The Central Bank of Nigeria (CBN) has taken a significant step in its fight against financial crimes by introducing the new Customer Due Diligence Regulations 2023 for financial institutions under its purview. These new regulations, aimed at enhancing compliance with anti-money laundering and counter-terrorism financing provisions, align with international best practices in the banking sector.
The latest addition to the Know Your Customer (KYC) requirements is the inclusion of customers’ social media handles. This move by the CBN emphasizes the need for financial institutions to establish robust internal processes and procedures for carrying out customer due diligence measures for both potential and existing customers, as well as occasional customers.
The new CBN customer due diligence rules applies to both individuals and legal entities.
Here are things to know about new CBN customer due diligence rules
- Customer Due Diligence Regulations 2023 requires financial institutions to establish internal processes and procedures to carry out customer due diligence measures for potential and existing customers along with occasional customers.
- The regulations apply to all financial institutions under the regulatory purview of the Central Bank of Nigeria.
- Prohibition of opening anonymous accounts, numbered accounts, or accounts in fictitious names.
- Financial institutions must conduct customer due diligence (CDD) measures when establishing business relationships or conducting certain types of transactions.
- CDD measures include customer identification, verification of identity, understanding the nature and purpose of the business, understanding sources of funds, and ongoing due diligence.
- Customers’ personal information, such as legal name, address, date of birth, identification numbers, occupation, and nationality, must be obtained.
- Legal persons and arrangements must provide relevant documentation, including registration information, board resolutions, and identification of directors, shareholders, and beneficial owners.
- Verification of customer identity must be done using reliable, independent sources.
- Ongoing due diligence is required to monitor transactions and ensure consistency with customer information and risk profiles.
Non-compliance with the Customer Due Diligence Regulations 2023 may result in sanctions, highlighting the importance of adhering to these guidelines. It is crucial for financial institutions to retain records obtained through customer due diligence measures, account files, business correspondence, and analysis results for a minimum of five years after the termination or cessation of a business relationship or an occasional transaction.
Regular reviews of existing customer records are mandatory and should be based on risk categories. High-risk customers require annual reviews, medium-risk customers necessitate reviews every 18 months, and low-risk customers should be reviewed every three years.
The CBN emphasizes that the regulations are subject to potential amendments or revocation in the future, indicating a commitment to adapt and enhance the effectiveness of these measures.