Banks panic as CBN moves to verify update of customers’ accounts

Posted by admin CBN (Central Bank of Nigeria), Latest Politics Sunday, February 20th, 2011

SHOCK waves swept through the nation’s banks at the weekend as they got wind of the Central Bank of Nigeria (CBN) planned verification of the level of their compliance with the just-concluded customer accounts’ update.
The exercise begins on March 7, but the banks will today formally receive letters from the CBN informing them of the exercise.

When the apex bank ordered the banks last November to begin the update of the accounts of their customers, there was no indication that banks’ compliance will be scrutinised. In fact, the banks were said to have carried on business as usual, and in some cases creating dummy accounts to spread the funds of their clients, and some cases shielded their identities.

So, when feelers came from CBN at the weekend that the verification exercise would begin on March 7, most of the banks were allegedly shocked by the move, apparently because of surreptitious handling of the exercise, where in some cases the details and identities of the accounts of high net worth customers were concealed.

Among the customers, whose accounts are reportedly giving the banks headache over the CBN’s move, are persons with huge sums of money with the banks but from questionable sources.

Some of such customers are believed to be public office holders, politicians, and businessmen, who cannot openly defend their sources of income.

To retain their accounts and shield them from the CBN, The Guardian learnt that the affected banks resorted to creating “dummy accounts” with fictitious credentials to conceal part of the funds.

This action was allegedly informed by their alleged conviction that the apex bank would not have the time and the manpower to investigate the account numbers in all the banks, which are in the region of trillions.

The Guardian learnt that all financial institutions would today receive the CBN’s letter on the planned verification of their level of compliance and handling of the entire exercise. A source at the apex bank said the apex bank’s officials would concentrate their activities on the corporate headquarters and branches of the banks during the examination of their records.

On sanctions for banks, which failed to comply with the directive, the official said that the CBN, for now, is silent on the exact penalty until after it concludes the verification exercise.

He, however, noted that the CBN had confirmed that there would be zero tolerance for non-compliance both for defaulting individuals and institutions.

The CBN official said the management was magnanimous in disclosing the exact date for the commencement of the verification exercise instead of conducting surprise checks on banks.

He said the apex bank had warned banks that the current CBN management is “flexible but not elastic,” stressing that any “Know Your Customer (KYC)” deficient financial institution would be sanctioned.

The CBN had on November 29, 2010 directed all customers of banks and financial institutions to update their accounts’ information by December 31, failing which the accounts would be suspended from January 1, 2011. This was extended to January 31.

The apex bank had explained that the account update was part of the Customer Due Diligence (CDD), which involves KYC’s compliance, which is accepted worldwide as a tool for the fight against money laundering and terrorism financing as well as protecting the interest of customers.

The Guardian had exclusively reported that with the expiration of the CBN mandated bank accounts update, it had ordered the banks to “flag” any account that was not updated or with defective details.

In banking parlance, to flag an account means to close it or deny the owner access to it
A CBN source told The Guardian that from reports at the disposal of the banking industry regulator, the exercise would expose a lot of illegal funds in the system, adding that, “with the heat on them (customers) from foreign banks, they have resorted to hiding illicit funds in Nigerian banks.”

Besides, he explained that it would enable the apex bank to have a clear picture of the funds in the system with a view to planning adequately for the sector and the economy.

This was also alluded to by the Committee of Chief Compliance Officers of Banks in Nigeria, which noted that “as industry practitioners, we appreciate the need for this exercise as a tool for improved customer service and also for fighting money laundering/terrorism financing in line with global requirements.”

-Guardian

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