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.
At the Prembly Compliance Breakfast Dialogue on Thursday 6 April, Blaise Ijebor, Director of the Risk Management Department and Chief Risk Officer of the Central Bank of Nigeria, was joined on a panel by Olufemi Shobanjo, Head of Broker-Dealer Regulation of the Nigerian Stock Exchange.
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 identified three vulnerabilities which cybercriminals are taking advantage of, with Tier-1 accounts being the primary one. This type of account requires minimal or no documentation, and can be opened with just a passport photograph. It has a deposit limit of N50,000, 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.