Why government wants forfeiture of balances in non-BVN-linked accounts

The Federal Government recently secured a Federal High Court Ex-parte Order that, among other things, directs the Central Bank of Nigeria (CBN) and 19 Deposit Money Banks (DMBs) in the country to: freeze bank accounts that are not linked to Bank Verification Number (BVN) and compile and submit a list of such accounts (stating the account location, name, number and balance) to the government. The Order further directs that balances in such accounts should be forfeited to the government if the account owners fail, within 14 days, to step forward with acceptable proof of ownership to claim the balances.

The motivating factors for this are government’s belief, in its wisdom, that: bank accounts without BVN belong to corrupt persons who have hidden ill-gotten money in the banks and are afraid to have their names linked to the accounts; obtaining the Court Order will not only assist the government to unravel and acquire balances in bank accounts of corrupt persons but will also make the anti-corruption war more effective and successful; and finally, it will deter further looting of public treasury finding safe haven in banks.

Unfortunately, the Court Order is not limited to accounts of corrupt persons. It also does not cover only accounts with credit balances. It covers all bank accounts not BVN-linked, whether owned by corrupt or non-corrupt persons; whether in credit or debit balances.

Beyond the reasons indicated by government for embarking on this forfeiture of balances in non-BVN linked bank accounts, there are also deliberately undisclosed reasons for the action. The undisclosed ones include, to legally compel persons to comply with the BVN regulatory requirement; to obtain ‘free’ money to pay its long outstanding financial obligations; to fund its budget deficit; to reduce its financial cost; to, of course, traumatize bank customers unnecessarily; and without knowing it, to confirm the failure of government agencies in performing their duties under the Money Laundering (Prohibitions) Act 2011(as amended) and Terrorism Prevention (Amendment) Act, 2011 (as amended).

Now, according to reports from the Nigerian Interbank Settlement System (NIBSS), the number of non-BVN accounts in banks is 45.85 million, a number, by every standard that is very huge. If on average, each of the 45.85 million accounts has a credit balance of say N1, 000 only, the total amount to be affected by the Order will be N45.85 billion. But it is a well known fact that most, if not all the DMBs, maintain a minimum balance on account policy of over N1000. Thus, the amount of money the FGN will pull-off the banks, in one swoop, if the Order is fully and effectively implemented, will be staggering. Such a pull-out of funds from the banks will have dare consequences for the banks, the banking system and the larger economy.

With the CBN as its financial adviser, government embarked on this anti-financial inclusion programme after it might have confirmed, that 45.85 million accounts are without BVN and together they house substantial amount of money; that huge amount of money resides in several bank accounts that have long been in dormant without any foreseeable possibility that their owners would reactive and claim them. (The CBN, in the not too distant past, issued guidelines on banks’ handling of dormant credit balance in accounts); that bank customers who had, for various reasons, allowed their accounts to be dormant for years are unlikely to go for BVN. Some might have even forgotten the existence of such accounts. Even if they remember, they will not worry about BVN if the balances in the accounts will not justify the costs that will be incurred in their reactivation. It is essentially the dormant credit balances that sum to huge amount of money that the government is targeting.

Being desperately in need of funds to pay its long overdue financial liabilities to several stakeholders including oil marketing companies and road contractors, it concluded that the money in the non-BVN accounts would be a big relief if forfeited. Perhaps, if account holders in banks had kept all or most of their accounts active and registered under the BVN regulation, the government would probably not have gone after the balances in the accounts.

The other side, of course, is that government agencies have not been performing their duties effectively. If they had done so, government would not have gone for all non-BVN accounts to be frozen and forfeited. As it were, if banks rendered ‘suspicious transaction reports’ to appropriate government agencies and those agencies followed up, it would have been easy to isolate accounts that should have been the target of the government under the Court Order. After all, from the Nigerian experience, corruption-derived monies in banks run in multiples of millions, billions, and even trillions not hundreds and thousands. Consequently, the government should have had a threshold of say, N5 million and N10 million in the case of individuals and corporate organisations, respectively as provided in the MLPA, 2011 (as amended) which the Court Order would have attached. That way, accounts not affected by corruption, though they are not BVN-linked, would have been spared/exempted.

But what has happened is that because of the ineffectiveness of government agencies like the Nigerian Financial Intelligence Unit (NFIU) who ought to screen and follow up on leads from banks’ ‘reports’, almost 50% of bank customers are being subjected to traumatising experiences to reclaim their accounts or risk losing their money to the government.

The Nigerian Financial Intelligence Unit (NFIU) can only be found inculpable if banks failed to render “suspicious transaction reports” to it as provided in the Money Laundering (Prohibition) Act, 2011(as amended) and Terrorism Prevention (Amendment) Act 2011 (as amended). If it had followed up on the reports diligently, the contemplation by government to freeze and acquire peoples’ accounts/money would probably not have arisen.

Government is hiding under the guise of fighting corruption to find ways and excuses to covertly acquire innocent peoples’ money in banks. It is well known that its creditors have frequently been threatening it to pay its overdue non-performing financial obligations to them. It has failed to do so to the extent that, if it had been a private concern, it would have long been declared bankrupt and liquidated as a result. It is also true that government has been borrowing, at high financial costs, to found its budget deficits. Thus, if the monies in non-BVN-linked accounts, which are financial cost-free, are appropriated by the government, the Buhari administration will use them to settle part or all of the debts and cover its budget deficits at the detriment of the account owners, the banks the monies will flow out from and perhaps, the banking system cum entire economy. Given the slow pace at which this economy is exiting from recession, it will be most inappropriate to, in an attempt to solve a bad problem, end up creating worse situations.

Dr. Uju Ogubunka wrote from Lagos.