We discussed here that one of Nigeria’s weakest AML (anti-money laundering) points is Bureau de Change (BDC) which does not collect vital information as people exchange Naira and foreign currencies. That loophole should be a major vector of concern for Nigeria’s central bank. Yes, you cannot ask fintechs, Binance, etc to provide KYC/KYB data when BDCs roll free. Good People, it seems the central bank has the memo:
“The Central Bank of Nigeria (CBN) has issued a directive requiring all Bureau de Change (BDC) operators in the country to reapply for new operational licenses by June 3, 2024. This move is part of a broader effort to restructure the foreign exchange (forex) market and strengthen the regulatory framework governing BDC operations. In addition to reapplying for licenses, BDC operators must now meet new capital requirements: N2 billion for Tier 1 operators and N500 million for Tier 2 operators.”
Get the message: by the time you seek that new license, the Central Bank of Nigeria will know those behind the BDCs. Yes, they want to open the veil. Yet, I do believe that they can just ask for information updates instead of asking BDCs to “reapply”, just for the sake of ease of doing business messaging in Nigeria.
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Comment 1: The CBN’s directive on BDC relicensing is definitely a step in the right direction. Here’s why I see value in both the CBN’s approach and the suggestion for an update process:
Strengths of the CBN’s approach:
COMPREHENSIVE REASSESSMENT: Reapplication forces a complete review of BDC operations. This can uncover previously hidden issues beyond just KYC compliance, potentially identifying bad actors who might have slipped through the cracks before.
STRONGER SIGNAL: The act of relicensing sends a clear message that the CBN is prioritizing AML efforts and won’t tolerate lax practices. This can deter future attempts to exploit BDCs for money laundering.
Addressing concerns and finding a middle ground:
UPDATE PROCESS FOR COMPLIANT BDCs: The CBN could consider a two-pronged approach. For compliant BDCs with a clean record, a streamlined KYC update process could be implemented alongside the relicensing for non-compliant operators.
FOCUS ON EFFICIENCY: Streamlining the application process with clear online forms and efficient turnaround times can minimize disruption for legitimate businesses.
SUPPORT PROGRAMS: The CBN could offer workshops and resources to help BDCs understand and comply with the new requirements.
Additionally:
TECHNOLOGY SOLUTIONS: Exploring digital solutions for KYC verification and information sharing with the CBN can further enhance efficiency and reduce administrative burden in the long run.
Overall, a combination of the CBN’s stricter approach for initial relicensing, coupled with a future system for easier KYC updates for compliant operators, could be a balanced solution. This would strengthen AML efforts while minimizing disruption for legitimate BDCs contributing to a healthy foreign exchange market in Nigeria.
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