Enhancing Financial Inclusion Using Telecommunications Companies and Anti-Money Laundering Policies: The Case of Nigeria

KYC Global Technologies

21 Pages Posted: 30 May 2019 Last revised: 28 May 2020

See all articles by Ehi Esoimeme

Ehi Esoimeme

University of Wales System - Cardiff Law School

Date Written: May 3, 2019

Abstract


PURPOSE – This paper will critically review the Central Bank of Nigeria’s guidelines for licensing, regulation and operation of Telecommunications companies. The aim is to determine if the guidelines for licensing, regulation and operation of Telecommunications companies adopts a balanced approach to financial inclusion and anti-money laundering measures.

DESIGN/METHODOLOGY/APPROACH – The analysis took the form of a desk study, which analyzed various documents and reports such as the Revised Central Bank of Nigeria National Financial Inclusion Strategy 2018, Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria as issued by the Central Bank of Nigeria in October 2018, the Central Bank of Nigeria’ Revised Assessment Criteria for Approved Persons' Regime for Financial Institutions 2015, the Central Bank of Nigeria Code of Corporate Governance for Banks and Discount Houses in Nigeria 2014, the Money Laundering (Prohibition) Act, 2011 (as amended), the Central Bank of Nigeria (Anti-Money Laundering and Combating the Financing of Terrorism in Banks and Other Financial Institutions in Nigeria) Regulations, 2013, the United Kingdom Payment Services Regulations 2017, the United Kingdom Payment Accounts Regulations 2015, the United Kingdom Electronic Money Regulations 2011 and the Financial Action Task Force Recommendations 2012.

FINDINGS – This paper determined that the Financial Inclusion Strategy for Telecommunications companies as enshrined in the Central Bank of Nigeria’s guidelines for licensing, regulation and operation of Telecommunications companies could achieve its desired objective of a balanced approach to financial inclusion and anti-money laundering measures if the following recommendations are implemented:

I. Paragraph 6.1 of the Central Bank of Nigeria Guidelines for Licensing and Regulation of Payment Service Banks should be modified to mandate that the detailed business plan or feasibility report of the Telecommunications company must include the Bank Verification Number of all the shareholders of the company. This measure will help to prevent a situation where a corrupt individual with just 2 percent of the company’s shares connives with other friends and family to own 5 percent of the company’s shares.

II. The Central Bank of Nigeria’ Revised Assessment Criteria for Approved Persons' Regime for Financial Institutions 2015 should be further revised to allow for on-going screening for specific positions in Telecommunications companies, as circumstances change, or for a comprehensive review of departmental staff over a period of time. Telecommunications companies should have a policy that mandates that the lie detector test should be taken once in 5 years by all staff of the company. For Staff in very sensitive positions, the lie detector test should be taken every three years. This will enable the lie detector policy to be more effective. Let us take for example, a person passes the fit and proper test genuinely without any influence of fraud and corruption; there is still a possibility that the person may change over time. The temptation to follow current employees to collect bribes is very high. But if the Telecommunications company put a policy in place that mandates every staff to take the lie detector test every five years starting from the first five years after recruitment, the cankerworm called fraud and corruption may be curbed effectively.

III. The Central Bank of Nigeria should ensure that Telecommunications companies are subject to adequate regulation and supervision and are effectively implementing the Financial Action Task Force (FATF) Recommendations. The Central Bank of Nigeria is strongly advised to enforce its regulations and punish errant banks/Telecommunications companies so as to discourage their serial abuse of guidelines for the financial sector. This approach will strengthen Know Your Customer policies, aimed at reducing fraud and money laundering. This measure is in line with the Financial Action Task Force Recommendations (Recommendation 26).

IV. Paragraph 5.3 of the CBN Code of Corporate Governance for Banks and Discount Houses in Nigeria 2014 should be modified to mandate financial institutions and Telecommunications companies to expressly prohibit retaliation by employers against whistleblowers and provide them with a private cause of action in the event that they are discharged or discriminated against by their employers. This approach is being adopted by the United States Dodd-Frank Act. Alternatively, the whistle-blowing policy could offer incentives to encourage whistleblowing in the financial sector. In Europe, a few countries offer incentives for whistleblowing in certain sectors. In Hungary, for example, anti-trust law qualifies whistleblowers for up to 1% of the fine collected from the employer capped at around 160,000 Euros. Historically, the United States of America has offered incentives to encourage whistleblowing in the financial sector. The False Claims Act (FCA) 1863, which prohibits fraud on the Government, allows individuals to bring claims on behalf of the Government. Successful claimants are eligible for a percentage of the amount recovered. More recently, the Dodd-Frank Act 2010 offers similar rewards for reporting securities violations.

V. Paragraph 6.6 of the Central Bank of Nigeria Guidelines for Licensing and Regulation of Payment Service Banks should be modified to allow for flexible capital requirements that are proportional to the size of the issuer. This is the approach adopted in Japan. This approach will deepen financial inclusion in Nigeria.

RESEARCH LIMITATIONS – This paper focuses on the Financial Inclusion Strategy of the Central Bank of Nigeria as it relates to Telecommunications companies. The focus is on the Central Bank of Nigeria Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria, 2018.

ORIGINALITY/VALUE – This Article offers a critical analysis of the Central Bank of Nigeria’s guidelines for licensing, regulation and operation of Telecommunications companies. The paper will provide recommendations on how the Guidelines could be strengthened. This is the only article to adopt this kind of approach.

Keywords: Financial Inclusion, Money Laundering, Telecommunications Companies, Digital Payment Systems

Suggested Citation

Esoimeme, Ehi, Enhancing Financial Inclusion Using Telecommunications Companies and Anti-Money Laundering Policies: The Case of Nigeria (May 3, 2019). KYC Global Technologies, Available at SSRN: https://ssrn.com/abstract=3382434 or http://dx.doi.org/10.2139/ssrn.3382434

Ehi Esoimeme (Contact Author)

University of Wales System - Cardiff Law School ( email )

PO Box 427
Cardiff, Wales CF10 3AX
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
12
Abstract Views
229
PlumX Metrics