CBN sets $1m as capital requirement for International Money Transfer Operators

The Central Bank of Nigeria (CBN) has established a minimum operating capital requirement for International Money Transfer Operators (IMTOs) at $1 million for foreign entities and an equivalent amount for local IMTOs.

This significant development was outlined in the revised guidelines for the operation of IMTOs, which were officially released on January 31, 2024.

According to the guidelines, applicants must adhere to the CBN’s anti-money laundering, combating the financing of terrorism, and countering proliferation financing of weapons of mass destruction regulations.

These regulations are detailed in the CBN guidelines for licensing banks and other financial institutions in Nigeria.

IMTOs intending to operate in Nigeria are required to submit their applications to the director of the trade and exchange department, along with various documentation.

This includes a non-refundable application fee of N10 million only, or an amount specified by the Bank. Other necessary documents encompass approval to operate in other jurisdictions or agency agreements, evidence of tax clearance, and incorporation documents for indigenous IMTOs.

Furthermore, the ownership structure of the IMTO, board approval to operate international money transfer services, and profiles of the company’s board and management are essential requirements.

The documentation process also mandates information on beneficial owners (BO) of the company, credit reports from licensed credit bureaus for shareholders and key officers.

These stringent measures aim to enhance transparency, accountability, and regulatory compliance within the international money transfer sector. IMTOs are also expected to provide any other information, documents, and reports specified by the CBN from time to time.

The CBN’s decision underscores its commitment to fostering a robust financial environment and ensuring the integrity of money transfer services within Nigeria.

The CBN also introduced a mandatory annual renewal process for IMTOs, signaling a heightened commitment to regulatory oversight in the financial sector.

According to the new guidelines, IMTOs are required to undergo the renewal process, subject to a fee of N10 million only or an amount specified by the CBN, payable through electronic transfer or bank draft on or before the 31st of January each year.

This fee structure aims to contribute to the cost of maintaining regulatory compliance and ensuring the continued integrity of money transfer services.

Crucially, the renewal of IMTO approval must be completed within the first quarter of every year, emphasizing the CBN’s dedication to a timely and efficient renewal process. Failure to comply with this timeframe could have significant consequences for IMTOs.

In a move to enforce strict compliance, the guidelines state that IMTOs must provide their agent banks with a copy of the CBN renewal for the current year within the first quarter. Should an IMTO fail to furnish its agent bank with this documentation, the bank is directed to cease any further transactions with the non-compliant IMTO.

CBN prohibits banks from operating as IMTOs, to act only as agents

In the guidelines, the CBN prohibits banks from directly operating International Money Transfer services. Instead, banks are authorized to act solely as agents in this capacity. Additionally, Financial Technology Companies have been barred from obtaining approval for IMTO.

These regulations align with the provisions outlined in the Banking and Other Financial Institutions Act of 2020 (BOFIA 2020), which extends the prohibition of certain persons’ employment in banks to the realm of IMTOs.

In adherence to BOFIA 2020, conditions excluding specific individuals from managing banks will now extend to the management of International Money Transfer Services.

This means shareholders and officers of companies involved in IMTOs are barred from undertaking International Money Transfer Operations.

The permissible activities for IMTOs are tightly defined, focusing solely on inbound international money transfer transactions. These activities include accepting funds for the purpose of transmitting them to individuals residing in Nigeria, cross-border personal money transfer services, and services for foreign tourists in Nigeria. Transactions are structured on a “person to person,” “business to person,” and “business to business” basis, subject to periodic reviews by the CBN.

IMTOs are expressly prohibited from engaging in any other business beyond the stipulated permissible activities. Outbound transactions and the purchase of foreign exchange from the domestic foreign exchange market for settlement are strictly off-limits.