Financial Inclusion: Challenges of bank ownership simplification

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By BABAJIDE KOMOLAFE

The Central Bank of Nigeria (CBN) has simplified ownership of bank accounts by creating three types of accounts through the Tiered Know Your Customer (KYC). The aim is to make financial services easily accessible to more Nigerians.

moneyThe Lower Level Account and Middle Level Account are both savings and can be opened on behalf of the owner by a bank agent from outside the bank. While the Middle Level Account requires documentation and verification of the customer’s identity, the Lower Lever Account does not require documentation or verification of customer’s identity. The objective is to make it easy for people to own a bank account. But to balance the objective of financial inclusion and the need to ensure the accounts are not used for money laundering, the CBN imposed transaction limits on these accounts.

However there have been concerns about the challenges of operating these accounts vis-a-vis the transaction limits, verification of documents, and impact on banks’ operations.

Transaction limits (Threshold)

Without any doubt there would be occasions when the customer may exceed the transaction limit. It could either be deliberate or not. For example, in the case of the Lower Level Account (LLA), the customer can make a single deposit that exceed the N20,000 limit for single deposit, or he may make a deposit that makes his cumulative balance to exceed the N200,000 limit. Furthermore, a third party can transfer money into his account, say, N50, 000, which exceeds the N20, 000 limits for single transaction. Also, he may have a cumulative balance of N185, 000, and a third party transfers N20, 000 into the account, thus increasing the balance to N205, 000, which exceeds the regulatory limit. In these circumstances what should the bank do? Should the bank close the account, upgrade the customer to the next level account, which requires documentation and verification?

According to the CBN, customers that exceed the transaction limit should not be allowed to withdraw from the account, irrespective of the reason for exceeding the limit. Such customers should be moved to the next level account, and he/she must satisfy the documentation requirements of the next level account. But if the customer is unable to provide the required documentation,   he/she should be advised to operate the account within the limit, and should not be allowed to withdraw from the account beyond the cumulative balance. This implies that if the cumulative balance rises to N205, 000, the customer would not be allowed to withdraw more than the N200, 000, which is the limit.

The CBN also made it clear  that banks are not to reject deposits or transfer in excess of the limit on single deposit, either by the account holder or third parties. Also banks cannot close the account because it exceeded the limit on daily transaction or on cumulative balance. The customer can still operate the account, by making deposits. But he or she cannot withdraw from the account.

The ideal thing for the customer especially those on LLA, is that, immediately they open the bank account, they should begin the process of obtaining documentation to move to the next level (MLA), such that whenever they exceed the daily transaction limit or the cumulative balance, they can easily upgrade to the next level, and hence be able to withdraw their money. According to the CBN, the customer can operate more than one of these three types of accounts. In other words, you can upgrade to the next level while still enjoying the lower level account, but within its transaction limits.

Verification of documentation

The Medium Level Accounts (MLA) and High Level Accounts (HLA) require documentation which must be verified by the banks. The acceptable documentation to ascertain the identity of the individual is National Identity card (issued by Nigeria Identity Management Commission), Drivers License (by Federal Road Safety Corp) and Voters card (by Independent National Electoral Commission. Should these documents be verified online through the website of the agency or through written letter (which may take a while)? Should banks verify information supplied by customers from all these agencies or just one of them?

These concerns are germane because it determines how quickly banks can open the account for the customer, and allow him to operate such. The apex bank advised that banks should do the verification online, and where the website of the agency is not available or functioning, or does not have capacity for such verification, banks should write to the agencies to verify the customer’s documentation. The apex bank however stated that, “It is envisaged that, with time, all these institutions will improve on their database infrastructure to a level that will facilitate their active partnership in this project.

 

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