In a major regulatory development, the Central Bank of Nigeria (CBN) has introduced robust measures to enhance oversight and transparency within the international money transfer sector, adding to several other regulatory policies it announced recently.
The guidelines, officially released on January 31, 2024, outline stringent requirements for International Money Transfer Operators (IMTOs), signaling the CBN’s commitment to fostering a secure financial environment.
Minimum Operating Capital and Application Process
The cornerstone of the new guidelines is the establishment of a minimum operating capital requirement for IMTOs. Foreign entities must maintain a minimum operating capital of $1 million, while local IMTOs are required to meet an equivalent amount in the local currency. This move is aimed at ensuring the financial stability of IMTOs and safeguarding the interests of both the operators and the consumers.
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Applicants seeking to operate in Nigeria are mandated to adhere to the CBN’s regulations on anti-money laundering, combating the financing of terrorism, and countering proliferation financing of weapons of mass destruction. These regulations, originally designed for licensing banks and other financial institutions, are now extended to cover IMTOs, underlining the importance of regulatory compliance across the financial spectrum.
To initiate operations, IMTOs must submit comprehensive applications to the director of the trade and exchange department. The application process includes a non-refundable fee of N10 million or an amount specified by the CBN. Additionally, applicants must furnish necessary documentation such as approval to operate in other jurisdictions, evidence of tax clearance, and incorporation documents for indigenous IMTOs.
Documentation Requirements and Transparency Measures
The documentation process also demands a clear understanding of the ownership structure of the IMTO, board approval to operate international money transfer services, and detailed profiles of the company’s board and management. To ensure financial soundness, the CBN mandates information on beneficial owners (BO) of the company, along with credit reports from licensed credit bureaus for shareholders and key officers.
These stringent documentation measures aim to enhance transparency, accountability, and regulatory compliance within the international money transfer sector. IMTOs are expected to provide ongoing information, documents, and reports specified by the CBN to maintain regulatory standards and keep the authorities informed about their operations.
Mandatory Annual Renewal Process
The CBN also introduced a mandatory annual renewal process for IMTOs, further highlighting its commitment to regulatory oversight in the financial sector. IMTOs are required to undergo the renewal process, subject to a fee of N10 million or an amount specified by the CBN, payable annually by January 31. This fee structure contributes to the cost of maintaining regulatory compliance and ensures the continued integrity of money transfer services.
Crucially, the renewal of IMTO approval must be completed within the first quarter of every year, emphasizing the CBN’s dedication to a timely and efficient renewal process. Failure to comply with this timeframe could lead to severe consequences for IMTOs, including potential suspension of operations.
To enforce strict compliance, the guidelines direct IMTOs to provide their agent banks with a copy of the CBN renewal for the current year within the first quarter. Failure to furnish this documentation would prompt the agent bank to cease any further transactions with the non-compliant IMTO, reinforcing the consequences of non-compliance.
Prohibitions and Aligning with BOFIA 2020
The guidelines explicitly prohibit banks from directly operating IMTO services; instead, they are authorized to act solely as agents. Financial Technology Companies have also been barred from obtaining approval for IMTO, aligning with the provisions outlined in the Banking and Other Financial Institutions Act of 2020 (BOFIA 2020).
These regulations extend the prohibition of certain individuals’ employment in banks to the realm of IMTOs. Shareholders and officers of companies involved in IMTOs are now barred from undertaking International Money Transfer Operations, ensuring alignment with BOFIA 2020 and its stipulations regarding the management of financial institutions.
Permissible Activities and Restrictions
The permissible activities for IMTOs are tightly defined, focusing solely on inbound international money transfer transactions. These activities include accepting funds for the purpose of transmitting them to individuals residing in Nigeria, cross-border personal money transfer services, and services for foreign tourists in Nigeria. Transactions are structured on a “person to person,” “business to person,” and “business to business” basis, subject to periodic reviews by the CBN.
IMTOs are expressly prohibited from engaging in any other business beyond the stipulated permissible activities. Outbound transactions and the purchase of foreign exchange from the domestic foreign exchange market for settlement are strictly off-limits, emphasizing the CBN’s commitment to maintaining the integrity of the financial sector and ensuring the security of money transfer services within Nigeria.