The Central Bank of Nigeria (CBN) has recently unveiled the Customer Due Diligence Regulations 2023, signalling its strong stance against financial crimes.
These regulations apply to financial institutions under the CBN's purview and aim to enhance compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) provisions while aligning with international best practices. The CBN's proactive measures are designed to safeguard the integrity of the Nigerian financial system.
To bolster customer identification procedures, the CBN has introduced a mandatory requirement for financial institutions to collect and verify customers' social media handles as part of their Know Your Customer (KYC) process.
An Overview of the New Regulation
In a bid to intensify the battle against money laundering, terrorism financing, and proliferation financing, the Central Bank of Nigeria (CBN) has implemented new regulations that complement the existing provisions outlined in the CBN's Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions Regulations of 2022.
The newly introduced regulations mandate financial institutions to establish internal processes and procedures to ensure thorough customer due diligence for both potential and existing customers, including occasional customers. This move aims to enhance the integrity of the financial system and curb illicit activities.
As per the regulations, financial institutions are required to gather detailed information about customers, whether individuals or legal entities. This information includes legal names, addresses, contact details, identification documents, account types, nature of banking relationships, and signatures. Notably, the regulations emphasize the importance of identifying politically exposed persons (PEPs), further reinforcing the fight against financial crimes.
- To ensure the verification of customer identities, financial institutions are now mandated to rely on reliable and independent source documents, data, or information, according to new regulations.
- For individuals, this involves confirming crucial details such as date of birth, residential address, contact information, and the validity of official documentation.
- In the case of legal entities or arrangements, financial institutions must conduct searches on public registries or databases, review annual reports or relevant financial statements, and scrutinize board resolutions.
These regulations place a strong emphasis on record-keeping and the maintenance of up-to-date customer information.
Financial institutions are required to retain records obtained through customer due diligence measures, including account files, business correspondence, and analysis results. It is mandatory for these records to be retained for a minimum of five years after the termination or cessation of a business relationship or an occasional transaction.
Furthermore, regular reviews of existing customer records must be conducted based on risk categories. High-risk customers necessitate annual reviews, medium-risk customers require reviews every 18 months, and low-risk customers are subject to reviews every three years.
Mandatory Social Media Handles Verification
Under section 6 (IV) of the recently introduced regulation, financial institutions operating under the regulatory purview of the Central Bank of Nigeria (CBN) now have the obligation to collect and verify customers' social media handles as part of their Know Your Customer (KYC) process.
This requirement applies to both individuals and legal entities, aiming to enhance the accuracy and depth of customer identification.
The inclusion of social media handles in KYC requirements aims to enhance the accuracy and depth of customer identification.
By obtaining customers' social media handles, financial institutions gain valuable insights into their online presence and activities, enabling a better assessment of potential risks associated with money laundering, terrorism financing, and proliferation financing. Banks can now follow this guide to KYC/AML compliance for user onboarding.
See how banks can enjoy seamless and secure technology for swift and accurate ID verification for KYC and AML compliance in Nigeria.