Despite the increasing awareness and reforms in the Bureau De Change (BDC) sub-sector, a significant number of operators are below the requisite rules guiding their activities, the Financial Stability Report of the Central Bank of Nigeria (CBN) for 2018, has noted.
In a target examination of 100 selected BDCs conducted during the second half of 2018, there were lapses, including poor Anti-Money Laundering/Combating Financial Terrorism (AML/CFT) compliance.
There was also observed failure to keep proper records of transactions, which may have opened up opportunities for money laundering and late/non-rendition of periodic returns that have always been at the centre of disagreement with the apex bank.
“Appropriate sanctions were imposed on the errant BDCs,” the report noted, adding that a strategic meeting was held with the leadership of the Association of Bureaux De Change Operators of Nigeria (ABCON) to emphasise the need for compliance with the guidelines.
CBN had recently advised ABCON to play a stronger role in the operations of its members by embracing effective self-regulation in efforts to deepen compliance.At the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) Mutual Evaluation Exercise Sensitisation workshop for South West Bureaux de Change (BDCs) in Lagos, CBN Deputy Director, Other Financial Institutions Supervision Department, Mustafa Haruna, said there was need for BDCs to ensure compliance with extant AML/CFT laws and regulations to mitigate the risks and vulnerabilities in the sub-sector.
READ ALSO: FG declares Monday public holiday
He said that ABCON should develop and implement a Code of Conduct for members to promote ethical practices and transparency in the sector while also continually advising the apex bank on market intelligence on key industry issues.
“Simply put, money laundering is the process of making dirty money look clean. It is the concealment of the true nature, source, location, disposition, movement, rights with respect to or ownership of property knowing that such property is derived from a criminal offense,” he said.
But ABCON President, Alhaji Aminu Gwadabe, said the association has consistently advised members to put in place and implement a system of internal policies, procedures and controls, including Know Your Customer, Customer Due Diligence and reporting of all suspicious transactions to regulators.
He said ABCON is also training the operators on regular basis on the need to keep transaction records and get a designated compliance officer that has day-to-day oversight over AML/ CFT programme, as they have been taught the rules in preparing Suspicious Transaction Reports (STRs), and rendering STRs’ returns to the Nigeria Financial Intelligence Unit (NFIU).
The bank also carried out an examination of 490 Microfinance Banks (MFBs) during the review period, including the Routine Examination of 258 MFBs, Special Examination of 224 others and Income Audit of eight MFBs designated as Systemically Important Financial Institutions (SIFIs).
However, the examination revealed shortcomings in the sub-sector, with a high incidence of non-performing credits above five percent; inadequate capitalisation; absence of Capital Management Plans and weak strategic objectives. Other observations include high operating costs; weak risk management practices; and poor corporate governance, while CBN directed the affected MFBs to take appropriate measures to comply with regulatory requirements.
Also, 52 finance companies were examined in the second half of 2018, compared with 51 institutions in the corresponding period of 2017, while on-site examinations involved nine operators that were granted forbearance of 90 days by the apex bank to beef up their capital.
In the Primary Mortgage Banks (PMBs) sub-sector, 30 were examined during the period under review, as the examination adjudged the Composite Risk Rating of 16 institutions as High; seven, Above Average; and seven others, Moderate. To ensure compliance with the provisions of IFRS 5 on non-current assets held for sale, the report noted that a special examination was also conducted on some PMBs and those in breach were required to comply.