On December 1, 2023 the Central Bank of Nigeria (CBN) issued a new directive as part of measures to enhance the security and standardisation of the customer onboarding process within the Nigerian banking industry
The circular, referenced PSM/DIR/PUB/CIR/001/053, mandates the use of Bank Verification Numbers (BVN) for all tiers of individual customer accounts. This directive aims to streamline processes and bolster the integrity of financial transactions across the country.
The CBN’s circular outlines specific guidelines that banks and financial institutions must follow when onboarding new customers. The directive is part of a broader effort to improve Know Your Customer (KYC) protocols, ensuring that customer information is accurate and secure. Here is a breakdown of the key dos and don’ts associated with the mandate:
In complying with the directive, all banks and financial institutions are required to request the BVN from customers during the onboarding process. This step ensures that each customer has a unique identifier linked to their financial activities.
Banks and financial institutions are not allowed to enroll customers without BVN. If a potential customer does not have a BVN, the institution must enroll them for one. This step helps in broadening the coverage of the BVN system.
Banks are also to validate the BVN electronically against the Nigeria Inter-Bank Settlement System (NIBSS) BVN database using the BVN validation API or portal. This verification process ensures the authenticity of the BVN provided by the customer.
Using the BVN, banks can fetch essential customer information from the NIBSS BVN database. This information includes full names, date of birth, phone number, gender, and watchlist status. Such data is critical for accurate customer profiling and KYC compliance.
If there are any inconsistencies in the BVN details provided by the customer, banks are expected to advise them to update their BVN details. Accurate information is crucial for maintaining the integrity of customer records.
Banks are also required to update or upload all customer accounts or wallets to the Integrated Compliance and Anti-Money Laundering Division (ICAD) within 24 hours of opening the account. This rapid update process ensures that all customer activities are promptly recorded and monitored.
In avoiding compliance pitfalls, banks are not allowed to onboard customers without validating their BVN from the NIBSS database. This step is essential to prevent fraudulent activities and ensure the legitimacy of the BVN.
Onboarding customers with an invalid or placeholder BVN is prohibited. Only validated BVNs should be used to ensure data integrity and compliance. If a customer’s details are inconsistent with the BVN details, the onboarding process should not proceed until the discrepancies are resolved. Consistent and accurate data is vital for effective KYC.
Banks must also check the watchlist status of the BVN before onboarding a customer. Onboarding customers without this check could pose significant security risks and undermine compliance efforts.
The mandatory use of BVN for all tiers of bank accounts brings several benefits to the Nigerian banking industry as the directive simplifies the KYC process, making it easier for banks to verify customer identities accurately and efficiently. This improvement reduces the risk of identity fraud and enhances the overall onboarding experience.
By leveraging the BVN system, banks can streamline their onboarding processes. The ability to fetch and validate customer information electronically saves time and resources, allowing for faster account opening procedures.
The BVN mandate ensures that customer data is consistent and accurate across the banking system. This consistency enhances the reliability of customer records and supports better decision-making. The directive strengthens security measures within the banking sector. Validating BVNs and checking watchlist statuses help prevent fraudulent activities and ensure compliance with regulatory requirements.
With accurate customer data and robust KYC processes, banks can manage risks more effectively. The BVN system provides a reliable framework for monitoring customer activities and identifying potential threats.
