CBN orders banks to regularly monitor political appointees’ accounts for money laundering, terrorist financing, other risks

The Central Bank of Nigeria (CBN) has ordered banks and other financial institutions to ensure regular monitoring and screening of accounts belonging to Politically Exposed Persons (PEPs) in Nigeria.

The apex bank instructed that accounts of PEPs should be subject to periodic review and that the frequency of such reviews should be determined by the risk of the customer and documented appropriately.

This was contained in a circular signed by Chibuzo Efobi, the director in charge of financial policy and regulation to banks and other financial institutions on Friday, June 23, 2023.

In a June 22, 2023 circular titled “Guidance note on politically exposed persons(PEPs)”, the central bank said the banks and other financial institutions were required to develop measures to mitigate the risks associated with business relationship with politically exposed persons and their entities.

Banks are to create in-house databases and send alert to the fraud unit of the security agency should any information emerge about suspicious transactions involving a politically exposed person.

It read, “PEP accounts should be subject to periodic reviews as may be determined by the FI in line with risk assessment.

“Frequency of the periodic reviews should be determined by the risk of the customer and documented appropriately. FIs should also review their PEP database frequently.”

“On a regular basis, transactions and account activities should be monitored and scrutinised for money laundering/terrorist financing/ proliferation financing risks.”

The apex bank further explained that those entrusted with prominent public positions in Nigeria are categorised as domestic PEPs, while those holding prominent public positions in any other foreign jurisdiction were referred to as foreign PEPs.

It stated that domestic PEPs were rated highly vulnerable to financial risks owing to the level of corruption in Nigeria, and by default, people in this category were considered high risk.

On the other hand, foreign PEPs with briefs in international organisations should be categorised based on the level of risk as assessed by financial institutions, the CBN added.

It also ordered banks to ensure that customer due diligence is continually carried out even after a relationship has been established with the customer.

In the 14-page guidance note attached to the circular, the CBN warned the banks that politically exposed persons may seek to circumvent the laws, saying, “there is a risk that PEPs could circumvent the anti-corruption safeguards by opening accounts, establishing business relationships or conducting transactions using third parties, such as intermediaries, legal entities or legal arrangements.”

According to the note, “when the risk assessment established that the business relationship with a domestic/international organization PEP does not present a higher risk, the PEP in question can be treated like any other normal customer.”

The apex bank said, “The behaviour of the customer, transactions and accounts should be in line with the expected level of activity. Ongoing monitoring is crucial as a customer risk profile may change over time.”

Emphasising the essence of the directive, the CBN said PEPs posed a high risk of money laundering, financing of terrorism and proliferation financing due to the tendency for the individuals holding such positions to misuse their power and influence for personal gain or advantage to themselves, close family members and associates.

“Such individuals may also use their families or close associates to conceal illicit funds and assets.

“In addition, they may also seek to use their power and influence to gain representation and/or access to or control of, legal entities for similar purposes,” It added.