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Smile ID’s H1 2023 Report: Here are new regulations impacting digital KYC in Nigeria

Smile ID’s H1 2023 Report: Here are new regulations impacting digital KYC in Nigeria

Probably, you have recently heard or read about the concept eKYC (electronic Know Your Customer or digital KYC). The need of identification and user registration has increased with the transposition of the offer of products and services of all kinds to the online sphere.

The eKYC concept applies to all sectors of activity, but it is especially delicate in sensitive sectors such as those related to finance, investments and wealth

A recent report released by Smile ID, Identity verification solution has highlighted recent regulatory changes that influence KYC on the continent, stating the need for Nigerian businesses to align their KYC procedures with international best practices.

The H1 2023 State of KYC report proposes insights into the efficacy of biometric verification, the growing adoption of digital identity, and the impact of fraud rates across the continent,

In the first half of 2023, Nigeria’s digital KYC landscape experienced several changes that businesses must keep up with to maintain regulatory compliance and customer satisfaction.

According to the report, these changes include a new policy by the Federal Executive Council that allows commercial banks to issue debit cards that double as NIN Identity cards. The policy, introduced to increase access to physical ID documents for NIN enrollees, is expected to change how businesses verify users going forward.

The reports also stated that the introduction of the National Data Protection Bill to replace the Nigerian Data Protection Regulation (NDPR) is another crucial regulation to watch for businesses with data storage and processing requirements.

“Despite having one of Africa’s most advanced Know Your Customer (KYC) regimes, Nigeria still has some way to go in its fight against money laundering and terrorism financing (ML/TF). This much was evidenced by the Financial Action FATF’s recent mutual evaluation of Nigeria, which revealed that the country had up to 15 strategic deficiencies in its Anti-money laundering and counter-terrorism financing (AML/CTF) regime. The mutual evaluation, which also led to Nigeria’s greylisting, is expected to yield regulatory reforms affecting digital KYC, especially with respect to customer due diligence reporting,” the report stated.

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The state of KYC in Africa report which cuts across several African countries, also discusses the trends in ID-related fraud behaviours within the H1 2023 period. Across Africa, onboarding fraud attempts dropped from a record high of 28 percent in 2022 to 23 percent in the first half of 2023. The decline in fraud attempts has been largely attributed to a decline in marketing promotions which have been observed to trigger most fraud attempts.

The report, which is available to read on Smile ID’s website, also touches on the importance of biometric authentication, liveliness checks, and anti-spoof technologies, among others, for fraud prevention, especially as fraudsters evolve their methods.

Also, the report stated that 43 percent of the fraud caught by the organisation were cases where the face of the user did not match the face on the ID they submitted, indicating that a stolen ID was used. In 41 percent of the cases, the users attempted to spoof the ID owner’s face using a picture or a video. Relying on textual verification alone would have resulted in these fraudulent attempts going undetected.

Other pertinent issues covered within the African KYC compliance ecosystem include the increase in gender inclusion across Africa, KYC compliance tips across 13 countries, Fraud trends across various industries like Payment, Crypto, BNPL, and Remittance among others, how biometric verification reduces fraudulent users by up to 50 percent with facial recognition emerging as the preferred and most accessible option and how several African countries are making notable strides in adopting digital identification.