BVN: Slippery slope to property right violations
The Federal Government’s move to seize funds in non-BVN linked accounts is a slippery slope that can lead to other violations of property rights of Nigerians, analysts say.
Data obtained by BusinessDay from Nigeria Inter-Bank Settlement System Limited (NIBSS) shows that a total of 46 million bank accounts are yet to be linked to BVN as at February 2017, the latest period for which data is available.
Total bank accounts in the banking system were 97.57 million as at February 2017 while total accounts linked with BVN stood at 51.72 million
BVN was introduced in February 2014 to ensure that all bank accounts have the biometric identification of their owners.
Taiwo Oyedele, head of tax and regulatory services, PWC, said the forfeiture order raises some questions. Section 3 of the Money Laundering (Prohibition) Act referred to in the Order only mandates banks to obtain sufficient identity of customers for transactions exceeding US$5,000 or its equivalent. Not having sufficient know your customer (KYC) as stated doesn’t mean you have committed a crime to justify losing your money to government.
“What happens to account holders living abroad who haven’t been able to do their BVN for practical reasons and account holders who have passed on and bureaucracy would not allow their families claim their monies?
This move is capable of depriving a lot of innocent people of their hard earned money and fraudsters are likely to intensify their BVN scam in the coming days on the back of this Order,” Oyedele said.
Justice Abubakar Malami, Attorney-General of the Federation and Minister of Justice on October 17 obtained an order from Federal High Court judge, Nnamdi Dimgba, seeking to confiscate all funds in accounts without BVN to the Federal Government. The order was obtained against 19 banks in the country with the Central Bank of Nigeria also included as a defendant in the case.
The banks have been given an ultimatum of 14 days to advertise accounts without BVN in a national newspaper, during which time, the owners of such accounts are expected to show cause why the money should not be forfeited.
Ayodeji Ebo, managing director, Afrinvest Securities Limited said, “I suggest this should be systematic and an impact analysis should be carried out before implementing. A Significant proportion of the Banks’ deposits may be affected as credit created on the back of the funds cannot be recalled immediately”.
“My position will be to move the funds to a particular account with the CBN which will be properly managed after careful analysis. If this is done without proper planning and assessment, it’s impact may be negative on the banks and may trigger severe liquidity crisis in the financial system”, Ebo said in an emailed response to BusinessDay.
The order obtained by the AG specifies that; “That the 1st-19th defendants shall disclose (a) the names of the accounts as operated, (b) account numbers, (c) account balances (d) domiciliary accounts, (e) the branch/location where the accounts are domiciled, of all accounts without BVN,” the papers read.
“That the 1st-19th defendant banks to disclose any investments made with funds from these accounts without BVN in any product, including fixed/term deposits and their liquidation and interest incurred, bank acceptances, commercial papers and any other relevant information related to the transaction made on the account.”
“That an order is hereby made, freezing the said accounts by stopping all outward payments, operations or transactions (including any bit of exchange) in respect to the accounts, pending the hearing and determination of the substantive application.
“An interim order of forfeiture to the monies in the said accounts without BVN to the claimants, being accounts with insufficient Know Your Customer (KYC) guidelines contrary to Section 3 of the Money Laundering Act, 2011 and CBN guidelines pending the determination of the Originating Motion on Notice.”
The Central Bank of Nigeria (CBN) and Nigeria Interbank Settlement Systems (NIBSS) were directed to verify the data provided.
“That an interim order is hereby made, granting leave to the applicants or any officer authorised by them to advertise the accounts without BVN disclosed by the banks in a widely circulated national newspaper, as notice to any person or body, corporate or financial institution, who may have any interest in any of the said accounts to claim ownership of same within 14 days of the publication of the order and show cause why the proceeds in the account should not be permanently forfeited to the federal government of Nigeria.”
Sources in the banking industry have told BusinessDay that the move by the Federal Government has shaken players in the banking industry. They note that the Federal Government did not contribute a kobo in setting up the BVN system in the banking industry but is now seeking to take advantage of it, to the detriment of the banks that set it up. It cost banks about US$60 million to set up the current BVN system.
There are also indications that the big banks are likely to be highly impacted by the move. This is because most of the older generation banks have a high proportion of dormant accounts on their books, which now stands the risk of being forfeited to the government, based on this new rule. Most dormant account have no BVN attached, either because their owners are dead, travelled out of the country, incarcerated, or there is dispute over the account, due to improper documentation by a deceased relative.
Banks said to have a high proportion of dormant accounts on their books include First Bank of Nigeria Plc, United Bank of Africa Plc and Union Bank of Nigeria. The number of dormant accounts in the banking system is about 30 million, according to figures from NIBSS. It is not clear how much these accounts may hold but some estimates put it in excess of N1 trillion which is about five percent of the total deposits in the Nigerian banking system.
Diaspora Nigerians who are yet to register for their BVN are also going to be hit hard by the CBN directive. Even though banks have been making efforts to get as many Nigerians in the Diaspora as possible, to register, sources say many have not been able to do so because of distance and other challenges like work schedule.
Even though banks are not happy with the move by the Federal Government to confiscate non-BVN linked funds, our sources say banks will challenge the move in court in order not to be painted as supporting corruption.
The FG is said to have made the move due to speculation that many politically exposed Nigerians and public service workers have abandoned their funds in banks for fear the of accounts being linked to them with their BVN since they cannot justify the funds in their bank accounts. Some sources in the banking industry had earlier told BusinessDay that as much as US$2.5 billion is lying in domiciliary accounts because their owners have refused to claim them out of fear that the Economic and Financial Crimes commission will come after them to explain the source of their funds.
A legal practitioner, Osagie Agbonlanhor, while noting that the government is right by using the court process to express its dissatisfaction with the way the BVN has been implemented in the banks, cautioned that government must also be careful of ‘retro-active laws and their ambushing consequences.”
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