Numerous bank customers in Nigeria have expressed concern following the decision by the Central Bank of Nigeria (CBN) to prohibit mobile money operators and fintech firms from onboarding new customers.
The CBN directive, however, has received the backing of the Bank Customers Association of Nigeria.
As a result, fintech companies such as Kuda Bank, Moniepoint, OPay, and Palmpay will no longer be permitted to open new accounts until further notice.
Reliable sources from three major fintechs, who preferred to remain anonymous as they were not authorized to speak on the matter, have confirmed the development on Monday.
The CBN’s decision is linked to an ongoing audit of the Know-Your-Customer (KYC) process of fintechs, which have been under scrutiny over the last few months due to concerns around money laundering and terrorism financing.
It was gathered that the CBN had summoned some of the heads of fintechs to Abuja to discuss issues around KYC last week. The CBN has not made any public statement concerning the directive to the fintech firms.
Furthermore, the directive coincided with the court order that the Economic and Financial Crimes Commission (EFCC) obtained.
The order froze at least 1,146 bank accounts belonging to various individuals and companies allegedly involved in illegal foreign exchange transactions.
The 85-page court order document listed the bank account details suspected to be involved in illicit activities. Justice Emeka Nwite, in a ruling on the ex-parte motion, moved by counsel for the anti-graft agency, Ekele Iheanacho, also granted the commission’s request to conclude the investigation within 90 days.
Part of the court document read, “That the applicant’s (EFCC) application is hereby granted as prayed.
“That an order of this honorable court is hereby made freezing the bank accounts stated in the schedule below, which accounts are owned by various individuals who are currently being investigated in a case involving the offenses of unauthorised dealing in foreign exchange, money laundering, and terrorism financing, to the extent that the investigation will be for a period of 90 (ninety) days.”
The EFCC, in the motion marked FHC/ABJ/CS/543/2024 dated and filed April 24 by Iheanacho, was heard by the judge the same day in the interest of national interest. “The motion was brought pursuant to Section 44(2) and (K) of the 1999 Constitution; Section 34 of the EFCC Establishment Act 2004; Section 7(8) of the Money Laundering Prevention and Prohibition Act, 2022; and under the inherent jurisdiction of the court.”
The President of the Bank Customers Association of Nigeria, Uju Ogubunka, backed the CBN’s move to suspend new account opening on the affected platforms.
He told The PUNCH that the strict regulations that govern deposit money banks must apply to fintechs, and microfinance banks in order to ensure the integrity of the financial institutions.
He said, “Anything that can disrupt the system should not be permitted. If the platforms are being used for things that are against the regulations, I think the CBN decision is OK. I don’t see anything wrong with that. It behooves on the companies now to get their KYC right.
“Let them do what they are supposed to do. KYC applies to banks and other financial institutions that deposit money. It should also apply to them so that the regulators can understand what is going on and hold them accountable.”
On the other hand, Emmanuel Odunsi on X (formerly Twitter) welcomed the move, citing the need for better KYC processes to prevent scams and fraudulent activities.
“Their KYC isn’t that great. Lots of scammers are using their apps to defraud people.
“Most of the accounts were created by mining phone numbers, with subscribers’ permission. Almost every phone number has been linked to an account,” Odunsi said.
In October 2023, Fidelity Bank blocked transfers to OPay, Palmpay, Kuda, and Moniepoint due to concerns around KYC processes.
In response, the CBN introduced new KYC rules for all financial institutions in November 2023, which appeared to target fintech startups.
A source from Moniepoint said the company had complied with the directive, effectively halting new account creation on their platform. However, the source denied having anything to do with KYC.
“It’s just a regulation from the CBN, and we’ve complied. The real question is, why are fintechs always targeted,” he source argued.
“It has nothing to do with KYC; I am aware that the CBN communicated, but this particular issue dwells on accounts related to cryptocurrency transactions,” the source revealed.
The CBN has an ambitious target to increase overall financial inclusion to 95 per cent of the adult population by 2024.
With the new order, the target may be affected, as the company processes about 100 new accounts every day.
The source argued that fintechs had played significant roles in deepening financial inclusion in the country.
The company had deployed robust and reliable digital payment infrastructure that has facilitated an average monthly transaction value of $12bn for about 1.6 million businesses, it said last year.
A senior employee of PalmPay confirmed to The PUNCH that there was a CBN directive for fintechs to reassess their KYC processes.
The source stated that this is causing a temporary pause in onboarding new customers.
She clarified that the KYC review was a collaborative effort with the CBN, and fintechs were awaiting further instructions without a specified timeline for resolution.
Another source at OPay, who also declined to be named, said they followed the CBN’s directive and could not comment further.
“We don’t really have anything to say. It’s just a directive that we are following. The CBN has issued their directive.“
Fintech companies have faced increased regulatory scrutiny over their account opening processes.
However, some customers have also used social media, both on X (formerly Twitter) and Facebook, to express their worries and opinions on the matter.
Some customers are anxious about the safety of their funds, with Warisenibo Jumbo suggesting it’s best to transfer their money out of Opay.
Oye Niran wondered if their Moniepoint account was safe, stating, “Hope my Moniepoint account is safe.”
Larry Leanz questioned the rationale for keeping money on these platforms.
“But is it still safe to keep money there?, Leanz questioned.
