Send, Receive, Thrive: Nigeria's Updated International Money Transfer Regime

1.0. INTRODUCTION

International Money Transfer Operators ("IMTOs") in Nigeria are companies or organisations authorised by the Central Bank of Nigeria ("CBN") to facilitate the transfer of funds from individuals or entities residing abroad to recipients in Nigeria, and the payment of a corresponding sum to a beneficiary through a clearing network to which the IMTO belongs.¹ These IMTOs play an important role in the remittance process by providing secure and efficient channels for individuals in the diaspora to send money to their families, friends, or business partners in Nigeria.

Diaspora remittances account for a considerable portion of Nigeria's foreign exchange inflow, and statistics show that between 2019 and 2022,² Nigerians in the diaspora were reported to have remitted $60.22billion. Furthermore, a total of $168.33 billion has been remitted in the past eight years (which is estimated to be over ten times higher than the amount of foreign direct investment (FDI) attracted by Nigeria over the same period). This data is indicative of how remittances could significantly impact Nigeria's economic growth and currency exchange regime,

The Central Bank of Nigeria (CBN), being the apex regulator of the Nigerian financial system, has issued certain regulations to govern specifically, international money remittances and cross-national boundary transfer of funds in Nigeria, some of which include: the Foreign Exchange (Monitoring and Miscellaneous) Provisions Act(1995); and the Foreign Exchange Manual, 2018, amongst others.

By a circular dated September 26, 2014, the CBN issued Guidelines for International Money Transfer Services ("IMTS") in Nigeria which provided a framework for the operations of IMTOs in Nigeria, the creation of an IMTS Operators licencing regime and provision of minimum standards and requirements for the IMTS Operators. However, on the 31st of January 2024, the CBN released revised Guidelines for IMTS in Nigeria (the "IMTO Guidelines"), following recent reforms to:

Liberalise the foreign exchange market and ensure transparency in foreign exchange market transactions;
Boost diaspora remittances and other foreign capital inflows to Nigeria;
Promote efficient price discovery mechanisms and the evolution of an appropriate market determined exchange rate; and
Enhance the ease of doing business for IMTOs in Nigeria and money transfer recipients.

2.0. THE REVISED GUIDELINES ON INTERNATIONAL MONEY TRANSFER SERVICES IN NIGERIA

In line with Section 2(d) of the Central Bank of Nigeria Act, 2007, and Section 30(1) of the Banks and Other Financial Institutions Act (BOFIA), 2020, the CBN issued the IMTO Guidelines in the exercise of its powers to issue regulations, guidelines, and policies to ensure responsible conduct and engender public trust and confidence in the use of financial services in Nigeria³. The Guidelines provide the requirements for obtaining an IMTO licence, the organisational structure of an IMTO, principles of ownership and control, corporate governance standards, including permissible and non-permissible activities of IMTOs.

2.1. Requirements for obtaining an IMTO Licence

To obtain an IMTO licence, an applicant must submit an application to carry on the business of IMTS to the Director, Trade and Exchange Department of the CBN. The approval process is in two phases; Approval-in-Principle ("AIP") and Final Approval.

2.1.1. Approval-in-Principle:

A non-refundable application fee of N10,000,000 (Ten Million Naira) payable to the CBN; ii. Evidence of approval to operate in other jurisdictions or agency agreements;
Evidence of tax clearance and incorporation documents for Nigeria entities, to include the CTC of Memorandum and Articles of Association, of which the primary object clause shall indicate provision of money transfer services;
Ownership structure of the IMTO;
Board of directors' approval to operate IMTO licence;
Return on allotment of shares and particulars of directors;
Profile of the company including the curriculum vitae of the Board and the management of the company;
Information on beneficial owners of the company (where applicable);
Credit reports from a licenced credit bureau for the shareholders and key officers of the IMTO;
Minimum share capital of US$1Million for foreign applicants, while indigenous IMTOs shall have the Naira equivalent of the US$1million as their minimum share capital.

Upon complying with the above requirements, the applicant may be granted an AIP, allowing the applicant to open a bank account and process pre-operational processes. It is important to state that the AIP does not grant authorisation for IMTO operations. Within three (3) months of obtaining the AIP, the applicant is expected to apply to CBN for Final Approval.

2.1.2. Final Approval:

i. Names of authorised dealer banks to serve as local agents and copy of agency agreement;
Submission of a detailed business plan to the CBN.³

Upon the grant of Final Approval, the IMTO licence must be renewed annually on or before the 31st of January in each year. The renewal fee for the IMTO licence is set at Ten Million Naira (N10,000,000) and where an IMTO fails to provide its agent bank a copy of the CBN's renewal of its IMTO licence within the first quarter of that year, the bank would cease any further transaction with the IMTO.

2.2. Anti-Money Laundering/CFT/CPF Requirements

All IMTOs must establish and implement internal policies stating their commitments to comply with Anti-Money Laundering (AML), Combating Financing of Terrorism (CTF) and Countering Proliferation Financing (CPF) of weapons mass destruction obligations under subsisting laws, regulations and regulatory directives. These policies must align with the CBN's Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation of Financing of Weapons of Mass Destruction in Financial Institutions Regulations 2022. The identification, assessment and management of AML, TF and PF risks must be approached from a risk-based standpoint. In addition, the IMTOs must render statutory reports to the CBN, the Nigeria Financial Intelligence Unit (NFIU) and other competent authorities as required by law and monitor compliance of their agents with AML/CFT requirements.

