The Central Bank of Nigeria (CBN) has released its Customer Due Diligence Regulations 2023 or financial institutions under its regulatory purview as it takes a decisive stance against financial crimes.
In an effort to enhance the accuracy and depth of customer identification, the CBN has made it mandatory for financial institutions to collect and verify customers’ social media handles as part of their Know Your Customer (KYC) requirements.
The CBN’s latest move aims to bolster compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) provisions while aligning with international best practices.
These new regulations, which complement existing provisions outlined in the CBN’s Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions Regulations of 2022, are designed to fortify the fight against money laundering, terrorism financing, and proliferation financing.
Under the new regulations, financial institutions are required to establish internal processes and procedures for conducting customer due diligence measures for both potential and existing customers, including occasional customers.
They must identify customers, whether individuals or legal entities, and obtain specific information such as legal names, addresses, contact details, identification documents, account types, nature of banking relationships, and signatures. Furthermore, the regulations emphasize the need to identify politically exposed persons (PEPs).
To verify customer identities, financial institutions must rely on reliable and independent source documents, data, or information.
For individuals, this involves confirming date of birth, residential address, contact details, and the validity of official documentation.
In the case of legal persons or legal arrangements, financial institutions are required to undertake searches on public registries or databases, review annual reports or relevant financial statements, and examine board resolutions.
The regulations also emphasize the importance of record-keeping and maintaining up-to-date customer information.
Financial institutions must retain records obtained through customer due diligence measures, account files, business correspondence, and analysis results for at least five years after the termination or cessation of a business relationship or an occasional transaction.
Regular reviews of existing customer records are required based on risk categories, with high-risk customers requiring annual reviews, medium-risk customers requiring reviews every 18 months, and low-risk customers requiring reviews every three years.
Under section 6 (IV) of the new regulation, financial institutions operating under the regulatory purview of the CBN are now obligated to collect and verify customers’ social media handles as part of their KYC process.
This requirement applies to both individuals and legal entities.
The inclusion of social media handles in KYC requirements aims to enhance the accuracy and depth of customer identification.
By obtaining this additional information, financial institutions can gain valuable insights into customers’ online presence and activities, enabling better assessment of potential risks associated with money laundering, terrorism financing, and proliferation financing.
The CBN’s decision to include social media handles as a mandatory KYC requirement recognizes the growing influence and prevalence of social media platforms in individuals’ and businesses’ daily lives.
It acknowledges that social media can provide valuable information about customers’ professional networks, affiliations, and potential sources of income.
Financial institutions will be required to establish internal processes and procedures to collect and verify customers’ social media handles accurately.
This information will be used alongside other KYC data, such as legal names, addresses, contact details, and identification documents, to create a comprehensive profile of the customer.
The addition of social media handles to the KYC requirements reflects the CBN’s commitment to keeping pace with technological advancements and evolving risks in the financial sector.
By adapting regulations to include digital footprints, the CBN aims to ensure that financial institutions have a more holistic understanding of their customers, promoting enhanced due diligence and risk mitigation.
This development serves as a reminder to individuals and businesses to be mindful of their online presence and activities.
Customers should ensure that the information shared on social media platforms aligns with their stated profiles and remains consistent with their financial transactions.
Financial institutions will leverage this information responsibly and strictly adhere to data privacy and protection regulations.
(Courtesy: Nairametrics)
