Concise Summary
- CBN in year 2014 issued Guidelines on international money transfer services (“IMTS”) in Nigeria (the “Guidelines”)
- An operator of IMTS is an international money transfer operator (“IMTO”)
- An IMTO who needs Central Bank of Nigeria’s (“CBN”) licence to perform international money transfer services in Nigeria may collaborate with a foreign technical partner
- Deposit money banks (“DMBs”) are excluded as IMTOs in Nigeria
- DMBs can only act as agents of any IMTO
- An IMTO’s business model may include a foreign technical partner, who must enjoy CBN’s approval
- IMTO compliance and regulatory regimes protect consumers’ interest and financial inclusion
Well, it is safer to bolt the stable by ensuring compliance and regulatory in international Money Transfer Operation. A more pro-active step than attempting to bolt the stable after the horse – a risk has occurred.
IMTS may be in-bound or out-bound. It is in-bound when Oludapo who now lives in Calgary, Canada, sends money (dollars) to Aisha, who wants to remain in Lagos, Nigeria. Aisha may cash out the Canadian dollars in any DMB or ask the DMB to pay it to her domiciliary bank account. Out-bound IMTS means the converse.
Any out-bound or in-bound payment must be between 2 (two) human persons. Corporate entities are barred from IMTS and it may be money laundering to attempt to spilt transactions.
We considered licencing regimes for IMTOs here and agency framework in international money transfer services here.
CBN’s regulatory framework for IMTS is the Guidelines on International Money Transfer Services in Nigeria, 2014 (the “Guidelines”).
Regulatory and Compliance
The Guidelines provide risk systems and internal controls. Any IMTS application must be able to detect any transactions initiated by a corporate body, given that only natural persons must utilize IMTS.
CBN permit financial institutions to monitor customers transaction in order to avoid or avert frauds. This is the plank of CBN’s circular on Establishment of Industry Fraud Desk, 2015, that binds DMBs, and payment processing entities that include IMTO and Switches.
How CBN enforces compliances are becoming clearer to all stakeholders. CBN penalized certain banks for allowing customers to trade on cryptocurrency.
IMTS application should detect spilt transactions. That is a transaction aimed at by-passing money laundering act (MLA) and CBN’s combating of financing terrorism (CFT) regulations, by performing multiple transaction below the prescribed limit.
It is true that IMTS application must ensure that permissible transactions go through only. Out-bound transactions must not exceed US$2,000 or its equivalent in any other currency. We are not aware of any upward or downward review of this limit on out-bound transaction.
A major agreement an IMTO must sign with a foreign technical partner will include clear compliance obligations and dispute resolution.
CBN’s sanctions against an IMTO, its board of directors, officers or agents include:
- to withhold corporate approvals
- financial penalties
- suspension from money transfer operation and
- revocation of international money transfer service
The Guidelines did not name applicable penalties, so, CBN enjoys discretion in respect of penalties and a court of law may not readily question its discretion, unless, it is shown that CBN exercised it in bad faith.
We submit that it is good (business) practice to ensure that IMTS application is purpose built and that the IMTO has the capacity to manage consumers’ complaints, at all times. CBN should, prior to AIP (approval-in-principle) ensure that the IMS application is fit for purpose.
The framework for regulatory sandbox operations renders this very practicable and necessary.
Depending on your business model, acting as an IMTO for a foreign technical partner may give your business an edge, in terms of global presence. This could include providing local IMTS application that the foreign technical partner will utilize to process payment, locally.
From our practice experience, should you have lean resources to ensure regulatory and compliance, that may include cost of licencing, you could roll out your international money transfer services, with a tacit approval from CBN.
We do not refer to API. This is because CBN has a predilection for FinTech in Nigeria – as long as you stay within the bounds of ethics, compliance and regulatory.
Osita Enwe heads our FinTech, education and agribusiness law practice groups
