International monetary transfer- an overview of the CBN’s guidelines and its recent review

The Central Bank of Nigeria (the “CBN”) just recently (September 2014) announced a review of its Guidelines on International Money Transfer Services in Nigeria (“the Guidelines”). The review, according to the CBN, was carried out in order to accommodate inbound as well as the outbound money transfer services that was introduced recently. The CBN had earlier in the year (June 2014) issued these Guidelines which addressed rules governing the operation of international money transfer services in Nigeria. In this article, we would be reviewing the Guidelines and comparing it with the recent review.

The main objectives of the Guidelines are:

• to provide minimum standards and requirements for International money transfer services operations in Nigeria; specify delivery channels for offering international money transfer services (inbound/outbound), in a cost effective manner; provide an enabling environment for international money transfer services in the Nigerian economy; specify minimum technical and business requirements for various participants in the international money transfer services industry in Nigeria; and provide broad guidelines for implementation of processes and flows of international money transfer services, from initiation to completion.

The Guidelines set the basis for the regulation of the services offered at different levels and by diverse players in the relevant sector. It expressly prohibited the provision of international money transfer services by persons or institutions unless such persons/institutions have been duly licensed by the CBN. Also, operators must be ready to comply with the provisions of the CBN’s “Anti-Money Laundering and Combating the Financing of Terrorism in Banks and Other Financial Institutions Regulations 2013” and all other applicable laws and regulations.

Applications for a licence to carry on the business of international money transfer services would be accompanied by some documentary evidence including, copies of applicant’s Incorporation document; board of director’s approval to offer International money transfer services; business plan; information technology policy of the Company including its privacy policy, information ownership/disclosure/loss policy, backup and restore policy, network security policy, encryption policy, confidential data policy, password policy, third party connection policy; contingency and disaster recovery plan (business continuity plan); credit reports from a licensed credit bureau for the shareholders and key officers of the money transfer services operator; a non-refundable application fee of N500,000 (Five Hundred Thousand Naira) or such other amount that the CBN may specify from time to time; evidence of meeting the minimum paid up share capital of N2,000,000,000 (Two Billion Naira) for Nigerian companies; and N50,000,000 (Fifty Million Naira) or its equivalent for Foreign companies, plus the guarantee of the parent company; presence in at least seven (7) different countries; and any other information as may be required by the CBN from time to time.

With the recent review, the CBN has pegged the share capital of international money transfer operators willing to operate in Nigeria at $1million while indigenous international money transfer operators’ minimum paid up capital remains at N2 billion.

An indigenous money transfer operator wishing to engage a foreign technical partner that will provide global or regional money transfer platform, shall obtain a letter of no objection from the CBN upon the technical partner’s fulfilment of some conditions. Some of these conditions being that the technical partner must be a registered entity, licensed in its home country to carry on money transfer activities and have a minimum Net Worth of US$1 million, as per the latest audited financial statement, or as may be determined by the CBN from time to time. However, with the recent review, the minimum net worth is now $10 million. The overseas technical partner should be well established in the money transfer business, with a track record of operations and there should be an MOU that clearly delineates liabilities in the event of disputes and/or process failures.

Deposit Money Banks are prohibited from operating as Money Transfer Service Operators (‘MTSOs’), but can act as agents except with the express approval of the CBN. Section 19 (1) (a) of the Banks and Other Financial Institutions Act Chapter B3, Vol. 2, Laws of the Federation of Nigeria 2004, which provides for persons not qualified to be in the employment of banks, shall also apply to MTSOs.

Operations of International Money Transfer Services

Permissible Activities

These are allowable inbound and outbound international money transfer transactions. The transactions shall consist of the acceptance of monies for the purpose of transmitting them to persons resident in Nigeria or another country; cross-border personal money transfer services, such as, money transfer services towards family maintenance and money transfer services favoring foreign tourists visiting Nigeria; and the money transfer services shall target individual customers mainly and the transactions shall be on a “person to person transfer” basis to safeguard against corporate customers that might structure their transactions into smaller amounts to circumvent the statutory reporting threshold.

Non-permissible Activities

MTSOs are not authorized to act as an authorized dealers in gold or other precious metals; engage in deposit taking and/or lending money; maintain current accounts on behalf of customers; establish letters of credit; act as a custodian of funds on behalf of customers; engage in institutional transfers; or buy foreign exchange from the domestic foreign exchange market for settlement.

Transfer Limits

The allowable limit of all outbound money transfer is US$2,000 or its equivalent per transaction, subject to periodic review by the CBN. All in-bound money transfers to Nigeria shall only be disbursed to beneficiaries through bank accounts or mobile money wallets. Where the beneficiary does not have a bank account or mobile money wallet, payments shall only be made upon the provision of a satisfactory reference from a current account holder in a bank, confirming that the beneficiary is the bona fide owner of the funds.

With the recent review by the CBN, the maximum limit of outbound money transfer remains $2,000 per transaction, however the maximum allowable cash withdrawals for inbound money transfer shall not be more than $500 and any amount in excess of $500 would be paid through a bank account. All inbound money transfer to Nigeria would be disbursed to beneficiaries who operate a bank account, mobile money wallets, the agent or through an ATM.

An approved money transfer service operator may conduct its business through an agent, in line with the provisions of these guidelines. An agent is a suitable entity engaged by a money transfer service operator to provide money transfer service on its behalf, using the agent’s premises, staff and technology.

Obligations of MTSOs

Some obligations are applicable depending on the outward or inbound nature of the money transfer service to be provided:

Outward Money Transfer Services:

A money transfer operator shall, advise customers of the time funds sent would be available for collection by beneficiaries; inform the customers within 24 hours where outward transfers could not be effected within the time frame advised; refund to the sender, any amount returned undelivered in the manner it was paid by the customer; where the operator is responsible for the returned transfer, the refund to the sender shall include all the fees and charges paid by the sender; and where the sender is responsible for the returned transfer, the operator shall recover from the sender, only costs associated with the transaction.

Inward Money Transfer Services:

A money transfer operator shall make payment to customers only in Nigerian currency; use the prevailing exchange rate on the day the transfer is received; and declare in the receipt/certificate of transfer that the money paid to the customer is not counterfeited.

Dispute Resolution

Each operator shall provide a Complaints Management Unit to resolve complaints or disputes submitted by its customers. Complaints must be fully investigated by the operator and an appropriate decision must be made and communicated to the complainant within one week of the receipt of complaint.

Where a complainant is dissatisfied with the decision, the operator shall provide an internal mechanism to review its initial decision. The review body must arrive at a decision within one week of receiving letter of dissatisfaction from a complainant. Where a complainant is not satisfied with a decision of a review body, the complainant may escalate the issue to the Director, Consumer Protection Department, Central Bank of Nigeria. An operator shall render monthly returns on all complaints to the Director, Trade & Exchange Department, Central Bank of Nigeria, Abuja, in a format approved by the CBN.

Sanctions and Remedial Measures

The CBN may take any corrective action against the MTSOs as may be prescribed from time to time for failure of the latter or its agent to comply with the Guidelines. In addition, the CBN may take any or all of the following sanctions against an MTSO, its board of directors, officers or agents:

• withhold corporate approvals;

• financial penalties;

• suspension from money transfer operation; and

• revocation of the money transfer service operation licence.

TOKUNBO ORIMOBI LP is a full-fledged commercial law firm with offices in Lagos, Ibadan and Abuja.