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CBN, BVN and fraud



Deposit Money Banks in the country have, appropriately been ordered by the Central Bank of Nigeria (CBN) to suspend bank accounts and Bank Verification Numbers (BVN) of their customers linked with any fraudulent activities.

It is noteworthy that the BVN was launched in February 2014 and its operational framework came on-stream, October 18, 2017, that is, more than three years after the commencement of the programme. What this means is that the CBN and the banks operationalised the BVN programme before formal guidelines were developed and issued. This, perhaps, explains why the programme was encumbered by numerous problems including lack of proper understanding by those with the responsibility of making it work smoothly without putting undue and unnecessary pressure on the banking public, particularly existing customers of banks.

Implementation of the programme was such a high-pressured exercise with tight completion deadline as though the banking system could not progress without it. The pressure on bank operators and their customers was such that even the least of questions raised and clarifications sought by the customers could hardly be resolved at many banks’ branches without reference to their head offices. Anyway, the CBN eventually issued the operation framework last October under the signature of its Director, Banking and Payments System Department, Dipo Fatokun.

If the framework had first been issued, adequately publicised and explained, most of the attendant challenges faced in the course of its implementation would have been nipped in the bud. Even, since its belated issuance, not much, if any awareness and sensitisation exercises have been undertaken by both the regulators and operators in the banking industry.

Notwithstanding, it is appropriate to acknowledge the essence and importance of the BVN in the country. Perhaps, if it had been undertaken many years ago, and diligently operated, most of the financial crimes in the country through the banking system, would not have occurred; and if they did occur, tracking and pinning down the perpetrators would have been less cumbersome. As the framework highlights, the BVN is meant to ensure, among other things, that banks know their customers (KYC), promote a safe, reliable and efficient payments system and to address increasing incidences of frauds and engender public confidence.

It is important for those who maintain or intend to maintain bank accounts in DMBs in the country to appreciate that the framework issued by CBN transcends BVN. This is reflected in the title, “The Regulatory Framework for BVN Operations and Watch-List for the Nigerian Banking Industry.” Paramount for bank account holders’ awareness is the fact that they have been assigned two (2) principal roles. One, abide by the Regulatory Framework, and two, report all suspicious or unauthorised activities on their accounts.

It is also imperative for them to understand that in the framework, fraudulent activities in banks have been classified into four categories: 0, 1, 2 and 99. For example, category (0) covers any “fraudulent infractions without monetary value” such as, “forgery, compromise, complicity, fraudulent duplicate enrolment.” For such frauds, the tenure of imposed penalties shall be five (5) years. Category (1) involves “confirmed successful fraud with monetary value.” The prescribed period for the penalty is 10 years. Category (2) covers “when a customer is watch-listed more than once.” This carries penalties with ten (10) years period and “transactions are limited to the branch where account is domiciled.” Category (99) deals with “individual who committed fraud and is at large.” A “Post-no-debit” shall be flagged “on all accounts linked to the BVN.”

A “Watch-List” table has also been created for banks to enter the names of customers whose accounts may be involved in fraudulent activities. As general penalties, a watch-listed individual: “Shall not be allowed to enter into new relationship with any bank”; “A bank may choose not to continue business relationship with the account holder on the watch-list. Where a bank chooses to continue an existing business relationship with the holder of account on the watch-list, the account holder shall be prohibited from all e-channels, such as ATM, POS, Internet Banking, Mobile Banking, including issuance of third-party cheques. A watch-listed customer shall not provide reference to another customer, neither shall he/she be allowed access to credit facility or guarantee credit facilities.” “A watch-listed individual shall remain in the watch-list for a period as specified in the penalty table. In the event of a re-occurrence, the tenure shall begin to count from year one” and “Penalties that applied to watch-listed customers, shall apply to all accounts that he or she is a signatory to.”

There are only two conditions on which a watch-listed account can be delisted: Upon expiration of term in the watch-list and if erroneously listed in the watch-list.

From the foregoing, this framework in which the CBN interchangeably used “banking industry,” “banking system” and “financial system,” is a significant regulatory document, with enormous risk implications for banks and their customers. It requires thorough understanding and compliance. It is not enough for CBN to simply issue the document to DMBs without any efforts on its side or that of the DMBs to carry along the banking public particularly, bank customers.

There is the need for long-tenured public awareness and sensitisation programmes for all banking services consumers. The nation’s preachment on financial inclusion and financial literacy, at least, justifies this requirement. The specified penalties and their tenures in the framework which appear steep necessitate the question on their reasonableness and the role of the law courts before an offending account holder is punished and/or after he/she has been punished in line with the provisions in the framework, since fraud offences are criminal in nature.

Finally, given the essence of the framework, and in order to protect themselves against the obvious grave, punitive and hopefully deterrent penalties, it is advisable for all bank account holders to ensure they prevent their accounts from being used for fraudulent purposes.

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