Timely reset
•Wholesome banking is as good for the financial system as it is for general security A March 10 Central Bank of Nigeria (CBN) memo just directed banks to upgrade their
•Wholesome banking is as good for the financial system as it is for general security
A March 10 Central Bank of Nigeria (CBN) memo just directed banks to upgrade their anti-fraud and anti-money laundering systems. The circular gave different segments of the financial market different deadlines to meet up with the new requirements. The CBN – and rightly so – says financial services are becoming more technology-driven and complex.
Commercial banks (technically deposit money banks: DMBs) – the dominant industry players – have 18 months to comply with the new upgrade, from March 10. That would be September 9, 2027. Other financial players have 24 months – that’s March 9, 2028, to fulfil the new requirement.
By these upgraded fintechs, banks should be primed to flag putative serious financial heists and massive money-laundering transactions, even before they are pulled off. That would not only make banking transactions safer and more wholesome for the banking public and the financial system, it could also arrest insecurity, in this era of terrorism-financing.
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This is a good call that, other things being equal, no one should oppose. Anything to make the financial system more secure could possibly hurt no one?
Still, the question: why this new directive – and why now? Since the Nigerian banking system transited from manual to digital operations, banking halls all over Nigeria have been awash with bills telling customers that amounts around certain thresholds are automatically flagged – a digital alarm to financial crimes authorities to scrutinise those transactions.
Are many banks now failing in this basic requirement? If they are not, are the current digital safeguards no longer adequate to cope with today’s global sophisticated banking, especially with the increasing role of artificial intelligence (AI)?
Whatever it is, it is good that the CBN appears strategic in its thinking; and has opted to be proactive, rather than reacting to sure financial operation crises sure to come, should any of these banking networks be breached – with disastrous consequences.
The CBN new strengthening includes upgraded capacity for automated anti-money laundering (AML), transaction monitoring, customer identification and verification, case management for suspicious transactions and sanction screening, among other areas, to automate prompt alarms before the system is breached.
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Happily any bank or financial institution worth its name already has the basic customer-identification and verification pillars: the Bank Verification Number (BVN) and the National Identification Numbers (NIN), without which hardly anyone could do transactions in any bank today.
What the CBN moves for is a seamless integration of each customer’s personal data into a national database, to make the system saner and more secure.
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Such an integrated data base should make it far less risky to run a consumer-credit economy, which the present government is trying to put in place. With consumer credit, there would be little need to accumulate cash to procure basic household comforts: fridges, furniture, cars, home theatre systems, and the likes. That could give sleaze a bloody nose.
But such could remain a pipe dream, with no integrated register to, with the tap of a computer button, throw up a customer’s credit rating.
Much more pressing for public safety: a rich database, with a strong alarm system, can avert terrorism financing, before rogue money turns into guns and bombs that kill and maim.
Still, it is hoped that the CBN did enough market consultation before its directive. That takes nothing from its proactiveness. But since these systems upgrade means more cost, due consultation is the CBN looking out for the financial health of banks that will spend more money to meet the new digital deadline.
