KYC Enforcement is Up in Nigeria

Don’t get caught unprepared.

Since July of this year we’ve seen a trend across our Partners towards increased KYC enforcement and higher standards for KYC collection and verification in Nigeria. We believe this is being driven by the CBN and to a lesser extent, the NCC in Nigeria. Our Nigeria team chalks this activity up to three converging trends.

1. Continued technology adoption means cybercrime/online fraud is up in Nigeria. Every institution is going digital. Low barriers for customer entry due to the advent of technology also mean low barriers to online fraud. Companies and customers are now only as strong as their weakest digital link — whether that means fraudulent consumer loan applications or agent-based SIM swap. Regulators are realizing that they have to keep up with the times.
2. Digital Operators: Nigerian digital service providers have enjoyed massive growth in the past 5 years and have become important stakeholders in the economy as they manage large sums of other people’s money. Increasingly they are being recognized as systemically important by the regulators. Previous KYC regulations did not cover these type of operators having focused banks, insurance and more traditional forms of payment.
3. Financial Inclusion: The Central Bank of Nigeria (CBN) is actively driving and investing in depending financial inclusion in Nigeria. One part of this is the licensing of telecoms and others as mobile money operators, enabling widely available cash in/cash out digital currency. This means a massive increase in the amount of digital transactions in the country — even if the average digital transaction size will probably decrease. The shear volume of digital transactions likely to occur under the new model creates risk and the best way to manage it is by enforcing KYC and AML standards at the outset.

CBN has continued to use its previously established 3 tier model of KYC based on transaction size and account balance, updating it in the past to allow for increased account balances but now adding to the types of checks required for tier 2 and 3 accounts as well. In particular we are seeing requests for upfront and on-going list checking (checking names against watch lists to prevent money laundering). We’ve also seen demand for image quality checks for face and profile images to ensure that these images are useful in later account analysis.

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