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KYC: Why CBN limits consumers’ Dollar cash purchases, directs BDCs on Forex requirements

*The Central Bank of Nigeria releases revised Foreign Exchange requirement guidelines to Bureau De Change operators, explaining the measures are designed to regulate the amount of foreign currency sold to individuals for specific purposes, and to prevent currency hoarding

Isola Moses | ConsumerConnect

As part of efforts at ensuring the application of Know Your Customer (KYC) to sanitise the Foreign Exchange (Forex) market in the country, the Central Bank of Nigeria (CBN) has pegged the payment of cash Dollar purchase to a customer at $500.

ConsumerConnect reports the CBN, in the latest directive to the Bureau De Change (BDC) operators, is contained in its revised regulatory and supervisory guidelines released Friday, February 23, 2024, for the attention of the Forex market operators in Nigeria.

The Bank stated that a foreign currency exceeding this amount would be made through a transfer to a consumer’s Naira bank account in Nigeria.

The banking sector regulator also explained if the customer purchasing the foreign currency is a non-resident, regardless of whether he/she is Nigerian or not, a Bureau De Change (BDC) will issue him/her a prepaid Nigerian Naira (NGN) card instead of transferring money into a bank account.

The CBN said the card would serve as a means for non-resident customers to receive their funds.

Besides, there are specific limits on the amount of credit and the total amount that can be loaded onto the prepaid NGN card, according to the Bank.

As regards the significance of the measure to the country’s financial system, the CBN noted that the fresh limits are set in accordance with relevant Know Your Customer requirements.

The Bankers’ Bank described the KYC requirements “measures designed to verify the identity and suitability of customers.”

KYC requirements will sanitise Forex ecosystem: Muda Yusuf

In his comment on the CBN’s revised guidelines on KYC requirements, Dr. Muda Yusuf, Director/Chief Executive Officer (CEO), Centre for the Promotion of Private Enterprise (CPPE), reportedly said: “The idea is to sanitise that space because a lot of malpractices are going on in the BDC ecosystem.”

Yusuf noted that the BDCs are too many and regulating them becomes an issue.

According to him, the revised guidelines will reduce the number and ensure regulatory effectiveness, much better monitoring, due diligence, and mainstreaming the BDCs into the entire FX system.

The expert and CPPE CEO was also concerned that in the BDC space, there is no transparency, no documentation and that there is a lot of money laundering activities in the Forex market.

The release of the CBN’s reviewed guidelines is a good idea, as it will help reduce the level of speculative activities in the sector, stated Yusuf.

BDCs to declare source of Forex exceeding $10,000

The Bank’s guidelines as well stipulate that sellers dealing in USD 10,000 or more are now mandated to declare the source of the Foreign Exchange.

It is noted that this measure aims to monitor large transactions closely and prevent potential misuse of foreign currency.

According to the guidelines,  customer-present transactions, all Naira proceeds must be electronically credited or transferred to the customer’s Naira account or prepaid card.

This directive aims to promote digital payment solutions and enhance transaction traceability.

BDCs are authorised to sell foreign currency up to the equivalent of USD 4,000 and USD 5,000 for Personal Travel Allowance (PTA) or Business Travel Allowance (BTA), respectively, to individuals once every six months. This measure aims to regulate the amount of foreign currency sold to individuals for specific purposes and prevent currency hoarding.

Foreign currency sales to intending travellers must be supported by various documents, including BVN/TIN, completed e-Form A, valid international passport and visa, valid international return ticket, and additional documentation for BTA, such as a letter of request from the corporate body, business registration or incorporation certificate, invitation letter from the overseas business partner, and tax clearance certificate.

Additionally, the amount of foreign currency sold and the date of sale will be endorsed on the traveller’s passport, and relevant documents will be filed sequentially by the BDC for record-keeping purposes.

“BDCs may sell foreign currency up to the equivalent of USD5,000 to a customer for medical bill once a year. Such bill, which shall be transferred from the BDC’s domiciliary account with a Nigerian bank, shall be paid directly to the hospital and supported by the following documents, according to the revised guidelines on Forex market operations in Nigeria.

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