CBN Introduces Tougher Customer Due Diligence Measures to Combat Money Laundering
Enhancing Anti-Money Laundering Efforts in Nigeria
The Central Bank of Nigeria (CBN) has introduced stricter measures for financial institutions to conduct customer due diligence, aimed at strengthening the country’s efforts in combating money laundering and terrorist financing.
Thorough Customer Due Diligence Required
According to a new regulation, all financial institutions operating in Nigeria are required to:
- Conduct thorough customer due diligence on all customers
- Identify and verify their identities
- Ensure that the CDD process is commensurate with the institution’s risk profile and allows for changes to a customer’s risk profiling
Enhanced Due Diligence Procedures and Processes
Financial institutions must have in place enhanced due diligence procedures and processes to:
- Identify customers who may pose higher risks of money laundering or terrorist financing
- Provide guidance notes on documenting analysis associated with the due diligence process
Requirements for Financial Institutions
The regulation emphasizes that financial institutions cannot establish anonymous accounts for customers and must ensure that they have appropriately ascertained the identity of each customer. Additionally, institutions are required to:
- Maintain current customer information and update it regularly
- Ensure that customer information is accurate and reliable
Standards for Customer Identification and Verification
The CBN has prescribed standards for customer identification and verification, which include:
- Inspecting original valid documents to ascertain the identity of individuals and the existence of corporate entities
- Collecting substantial information on corporate customers or other entities, including names, addresses, and occupations of directors and ultimate beneficial owners
- Taking reasonable measures to obtain this information, such as requesting it directly from the entity or consulting credible public databases
Determining Customer Relationships and Origin of Funds
Financial institutions must also:
- Determine whether an individual customer is acting for or on behalf of a third party
- Take reasonable measures to determine the origin of customers’ accumulated funds or wealth
Strengthening Nigeria’s AML/CFT Framework
The new regulation aims to strengthen Nigeria’s anti-money laundering and combating the financing of terrorism (AML/CFT) framework, which is critical in preventing illicit financial activities and maintaining financial stability.
Compliance Expected Immediately
Financial institutions operating in Nigeria are expected to comply with the new regulation, which comes into effect immediately. Non-compliance may result in severe penalties, including fines and even license revocation.
Sanctions for Employee Failure to Attend Assigned Training Programmes
Enhancing AML/CFT Knowledge and Skills
The CBN has also introduced sanctions for employees who fail to attend assigned training programmes aimed at enhancing their knowledge and skills in AML/CFT compliance.
Requirements for Financial Institutions
Financial institutions are required to provide regular training to their employees on AML/CFT issues, including customer due diligence, suspicious transaction reporting, and other related topics.
Consequences of Non-Compliance
Employees who fail to attend these training programmes may be subject to disciplinary action, including written warnings, suspension, or termination of employment. Financial institutions that fail to provide adequate training to their employees may also face penalties, including fines and even license revocation.
Strengthening AML/CFT Compliance in Nigeria
The new regulation is a significant step towards strengthening Nigeria’s AML/CFT framework and promoting a culture of compliance among financial institutions operating in the country.