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In a report by local media outlet The Leadership on Thursday (Nov. 11, 2021), Nigerian banks, following a directive from the Central Bank of Nigeria (CBN), have instructed their staff to monitor and identify accounts that engage in cryptocurrency transactions. According to a memo by one of the commercial banks:
"We wish to reiterate that the CBN is strictly monitoring non-compliance with the directive on the closure of all accounts involved in cryptocurrency for high impact regulatory sanction. In view of the above, all staff are hereby advised to identify entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately."
The memo also gave examples of red flags that employees should look out for in accounts for crypto transactions. along with the appropriate actions. Some of the red flags include accounts that conduct several transactions with multiple accounts that do not have logical business explanation and small businesses that engage in frequent large transactions that are bigger than its scope.
Others that would come under the radar include “accounts receiving high daily inflows from a huge number of multiple payees from all over the country”, personal accounts that are used instead for business, corporate or fintech accounts who get multiple transactions daily without obtaining a payments license from the necessary regulatory authorities, etc.
According to the memo, the directive to monitor customers’ accounts and transactions is supposed to protect against money laundering, terrorist financing, and other criminal activities. Furthermore, the document warned that an employee who deliberately decides not to disclose accounts that engage in crypto trading would be duly sanctioned.
The current development reiterates a CBN circular earlier in February, which banned financial institutions in the country from servicing crypto trading platforms. The apex bank further asked these institutions to close accounts of clients who trade crypto.
Shortly after the order, the CBN governor Godwin Emefiele stated that the central bank's action was to protect Nigerian investors and the country's financial system. Emefiele said at the time:
"Cryptocurrency has no place in our monetary system at this time and cryptocurrency transactions should not be carried out through the Nigerian banking system."
However, the CBN later clarified that there is no cryptocurrency ban in Nigeria, but stated that the prohibition was targeted against conducting crypto transactions in the banking sector. Despite the ban, peer-to-peer (P2P) transactions have soared in the country.
Meanwhile, the Nigerian government is involved in a central bank digital currency (CBDC). After announcing plans to release a sovereign digital currency back in June, the CBN later scheduled to launch the eNaira on October 1, while unveiling the CBDC website.
However, the eNaira project became live later on October 25, 2021, making the CBN the first central bank in Africa to officially launch a CBDC.