2.3. Overseas Partnership Requirements

An indigenous IMTO can only collaborate with a foreign technical partner upon the prior approval of the CBN. It is expected that the foreign technical partner must be a registered entity in its home country, have the approval to carry out IMTO transactions there, with a verifiable track record of engaging in IMTO businesses. The relationship between the indigenous IMTO and foreign technical partner must be formalised through a Memorandum of Understanding. The CBN shall also conduct appropriate due diligence on the promoters, directors and key officers of the proposed IMTO.

2.4. Prohibition of Banks and Financial Technology Companies from operating IMTO Licences

The Guidelines expressly prohibit banks and fintech companies from operating IMTS and from operating the IMTO licence⁴. While fintech companies are prohibited from acting as IMTOs, banks are permitted to act as agents to IMTOs duly licensed by the CBN. In effect, fintech companies that require IMTS to effect relevant aspects of their operations may partner with licensed IMTOs, as appropriate. Not all fintech companies will be affected by the IMTO Guidelines as long as the payment system associated with the products or service offerings of such fintech company does not involve international money transfers, the IMTO Guidelines will not apply to its operations. However, the revised Guidelines do not indicate how this restriction will apply to fintech companies that currently hold IMTO licences.

2.5. Permissible Activities

Under the 2014 Guidelines, IMTOs were permitted to engage in both inbound and outbound IMTS, with a $2000 threshold for outbound transactions. Such transactions were restricted to "person to person". However, the current IMTO Guidelines exclusively authorise the IMTOs to undertake inbound transactions while prohibiting them from conducting outbound transactions. This implies that IMTOs can no longer transfer funds directly to recipients outside Nigeria as they will have to use their agent banks to effect such outbound international money transfers.

The IMTO Guidelines further expanded the scope of inbound transactions to include "business to person" and "business to business". This implies that licensed IMTOs can make payouts to both individuals and business entities. On the mode of disbursement for inbound remittances, the channels for payout of diaspora remittances in Nigeria have been limited to cash and bank accounts. If the proceeds of the IMTO exceed $200, payment is to be made through an account. Additionally, the payout currency is now limited to the Nigerian Naira and not in foreign currency and the exchange rate shall be at the prevailing rate in the Nigerian foreign exchange market.

Furthermore, IMTOs are prohibited from sourcing foreign exchange from the domestic foreign exchange market for settlement purposes and are restricted from engaging in any business other than as stipulated in the IMTO Guidelines.

2.6. Collaboration with Banks (Agents)

The IMTO Guidelines state that an approved IMTO may conduct its business through an agent, subject to the terms specified in a formal contract. This contract shall contain the following terms:

A statement that the IMTO is wholly responsible and liable for all actions or omissions of the agent;
specific services to be rendered by the agent;
appropriate policies and procedures to detect, prevent, and report money laundering;
responsibilities of the agent to deliver supporting transaction documents;
a statement that the IMTO is the data controller concerning information collected by the IMTO;
confidentiality of user information, etc.

IMTOs are also expected to notify the CBN upon the appointment of an agent and are required to maintain a separate account with their agents which would hold customer funds meant for remittance.

2.7. Records and Returns

The Guidelines mandate IMTOs to keep a comprehensive record of the management information system that facilitates efficient collection and processing of data required for audits trails. IMTOs are also to maintain accurate information on each transaction for a minimum of five (5) years, and issue receipts accordingly⁵.

Furthermore, the Guidelines stipulate that both IMTOs and their agents shall submit daily, weekly and monthly returns using the prescribed template to the CBN. Additionally, IMTOs and their agents shall submit suspicious transaction report ("STR") filed in the originating country within 24hours after the transaction.

2.8. Disclosure Requirements

The Guidelines require IMTOs to transparently disclose to their customers details of applicable exchange rates, commission, fees and any other charges imposed either by the IMTO or their agents in the remittances process. Additionally, these disclosures must explain the meaning of technical terms and acronyms used. The disclosure should also state that the IMTO does not accept deposits nor lend to the public.

2.9. Dispute Resolution

The Guidelines mandate IMTOs to acknowledge all complaints of customers and in addition, to establish a complaints management unit to resolve such complaints or disputes free of charge through well-publicised channels, phone numbers and email addresses. Furthermore, IMTOs shall assign a unique identifier to each complaint and provide dedicated means through which complainants may enquire about the progress of their complaints. IMTOs are also required to provide a monthly report on all complaints received to the CBN, in a format approved by the CBN.

2.10. Sanctions

From the effective date of the IMTO Guidelines, any entity engaging in the business of IMTS without approval from the CBN shall be deemed to be operating illegally and in violation of extant laws and shall be sanctioned and/or prosecuted in accordance with the provisions of BOFIA 2020.

Furthermore, in the event that an IMTO breaches any provision of the IMTO Guidelines, the CBN may take remedial or corrective actions against the IMTO. In addition, the CBN may withhold corporate approvals, place financial penalties or suspend the IMTO and revoke the IMTO's license to operate in Nigeria⁶.

CONCLUSION

The importance of IMTOs cannot be over-emphasised as they have established partnerships and networks with local banks and financial institutions in Nigeria to ensure the smooth remittance of funds to the intended recipients across borders. Thus, it goes without saying that the revision of policies on IMTS reflects the coordinated attempt by the apex regulator to issue policies that will boost the stability of the Naira and create a system that guarantees that all foreign exchange transfers to recipients abroad pass through authorised banking channels.

Footnotes

1. Section 1.1, CBN Guidelines on International Money Transfer Services in Nigeria

2. Personal remittances, received (current US$) – Nigeria | Data (worldbank.org)

3. Section 1.0, the IMTO Guidelines

3. Section 2.2 (II) (a-m), the IMTO Guidelines.

4. Section 2.6, the IMTO Guidelines

5. Section 3.8, IMTO Guidelines.

6. Section 8.0, IMTO Guidelines.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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