
CBN Regulatory Regime – New KYC/AML Requirements Payment Services Banks

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With the increased risk of financial crime, banks and other financial institutions within a state’s jurisdiction have to comply with all global and local regulations. On 8th July 2021, the Central Bank of Nigeria (CBN) published “Supervisory Framework for Payment Services Banks (PSBs)”, which focuses on the use of technology for service providing, risk management, corporate governance, and customers funds’ security of PSBs. In the first eight months of 2020, Nigerian financial businesses lost N5.2 billion to frauds. The law will help minimize the frauds lose for PSBs.
The objective of this law is to ensure transparency in operations, streamline workflows and set up a workable mechanism for PSBs. The law gives new direction regarding methods of performing Know Your Customer (KYC) and Anti Money Laundering (AML).
This article will cover a round-up of Nigeria’s new regulatory regime and how it will affect the current financial landscape.
It covers tangible/intangible, moveable/immovable, all kinds of assets for instance bank & traveller’s cheques, shares, security bonds, money orders, drafts or bank credits.
Transactions that are processed by a person through electronic means using a PSB with the intention of giving money to a person in another financial institution. The initiator and the beneficiary can be the same person.
A natural person who ultimately controls or owns a customer who is proceeding in a transaction and who practises control of a legal person or arrangement.
Any coordination between PSB and businesses who want to carry out transactions on a daily, frequent or habitual basis.
Likelihood of money laundering and/or terrorist financing.
Individuals who were or are currently assigned with prominent government functions of Nigeria or foreign countries and persons associated with them, including
When individuals (having no stake in banks) enter into the banking system by opening or registering bank accounts. At this point, the banks give them knowledge of the financial service they can avail after the process is complete.
The guidelines for Know Your Customer and AML are modified and encouraged the use of innovative solutions. Low risk customers will be verified by standard due diligence and high risk with the enhanced due diligence. Customer due diligence is performed when the transaction amount is less than USD 1,000. Any suspicious transaction must be reported to the Nigeria Financial Intelligence Unit.
Time of Verification
PSBs are required to verify the identity of customers before opening a business account or during a one-off transaction. Also, customers should be verified when they are initiating a series of linked transactions.
Three Tiered KYC
Previously, PSBs were required to perform conventional KYC on all customers, In this law, CBN recommends a three tiered KYC on customers.
Suggested Read: Third-party Due Diligence – Red Flags, Regulations and 5 Ways to Enhance It
Shufti Pro provides state of the art KYC and AML solutions backed by thousands of AI models. Individual’s identity is verified through government-issued ID documents. Through AI-driven optical character recognition (OCR), the authenticity of the document is ensured. Furthermore, in less than 30 seconds, banks and other financial institutions can onboard legitimate customers.
The good news is Shufti Pro’s identity verification system complies with the three tier system defined by CBN’s new regulatory regime.
Are you a PSB operating in Nigeria? Find out how to comply with the new regulations through our KYC/AML solution.