The Central Bank of Nigeria (CBN) has directed money deposit banks to move balances that have remained in dormant accounts for up to 10 years to the Unclaimed Balances Trust Fund Pool Account (UBTFPA), in a fresh move that will see the apex bank investing unclaimed funds in Treasury Bills on behalf of the federal government.
The directive was contained in a circular signed by Chibuzo Efobi, director, financial policy and regulation department of the CBN, which was shared to all banks and other financial institutions (OFIs) with the title; ‘the Management of Dormant Accounts, Unclaimed Balances and other financial assets in Banks and Other Financial Institutions in Nigeria’, on Thursday.
The directive came as part of the release of an exposure draft of guidelines for the management of dormant accounts, unclaimed balances, and other financial assets in banks and other financial institutions in Nigeria.
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Efobi said the directive was necessitated by demand from banks and other stakeholders, for the CBN to further clarify the procedures for management of dormant and inactive accounts by banks in Nigeria.
According to the guidelines, the CBN shall open and maintain the UBTF Pool Account to warehouse unclaimed balances in eligible accounts. The funds in the account will be invested in Nigerian Treasury Bills (NTBs) and other securities as approved by the “Unclaimed Balances Management Committee.”
This means that eligible dormant accounts, unclaimed balances and other financial assets include various types of deposits, domiciliary accounts, prepaid card accounts, and wallets, proceeds of uncleared and unrepresented financial instruments, unclaimed salaries and wages, and other similar assets will be transferred into the UBTFPA.
Are the account holders losing their money?
Under the Finance Act 2020, the federal government can borrow from the unclaimed dividends and dormant account balances under the Unclaimed Funds Trust Fund. The funds are therefore converted and made available as a special debt owed by the federal government to the respective shareholders and the dormant bank account holders.
The guidelines state that the affected account will be able to access the list of unclaimed balances transferred to CBN on the websites of financial institutions, CBN or newspaper publications as a way of monitoring their funds.
In addition, the guidelines mandate the CBN to publish annually on its website, the list of owners of unclaimed balances that have been transferred to the UBTF Pool Account. The apex bank is also required to publish on its website, the procedure for reclaim of warehoused funds and other financial assets.
Financial institutions are also required to monitor inactive accounts and notify the customers, as well as protect such accounts from unauthorized usage. They are also expected to establish procedures that will ensure continuous contact with customers to reduce the incidence of inactive/dormant accounts.
In other to ensure full compliance with the new guidelines, the central bank has established a management committee to oversee the operation of the UBTF Pool Account, issue regulations, guidelines, and circulars on the administration of dormant/unclaimed balances and financial assets in FIs, and monitor compliance with the guidelines.
The financial sector has for long been without guidelines on how to handle unclaimed funds or funds in dormant accounts. The situation has created cases where depositors and next of kins were deprived of their money. Those are believed to have the capability to cause chaos in the financial system. The new guidelines, which now stipulate how unclaimed funds and all funds in dormant accounts should be handled, are expected to put an end to the different rules being applied by each financial institution.
However, while the draft stipulates moving unclaimed funds to the UBTFPA, it also made exemptions. The guidelines specify that certain classes of dormant accounts financial assets such as; government-owned accounts, accounts that are subject to litigation, accounts under investigation by a regulatory authority or law enforcement agency, and encumbered accounts, are exempted.