Nigerians raise eyebrows as CBN tells banks to require social media accounts for KYC

There have been mixed reactions by concerned parties in Nigeria following a directive by the country’s Central Bank (CBN) for all financial institutions under its regulatory purview to collect the social media accounts of users as part of Know Your Customer (KYC) processes for account opening.

The directive is contained in new customer due diligence regulations issued by the CBN last month.

In a circular accompanying the regulations, the apex bank says the new guidelines are meant to “assist financial institutions with implementation and compliance with provisions of relevant laws and regulations related to customer due diligence.”

Specifically, the CBN says the move, which is compulsory for all banks and for all categories of customers, is part of the federal government’s anti-money laundering (AML) and counter-terrorism financing (CFT) crusade.

Low rate of social media use

Since the new regulations were made public, there have been concerns from various quarters criticizing it, and with many questioning how effective the move will be, given the low rate of social media use in the country, TechNext24 reports.

The outlet cites statistics from German data gathering platform Statista which indicate that only 31 million of Nigeria’s estimated 220 million people were connected to at least one social media platform as of January 2023.

Rather than advance financial inclusion, many fear that requiring social media handles for account opening could produce a counter effect by keeping away those who do not have, thus rendering the current exclusion gap even wider.

Also, the problem of inaccurate identification has been raised as it is common knowledge that some persons use ID information such as their name, address or date of birth on social media, which is different from the information on their official ID credentials.

KYC industry players express reservations

In the meantime, some industry players say they don’t yet see how including social media handles to KYC requirements for account opening will help prevent financial crimes.

“I don’t see how yet. I would rather have focused on developing/enhancing a national credit and fraud reporting regulation so the private sector can invest in powering that. This perhaps would be more targeted while protecting the free speech of Nigerians,” Esigie Aguele, CEO and co-founder of digital ID verification firm QoreID, a VerifyMe Nigeria company, told Biometric Update in an email.

On whether the move has any impact on the delivery of their services, Aguele said “not really,” before adding that “we will continue to build products for financial inclusion so that Africans can get access to financial products.”

Highlights of the new regulations

Per the CBN, the new regulations are meant to provide additional customer due diligence for financial institutions to further their compliance with relevant provisions of the Money Laundering (Prevention and Prohibition) Act 2022, Terrorism (Prevention and Prohibition) Act 2022, and the Central Bank of Nigeria (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions) Regulation 2022.

The rules state that financial institutions shall identify their customers and obtain personal information including their legal name, permanent address, residential address, telephone number, e-mail address and social media handle, date and place of birth, bank verification number and tax identification number, among other personal information. The rules apply to permanent or occasional customers, natural or legal persons and legal arrangements.

All financial institutions unable to comply with the customer due diligence measures pursuant to these regulations shall not be permitted to open accounts, commence business relations or perform any transactions with these persons, the document mentions in its Article 19.

TechCabal in a report observes that many banks are yet to begin compliance with the new customer due diligence rules, saying they await further clarification form the CBN.

Article Topics

Africa  |  AML  |  banking  |  fraud prevention  |  KYC  |  Nigeria  |  QoreID  |  regulation  |  social media  |  VerifyMe Nigeria