EXPLAINER: Why CBN Wants To Freeze Bank Accounts Not Linked With NIN

Eko Hot Blog reports that starting from March 1, 2024, the Central Bank of Nigeria (CBN) has announced that accounts lacking the Bank Verification Number (BVN) and the National Identity Number (NIN) will face restrictions on conducting transactions

Similarly, the CBN has made the possession of BVN and NIN mandatory for all bank account openings.

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This is contained in a circular issued on Friday and jointly signed by Chibuzo Efobi, Director, Payment System Management Department, and Haruna Mustafa, Financial Policy and Regulation Department.

According to the circular, the directive is necessitated by the CBN’s efforts towards promoting financial system stability by strengthening Know Your Customer (KYC) procedures in financial institutions.

The circular stated, “Effective March 1, 2024, all funded accounts or wallets shall be placed on “Post No Debit or Credit” and no further transactions permitted.

“The BVN or NIN attached to and/or associated with all accounts and wallets must be electronically revalidated by January 31, 2024.

The circular partly reads, “All existing customer accounts and wallets for individuals with validated BVN shall be profiled by the NIBSS ICAD mediately within 24 hours of opening accounts and wallets.”

“To ensure uniform and full compliance, the Executive Compliance Officers, Chief Compliance Officers, or Heads of the Compliance Functions are advised to acquaint themselves with the attached Guidance Notes, which become applicable to all institutions regulated by the CBN.

“Also, a comprehensive BVN and NIN audit shall be conducted shortly, and where breaches are identified, appropriate sanctions shall be applied.

“Finally, all financial institutions regulated by the CBN are required to apply strict compliance on restrictions on Tier 1 accounts and wallets as they relate to limits on transaction values and cumulative balances.”

NIN and Nigeria’s Long Journey to Banking Safety 

The use of National Identity Number as a prerequisite for verification of customers identity in the Nigerian financial system can be traced back to 2012 when the CBN under the leadership of Sanusi Lamido Sanusi notified all deposit Money Banks, microfinance banks, primary mortgage banks on the use of NIN for Know your customer (KYC) verification.

Sanusi Lamido Sanusi, CBN Governor, (3 June 2009 – 20 February 2014)

In a document titled “Circular To All Nigerian Deposit Money Banks, Microfinance Banks, Primary Mortgage Banks On The Use Of The National Identity Number (NIN) For The Know Your Customer (KYC) Verification”, issued on 28th May, 2012 by the then Director, Banking and Payments System Department at the CBN Dipo Fatokun, the apex bank apprised all financial institutions in the country on the use of NIN as part of customers identity verification.

The circular reads in part, “As you may be aware, the National Identity Management Commission (NIMC) was established by the NIMC act 2007, to establish, operate, maintain and manage the new National Identity Management System (NIMS), which is the avenue for achieving government’s desire to develop and deepen the consumer credit sector, enable e-payments, facilitate financial inclusion, develop commerce and harmonize all existing and future identification schemes.

‘The output of the NIMS is the issuance of the National Identity Numbers (NIN) i.e an eleven-digit number which is unique and unchangeable to an individual, and the issuance of a General Multipurpose Card (GMPC), based on chip technology to all citizens and legal residents in Nigeria.

“This new system will be backed up by a central standardized Identity database which will in turn enable financial institutions, verify the identity of their customers on an online real time basis, using their NIN or biometrics.

“Consequently, the Central Bank of Nigeria hereby directs that starting 8th January 2013, the NIN would become the basis for KYC verification and compliance by all Deposit Money Banks and by extension, other deposit taking financial institutions including the Microfinance Banks (MFBs) and Primary Mortgage Banks (PMBs) in Nigeria.”

However in another move towards curtailing the high rate of fraudulent activities through identity theft in the Nigeria’s banking system, the CBN in February 2014 introduced the Bank Verification Number (BVN) scheme.

According to the apex bank, the scheme aims to revolutionize the country’s banking and payment systems in Nigeria by addressing issues such as: ensuring the safety of depositors’ funds, avoiding losses through the compromise of personal identification numbers, preventing identity theft; checking fraud, and including illiterate persons in the banking system.

Godwin Emefiele, Governor Of Central Bank of Nigeria, (4 June 2014 – 9 June 2023)

The bank verification number is a biometric registration of customers in the financial system introduced to tackle cybercrime and ATM fraud. The CBN stated that the bank verification number allows a customer to have “a single identity within the financial system”.

Thus, people who are unable to read and write will be able to use their biometrics for banking transactions, as this cannot be replicated. It will tackle incidents of identity theft and enable banks to verify their customers easily in the context of the Know Your Customer initiative.

Dermalog BMS, the German company which handled the project, noted that it was the first time that any country had implemented the platform for national use. Deposit money banks were directed to commence biometric registration of customers in February, 2014 with an initial deadline of June 2014.

The BVN registration exercise deadline was later extended to October of the same year following the harrowing experiences of Nigerians as bank customers stormed banks in droves to register before the deadline closes.

NIN to Replace BVN

On February 9th, 2021, the Federal Government announced a plan to replace the Bank Verification Number (BVN) with the National Identity Number (NIN).

The then Minister of Communications and Digital Economy, Dr Isa Pantami made the announcement at a media briefing after a survey of NIN registration exercise at NIMC enrolment centres in the FCT.

Pantami revealed that he has consulted with the then Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele on the need to replace BVN with NIN. He further stated that he led a presentation made to the National Economic Sustainability Committee (NESC) to that effect.

Dr Isa Pantami, the former Minister Of Communication And Digital Economy

Pantami explained that the use of NIN is mandated by law stipulated in National Identification Number Regulations 2017 while the BVN is a policy introduced by the CBN.

“BVN is our secondary database, while NIN and the database is the primary one in the country that each and every institution should make reference to NIMC,” he added.

Significance of Linking NIN to Bank Accounts

The recent move by CBN to freeze all bank accounts not linked with NIN is parts of its efforts to comply with global best practices set by global agencies for anti-money laundering (AML) and countering the financing of terrorism (CFT).

According to the circular released on Friday, “the directive is necessitated by the CBN’s efforts towards promoting financial system stability by strengthening Know Your Customer (KYC) procedures in financial institutions.”

KYC is the mandatory process of identifying and verifying the client’s identity when opening an account and periodically over time.

In other words, banks must ensure that their clients are genuinely who they claim to be. It is a pivotal component in the ongoing battle against financial crime, money laundering and terrorism financing.

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The NIN being the distinctive numeric identifier assigned to individuals in Nigeria therefore plays a crucial role in customers identity verification.

Additionally, the linkage of bank accounts to NIN will add extra layer of security and accountability, making it more challenging for criminals involved in kidnapping, terrorism, and banditry to exploit the financial system.This proactive approach is essential to curb illicit activities, safeguard national security, and ensure the integrity of financial transactions in the country.

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