CBN Moves Against Illegal International Fund Transfer

The Central Bank of Nigeria on Friday said it observed that some banks are operating accounts either as companies or companies masking themselves as individuals for the purpose of illegally receiving money transfer flows into those accounts for onward disbursements to recipients in Nigeria.

This came on the day the naira sustained its downswing on the parallel market as it fell to a record low of N412 to the dollar, as against the N408 to the dollar it closed the previous day.

To curb this international fund transfer, the CBN in a circular titled: “Illegal International Money Remittances Through the Banking System,” dated August 25, 2016, and signed by its Acting Director, Trade and Exchange Department, Mr. W.D. Gotring, directed banks to identify and freeze such accounts receiving illicit flows with immediate effects.

The banks were also directed to submit the mandate and account details of these accounts held in naira or foreign currency to it for onward reporting to the security agencies.
“The CBN therefore reiterates that deposit money banks have the absolute responsibility to conduct Know Your Customers’ Business (KYCB) checks on all their customers to ensure that they do not transact in illegal/illicit flows,” it added.

Meanwhile, experts have expressed concern that the falling value of the naira coupled with a high inflation rate of 16.5 per cent is making the nation’s currency to lose its function as a store of value.
But on the interbank forex market, the spot rate of the naira rose marginally to N314.95 to the dollar yesterday, higher than the N316.84 to the dollar it closed the previous day.

The strong depreciation of the naira on the parallel forex market was majorly attributed to the strong demand for the greenback by customers of the eight banks that were banned from foreign exchange transactions.
It was gathered that a lot of them now patronise the parallel market for dollar purchases to meet their pressing obligations as they await the resolution of the matter between their financial institutions and the Central Bank of Nigeria (CBN).

The CBN on Tuesday barred nine banks from participating in the forex market for not remitting a total of $2.334 billion Nigerian National Petroleum Corporation (NNPC)/Nigerian Liquefied Natural Gas (NLNG) Company dollar deposits to the federal government’s Treasury Single Account (TSA).

The affected banks were: the United Bank for Africa (UBA) Plc, First Bank of Nigeria (FBN) Ltd, Diamond Bank Plc, Sterling Bank Plc, Skye Bank Plc, Fidelity Bank Plc, Keystone Bank, First City Monument Bank (FCMB) Ltd and Heritage Bank Limited.

But UBA was re-admitted into the forex market by the CBN on Thursday having complied with its directive.
Speaking in a telephone interview with THISDAY yesterday, the Chief Executive Officer of Graeme Blaque Group, Zeal Akaraiwe faulted the restriction of the banks from participating in the forex market, saying the action by the central bank sent a wrong signal to investors.

“There CBN ought to have imposed other punishment. We are having serious forex problem in this country, clients cannot find forex and you are banning banks from the forex market. What I see is that we are trying to sabotage ourselves.

“This would certainly affect investor confidence, especially the foreign investors which we have been pursuing. The financial market works on a lot of confidence and destroying the confidence does not help anybody.”
Akaraiwe expressed concern that the nation’s currency has lost its quality as a store of value, saying a lot of people may be forced to dump the currency for other stronger currencies.

“Of course, it is going to increase the pressure in the forex market. And we cannot do anything about the dollar because we do not have natural control over dollar cash flow. One of the things we are suffering is cash flow problem. That is, we have dollar assets on the ground as oil, we have dollar assets sitting in oil companies, but we don’t have dollar cash and we are not doing anything to fix the problem.

“I keep emphasising that in the financial market, confidence is very important and you must do all to retain that confidence, but not by banning banks from the forex market,” Akaraiwe added.
Also, the chief executive officer of an investment bank who pleaded to remain anonymous expressed concern over the loss of value of the naira.

He urged both the fiscal and monetary authorities to fake urgent steps to correct the structural imbalances in the economy, saying the country’s economic managers must not fold their arms and watch the country go the way of Zimbabwe whose currency has been battered.