Recapitalisation: CBN, EFCC to Watch Banks Against Injection of Illicit Funds Into Banking System

Recapitalisation: CBN, EFCC to Watch Banks Against Injection of Illicit Funds Into Banking System

  • The CBN and EFCC will work together to prevent the infiltration of illicit funds as banks begin the process of recapitalisation
  • The CBN recently announced an upward review of the minimum capital base requirements for banks operating in Nigeria
  • The apex bank says it would enforce rigorous background checks on all potential major shareholders, directors, and others journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

The bank recapitalisation initiative has gained momentum, prompting vigilant oversight from the Central Bank of Nigeria (CBN), the Economic and Financial Crimes Commission (EFCC), and other law enforcement bodies.

Their aim is to diligently monitor the process to thwart any influx of illegitimate funds into the banking sector. recently reported that the CBN announced an upward review of the minimum capital base requirements for banks operating in Nigeria.

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Banks recapitalisation
The circular highlights the importance of scrutinizing new investors and major shareholders. Photo credit - EFCC, CBN
Source: UGC

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This information was conveyed through a circular issued by the apex bank, signed by Mr. Haruna Mustafa, the Director of the Financial Policy and Regulation Department.

According to The Sun, the circular, tailored for commercial, merchant, and non-interest banks, as well as promoters of prospective banks, outlines the updated minimum capital requirements.

CBN to prevent infiltration of illicit funds

The circular reflects the firm determination of the apex bank to prevent bank owners and their promoters from infiltrating the banking system with proceeds of criminal activities or bolstering their capital with such tainted funds.

Consequently, banks are mandated to implement thorough anti-money laundering measures, encompassing Know Your Customer (KYC) procedures, Customer Due Diligence, and vigilant monitoring of suspicious transactions to safeguard the recapitalisation process from the influence of illicit funds.

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The circular read:

“The CBN has robust anti-money laundering regulations which will be strictly enforced, with the active collaboration of relevant law enforcement agencies.
“In addition, the CBN will require all banks to ensure that appropriate and effective anti-money laundering screening/checks (Know Your Customer, Customer Due Diligence and Suspicious Transactions Monitoring, etc) are conducted.”

CBN to rigorously check major banks' shareholders

Furthermore, the circular highlights the importance of scrutinising new investors and major shareholders.

It underscores the necessity of ensuring that only individuals and entities meeting the 'Fit and Proper' standards can make substantial investments in or hold shares in banks.

This initiative requires rigorous enforcement of background checks on all potential major shareholders, directors, and senior management personnel to preserve the integrity of leadership and ownership within the sector.

“The CBN will actively monitor and supervise the recapitalization process to ensure compliance with set guidelines.

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"This will involve the conduct of on-and off-site reviews, verification of capital, periodic interventions when necessary and broader stakeholder engagements.”

The apex bank instructed that all banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026.

Speaking on the matter, Hussein Umar, a financial market analyst, told that the review of banks' capital base was long overdue.

He said:

"The current recapitalisation will be different from that of 2005 and it would be much easier for many banks to either reach the new capital base or find their way around it by mergers, acquisitions and the rest.
"Some of the banks are much stronger than they were two decades ago, hence meeting the new capital base will not be much of a problem. The CBN, on its part, just have to ensure the process is done right."

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Five banks that would meet minimum capital base

In related news, reported that analysts and finance experts have supported the CBN's move to review the capital base of banks operating in Nigeria

In his remarks, Prof Uche Uwaleke supported the recapitalisation of banks, calling it a positive step.

He claimed it would also potentially strengthen the nation's financial system and help the stock market.

Dr. Aliyu Ilias, a different financial analyst, stated that the banks had long anticipated recapitalisation given their recent trillion-naira gains.


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