The Central Bank of Nigeria (CBN) has disclosed series of penalties that will readily be meted out of anyone who violates Bank Verification Number (BVN) operations. The BVN system gives each customer in the Nigerian banking industry, a unique identifier number.
BVN operations include process involving enrollment, identification, validation, verification, linking of customers BVN to all related bank accounts/wallets (except Tier 1), offline authentication, fraud management and customer information update.
The apex bank noted this in its recently released regulatory framework for bank Verification Number (BVN) operations and Watch-List for the Nigerian banking industry.
The Central Bank of Nigeria, in collaboration with the Bankers’ Committee, deployed a centralised Bank Verification Number (BVN) System in February 2014. This is part of the overall strategy of ensuring effectiveness of Know Your Customer (KYC) principles, and promotion of safe, reliable and efficient payments system.
The Central Bank of Nigeria (CBN) issued the revised regulatory framework in exercise of the powers conferred on it under the Central Bank of Nigeria Act, 2007 (CBN Act), and the Banks and Other Financial Institutions Act (BOFIA) 2020.
“A Watch-List shall be maintained for the banking industry. The Watch-List contains BVN records of individuals that have been confirmed to be involved in breaches outlined within this Framework”, the apex bank said.
The watch-list stakeholders include: CBN, Nigeria Inter-Bank Settlement System Plc (NIBSS), Banks/Other Financial Institutions (OFIs), and Customers.
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Sanctions for customers with BVNs on Watch-list
According to CBN, the following penalties shall apply to customer whose BVN is on the Watch-list: They shall not be allowed to enter new relationship with any participant.
A participant may choose not to continue business relationship with account/wallet (except Tier 1) holder on the Watch-list.
Where a participant chooses to continue an existing business relationship with holders of account/wallets(except Tier 1) on the watch-list, the account/wallet(except Tier 1) holder shall be prohibited from all electronic channels such as but not limited to ATM, POS, Internet Banking, Mobile Banking, USSD including issuance of third-party cheques. However, inflows may be allowed, provided these are from legitimate sources.
A customer with watch-listed BVN shall not reference accounts, access or guarantee credit facilities. A customer shall remain on the Watch-list for a specified period. In the event of a recurrence of breach, the penalty period shall run consecutively.
Subject to the provision of Section 1.9, penalties associated with a watch-listed BVN shall apply to all accounts/wallets (except Tier 1) the BVN is linked to.
Sanctions for Participants
According to CBN, the following infractions by participants shall attract appropriate penalties: Misuse of the BVN watch-listing process for victimisation; improper linking of accounts/wallets (except Tier 1); and Other infraction(s), as may be determined by CBN.
For operating an account without BVN, the participants will pay N2million penalty per infraction/customer, 15percent of the total amount credited into the account during the period infraction exists and N20,000 penalty per infraction/customer per day after the infraction exists.
For participants who fail to capture customers’ biometrics and bio-data in line with the BVN Framework, it attracts N2million penalty per infraction/customer. Same N2million penalty will be paid by participants who fail to validate in-line with the BVN Framework and BVN SOG.
Among other sanctions as stated in the revised framework, the CBN said failure to comply with the Framework and BVN SOG attracts N200,000 penalty per infraction/customer; and N20,000 penalty per infraction/customer per day after the infraction exists.
This Framework defines the operations of BVN as well as the establishment and operations of a Watch-list for the Nigerian Banking Industry, to address increasing incidence of frauds and to enhance public confidence in the banking industry.
This Framework, without prejudice to existing laws, is a guide for the operations of the Watch-list in the Financial System. The Watch-list is a database of customers identified by their BVNs, who have been involved in confirmed cases of breaches, as defined within the framework.
The objectives of the Regulatory Framework for BVN and Watch-list Operations in Nigeria are to: Define roles and responsibilities of participants in the BVN system; Define Bank Verification Number (BVN) operations in Nigeria; Define access, usage and management of the BVN system; Outline operations of the BVN Watch-list process; Define sanction regime for breaches in BVN operations; and Deter fraud incidences in the Nigerian Banking Industry.
The Framework provides regulations for BVN operations and Watch-list for the Nigerian Banking Industry. BVN operation comprises all activities leading to the management of the unique banking identification of customers in the BVN database. CBN said this Regulatory Framework shall guide the activities of the participants in the provision of BVN Operations and Watch-list. Participants include: Central Bank of Nigeria (CBN); Nigeria Inter-Bank Settlement System Plc (NIBSS); Banks; Other Financial Institutions (OFIs); and Customers.
