New rules from the Central Bank of Nigeria (CBN) say that financial institutions should collect and verify the social media handles of customers. The banks seem unsure of how to go about it.
Last week, the Central Bank of Nigeria (CBN) introduced the Customer Due Diligence Regulation 2023. According to the new regulations, banks will now collect customers’ social media handles as part of the Know Your Customer (KYC) process. However, several banks told TechCabal that they are waiting on further clarification from the CBN before they begin to implement the guidelines.
While some banks said that they are waiting on an official memo from the regulator, others said that they are currently deliberating on how to implement the new regulation. “There has to be a stakeholder engagement between the bank and the customers, then a memo would be issued out to compliance officers in regions on implementation steps,” a Fidelity bank personnel told TechCabal.
Concerns about the rules mandating identification on social media
Per the regulation, the CBN requires social media handles as means of identification but also requires institutions to monitor customers’ online activities, in certain cases, especially if a substantial portion of their business is conducted online. This has been received poorly by many Nigerians who have cited privacy, concerns. Yanuza, a Twitter user said, “We cannot watch silently as CBN goes after the very core of our digital rights which is our privacy by harvesting and linking our social media footprints to our accounts.” The Socio-Economic Rights and Accountability Project (SERAP) has also threatened to sue the CBN.
Questions have also arisen regarding the reliability of individuals’ online personas as reliable data for financial institutions. While social media activity is increasingly acknowledged in legal proceedings, users can create fake profiles, manipulate images, impersonate others, and make false claims about their financial status. Moreover, fraudulent businesses operate on social media, posing as legitimate entities. However, the CBN thinks that financial institutions can better assess the customers for potential risks associated with money laundering, and terrorism financing.
Moreover, the new requirements do not take into account Nigeria’s low internet penetration which makes social media platforms a luxury for many, unlike the previous one.
In 2009, the CBN published anti-money laundering regulations that detailed KYC requirements but recognized that many individuals lacked formal means of identification due to financial constraints. To avoid inadvertently excluding the poor, in January 2013, the apex bank introduced a three-tiered KYC requirement that provided flexible opening requirements for low-value and medium-value account holders, with increasing requirements as transaction amounts escalated.
This three-tiered KYC requirement is also referenced in the new regulation, albeit briefly. In Section 16 (2), the regulation states, “Financial institutions shall comply with Tiered KYC measures as stipulated in the CBN circulars on TKYC [tiered KYC] and the CBN AML, CFT and CPF Regulations.”
However, it remains to be seen how the banks and financial institutions will comply with the new regulations. Previous circulars permit them to create internal processes for verifying the identities of customers who are genuinely unable to meet certain identification requirements. This new regulation does so too but mandates that such policies be brought for approval before implementation.
So it is possible that just as email address— the only internet-based identity required then—was optional for lower tier bank accounts, the social media handles might also be an optional KYC requirement for customers of low socio-economic status who would otherwise be excluded from financial services.
