Nigerian Central Bank Announces Latest Guidelines to Combat Money Laundering

The Central Bank of Nigeria ordered all customers to link their Bank Verification Number (BVN) and National Identification Number (NIN) by March 1st, 2024, to combat money laundering and terrorist financing.  

At the annual plenary meeting of the International Financial Action Task Force (FATF) in October, Nigeria failed to comply with the FATF recommendations to exit the increased monitoring regime list. The global agency rejected its guidelines and detected deficiencies in the country’s legal framework to combat money laundering and terrorist financing. This failure landed the country on the gray list with 20 other countries. Although the Nigerian government claimed they are working on the AML measures to comply with the FATF recommendations, it did not comply with international standards. The graylisting damaged the Nigerian financial ecosystem. It increased the due diligence process for international businesses when investing in the country or doing transactions with Nigerian companies. 

The crucial element of FATF recommendations is the Know Your Customer (KYC) process. This assists financial institutes in verifying clients’ identities. Organisations can utilize identity verification for new customers and existing ones. To remove the country from the FATF, the Nigerian national bank ordered all customers to link their bank with national ID numbers before March 2024. The Director of the Financial Policy and Regulation Department, Haruna Mustapha, stated this is a part of rigid measures to enhance financial derivatives and stability to combat financial crimes. The statement issued by the Central Bank was jointly signed by the Director of the Payments System Management Department, Chibuzo Efobi, and Haruna Mustapha. The circular stated, “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 response to the most recent direction from the CBN, Muda Yusuf, Executive Director of the Center for the Promotion of Private Enterprise, highlighted the necessity of a robust identity verification system and database to unify all of the data associated with every individual. Yusuf stated, “the country should have an organised database, and some of the new government officials have indicated plans to put together a framework to harmonise all these databases all over the place. The Know Your Customer policy is one of the effective ways to stop the flow of illicit funds because there are a lot of things going on in the economy. Some of which are also disrupting and affecting the effectiveness of policies.” Whilst the financial institutes are divided on implementing this strategy, there is no doubt that it would strengthen Nigeria’s efforts to combat money laundering and increase the country’s prospects of being removed from the international gray list.

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