As is usual with major episodes in the country’s trajectory, the ongoing health and economic challenges have unerringly exposed the weaknesses of Nigerian institutions and the way the flaws frustrate development efforts. The primitive spectacle of officials transporting plane and truck loads of cash across the country, ostensibly to alleviate the impact of restrictions on movement on the poor, reflects badly on the Central Bank of Nigeria. The same could also be said of the confession that millions of bank accounts are not linked to the mandatory Bank Verification Number scheme.
Enforcing laws and regulations should neither be optional nor subject to the whims of an individual; building and sustaining institutional capacity involve robust surveillance, monitoring and sanctioning of offences and offenders. It is expected that any bank that fails to comply with the apex bank requirements for strong customer authentication, which the BVN provides, will be subject to full supervisory and enforcement action. Nevertheless, the federal and state governments and their agencies are notorious for lax, selective or non-enforcement of ordinances. The BVN is an abject case in point.
Introduced in February 2014 by the CBN in collaboration with the Bankers’ Committee (made up of the CBN governor and all banks’ CEOs) and the Nigerian Inter-Bank Settlement System Plc, the BVN is a biometric identification system that gives each bank customer a unique identity across the financial industry. It captures fingerprints, signature, face recognition features and personal details. Every customer has only one BVN linked to all accounts he or she has in the banking system.
The objectives of the BVN scheme include protecting bank customers, tackling fraud, strengthening the financial system and advancing the frontiers of banking. Moreover, it is in line with the Know-Your-Customer policy. It was touted as a major advance in efforts to combat corruption, money laundering and illicit outflows by giving regulators and law enforcement enhanced technological tools to track all financial transactions. It is also part of efforts to bring all adults into the formal banking system and in furtherance of a cashless financial system.
Deadline for registering for the BVN was shifted several times, finally ending in June 2015, after which the rules spelt out that any account not linked to a BVN number should not be operated, while no Deposit Money Bank should open any new accounts without one. Alas, these rules are, as usual, being breached with impunity.
As of April 26, according to the NIBSS, there were only 41,729,896 BVN accounts out of about 125 million bank accounts in the country. Of this total, only 79 million accounts are active. Emefiele and the CBN have tough questions to answer. Why do they allow banks to permit the operation of over 36 million active accounts in blatant contravention of their own regulation, five years after the deadline? Why do Nigerian government officials constantly sabotage their own policies?
This is an ongoing scam. By January 2019, 34.7 million accounts were identified by the CBN to be operating without BVN; 38.19 million were linked by June of that year out of 72.93 million active ones. According to Enhancing Financial Innovation and Access, a non-profit that promotes financial inclusion, 36.8 per cent of adults in Nigeria still lack access to formal bank accounts, compared to 32 per cent in South Africa and less than 30 per cent in Brazil. Ongoing corruption trials of some highly politically exposed persons revealed that bankers are still actively flouting this and other rules without facing severe sanctions.
INTERPOL emphasises the correlation between money laundered through national and transnational borders in funding drug trafficking, terrorism, organised crime and treasury looting, and recommends the adoption of technology tools like the BVN and strict enforcement of laws and regulations. Failure to enforce rules weakens the anti-graft war and the country’s obligations to international agreements under the auspices of the United Nations Global Programme against Money Laundering, among others.
Emefiele should responsibly wield the enormous powers of the CBN to rein in errant banks and bankers. The CBN has always projected weakness in enforcement despite serial exposures of misbehaviour by banks. In 2017, it took a court order, after a suit filed by the Attorney-General of the Federation, to compel seven DMBs to refund $793.2 million of public funds they had hidden, the latest evidence of the banks’ serial flouting of the Treasury Single Account regime. In 2019, the National Assembly launched investigations after it accused banks of failing to remit up to N20 trillion collected as stamp duty on behalf of the government. Banks also routinely flout other rules with either no sanctions at all or a mere slap on the wrist.
But in other jurisdictions, authorities take a harsh view of financial malfeasance. The world’s leading economies had by early 2018, imposed cumulative fines on banks for their roles in the global meltdown. There are no sacred cows as the United Kingdom fined its largest banks over £71 million in 2018. Citing research findings, Fortune magazine reported that, in the 15 months to December 2019, regulators across the world, imposed $10 billion in fines on banks, with 60.5 per cent of this as punishment for violating money-laundering rules.
Increasingly devising and deploying new technology tools and zero tolerance for fiddling with the rules mark out the successful economies. The European Banking Authority has rolled out new guidelines in line with technical standards to take effect in December and prescribed fines of up to €5 million or 10 per cent of annual turnover as penalty for violating mandated tech rules on crypto currency. Canada’s financial intelligence agency, FINTRAC, in 2019, updated its KYC enhanced technology tools.
That is the way forward. For a country that lost N12.06 billion through bank fraud in the first half of 2018, suffers from “grand corruption” (which the US State Department says bleeds up to 40 per cent from all procurement contracts), accounts for 40 per cent of illicit funds outflows in Africa and faces impunity in the public and private sectors, laxity in enforcing financial sector rules is suicidal. Therefore, Emefiele should clean up the mess today, ensure full compliance with the BVN and other regulations and sanction errant banks and operators.
