations Department, Mr Haruna Mustapha, to all commercial, merchant, non-interest and payment service banks, other financial institutions and mobile money operators, stated that all individual existing and new tier 1, 2 and 3 accounts/wallets must have BVN or NIN.

Mustapha noted that the mandate was part of the apex bank’s effort in promoting financial system stability which has led to its amendment of Section 1.5.3 of the Regulatory Framework for BVN Operations and Watch-List for the Nigerian Banking Industry (Guidelines).

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The CBN’s circular also specified that existing unfunded individual Tier 1 accounts without BVN or NIN would be placed on “Post No Debit or Credit” immediately.

“For all existing Tier 1 accounts/wallets without BVN or NIN: Effective immediately, any unfunded account/wallet shall be placed on ‘Post No Debit or Credit’ until the new process is satisfied.

“Effective March 1, 2024, all funded accounts or wallets shall be placed on ‘Post No Debit or Credit’ and no further transactions permitted. The BVN or NIN attached to and/or associated with all accounts/wallets must be electronically revalidated by January 31, 2024,” the circular read.

It further said that to ensure uniform and full compliance, the executive compliance officers, chief compliance officers or heads of the compliance functions are advised to acquaint themselves with the attached guidance notes which becomes applicable to all institutions regulated by the CBN.

Sources noted that the matter was being treated as a “national security issue”, adding that banks caught operating accounts without BVN or NIN after the expiration of the deadline “shall be severely dealt with”. Investigations further reveal that Nigerians have begun to besiege commercial banks and the National Identity Management offices as a result of the directive.

A look into the legal framework underpinning the policy indicates that the National Identity Management Commission (NIMC) Act 2007 established the NIMC and mandated the creation of a National Identity Database (NID) containing unique NINs assigned to Nigerian citizens and legal residents.

The Mandatory Use of the National Identification Number Regulation, 2017, further stipulates that NINs be used for various transactions, including employment, access to social intervention programs, and opening bank accounts whereas the CBN’s policy builds upon this existing legal framework, aiming to enhance financial security and inclusion by mandating the inclusion of identity documentation across all segments of the banking system.

However, industry records reveal that NIMC has registered just over 100 million Nigerians whilst the latest data from the Nigeria Inter-Bank Settlement System (NIBSS) as of October 9, 2023, revealed that there were 59 million (58,999,262) accounts with BVN. It is there expected that the regularisation of accounts without BVN or NIN can be achieved within the deadline given the progress that’s already been recorded on both fronts.

Looking deeper into this development, this policy provides a big boost in reducing identity theft, fraudulent activities and prevent unauthorised access to an individual’s account.

Battle against money laundering

At the Financial Action Task Force plenary held late October in Paris, France, Nigeria failed to scale a review of Money Laundering and Terrorism Financing Risk conducted by the global financial intelligence agency.

The global agency faulted Nigeria’s anti-money laundering war, which had landed the country on the international grey list in February alongside South Africa, and 20 other countries.

Although the Nigerian Financial Intelligence Unit said it had been working to meet the FATF recommendations on money laundering and terrorism financing, it did not scale the review carried out by the FATF at its last plenary.

Countries on the FATF grey list have been identified as having strategic deficiencies in their anti-money laundering, terrorist financing, and proliferation financing regimes. According to KPMG, the implications for the greylisting of two of the biggest economies in Africa may be far-reaching.

Concerning Nigeria, KPMG said: “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 (KYC), which helps financial institutions verify the identity of new and existing customers. Hence, this directive by the CBN is a tool to get Nigeria off the grey list and strengthen its battle against money laundering in Nigeria.

Enhancing financial inclusion and financial security

So far, Nigeria has brought more of its citizens into the financial system but remains far from its goal of getting 95 per cent of the population fully banked this year 2024. According to EFInA, a UK government-backed firm, the percentage of adult Nigerians with formal financial services- including bank accounts, insurance and mobile money- rose to 64 per cent in 2023 from 56 per cent recorded in 2020.

But just about 52 per cent have a bank account and more comprehensive adoption is hampered by widespread poverty in the country. This directive offers a much broader sense of increasing the number of financially included people especially if it is very much strictly implemented. Once this is achieved, scammers who previously relied on stolen information to conduct fraudulent transactions will face a bigger challenge.

Boost economic growth and improve revenue generation

Apart from prevention and financial inclusion, this directive is expected to unlock new markets, drive entrepreneurship, and boost the creation of jobs. Similarly, with an accurate identification technique, tax evasion by individuals and companies becomes significantly harder. This can lead to increased government revenue and improved public services, benefiting all Nigerians.

Conclusion

The truth is that very few policies go through successful implementation in Nigeria, the onus is now on the CBN to revolutionize the country’s financial sector through financial security, empowering Nigerians, and stimulating economic growth through its latest directive. Although January 31, 2024 looks like a long period, the CBN & NIMC should do everything humanly possible to adeptly navigate potential pitfalls, unlocking the brighter future promised by this ambitious initiative.


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