CBN seeks to enhance regulatory framework for BDCs, stakeholders

BRANDPOWER reports that some portions of the 50 paged draft document targeted transparency, elimination of corruption and hoarding of Forex.

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CBN, enhance, regulatory framework, BDCs, stakeholdersThe Central Bank of Nigeria (CBN) has issued a draft of revised Regulatory and Supervisory Guidelines for all Bureau de Change (BDC) Operators and stakeholders in the financial services industry.

The guidelines which seek to enhance the regulatory framework for BDC operations as part of ongoing reforms of the Nigerian foreign exchange market, was contained in a circular on Friday.

The circular signed by Haruna Mustafa, Director, Financial Policy and Regulation Department of the CBN had the 50 paged guidelines attached.

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The guidelines spelt out activities allowed, licensing requirements, corporate governance and Anti-Money Laundering/Combating the Financing of Terrorism provisions for BDC operations.

The draft document on the CBN’s website also listed new record-keeping and reporting requirements, corporate governance requirements, financial requirements, among others.

“Pursuant to the powers conferred under Section 56 of the Banks and Other Financial Institutions Act, 2020 (BOFIA), the Central Bank of Nigeria (CBN) hereby issues this draft revised Regulatory and Supervisory Guidelines for Bureau de Change (BDC) Operations in Nigeria for stakeholder comments and/or inputs.

“The Guidelines significantly enhances the regulatory framework for the operations of Bureau De Change as part of ongoing reforms of the Nigerian foreign exchange market.

“The Guidelines revises the permissible activities, licensing requirements, corporate governance and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) provisions for BDCs.

“It also sets out new record-keeping and reporting requirements, among others,” the circular said.

Mustafa said the draft guidelines were available on the CBN’s website, www.cbn.gov.ng.

He urged stakeholders to forward thier comments to the Director, Financial Policy and Regulation Department, CBN, Abuja with soft copies mailed to PolicyandRegulationDivision@cbn.gov.ng by March 4, 2024.

BRANDPOWER reports that some portions of the 50 paged draft document targeted transparency, elimination of corruption and hoarding of Forex.

It gave reasons for preservation of records and conditions for revocation of BDC operations licence.

“Every BDC shall maintain documents obtained from its customers for at least five years after the consummation of the transaction,” draft item 18.0 in the schedule noted.

It said the CBN may revoke the license of a BDC: where the operator or its entities forges, mutilates, alters or defaces any foreign currency, or other fx instruments with intent to defraud.

The document also prohibited multiple ownership of BDCs; obtaining foreign currency from ineligible sources or from eligible ones in a fraudulent manner.

It also spelt out sanctions for other regulatory infractions.

Here Are Key Points :

1.⁠ ⁠Bureaux de Change (BDCs) now have tiers: Tier 1 requires a minimum capital of N2bn (this is for a national license), while Tier 2 has a minimum capital requirement of N500m (these can only operate within one state and are allowed a maximum of 3 branches).

2.⁠ ⁠A shareholder cannot own more than one BDC, thus preventing people from holding more than one license.
3.⁠ ⁠BDCs can now serve as agents to disburse funds on behalf of International Money Transfer Operators (IMTOs). Only amounts less than $500 can be received in cash, while larger amounts should be deposited in bank accounts. For foreigners, a card will be issued. Essentially, BDCs will now be able to issue Naira cards.

4.⁠ ⁠BDCs can now issue PTAs and BTAs.

5.⁠ ⁠BDCs are going digital and will need to integrate the Central Bank of Nigeria (CBN) reporting platform for transaction and Anti-Money Laundering (AML) purposes. They will also integrate Federal Inland Revenue Service (FIRS) and Nigeria Inter-Bank Settlement System (NIBSS) for Bank Verification Number (BVN) verification, among other things.

6.⁠ ⁠As a Tier 1 BDC, you must have a minimum of 5 board members and a maximum of 9. Tier 2 should have 7 members. The draft guideline provides for gender equality, so a board cannot be constituted with only one gender. The CBN must now approve of directors serving on the board of a BDC and another regulated financial institution. New qualifications now require board members to have experience working in financial institutions. In particular, independent directors must have worked on the management team of a BDC.

7. Banks and Other Financial Institutions (OFIs) cannot hold Bureau De Change (BDC) licenses. It remains to be decided whether some of the permissible activities of BDCs under the draft regulation, such as the issuance of Business Travel Allowance (BTA) and Personal Travel Allowance (PTA), will be exclusively reserved for the BDC.

8.⁠ ⁠There is now a very extensive requirement for licensing. It’s a whole lot. It is very similar to what the CBN would demand from a finance company or bank, with increased scrutiny.

10. Unlike banks- BTA/PTA threshold they can sell is bi annual – sell 4k to individuals and 5k to businesses cumulatively in a 6 month period

11. No more street trading under BDC operations.