The Central Bank of Nigeria (CBN) has released the Customer Due Diligence (CDD) regulations for 2023, aimed at assisting financial institutions in complying with anti-money laundering (AML), counter-terrorism financing (CFT), and counter-proliferation financing (CPF) laws and regulations. The new regulations outline the increased fines and penalties for institutions that fail to adhere to the provisions related to customer due diligence.
This information was disclosed in a report by CBN on their official website seen by RateCaptain.
Under Schedule 1 of the CDD measures, the regulations address various infractions and penalties. Failure to establish internal processes and procedures for conducting CDD measures for all customers can result in a minimum penalty of N750,000 for the Executive Compliance Officer (ECO) and N500,000 for the Chief Compliance Officer (CCO) in Deposit Money Banks (DMBs). Other culpable employees may face a penalty of N500,000. For Payment Service Banks (PSBs), the minimum penalty is N250,000 for the CCO and N200,000 for other employees.
Non-compliance with conducting CDD measures on customers can lead to penalties such as N20 million for DMBs and N10 million for PSBs, along with additional penalties of N200,000 per customer without CDD for DMBs and N100,000 per customer for PSBs.
The regulations also cover failure to identify and verify the identity of beneficial owners, directors, signatories, and those with controlling interests in legal persons or arrangements. The penalties for such failures range from N1,250,000 on the ECO to N1 million on the CCO in DMBs, along with penalties per customer. PSBs may face penalties of N500,000 on the CCO and N200,000 per customer.
The CBN’s regulations also address the implementation of risk-based approaches to CDD, obtaining CBN approval for simplified CDD measures, and complying with Tiered KYC measures. Failure to comply with these provisions can result in penalties ranging from N1,250,000 to N15 million for DMBs, and N500,000 to N10 million for PSBs.
Furthermore, the regulations outline penalties for failure to conduct initial customer risk assessments, ongoing due diligence, enhanced CDD, and agent due diligence and monitoring. Penalties can range from N1,500,000 on the ECO to N100,000 per customer for DMBs and N500,000 on the CCO to N50,000 per customer for PSBs. The penalties also extend to agents, with amounts varying based on the type of financial institution.
The CBN emphasizes the importance of keeping records and ensuring they are up to date. Failure to comply with record-keeping requirements can result in penalties of N10 million for DMBs and N5 million for PSBs.
Financial institutions, including Deposit Money Banks, Payment Service Banks, Other Financial Institutions, and Payment Service Providers, are urged to familiarize themselves with the CBN’s customer due diligence regulations and take the necessary steps to ensure compliance. The regulations aim to strengthen the integrity of Nigeria’s financial system and combat money laundering, terrorism financing, and proliferation of weapons of mass destruction. Failure to comply with the regulations may result in severe financial penalties for institutions and individuals involved.