CBN goes tough, seeks abolition of offshore banks

.Says offshore transactions serve as conduit for money laundering

.Wants banks to sell forex at N360/$1

The Central Bank of Nigeria (CBN) is seeking the abolition of offshore banks operating in the country without been licenced locally, saying that such facilities serve as conduits for money laundering.

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages.

The CBN Governor, Mr. Godwin Emefiele, made the request on Tuesday, at the two-day public hearing organised by the House Committee on Banking and Currency on a bill to amend the Banking and Other Financial Institutions Act (BOFIA) and other bills in Abuja.

He said that the shell banks, apart from being used for money laundering, distort the banking system and are a problem to regulatory agencies.

Emefiele, who was represented by the Director, Legal Services Department, Johnson Akinwunmi, said: “We wish to propose the introduction of new subsection 3(6) and (7) for the proscription of shell banks in response to the latest recommendations of the Financial Action Task Force (FATF) on money laundering.

“Any bank or its subsidiaries without physical presence in the country where it is incorporated and licenced and is not affiliated to any financial services group that is subject to effective consolidated supervision shall not be allowed to operate in Nigeria and no Nigerian bank, orbits subsidiaries shall establish or continue any
relationship with such bank or subsidiary.”

Similarly, the CBN is also seeking additional powers to revoke licences of banks and the power to inject funds into a falling bank by way of equity participation up to a level that guarantees control by the CBN.

The additional powers, according to the director, is to enable the CBN acquire equity investment institutions and its ability to ensure a sound financial system.

The CBN also backed the House of Representatives in imposing stiffer penalties and terms of imprisonment of certain offences on erring commercial banks and their members of staff.

But in his presentation, the Director of Legal/Board Secretary, Nigeria Deposit Insurance Corporation (NDIC), Belema Taribo, opposed the proposed fines, saying they were too high.

On the issuance of licences, the NDIC proposed that the CBN should seek its consent before granting any application for banking licence, adding that “this is to enable the corporation have a prior evaluation of the applicants with regard to insurance of deposits.”

Earlier, in his welcome address, the Chairman of the House Committee on Banking and Currency, Hon. Jones Onyereri, said increase in penalties to the bank operators would streamline the operations of such banks to conform to international best practices.

He informed that the proposed amendments to the BOFIA Act 2017 was initiated by three lawmakers, namely, Hon Daniel Reyeneiju (PDP/Delta); Hon Betty Apiafi (PDP/Rivers) and Hon Jones Onyeriri (PDP/Imo).

Some of the penalties in the 70 proposed amendments to the BOFIA Act 2017 include: a fine of N20 million on banks that fails to comply to the conditions of the licence, a fine of N20million on any director that fails to declare any property he/she owns that runs contrary to the Act;

“A fine of N10 million against a director or manager that fails to keep a book of account and a fine of N2million on banks that fail to publish its annual report of its general meeting in two reputable national dailies among others.”

Meanwhile, the CBN in a new circular has directed all Deposit Money Banks (DMBs) operating in the country to comply with the agreement of the Bankers Committee to begin sale of foreign exchange for invisibles at N360 to $1, as well halt collection of charges and fees on such forex sales.

The circular, signed by the CBN’s director, Trade and Exchange Department, W.D. Gotring, titled, “Charges on the Sale of Foreign Exchange for Invisible Transactions”, ordered all banks to comply with the directive immediately.

According to Gotring, “All authorised dealers are hereby informed that the charging of commissions on retail foreign exchange transactions such as business travel allowance (BTA), personal travel allowance (PTA) medical and school fees have been abolished.”

The Bankers Committee, which is made up of chief executives of banks and regulators in the financial industry, rising from its meeting last week, agreed that customers buying foreign exchange from banks for the payment of school fees, medical bills or personal and business travel allowance are not to pay extra charges for the purchase.

The Bankers committee of the CBN last week directed commercial banks to stop commission charges from end-users on sales of Personal Travel Allowance (PTA), Basic travel Allowance (BTA), among others, as foreign exchange rate now hamonised at N360 to $1.

Speaking to the journalists on behalf of the committee, Managing Director/CEO of FSDH Merchant Bank, Mrs. Hamda Ambah, explained that the uniform sales at the invisible market will serve as palliative measures for individual Nigerians to access foreign exchange without commission charges by banks for such foreign exchange sales.

She said: “One of the things that we agreed at the meeting was something we measured that will be palliative for individual in the economy. It was agreed that for foreign exchange at banks sale with CBN authority to their clients- PTA, BTA, school fess and for medical bills.

“The committee has also pegged the buying rate of dollars for invisibles at N360, urging customers to patronise banks for their foreign exchange demands. Some banks had been charging commissions on forex bought by customers for invisible”.

The CBN Director, Banking Supervision, Ahmed Abdullahi, urged customers to report any bank that sells above N360 to $1 or imposes charges and commissions.