BVN-related asset forfeiture may jolt banks like TSA

• Banks Mum, As Stakeholders Urge Caution, More Time
• Forfeiture Order Arbitrary, Lawyers Say
• Move Will Aid Fight Against Corruption-Kpakol
• Expect Elongated Legal Battle –Nweze

A repeat of the credit and liquidity squeeze, which rocked the banking sector in the wake of the takeoff of Treasury Single Account (TSA), may be in the offing if the Federal Government succeeds to acquire private accounts operated without Biometric Verification Number (BVN) numbers.

The Federal High Court, Abuja, penultimate week granted the Federal Government’s prayers to have thousands of account in commercial bank, that are still without BVN forfeited if owners do not come forward to claim them in two weeks.

Trouble for this class of account holders started on October 17 this year, when Justice Nnamdi Dimgba ruled on an ex-parte motion filed by the Attorney General of the Federation (AGF), Justice Abubakar Malami.

He slammed a restraining order on commercial banks to desist from operating such accounts, and further directed the 19 Deposit Money Banks (DMBs) to disclose the owners and the financial content of each of the accounts., in a move, which seeks to check corruption and enthrone transparency in the financial system.

According to industry source, no less than N600b, and an alleged undisclosed N400b by “smarter banks,” mostly belonging to politically exposed persons, may be sterilsied in the exercise, if followed duly and diligently by authorities.

This development, will definitely return banks to the path of renewed hunt for liquidity to cover up daily operational demands, thereby raising fixed
deposit and interbank lending rates, aggravated cost of funds for customers and resort to frequent visits to the discount window, especially as Nigerian banks have the penchant for trading with free and cheap monies.

At the onset of the TSA, it took the intervention of Central Bank of Nigeria (CBN) to reduce the Cash Reserve Ratio from 31 per cent to 25 per cent, which allowed banks to retain a level of liquidity to cushion the effect of the withdrawals that exceeded N1.2 trillion.

Meanwhile, banks at the weekend maintained sealed lips in the face of the fast approaching enforcement date of the forfeiture, and subsequent
transfer of values to the CBN.

Also, both the apex bank and the financial safety net institution-Nigeria Deposit Insurance Corporation (NDIC) have chosen to keep mum over the issue.

A financial analyst, Femi Ademola, said although the move is right in terms of ensuring a clean financial system, it will definitely scramble the money market matrix, at least for a few days.

“The realities are that we have transactions that are forthright in the system, mostly in relation to politically exposed persons, who seek and get favours from the banking system, even asking for cover up.

“But I can also tell you that the operators are smarter than the regulators, so they may still find a way out of this despite the order,” Ademola said, and expressed concerns that this might multiply the woes of accounts that are lined in the unending processes of obtaining Letters of Administration.

Ademola also allayed concerns that the Federal Government and CBN might be facing series of litigations over the matter, saying that the enforcement ab initio is a court order and wondered why a depositor, without a hidden agenda, would delay perfecting his/her BVN.

For former Economic Adviser to President Olusegun Obasanjo, Dr. Magnus Kpakol, if there is significant value in any account outside the
BVN scheme, it is the owner that made it suspicious and is the one to blame.

Kpakol, who maintained that the campaign has been ongoing over the years, also queried how
someone without ulterior motives would leave an account with significant value unattended to, even under difficult times, till now.

“The move is in the right direction especially for the purposes of ongoing fight against corruption. The only thing I ask is time to accommodate those with genuine reason,” he said.

An economist and faculty member at the Pan Atlantic University, Dr. Austin Nweze, expressed concerns with the fire brigade approach to serious issues, saying they are capable of misrepresenting the nation or affecting investments.

He bared his fangs over the issue, not just for the policy direction, but the implementation without prior warning and notices, which should have put everyone concerned and stakeholders at
alert.

“I know it is not all accounts in this category that the government is looking for. They know who they are actually looking for, but the innocent people will now suffer alongside.

“Some lawyers are already challenging this, perhaps because of the method and this may introduce a regime of elongated legal tussle soon, with its financial implications,” he said.

Legal practitioners share Nweze’s views. Apart from describing the action as illegal, they are also those interested to seek legal redress to quash the order.

Lagos lawyer and human rights campaigner, Ebun-Olu Adegboruwa, regreted that the Federal Government is employing interim orders for permanent purposes.

He said: “I am well concerned about how we deploy interim orders for permanent purposes, such as to forfeit valuable assets, without any fair hearing from the person(s) concerned.

