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Nigeria: FG to Clamp Down On Banks over corruption

by Business News Report

By Omoh Gabriel Business Editor
The federal government will soon clamp down on banks managing director who use their banks to forster corruption in the country. As a result the 25 Banks Managing Directors were made to sign undertaking in December that they will stop corrupting government officials through inducement of negotiated above normal upfront interest payment on government funds placed in banks.
Presidency sources told Vanguard that a memo was sent out by the Central Bank of Nigeria to all Managing Directors of Banks in which they were asked to sign an undertaking that they will stem corruption in their banks. The move is said to have been prompted by the flagrant manner banks violates the ethics of banking in their quest for cheap government funds. It was gathered that all investigation into corrupt activities of governors, government officials in the act of money launder
in the country have placed at the foot steps of Nigerian banks.
According to the presidency source four banks are in the forefront of corruption in Nigeria. The four banks are being accused of doing incalculable damage to the banking culture in Nigeria. One of the Managing Director who confirm signing the document said that in the drive for funds managing banks have thrown caution to the wind as they use every unethical means to attract funds from government institutions and agencies. He said that now government agencies and parastatals demand about four percent above normal up-front interest payment for funds placed in banks. Many banks which want to stick to the ethics of banking are losing funds placed with them in the past. He said that a particular bank lost N5billion deposit recently when it refused to pay the up-front fee demanded by the officials.

He said that a particular state governor collects 5 per cent on the funds placed with the bank which the bank in question styled COT charges. The 5 per cent is said to be split into two monthly and delivered to the governor in cash. The other half is kept by the bank.
It will be recalled that last year the federal government worried that Nigeria was still listed by the Financial Action Task Force on financial crime as a non cooperative country in the fight against corruption and money laundry warned banks and other financial institutions to comply with CBN directive on know your customer and rendition of suspicious transaction report to the Economic and Financial Crime Commission. Many banks are said to have devise a means of splitting large deposits and do instal mental placement on behalf of customers especially marketing officers who are given unrealistic deposit targets.
A directive issued by the monetary authority to banks, Community Banks, Primary Mortgage Institutions, Finance Companies and Bureau De Change on that occasion said “As part of our renewed efforts to combat money laundering and other financial crimes, it has become imperative to bring to your attention to the provisions and requirements of the Money Laundering (Prohibition) Act 2004, CBN circulars BSD/DO/CIRIV. 1/01/24 dated November 28, 2001 and BSD/08/2005 dated April 11, 2005 on the “Know your Customers” principles (KYC).
“The Act and circulars under reference require banks and other financial institutions (Community Banks, Primary Mortgage Institutions, flnance Companies and Bureaux De Change) to comply with the understated amongst others:
“Record all complex, unusual or suspicious transactions and report any single transaction, lodgement or transfer of funds in excess of N1,000,000 or its equivalent in the case of an individual or N5,000,000 or its equivalent in the case of a body corporate.
“Develop programmes to combat the laundering of proceeds of a crime or other illegal acts through your institution which shall include:- the designation of compliance officers at the management level.
Internal audit unit scrutinizes and ensure that your records are well kept; on-going training /awareness for all the staff; display of notice in a conspicuous place directing the attention of customers and the general public to the dangers associated with money laundering and other financial crimes.
“Forward all Suspicious Transaction Reports and other related investigation Reports to the Economic and Financial Crimes Commission (EFCC)/ Nigeria Financial Intelligence Unit within 7 days.
“Copies of reports to EFCC should be well documented for on-site inspection by CBN Examiners.
“Financial institutions are also to note the provisions of the Act which prohibits a transaction in excess of N500,000 or its equivalent in the case of an individual or N2,000,000 or its equivalent in the case of a body corporate except such a transaction is made through a financial institution”.
The CBN warned banks Directors, Management, Internal Auditors and compliant officers of all financial institutions that failure to ensure strict compliance with the above will attract the penalties as stipulated in section 6(9) of the Money Laundering Act 2004 and Section 44 (2) (d) of BOFIA 1991 as amended.

File FG to clamp down on banks 17/03/07

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