The Central Bank of Nigeria has published tough guidelines to banks to monitor and restrict transactions by politically exposed entities and individuals as the apex financial institution seeks to block customers thriving in illegally sourced funds by using the banking system to launder their loot.
In a June 22, 2023 circular titled “Guidance note on politically exposed persons(PEPs)”, the central bank said the banks and other financial institutions were required to develop measures to mitigate the risks associated with business relationship with politically exposed persons and their entities.
Banks are to create in-house databases and send alert to the fraud unit of the security agency should any information emerge about suspicious transactions involving a politically exposed person.
In the circular signed by Chibuzo Efobi, the director in charge of financial policy and regulation, the CBN specifically mentioned money laundering, terrorism financing and proliferation financing risks posed by high-risk customers including politically exposed persons.
In the 14-page guidance note attached to the circular, the CBN warned the banks that politically exposed persons may seek to circumvent the laws, saying, “there is a risk that PEPs could circumvent the anti-corruption safeguards by opening accounts, establishing business relationships or conducting transactions using third parties, such as intermediaries, legal entities or legal arrangements.”
According to the note, “when the risk assessment established that the business relationship with a domestic/international organization PEP does not present a higher risk, the PEP in question can be treated like any other normal customer.”
The apex bank said even after a relationship has been established with a customer, constant vigilance must be the watchword to ensure that new information established are used to re-evaluate the status of such a customer and to determine if the customer should now be treated as a politically exposed person.
According to the CBN guidelines, “PEP accounts should be subject to periodic reviews as may be determined by the bank in line with risk assessment.”
According to the circular, “banks should closely monitor transactions of all foreign PEPs and high risk domestic or international organization PEP. If there is a suspicion that a transaction involves funds linked to any form of criminal activity, a suspicious transaction/activity report must be filed with the NFIU.”