CBN To Banks, Others: Pay Special Attention To Risks, Comply With Anti-money Laundering Rules

The Central Bank of Nigeria (CBN) has directed banks and other financial institutions (OFIs) to pay special attention to credit risk, operational risk, legal risk, liquidity risk, reputation risk and compliance with rules for combating money laundering, financing of terrorism and proliferation financing.

This comes as the Nigeria Deposit Insurance Corporation (NDIC) has advised depositors to avoid investment offers with quick and arbitrarily high returns.

Financial Institutions (FI) have responsibility to develop and implement risk management policies and procedures for agent banking activities, the CBN said in a regulatory framework for agent banking, published on its website.

The CBN highlighted specific risk management requirements to be carried out by the financial institutions. These include being responsible for monitoring and supervising the activities of their agents, having information on the numbers and volumes of transactions carried out for each type of service by each agent, and monitoring effective compliance with set limits and establishing other prudential measures in each case.

Financial institutions are to implement measures to control risks in operations, including having clause(s) in the contract establishing liabilities/responsibilities of agents, ensure periodic physical oversight visits by the principal’s staff or authorised persons to ensure that agents operate strictly within the requirements of the law, regulations, and the agent banking contract.

They are to comply with Nigeria Data Protection Regulation (NDPR) and other extant data protection laws and regulations, conduct due assessment of agent’s credit worthiness and set limit structures for agent’s various activities commensurate with this assessment, have product programs, procedure manuals and customer transaction limits, while considering implications for operational and liquidity risks for agents, and ensure that risks related to electronic banking as well as information and data security risks, in respect of agent banking, shall be managed by the FI in a prudent manner.

The CBN said the FI should have a business continuity plan which accommodates agent banking operations to mitigate any significant disruption, discontinuity or gaps, and institute systems and personnel to adequately monitor and control agent banking operations on an ongoing basis.

Agent banking according to the CBN refers to the use of third parties for the provision of banking and other financial services to the public. It enables banks and other financial institutions to extend their services to locations where they may not have physical presence.

The agent banking initiative in Nigeria has proved to be a viable tool for achievement of the financial inclusion targets set for the country.

Over the years, the agent banking initiative has resulted in the ubiquity of financial services agents across Nigeria, resulting in a significant and growing portion of financial transactions being conducted through the agents. This has necessitated the review of agent banking regulations to streamline activities in agent banking while ensuring that appropriate risk mitigation measures are taken by stakeholders, the guidelines stated.