The Central Bank of Nigeria (CBN) has made the digital ID and social media handles of bank customers a mandatory requirement for the Know Your Customer (KYC) policy in the financial industry going forward.
A digital ID is an electronic representation of personally identifying information that may be used to verify the identity of a person.
The move, the apex bank said, is aimed at strengthening the fight against financial crimes.
This was contained in the CBN’s Customer Due Diligence Regulations 2023 report, which was posted on its website and addressed to all banks and other financial institutions.
The regulation, signed by the CBN Director, Financial Policy and Regulations Department, Chibuzo Efobi, was aimed at bolstering compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) provisions while aligning with international best practices.
Under the Social Media Handles 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 and seeks to enhance the accuracy and depth of customer identification.
According to the new regulation, financial institutions will leverage the information responsibly and strictly adhere to data privacy and protection regulations.
It also stated that the inclusion of social media handles in KYC requirements will also 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 apex bank noted that it is now mandatory for financial institutions to collect and verify customers’ social media handles as part of their KYC requirements.
This new regulation, which complements the 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, was designed to fortify the fight against money laundering, terrorism financing, and proliferation financing.
Under the new regime, 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.
The banks 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, the framework further specified.
Moreover, the regulations emphasised the need to identify politically exposed persons (PEPs).
The Guidance Notes on Politically Exposed Persons Financial Policy and Regulation Department June 2023, clearly stated that to verify customer identities, financial institutions must rely on reliable and independent source documents, data, or information.
For individuals, the process involves confirming the 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 regulation also emphasised the importance of record-keeping and maintaining up-to-date customer information.
Under the regulation, 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.
The CBN’s decision to include social media handles as a mandatory KYC requirement recognises the growing influence and prevalence of social media platforms in individuals’ and businesses’ daily lives.
The apex bank pointed out that social media can provide valuable information about customers’ professional networks, affiliations, and potential sources of income.
Thus, financial institutions will be required to establish internal processes and procedures to collect and verify customers’ social media handles accurately.
The 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.
Essentially, 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, the apex bank stressed.
This development serves as a reminder to individuals and businesses to be mindful of their online presence and activities.
Customers should also ensure that the information shared on social media platforms aligns with their stated profiles and remains consistent with their financial transactions.
The CBN stated that the objective of the guidance was to assist FIs in the identification and management of risks associated with PEPs in the course of business relationships.
According to the CBN, “Financial institutions in the ordinary course of their businesses, establish business relationships with Politically Exposed Persons (PEPs) who may be vulnerable to corruption and thus may portend reputational and financial crime risks to the FI.
“PEPs pose a high risk of money laundering, financing of terrorism, and proliferation financing (ML/FT/PF) due to the possibility that individuals holding such positions may misuse their power and influence for personal gain or advantage to themselves, close family members, and/or associates.
“Such individuals may also use their families or close associates to conceal illicit funds and assets. In addition, they may also seek to use their power and influence to gain representation and/or access to or control of, legal entities for similar purposes,” the apex bank added.
The apex, as a result, mandated financial institutions to comply with the provisions of the CBN Anti-Money Laundering, Combating Financing of Terrorism and Countering Financing of Proliferation of Weapons of Mass Destruction (AML/CFT/CPF) Regulations, 2022 to mitigate the potential risks posed by PEPs.
“Amongst these obligations is the requirement to apply a risk-based approach to identifying Politically Exposed Persons (PEPs) and to apply appropriate Enhanced Due Diligence (EDD) measures when dealing with those that pose higher AML/CFT/CPF risks.
“In view of the corruption levels in Nigeria, domestic PEPs are rated highly vulnerable to financial risks, therefore, by default, most domestic PEPs are considered high risk. Foreign PEPs and PEPs with prominent functions in international organizations should be categorized based on the level of risk as assessed by financial institutions.”
In addition, it said: “Consequently, the CBN issues this Guidance in line with CBN AML/CFT/CPF Regulations 2022, FATF Recommendations, FATF Guidance on PEPs (2013) and Wolfsberg Guidance on PEPs (2017), to assist FIs in the identification and management of risks associated with PEPs.
“This guidance provides minimum standards for FIs in their relationships with PEPs and does not limit measures to be taken by FIs to meet their statutory obligations. The Guidance Notes will be revised from time to time, as necessary,” CBN added.