I think it is improper to obtain interim order to freeze bank accounts of estates that are in dispute between the beneficiaries of estates of deceased persons that are still being contested; of profits of companies that are still subject to litigation or other disputes, just to mention a few examples of the arbitrariness of these orders.”

According to him, there is nothing in Section 3 of the Money Laundering (Prohibition) Act 2011, that makes BVN a condition precedent for operating a bank account in Nigeria. What the law requires, he insisted, is verifiable identity of the customer such as name, address, photographs and identity cards.

He argued that the BVN is a policy decision of the CBN, and so a court of law should not base its orders on executive policies that are not backed by law.

“The other point is the bindingness of an ex-parte order upon the whole world and upon all millions of bank customers in Nigeria, who are not directly parties to the suit. How proper is it, for a court to seek to determine the rights of parties in their absence, in view of the clear provisions of section 36(1) of the 1999 Constitution and Article 7 of the African Charter,” he asked, adding that, while it is in order to trace, isolate and forfeit monies suspected to be proceeds of crime, seeking to forfeit all monies in all banks in Nigeria on the ground of absence of BVN is manifestly illegal.”

Adegboruwa, therefore urged the Attorney-General of the Federation to review the case with a view to adjusting the tenor of “these rather outlandish orders.”

Second vice president of the Nigeria Bar Association (NBA), Monday Ubani, is of the view that it is becoming clearer by the day that the forfeiture request and the granting of the order by the court needs to be properly examined to locate the legal basis for it in the first place.

He asked: “The first question would be, under what law and rules of court was this order obtained? Is there any existing law that gives the AGF or the Economic and Financial Crimes Commission (EFCC) such powers to forfeit monies belonging to those, who are unable to be linked to the BVN system?

“If none, then the forfeiture proceedings will be faulted on appeal. To make matters worse, the 14-day ultimatum from the date of judgment (not even from the date of publication) given to the affected victims is too short and punitive.”

Ubani, who noted that it may be true that some of those who refused to be linked to the BVN may have done so due to the suspicious source of their money, added that there is the possibility that majority of those affected by the order may be victims of illiteracy, or those in the Diaspora.

His words: “There may be genuine reasons for the delay and I think a more humane approach should have been adopted by the government. No doubt that this process is a vote of no confidence on the entire banking system, including the Central Bank, but we must be careful not to throw the banking sector, and by extension the entire economy into chaos and anarchy.”

According to him, the proper approach to adopt would have been to limit the amount for such measures to about N5m and above, and enough time given to those affected (not less than six months) to enable those living abroad to come and regularise the process.

“Another way is to halt final forfeiture for now and allow those who have genuine reasons to come up within a period of five years, after which the final forfeiture order can be sought and pronounced,” he suggested.

He advised those against whom final forfeiture order may be made against, due to their non- availability, to apply to set aside the order, as long as they have genuine reasons why they could not perfect the process on time.

Sylva Ogwemoh, a Senior Advocate of Nigeria (SAN), said it is within the discretionary powers of the judge before whom ex-parte proceedings are conducted to either grant, or refuse the application based on the facts presented in support of the application.
The position of the law, he said, is that such orders are not meant to last forever, but for a determined period of time and can be set aside by the judge, who made such order, or by another judge of the same court in appropriate circumstances.

“Under the Economic and Financial Crimes (Establishment etc) Act, there is the requirement of arrest, tracing and attachment/seizure of property before an interim forfeiture order is made upon a motion ex-parte brought by the Commission.

“The application upon which the order of Justice Dimgba was made was not brought under the EFCC Act to my knowledge.

“As I have indicated above, any order made in the absence of a party can be set aside by the party against whom the order is made, if the party is able to show to the court that the order was wrongly made,” he stated.

Ogwemoh pointed out that there may be genuine reasons why some persons may not have complied with the Federal Government policy on BVN.

“There may be instances of pending litigation in courts over accounts of deceased persons. Some other persons may not have complied because of some extraneous circumstances, some Nigerians have emigrated to foreign countries and are still not able to regularise their residency in the foreign country, and cannot take the risk of travelling out of such countries.

“Some persons are in remote areas and have the habit of savings, hoping to build castles in the air. There are several reasons why some people have not complied with the directive.

“In any event, if any person’s legitimate earnings are affected by this order, such a person can approach the court to explain his or herself and have the order of court set aside,” he advised.