CBN to Penalise Banks for KYC Breach
The Central Bank of Nigeria (CBN) has threatened to penalise banks and other financial institutions that transact business with customers that they have scanty information about.This according to the banking watchdog is a breach of the Know Your Customer (KYC) identification requirements.Banks have been given two-week deadline to fully comply with the Know Your Customer (KTC) guidelines or face severe sanctions.Mr. Ignatius Imala, CBN director of banking supervision who gave this directive, said after November 22, any bank that fails to comply fully with the KYC requirements as specified by Section 3 of Money Laundering Prohibition Act, 2004 would be seriously sanctioned. The CBN has also reiterated this directive in the following circulars: CBN KYC Directive, 2001 and KYC Manual, 2003.
In its current circular issued on November 8 and entitled Circular to banks and other financial institutions, compliance with Know Your Customer (KYC) requirements and banks' weekly money laundering reports to the NFIU using XML Schema Template, Imala said, "All banks and other financial institutions operating in Nigeria are by this circular reminded of the need to ensure full compliance with customer identification requirements in line with Section 3 of Money Laundering Prohibition Act, 2004, CBN KYC Directive, 2001 and KYC Manual, 2003".
Accordingly, banks and other financial institutions are required to demand and obtain complete identification information/evidence from all their customers (existing and intending). "This will enable the banks to render effective money laundering (ML) returns to the Nigerian Financial intelligence Unit (NFIU) through the XML Schema Template currently being used by them to render ML returns. Consequently, where customers fail to cooperate with the banks/institutions, they should suspend further transactions on such account(s) until full compliance is achieved.
KYC requirement is a manual intended to serve as a further guide to banks and other financial institutions in Nigeria on the procedures necessary for the proper knowledge of their customers. CBN said having sufficient information about your customer and making use of that information is the most effective weapon against being used to launder the proceeds of crime. In addition to minimising the risk of being used for illicit activities, it provides protection against fraud, reputational and financial risks and enables individual financial institutions to recognise suspicious activities.The KYC manual specifies that sufficient information should be obtained on the nature of the business that the customer intends to undertake, including the expected or predictable pattern of transactions.The information collected at the outset for this purpose should include: purpose and reason for opening the account or establishing the relationship; nature of the activity that is to be undertaken; expected origin of the funds to be used during the relationship; and details of occupation/employment/business activities and sources of wealth or income.
In its current circular issued on November 8 and entitled Circular to banks and other financial institutions, compliance with Know Your Customer (KYC) requirements and banks' weekly money laundering reports to the NFIU using XML Schema Template, Imala said, "All banks and other financial institutions operating in Nigeria are by this circular reminded of the need to ensure full compliance with customer identification requirements in line with Section 3 of Money Laundering Prohibition Act, 2004, CBN KYC Directive, 2001 and KYC Manual, 2003".
Accordingly, banks and other financial institutions are required to demand and obtain complete identification information/evidence from all their customers (existing and intending). "This will enable the banks to render effective money laundering (ML) returns to the Nigerian Financial intelligence Unit (NFIU) through the XML Schema Template currently being used by them to render ML returns. Consequently, where customers fail to cooperate with the banks/institutions, they should suspend further transactions on such account(s) until full compliance is achieved.
KYC requirement is a manual intended to serve as a further guide to banks and other financial institutions in Nigeria on the procedures necessary for the proper knowledge of their customers. CBN said having sufficient information about your customer and making use of that information is the most effective weapon against being used to launder the proceeds of crime. In addition to minimising the risk of being used for illicit activities, it provides protection against fraud, reputational and financial risks and enables individual financial institutions to recognise suspicious activities.The KYC manual specifies that sufficient information should be obtained on the nature of the business that the customer intends to undertake, including the expected or predictable pattern of transactions.The information collected at the outset for this purpose should include: purpose and reason for opening the account or establishing the relationship; nature of the activity that is to be undertaken; expected origin of the funds to be used during the relationship; and details of occupation/employment/business activities and sources of wealth or income.
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