On Wednesday, November 23rd, 2022, the Central Bank of Nigeria released additional requirements for licensing of banks and other financial institutions. The updated guideline is meant to be read in addition to existing regulatory requirements with respect to Anti Money Laundering (AML), Combatting and Financing of Anti-Terrorism (CFA), and Countering Proliferation Financing (CPF).
The reason behind the new guidelines is to;
- Guide promoters in complying with AML/CFT/CPF requirements in license applications for banks and other financial institutions.
- Ensure that proceeds of crimes are not used to establish financial institutions.
- Ensure that criminals do not own or control financial institutions in Nigeria.
- Identify and verify the beneficial owners of financial institutions.
- Ensure that promoters of financial institutions put in place appropriate and effective measures to mitigate ML/TF/PF risks.
The new guidelines apply to banks and financial institutions whose activities are within the purview of the Central Bank of Nigeria.
In this article, we would consider some key provisions of the updated guidelines.
KEY PROVISIONS OF THE CBN GUIDELINES FOR COMBATTING MONEY LAUNDERING FOR BANKS AND OTHER FINANCIAL INSTITUTIONS
- PROVISION OF ADDITIONAL REQUIREMENTS FOR CBN LICENSE APPLICATIONS
In addition to existing CBN license requirements for banks and other financial institutions such as Fintech companies, the new guideline provides additional requirements that all promoters of financial institutions are required to submit alongside an application for approval in principle (which is the first phase of almost all CBN license applications).
The additional requirements are;
i. Completed and personally signed Beneficial Owners Declaration Form.
ii. Notarised statement of net worth for all Beneficial Owners.
iii. Completed and personally signed Politically Exposed Persons (PEP) Declaration Form.
iv. AML/CFT/CPF Compliance policy, which shall at a minimum cover:
- Compliance structure including designation and status of a compliance officer;
- Employee screening and monitoring.
- Customer identification and verification.
- Customer due diligence measures;
- ML/TF/PF Risk Assessment;
- AML/CFT/CPF Training of the board, senior management, and other employees;
- Independent assessment of the AML/CFT/CPF Programme;
- Suspicious transaction monitoring, reporting, and record keeping;
- PROVISION OF CIRCUMSTANCES WHERE AN APPLICATION FOR LICENSE OR A PARTY(IES) TO AN APPLICATION MAY BE REJECTED PARTICULARLY AS IT CONCERNS THE AML, CFT, AND CPF REQUIREMENTS
Under the new guidelines, some of the conditions under which a CBN license application may be rejected in connection with the AML, CFT, and CPF requirements are;
a) Failure to demonstrate understanding of the ML/TF/PF risks inherent in the business;
b) Inability to address the AML/CFT/CPF licensing requirements satisfactorily, especially during the capital verification exercise;
c) Opaque ownership structure;
d) Discovery that a party to the application is on the sanctions lists;
i. United Nations Security Council (“UNSC”);
ii. United States Office of Foreign Assets Control (“OFAC”);
iii. Her Majesty’s Treasury, United Kingdom (“HMT”);
iv. European Union (“EU”);
v. French Ministry of Economy, Finance, and Industry (MINEFI);
vi. Nigerian sanctions list; and 2 Parties to an application include beneficial owners, shareholders, proposed directors, proposed senior management staff, and related entities Classified as Confidential
vii. Any other sanctions list as may be advised from time to time
e.) Opaque ownership structure, etc.
- REQUIREMENT OF PROVISION OF INFORMATION OF PROMOTERS OF FINANCIAL INSTITUTIONS
Promoters of financial institutions are required to provide the following information for verification during the application process;
a. The shareholding structure of the institution for which the license is sought.
b. Where a shareholder or prospective shareholder is a legal person or legal arrangement, relevant incorporation documents, detailing the current shareholding structure and directorship/trustee/fiduciary information.
c. Curriculum vitae of the Beneficial Owners.
d. Completed Beneficial Ownership Declaration Form. (Appendix 1).
Financial crimes and financing of terrorism get sophisticated by the day, and relevant regulatory agencies including the Central Bank of Nigeria will continue to take active measures to combat these activities by regulating and enforcing the said regulations. Hence the new guideline is no doubt a welcome development.
On the part of persons seeking to set up financial institutions as well as existing owners of financial institutions, the regulatory landscape will continue to change to meet up with current trends. This is why it is important for promoters of financial institutions to seek adequate legal guidance on the current requirements for obtaining licenses in Nigeria. Owners of existing financial institutions on the other hand must endeavor to stay in touch with the current regulatory landscape within their sector to enable stay compliant while providing solutions that satisfy the needs of their clients.
Are you considering obtaining a license for your financial institution in Nigeria? Our team of lawyers will assist you with the needed legal support. If you’ll like to work with us or make further inquiries about licensing for financial institutions in Nigeria, please reach out to us through the Whatsapp icon on your right or send us a mail HERE, and we will be delighted to assist you.