The Central Bank of Nigeria has released guidelines for licensing of banks and other financial institutions. The apex bank said, “it is for use by individuals and entities applying for licence to operate as banks or other financial institutions.”
The guideline is under the auspices of the Anti-Money Laundering, Combating The Financing of Terrorism, and Countering Proliferation Financing of Weapons of Mass Destruction (AML/CFT/CPF).
According to the central bank, the guidelines will assist promoters of financial institutions to comply with AML/CFT/CPF requirements while applying for operational licences.
The guidelines also provide specified minimum requirements and are expected to be considered by anyone applying for licenses shall.
Why this matters: This is the first time that the central bank has issued tough regulations aligning its application process for banking licenses that take into consideration terror financing, weapons financing, and other insecurity.
- This is likely going to make securing a banking license a lot more stringent and rigorous.
- Applicants might also need to invest in demonstrating that they understand the risk of money laundering, terrorism financing, and Proliferation Financing.
- More than ever, the CBN is going to be scrutinizing the shareholders of potential bank applicants, specifically targeting those who may have had criminal records or ties to crime in the past.
- One major cogent observation is that applicants also need to be wary of sanctions, especially from foreign countries and Nigerians.
- For example, if fund providers or backers of bank applicants are from countries that have been sanctioned, it could affect the success of their applications.
The scope of the guidelines covers both new and pending applications (including those awaiting final approval).
What the guideline is saying: While the guidelines provide for items such as objectives, scope, and applicability, requirements for license application, of interest in our assessment are grounds for rejecting applications for a banking license.
a) Failure to demonstrate understanding of the ML/TF/PF risks inherent in the business;
b) Inability to address the AML/CFT/CPF licensing requirements satisfactorily, especially during the capital verification exercise;
c) Misrepresentation of facts and false declaration;
d) Criminal record of a party to the application indicating conviction or any other offence that constitutes financial crime;
e) Opaque ownership structure;
f) Discovery that a party to the application is on the sanctions lists;
i. United Nations Security Council (“UNSC”);
ii. United States Office of Foreign Assets Control (“OFAC”);
iii. Her Majesty’s Treasury, United Kingdom (“HMT”);
iv. European Union (“EU”); v. French Ministry of Economy, Finance and Industry (MINEFI);
vi. Nigerian sanctions list; and
vii. Any other sanctions list as may be advised from time to time
g) Inability to address observed deficiencies in licencing application within specified timeline.
h) Any other condition that the CBN may specify
Download the guidelines.
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