On the 12th of October 2021, the Central Bank of Nigeria, (CBN) exercised the powers conferred on it under the Central Bank of Nigeria Act (CBN Act), 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020, and issued the ‘Revised Regulatory Framework for the Bank Verification Number (BVN) Operations and Watch-List for the Nigerian Banking Industry’, spelling out sanctions and punishment for breaches by customers and other stakeholders.
The regulatory Framework was made in line with the CBN’s objective of promoting financial system stability in Nigeria and it has been addressed to all banks, other Financial Institutions, and bank customers.
The Central Bank of Nigeria, in collaboration with the Bankers’ Committee, deployed the centralized Bank Verification Number (BVN) System of February 2014, which provides a unique identifier number for every customer, and the CBN revised the system to suit a more prevalent need in Nigeria, today. Under the new framework, no new account/wallet (except Tier 1) shall be allowed to operate without BVN (except inflows). However, any account/wallet (except Tier 1) without BVN shall be closed within 30 days. But a participant may choose not to continue business relationship with account/wallet (except Tier 1) holder on the Watch-List.
This is also mandatory for Non-resident Non-Nigerian Directors (NRNND) of corporate accounts. Banks are also to ensure customer’s name on the BVN database is the same in all of his/her accounts/wallets (except Tier 1) across the Banking Industry; report the BVNs of individuals in breach to NIBSS for update on the Watch-List within 1 business day of breach; report the BVNs of confirmed deceased customers to NIBSS for designation as “Deceased” on the BVN database within 24hrs of confirmation; use the Watch-list report submitted by participants and duly endorsed by the MD/CEO of the Institution, with clearance from the Director, Risk Management Department of CBN to delist the BVN from the Watch-List.
Also, law enforcement agencies; National Pension Commission; Pension Fund Administrators may be granted BVN information upon presentation of valid Federal High Court orders under the new regulations. Individuals are not eligible to access BVN information, other than their own.
The Framework further defines the operations of BVN, as well as the establishment, operations and guidance of a watch-list for the Nigerian banking industry. The watch-list is a database of customers identified by their BVNs, who have been involved in confirmed cases of breaches/fraudulent activities, as defined within the Framework, with the result that Customer’s BVN will be watch-listed in the Database if linked to fraud or forgeries.
According to the Framework, it is the responsibility of the CBN to conduct oversight on BVN operations and systems, monitor other stakeholders to ensure compliance, issue circulars to regulated institutions on the operations of the Watch-List, review framework for the operations of the Watch-List, as the need arises and apply appropriate sanctions for non-compliance with the Regulatory Framework. The Nigeria Inter-Bank Settlement System (NIBSS) is expected to collaborate with other stakeholders to develop and review the Standard Operating Guidelines of the BVN, initiate review of Guidelines, as the need arises, subject to the approval of the CBN, ensure seamless operations of the BVN system, maintain the BVN database, ensure adequate security of the BVN information; an maintain an on-line real-time Watch-list Portal.
The consequences to note:
- A watch-listed individual is barred from entering into new relationship with any bank;
- In a situation that a bank chooses to continue business relationship with account holder on the watch-list, account holder shall be prohibited from all e-channels, issuance of third-party cheques, shall not provide reference to another customer, shall not be allowed to access credit facility or guarantee credit facilities;
- Watch-Listed individual shall remain in the Watch-List for a period up to 10 years;
- Penalties that applied to Watch-Listed individual shall apply to all accounts that he or she is a signatory to.
Reasons for the Framework
- The Framework was introduced to ensure effectiveness of Know-Your-Customer (KYC) and Customer’s-Due-Diligence principles, and promotion of more safe, reliable and efficient banking and payment systems.
- To address increasing incidence of frauds and to enhance public confidence in the banking industry.
- To provide a guide for BVN operations and Watch-list activities carried out by financial institutions in Nigeria.
Once a Watch-Listed BVN has served its term in the Watch-List, the Nigerian Interbank Settlement System (NIBSS) shall automatically delist the BVN and notify the stakeholders. Where a bank realized that an individual was placed on the watch-list in error, the bank shall apply in writing, with supporting documents to the Director, Risk Management Department of the CBN, for approval to delist. The supporting documents shall be duly authorized by the MD/CEO and the Chief Audit Executive of the bank. Upon approval from CBN, the bank shall forward the approval to NIBSS for delisting. Only the institution that placed an individual on the watch-list can request for such delisting. Money Deposit Banks and Other Financial Institutions are expected to incorporate these requirements into their day to day processes to enable compliance and reporting.
For effective and efficient operation of this Framework, all bank customers are expected to provide their accurate biometrics and bio data, and report any changes in their Biometrics to any of the financial institutions managing their accounts. This is provided for in Regulations 1.5. 4 of the Regulatory Framework for BVN Operations. Follow the link to read the entire Framework: CLICK HERE