CBN to clean up Tier-1 accounts not linked to BVN

The Central Bank of Nigeria (CBN) plans to remove accounts not linked to the Bank Verification System (BVN) from the financial system. The objective is to clean up the sector and reduce the growing incidence of fraud.

Blaise Ijebor, director Risk Management Department and Chief Risk Officer, CBN said this at the Prembly Compliance Breakfast Dialogue on Thursday 6 April. He was joined on a panel by Olufemi Shobanjo, head of Broker-Dealer Regulation, NGX.

According to Ijebor, the apex bank has been working with the Nigerian Inter-Bank Settlement System (NIBSS) to address the growing incidence of fraud in the sector. Although he said the financial regulator is looking at doing this very soon he did not however give an indication of when the CBN intends to commence the clean-up.

He listed three loopholes that cybercriminals are exploiting. The Tier-1 account is top of the list of loopholes. A Tier-1 account refers to a bank account that can be opened with minimal or without any form of documents. This account can be opened with a passport photograph. The account has a limit of N50,000 deposit and an operating balance of N200,000 and N300,000.

They are mostly not linked to BVN and it is mostly targeted at the unbanked population and people living in rural communities. This is the account mostly dominated by digital banks also known as fintech firms. They also present the easiest entry point for hackers because they involve customers with little knowledge about cyber security and who are mostly not taking the necessary measures to protect their accounts, according to Ijebor.

The second loophole for fraud is the activities of some banks, especially digital banks that are not meeting all the regulatory requirements. The third loophole is the ability of hackers to exploit every vulnerability that grants them access to anyone’s bank account.

“We are doing a lot about agency banking. We are moving towards agents being able to do BVN registration which moves a lot of Tier-1 accounts to Tier-2,” Ijebor said.

Banking agents used to be able to open an account for users and also link them to BVN. However, the CBN suspended their access temporarily to enable the apex bank to come out with new guidelines that will soon be released. The new guidelines are expected to enable the banking agents to regain their access to account opening as well as ensure that all necessary know-your-customer (KYC) are followed.

Ijebor said the CBN is targeting a more inclusive compliance regime which involves the regulator getting to know more about the operators and creating guidelines that are tailored to their specific needs in the industry.

Efforts will be made to collaborate with other regulators such as the Nigeria Exchange Limited (NGX) and ensure that rules benefit operators in both markets. But the CBN said it is not going to change its position for certain segments such as the cryptocurrency market.

“Our position has not changed (on crypto) and I am not sure it will ever change. If you want to use digital assets, use eNaira. It has all the properties of a digital asset,” Ijebor said.