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Anatomy of Fintech Law

Concisely, the recall process for bank transfers due to customers’ errors means the customer’s Bank must inform the Receiving Bank.

The Sending Bank will encourage an amicable resolution where the customer knows the payment’s beneficiary.

Where the customer does not know the beneficiary or the beneficiary is unwilling to refund, the Receiving Bank will place a post-no-debit (PND) restriction on the instance of the Sending Bank.

After that, the Sending Bank and the Receiving Bank’s internal auditors must mediate between the parties, failing which the Receiving Bank will Watch-list the beneficiary, and the customer may seek legal redress in Court.


Akinjide, a retail manager, sought to recall one million Naira, which he erroneously transferred to an Access Bank customer.

The Central Bank of Nigeria (CBN) Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria 2018 specifies the recall process for transfer due to customers’ errors.

Bank transfers due to customer errors are not infrequent in Nigeria’s payment system. It differs from bank errors that happen when a Sending Entity – the customer’s Bank – erroneously sends value contrary to the customer’s instructions due to a wrong account number, amount, duplication, or glitch to a Receiving Entity.

Like Akinjide above, Oluchi, who lives in Asaba, mistakenly transferred three million Naira to Musa; Oluchi does not know Musa.

In any case, Musa refused to authorize the receiving Bank to refund Oluchi after the receiving Bank placed a post-no-debit restriction on Musa’s bank account.

Contrary to the transfer recall process for a bank transfer due to a customer’s error under the CBN Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services, the Bank’s branch requested Oluchi to obtain a police report and an affidavit.

Segments of Customers’ Error

CBN Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria 2018 broadly segments customers’ transfer errors into the following:

a. Where the beneficiary is known to the customer or

b. Where the beneficiary is not known to the customer

Where the beneficiary is known to the customer

The Sending Entity, a CBN-licenced Bank or Fintech that facilitates electronic fund ransfers or payments in Nigeria whose customer initiated the Instant Electronic Fund Transfer (EFT), shall encourage the customer to contact the beneficiary for an amicable settlement.

Amicable settlements hardly benefit the customer who transferred the funds erroneously due to pervading dishonesty among some Nigerians.

Where the beneficiary is not known to the customer

However, where the customer does not know the beneficiary or a known beneficiary refuses to refund the customer, the Sending Entity, upon reasonable explanations from the customer, must notify the Receiving Entity, who shall place a lien on the beneficiary’s account.

Furthermore, the Receiving Entity must take steps to obtain the beneficiary’s approval to refund the customer.

Indeed, our fintech lawyers understand that banks and fintech hardly apply the recall process under the CBN Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria 2018.

Should the beneficiary refuse to consent to a refund, the CBN Regulation on Instant (Inter-Bank) EFT Services requires the internal auditors of the Sending and Receiving Bank to mediate between the customers within two weeks of the complaint.

Our fintech law team believes banks need more time to follow this process because of time constraints, porous Know-Your-Customer (KYC) dynamics, and dwindling staff strength.

Although the CBN Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria 2018 makes the Banks’ internal audit teams’ decision final, Nigerian Courts may not treat such finality as final.

Accordingly, the lien on the amount in the beneficiary’s account shall not last more than two weeks. A Court Order may be required to perpetuate such administrative lien beyond two weeks.

Where the beneficiary has utilized the fund

The Receiving Bank’s Internal Auditors must watch-list the beneficiary’s BVN (Bank Verification Number), and the Sending Bank may report the incident to law enforcement agencies.

That is where the beneficiary utilized the funds before the receiving Bank placed a post-no-debit (PND) restriction on the account, and the beneficiary, after a demand, refuses to fund the account to facilitate a refund.

The Revised Regulatory Framework for Bank Verification Number (BVN) Operations and Watch-List for the Nigerian Banking Industry 2021 established the BVN.

NIBSS (Nigeria Inter-Bank Settlement System Plc) is the custodian, manager, and operator of Nigeria’s BVN database.

BVN operation is the process of enrolling, identifying, validating, verifying, and linking bank customers’ BVN to all related bank accounts, virtual accounts, or wallets subject to the Customer Due Diligence Regulations 2023.

A beneficiary whose BVN is watch-listed shall not be allowed to enter a new relationship with a Fintech or Bank.

A Fintech or Bank may continue business with a beneficiary whose BVN is watch-listed. Still, such beneficiaries must not access electronic fund transfer channels, including issuing third-party cheques.

A beneficiary whose BVN is watch-listed cannot reference accounts, access, or guarantee credit facilities.

Ten years is the minimum watch-list period for refusing to refund unsolicited payments due to customers’ errors.

Exceptions Complaint Handling

Banks’ Dispute Resolution System (DRS) must provide for exception handling where the status of a transaction between the Sending and Receiving Entities is indeterminate.

For example, when the sending entity debits a customer’s account but there is no credit in the beneficiary’s account in the Receiving Bank,


The banking industry thrives on trust, integrity, and honesty among operators, regulators, and customers. A customer must not consider unsolicited payments a bonanza.

Imagine that Baba Beji wanted to pay hospital bills for Iyabo’s C-Section (caesarean section) for their fourth child but mistakenly transferred the money to Oloye, who immediately cashed out the funds from a POS agent and switched off the mobile number, which is linked to his bank account.

The consequences of utilizing unsolicited funds due to a bank customer’s errors are not negligible in law. It is an offence of criminal conversion of property.

Financial institutions, including fintech, must apply the recall process under the Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria 2018 to ensure a safe payment system.

SRJ is a Fintech and digital banking law firm. We supplement our fintech & digital banking practice with retail, education law, and commercial litigation or dispute.

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