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The Central Bank of Nigeria (CBN) has introduced new Customer Due Diligence Regulations for financial institutions under its supervision, as part of its proactive approach against financial crimes.
The objective of these latest measures by the CBN is to strengthen compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) provisions while aligning with international best practices.
In a bid to enhance the accuracy and comprehensiveness of customer identification, the CBN has made it compulsory for financial institutions to collect and verify customers’ social media handles as part of their Know Your Customer (KYC) requirements.
New Regulation:
These new regulations 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. They are designed to reinforce the fight against money laundering, terrorism financing, and proliferation financing.
Under the new regulations, financial institutions must establish internal processes and procedures for conducting customer due diligence measures for potential and existing customers, including occasional customers.
Financial institutions are required to identify customers, whether individuals or legal entities, and obtain specific information such as legal names, addresses, contact details, identification documents, account types, nature of banking relationships, and signatures. Additionally, the regulations emphasize the importance of identifying politically exposed persons (PEPs).
To verify customer identities, financial institutions must rely on reliable and independent source documents, data, or information. This includes confirming personal details like date of birth, residential address, contact details, and the validity of official documentation for individuals. For legal entities or arrangements, financial institutions are expected to conduct searches on public registries or databases, review annual reports or relevant financial statements, and examine board resolutions. The regulations also stress the significance of record-keeping and maintaining up-to-date customer information.
Financial institutions are required to retain records obtained through customer due diligence measures, account files, business correspondence, and analysis results for a minimum of five years after the termination or cessation of a business relationship or an occasional transaction.
Regular reviews of existing customer records based on risk categories are necessary, with high-risk customers requiring annual reviews, medium-risk customers requiring reviews every 18 months, and low-risk customers requiring reviews every three years.
Social Media Handles:
According to section 6 (IV) of the new regulation, financial institutions operating under the CBN’s regulatory purview are now obligated to collect and verify customers’ social media handles as part of the KYC process.
This requirement applies to both individuals and legal entities.
The inclusion of social media handles in the KYC requirements aims to enhance the accuracy and depth of customer identification.
By obtaining this additional information, financial institutions can gain valuable insights into customers’ online presence and activities, enabling a better assessment of potential risks associated with money laundering, terrorism financing, and proliferation financing.
Significance:
The CBN’s decision to include social media handles as a mandatory KYC requirement acknowledges the increasing influence and prevalence of social media platforms in the daily lives of individuals and businesses.
It recognizes that social media can provide valuable information about customers’ professional networks, affiliations, and potential sources of income.
Financial institutions will need to establish internal processes and procedures to accurately collect and verify customers’ social media handles. This information will be used in conjunction with other KYC data, such as legal names, addresses, contact details, and identification documents, to create a comprehensive customer profile.
Implications:
The addition of social media handles to the KYC requirements demonstrates the CBN’s commitment to keeping pace with technological advancements and evolving risks in the financial sector.
By adapting regulations to include digital footprints, the CBN aims to ensure that financial institutions have a more comprehensive understanding of their customers, promoting enhanced due diligence and risk mitigation.
This development serves as a reminder to individuals and businesses to be mindful of their online presence and activities.
Customers should ensure that the information shared on social media platforms aligns with their stated profiles and remains consistent with their financial transactions.
Financial institutions will responsibly leverage this information while strictly adhering to data privacy and protection regulations.
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