Nigeria Implements Fintech Restrictions to Combat KYC Evasion
In a recent directive from the Central Bank of Nigeria (CBN), four prominent Nigerian fintech companies have been ordered to suspend the onboarding of new customers.
This move aims to tighten compliance with Know Your Customer (KYC) regulations among those engaging in cryptocurrency investments and other financial activities. The affected firms include OPay, Kuda Bank, Moniepoint, and PalmPay.
Nigerian fintech leaders OPay, Kuda Bank, Moniepoint, and PalmPay have been asked to halt new account creation during a KYC audit by the Central Bank of Nigeria. This move aims to strengthen compliance in both crypto and traditional investing. Stay updat… https://t.co/Zm8wMv56Ci pic.twitter.com/cgbkN8hxop
— Cheeky Crypto (@CheekyCrypto) May 1, 2024
The decision to halt new account creations at these fintech companies follows concerns that some users were exploiting these platforms for activities that could disrupt the foreign exchange market. According to a report by TechCabal, a source familiar with the matter cited the use of fintech services by crypto traders as a concern for the Central Bank of Nigeria. This regulatory action coincides with efforts by Nigerian law enforcement, specifically, the Economic and Financial Crimes Commission (EFCC), which recently blocked over a thousand bank accounts due to unauthorized forex dealings.
Impact on Fintech Operations and Market Response
Although new sign-ups have been paused, existing customers of these platforms can continue to deposit and transfer funds without restrictions. In response to the audit, one of the affected fintechs issued a statement apologizing for the inconvenience caused by the pause in new account openings, emphasizing that the measure is temporary. An analysis revealed that a small percentage of the blocked accounts were associated with fintechs, with the majority being traditional commercial bank accounts.
In October 2023, a similar concern was raised when Fidelity Bank blocked all outgoing transfers to the four fintech firms, citing KYC concerns. These actions are part of a broader strategy by Nigerian financial authorities to ensure that fintech operations do not become conduits for financial misdeeds such as tax evasion and money laundering.
Regulatory Outlook and Industry Reactions
The fintech landscape in Nigeria is seeing significant regulatory scrutiny at a time when the country is also focusing on enhancing the governance of its capital markets. The appointment of Emomotimi Agama as the new Director-General of the Securities and Exchange Commission (SEC) is seen as a strategic move to regulate the capital market more effectively, boost investor confidence, and promote overall economic growth.
Industry leaders have expressed support for the new appointment, hoping for improved cooperation between regulatory bodies and fintech startups. Nathaniel Luz, CEO of Flincap, conveyed optimism about future collaborations that could help streamline licensing processes for crypto platforms.
Meanwhile, Lucky Uwakwe, chair of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN) and founder of SaBi Exchange, praised the decision, indicating it could lead to more structured and reliable market conditions.
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