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According to the CBN, it has issued the Customer Due Diligence Regulations 2023, containing directives to assist financial institutions with implementation and compliance with provisions of relevant laws and regulations relating to customer due diligence.” The apex bank explained that the new rules are aimed at encouraging compliance with anti-money laundering and counter-terrorism financing provisions. Below, we’ll run through some of the highlights of the regulation and how they could affect you.
Due Diligence for Occasional Transactions Above $1,000Financial institutions (commercial banks, internet banks, insurance companies, brokerage firms, etc.) will conduct due diligence on their customers when they occasionally carry out transactions worth more than $1,000 (or significant sums in other foreign currencies). They will also have to verify details for occasional wire transfers (domestic and cross-border), and when debit or credit cards are used to effect money transfers. All of this means that you will need to undergo some checks if you’re going to initiate transfers for large sums in local or foreign currency.
Social Media Handles RequiredBanks and other institutions in the financial services industry will now request their customers’ social media handles when conducting due diligence. This applies to individuals and organizations. In addition, you will need to provide your legal name and other names you may have, date and place of birth, permanent and residential addresses, and Bank Verification Number, among other data. The request for social media handles is likely aimed at supplying authorities with information that will enable them to track individuals and businesses and spot any online activity that indicates suspicious financial and security-related links.
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Banks will Also Ask for Your Tax Identification Number (TIN)Financial institutions (including banks) are now mandated to ask for your Tax Identification Number (TIN) as part of their due diligence checks. With access to TINs, they will be able to gain a more comprehensive picture of your financial activity—which presumably includes your tax payments. Persons who do not yet have TINs are therefore expected to obtain one.
Frequency of Due Diligence ChecksThe CBN has directed banks and other players in the financial services industry to classify their customers into three categories, based on their perceived risk profiles: low-risk, medium-risk, and high-risk customers. High-risk customers—which are perceived to be the most likely to be involved in significant financial and security-related illegality –include non-resident customers, Money and Value Transfer Services providers, private bank customers, non-face-to-face customers, and Politically Exposed Persons. Due diligence will be carried out for low-risk customers every 3 years; for medium-risk customers, it’ll happen every 18 months; and for high-risk customers, annually.
Situations in Which Financial Institutions May Conduct Due DiligenceYou can expect the financial institution you patronize to carry out due diligence with you when you need to update your profile. They will also do this when they notice a significant change in how your accounts with them operate, or when they believe they don’t have enough information about you. However, they may evaluate your details and request information as they see fit.
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Final WordsThe CBN’s Customer Due Diligence Regulations are designed to plug gaps which have hitherto enabled financial crimes and insecurity. Hopefully, its implementation by banks and other financial institutions will effectively tackle these ills. Featured Image Source: Sentient International
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