The Central Bank of Nigeria (CBN)’s reviewed guidelines mandating banks to monitor and restrict transactions by Politically Exposed Persons (PEPs) will affect many Senators and House of Representatives members, especially those on first term.
The reviewed guidelines, released at the weekend, asked the banks to undertake a risk assessment of new political office holders to determine the level of risk posed by that customer and the proportionate levels of due diligence and monitoring required.
With this new policy, many of the 109 members of the Senate and a 360-member House of Representatives will have their accounts reclassified.The circular, signed by CBN Director, Financial Policy and Regulations, Chibuzo Efobi, provided guidance to the banks on what to look out for.
He said: “When considering whether to establish or continue a business relationship with a PEP, the focus should be on the level of money laundering, financing of terrorism and proliferation financing (ML/FT/PF) risk posed by the PEP, and whether the FI has adequate controls in place to mitigate such risks.
This is in order to prevent the FI from being used for illicit purposes should the PEP be involved in criminal activities.”The apex bank explained that in view of the corruption levels in Nigeria, domestic Politically Exposed Persons (PEPs) are rated highly vulnerable to financial risks, therefore, by default, most domestic PEPs are considered high risk.
The banks are required to conduct customer due diligence (CDD) for the purpose of establishing that a customer is a PEP, as provided by the CBN regulations.The banks are also expected to identify and verify the identities of PEPs before providing them with financial services, or as soon as possible afterwards. Identification should also cover legal persons and legal arrangements that have at least one beneficial owner who is a PEP.
According to the CBN guidelines, “PEP accounts should be subject to periodic reviews as may be determined by the bank in line with risk assessment.”
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