There are bad men and women out there.
People who go to sleep and wake up thinking about ways and means to scam people, defraud people, and to steal from people who have worked hard for their money. Look in your network and I am sure each one of us has one or to friends and family members who have been victims to these bad men and women.
It is because of these bad people, that the Government has specific means to identify and prevent the bad guys from operating. Sometimes it doesn’t work, and sometimes it does.
Today’s newsletter covers just a few of the tools which the government uses to catch these bad guys when they are engaging in financial crime.
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1. Biometric Verification Number (BVN)
Every single person who operates a Nigerian bank account is legally required to have a BVN. Some of us can remember the difficult process we went through as a country to implement the BVN – with many people’s accounts being temporarily blocked for no fault of their own.
Since then, however the BVN system has become fully entrenched (and hopefully seamless). So you may ask, how does the Government monitor your bank account through BVN? Well, the answer is simple, since each bank account is tied to a BVN, all the Government needs to do is monitor the BVN and not necessarily the bank accounts, and so once there is any indication of financial crime on an account, instead of just blocking only the account, the Government is able to go after the perpetrator more robustly by blocking the BVN.
2. Know Your Customer (KYC)
KYC is a due diligence process financial companies use to verify customer identity and assess and monitor customer risk. KYC ensures a customer is who they say they are.
So, when you open a bank account, or an account with a FINTECH, or you buy shares, or you take out a loan etc. Basically every time you open an account with a financial institution, the institution is legally required to perform KYC on you as a customer. This information is then accessible by the Government within certain circumstances, for instance when they need to conduct an investigation or there has been a suspicion of fraud or crime.
Properly conducted KYC helps prevent money laundering, terrorism financing, and fraud schemes. To meet KYC requirements, you are generally required to provide proof of your identity and address, such as driver’s license/international passport and utility bill.
3. Transaction Reports
Most people are not aware that under the relevant anti-money laundering laws in Nigeria, all banks are required by law to report to the Government every time an individual makes a transaction of over N5 Million. This report is also required when there is a transfer of over $10,000 from an individual’s bank account to a foreign account, or vice versa.
The government therefore has a record of any such transaction and can see who made the transfer, who received the transfer, the date, and the purpose of the transfer. Thus the government has another tool at its disposal to monitor the bank accounts of its citizens for potential instances of financial crimes.
4. Activity Reports
Similar to transaction reports, activity reports are permitted under the relevant anti-money laundering laws in Nigeria. The banks and other financial institutions are required to monitor the activity of certain types of individuals who are their customers e.g., politically exposed persons, and report to the Government if any of their transaction activity is indicative of a potential financial crime. Apart from activity of certain individuals, there is also generally activity which is suspicious. For instance, if a person does a transfer of N4.99m, the bank may flag this as suspicious and report it because it can be deduced that the person may be trying to avoid sending exactly N5m which they know would trigger the transaction reporting threshold discussed above.
Big Brother is watching
The Government is always watching and on guard to catch bad actors. Some of you might comment and say that how come the government is not catching the many apparent bad actors that operate within the political space in Nigeria?? …and that is a fair question, one which we are unable to answer.
We do know for certain that the Government has used these tools to catch fraudsters, money launderers, and terrorists. So it does work.
We hope knowing this information has made you feel safer…remember, the Government is always watching.
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Legal Term of the week – ‘Politically Exposed Persons’
This is someone who, through their prominent position or influence, is more susceptible to being involved in bribery or corruption.