Last week, the Central Bank of Nigeria (CBN) lifted the Post No Debit (PND) that was placed on the accounts of 440 individual and corporate accounts holders of banks in the country. The accounts whose PND restriction were lifted included that of betting, energy, technology, and fintech firms.
A letter dated July 25, 2023, signed by A.M. Barau on behalf of the CBN director of banking supervision, and issued to all banks in the country, directed that all PNDs on the 440 accounts be vacated.
“Post No Debit” is a term used to describe a restriction imposed by banks on specific accounts, preventing customers from making withdrawals, transfers, or any other debits from their accounts. This measure effectively freezes the funds in the account, rendering it inaccessible for the duration of the restriction.
Customers whose accounts are placed on PND, may be able to log in to their accounts online and check balance, but will not be able use the account to make purchases because of restrictions. Similarly, if the customer has multiple accounts (one in bank A, another in bank B) and has a Post No Debit or one account, all the accounts will be affected by the restrictions. While funds can be allowed into the account, any outstanding payment on the account will not go through, as it will bounce.
The rationale behind implementing “Post No Debit” can vary, and it is often introduced as a protective measure by banks and financial institutions in response to potential risks associated with the account or account holder. Common reasons for its implementation include suspected fraudulent activities, irregularities in transactions, account disputes, court orders, or concerns over the account’s solvency.
It is a global phenomenon to freeze any account that is suspected to be used for illegal inflow or outflows or if an account holder is a debtor who fails to pay their debts as when due, a creditor may obtain a court order to stop the debtor from making a further withdrawal from their account balance.
In Nigeria, for instance, a court order is needed to freeze an account, though the Central Bank of Nigeria governor once posited that PND is one of the tools it can deploy to freeze any account. Asides the CBN, banks, government agencies, creditors as well as the police can get a court order to place a PND on any account for the following reasons.
Illegal activities: Banks routinely carry out checks on transactions (inflow and outflows) and the accounts domiciled with them, any account suspected to have been involved in illegal transactions or suspected to be used for illegal transactions may be blocked.
Irregular activity: Banks also place a PND if an account that has never received up to N100,000 more than five years since it was opened and suddenly received a credit of N1,000,000. Such activity will send a red flag and the holder may experience a temporary restriction like withdrawing. In this case, even when the credit alert is legitimate, the bank may demand that the holder come to explain the source of the credit.
Suspected Hack: Sometimes, the bank may deem it fit to place a PND on an account if it suspects suspicious behaviour for which the customer is not responsible. Likewise the customer may contact and instruct the bank to stop debit from the account if he notices an unauthorized withdrawal from the account. Many banks have created USSD code that enables customers to execute debit restrictions if they suspect that such account has been compromised.
Violations: In certain jurisdictions, the apex bank clearly defines what monetary violations are. For instance, if cryptocurrency trading is forbidden in a country and customers caught using their bank account to fund crypto wallet or if such bank account is connected to a crypto account, such bank account may be frozen.
An instance of this was seen in late 2021, when the CBN directed banks in the country to close accounts of certain customers and place the funds in the accounts in suspense accounts for engaging in cryptocurrency trading in contravention of CBN Circular BSD/DIR/PUB/014/001 dated February 5, 2021.”
Debt recovery: Asides this, a creditor can obtain a court injunction to place the account of a debtor on PND. For instance, in April 2022, Asset Management Corporation of Nigeria (AMCON) got a court order of Post No Debit (PND) against ABG Communications and its founder Engineer Mohammed Bawa Garba pending the disposal of the proceedings for the recovery of debt of N1.7 billion.
Corruption: If political office holder is believed to have mismanaged finances under his watch, the anti-graft agencies or any of the government agencies may obtain a court order to freeze such account till the investigation is completed.
Investigation: During an investigation, an account of a company or individual may experience PND till the such investigation is completed. Some online investment firms that use apps experienced frozen accounts some time ago in Nigeria because the apex bank suspected them of using their firm for money laundering. The restriction was lifted on those who have convincing explanations of the transactions on their apps while some others found themselves in the hot soup of the CBN.
Terrorism Financing: The United States and the United Arab Emirates (UAE) are some of the countries that have tough laws against terrorism financing. Any funds or property linked to financiers or terrorism whether in the USA or outside the country will be blocked. The funds are not only frozen, but the operators of such accounts will also face the full wrath of the law. That’s why on March 25, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) found six persons guilty of financing Boko Haram in Nigeria.
Boko Haram is a terrorist organisation in Nigeria that has killed hundreds of civilians and security operatives in Nigeria while displacing millions of others in the north-east geo-political, its stronghold.
Financial experts argue that the implementation of this measure can help prevent further financial damage in cases where account holders may be involved in illegal or risky activities, such as money laundering or defaulting on significant debts.
