CBN Imposes N100M Penalty On Inadequate Processing Of Forex Documents

The Central Bank of Nigeria (CBN) has introduced stricter sanctions for banks that process foreign exchange transactions without proper documentation, imposing penalties that could run into hundreds of millions of naira.

Under the revised foreign exchange regulatory framework, authorised dealer banks found to have completed forex transactions with insufficient supporting documents will pay a N100 million fine. They will also incur an additional N10 million penalty for each affected transaction.

The sanctions are contained in the fourth edition of the Foreign Exchange Manual released by the apex bank. The document serves as the operational guide for participants in Nigeria’s foreign exchange market.

According to the CBN, the updated manual is designed to strengthen regulatory compliance, improve transparency and reinforce confidence in the country’s foreign exchange system.

The regulator classified the offence as the execution of foreign exchange transactions without adequate documentation. It stated that any authorised dealer found culpable would be liable to the prescribed penalties.

The revised guidelines place greater emphasis on documentation requirements for all categories of foreign exchange transactions. These include spot transactions, forward contracts, swap arrangements, imports and export-related dealings.

Banks are now required to obtain, verify and retain all relevant supporting documents before foreign currency can be released to customers. Similar requirements apply to forward and swap transactions, where evidence of the underlying trade or obligation must be available before settlement.

The manual also retains existing documentation requirements for imports. Importers are expected to provide Form M, invoices, certificates of origin, packing lists and shipping documents, among other mandatory records.

In addition, importers must submit Exchange Control Documents within 90 days after negotiating shipping documents through overseas correspondent banks.

Failure to comply with the documentation requirements attracts progressively stiffer sanctions.

A first violation will result in a 90-day suspension from foreign exchange transactions. A second offence carries a 180-day restriction, while a third attracts a one-year suspension.

The CBN warned that a fourth violation could lead to a complete prohibition from participating in foreign exchange transactions.

Banks that fail to report cases of default to the regulator will also face sanctions under the new framework.

The apex bank further tightened reporting obligations for authorised dealers. Institutions that fail to submit required daily or monthly returns will be fined N500,000 for late submission.

Where returns are not rendered at all, the offending institution will pay a minimum penalty of N5 million. An additional N500,000 daily fine will apply until the breach is corrected.

The revised manual also strengthens oversight of banks’ foreign currency exposure levels.

Financial institutions that exceed approved Net Open Position limits will receive a warning for the first offence. A second violation will attract a 10-working-day suspension from the Nigerian Foreign Exchange Market.

A third breach will result in a 90-day suspension from market activities.

The CBN also imposed sanctions on unauthorised reallocation of foreign exchange funds. Any bank found engaging in such practices will pay N10 million for each transaction involved.

Beyond the monetary penalty, affected institutions may be referred to the Bankers’ Committee ethics framework for further disciplinary action.

The central bank said the new measures form part of ongoing efforts to deepen transparency, promote market discipline and establish a more rules-based foreign exchange regime.

According to the regulator, stronger compliance standards and stricter enforcement will help improve market integrity, reduce abuses and enhance investor confidence in Nigeria’s foreign exchange market.