The Central Bank of Nigeria (CBN) has issued a directive to four prominent fintech companies, namely OPay, Palmpay, Kuda Bank, and Moniepoint, instructing them to halt the onboarding of new customers until further notice. This directive comes amidst allegations of these fintech platforms being involved in illicit foreign exchange transactions.
The CBN’s decision to halt the onboarding of new customers by these fintech companies comes just two days after the Economic and Financial Crimes Commission (EFCC) blocked 1,146 bank accounts that were allegedly involved in unauthorized forex dealings. The CBN’s directive is seen as a measure to curb any potential misuse of these fintech platforms for illicit activities.
Upon visiting the website of one of the affected fintech startups, a notice was displayed, stating, “We’ve temporarily paused new signups on our platform. This means that you’ll be unable to open a new account at the moment. We apologize for any inconvenience this may cause.” Representatives from two of the affected companies confirmed that the CBN’s order is indeed related to the allegations of illicit forex transactions.
However, these representatives also pointed out that the majority of the implicated accounts actually belong to commercial banks, rather than fintech platforms. They believe that the CBN’s directive seems misdirected, as it primarily focuses on fintechs while commercial banks are also involved in the issue. This concern was initially reported by TechCabal and has been corroborated by Nairametrics.
According to one of the sources, “I can confirm that 90% of the accounts implicated in the illicit forex transactions are with commercial banks, and only 10% are with fintechs. Why then has the CBN not extended this directive to the commercial banks? We face a widespread issue here, and targeting fintechs seems like an unfair focus on the more vulnerable targets.”
Fintech companies have faced increased scrutiny over their account opening processes in recent times. In October 2023, Fidelity Bank blocked transfers to OPay, Palmpay, Kuda, and Moniepoint due to concerns about lax Know Your Customer (KYC) processes leading to an increase in fraud incidents. The Central Bank then introduced new KYC rules for all financial institutions, which appeared to be specifically targeted at fintech startups.
The recent directive to pause account opening is believed to be linked to an ongoing audit of the KYC processes of these fintech companies. An executive at one of the affected fintechs described the pause as “temporary” and stated that it is part of the ongoing investigation by the EFCC into bank accounts involved in unauthorized forex dealings.
It has been reported that the CBN had discussions with representatives of the affected fintechs, along with the National Security Agency (NSA), on April 26. One person with knowledge of the meeting informed TechCabal that “The CBN feels like a lot of crypto traders were leveraging the fintech platforms to disrupt the FX market.” Another individual with knowledge of the conversations mentioned that “The banks also have a better relationship with the regulator while fintechs are yet to build that type of relationship and help their perception with the CBN.”
While an executive at one of the affected fintechs believes that the directive is connected to the EFCC’s investigation into unauthorized forex dealings, a spokesperson for the NSA denied any link with the directive to stop opening new accounts. As of now, the CBN has not provided an immediate response to requests for comment on the matter.
This development has raised concerns within the fintech industry, as it highlights the need for stronger relationships and communication between fintech platforms and regulatory bodies. It also underscores the importance of robust KYC processes to prevent illicit activities and maintain the integrity of the financial system.
As the situation unfolds, it remains to be seen how the affected fintech companies will navigate these challenges and work towards addressing the concerns raised by the CBN. The fintech industry plays a vital role in driving financial inclusion and innovation in Nigeria, and it is crucial for all stakeholders to collaborate in finding solutions that balance regulatory requirements with the growth and development of the sector.
