SEC wants operators to align with regulatory framework, FATF standard

As virtual assets gain prominence globally, the Securities and Exchange Commission (SEC) has stressed the need for capital operators and entire market stakeholders to adapt to the regulatory framework in line with evolving Financial Action Task Force (FATF) standards to create resilient financial systems that promote transparency and accountability.

At the NCMI Compliance Summit 2024 for Capital Market Operators held in Lagos yesterday, the Director-General of the SEC, Dr Emomotimi Agama, said failure to adapt to regulatory frameworks and align with the evolving FATF standards would not only jeopardise the integrity of the nation’s capital markets but also pose a risk to the country and global financial system.

The FATF sets global standards for combating money laundering, terrorist financing and proliferation financing. The group has been instrumental in establishing international standards to combat money laundering, terrorist financing, and other financial crimes.

It has been estimated that Nigeria loses an average of $18 billion yearly to illicit financial flows while Nigeria and other African nations are losing $50 billion a year to the menace.

Aligning to the standard would address problems associated with money laundering and terrorism financing. It will help Nigeria implement effective regulations, address risks associated with virtual assets, as well as mitigate the $18 billion yearly loss to illegal financial flows.

Agama said the rapid evolution of virtual assets and the emergence of the related service providers have brought considerable changes to the financial landscape, creating opportunities and invariably, creating untold regulatory challenges that necessitated immediate and appropriate attention.

Although deepening financial inclusion, increased transparency and improved security are tangible benefits, however, he noted that despite these growth opportunities, regulatory uncertainty, compliance costs and balancing innovation with regulation pose significant hurdles in navigating challenges ahead.

He stressed the need for an active collaboration of capital market operators and entire stakeholders in ensuring that the market remains at the vanguard of global financial integrity and efficiency while fostering an environment conducive to innovations.

Director/Chief Executive Officer for the Nigerian Financial Intelligence Unit (NFIU), Hafsat Bakari, said as Nigeria continues to experience the transformative impact of virtual assets on the financial landscape, the nation is also reminded of the accompanying risks, particularly in the areas of money laundering, terrorist financing and other illicit activities.

She said: “The rise of VASPs has necessitated not only a rethinking of our regulatory strategies but also the adoption of more dynamic technology-driven approaches in the fight against financial crimes. As regulators, law enforcement agencies, financial institutions and stakeholders in the fight against financial crime, we must ensure our regulatory frameworks remain robust and effective.”

Represented by Dr Mohammad Jiya, Chief Operating Officer, Emerging Technologies and Innovations, NFIU, Bakari said FATF has recently updated its standards to include virtual assets and VASPs within the Anti-Money Laundering, Combating the Financing of Terrorism and Combating Proliferation Financing, AML/CFT/CPE compliance framework.

According to her, Nigeria needs continuous efforts towards strengthening the regulatory environment to ensure that the challenges posed by these emerging financial products and services are effectively tackled.

She stressed the need to put necessary measures in place for the next mutual evaluation of the country’s Anti-Money Laundering/ Counter-Terrorism Financing regime by FATF, which is scheduled to take place in 2027.

She pointed out that virtual assets, cryptocurrency-related activities and VASPs will take centre stage in the mutual evaluation because of the country’s position in the global cryptocurrency adoption index.

“NFIU remains fully committed to collaborating with all stakeholders including the SEC, financial institutions, and law enforcement agencies, to enhance the effectiveness of our AML/CFT systems,” she added.