In its circular addressed to banks and other financial institutions, titled ‘Guidance notes on Politically Exposed Persons,’ the Central Bank of Nigeria has mandated regular screening of accounts belonging to Politically Exposed Persons. The directive, signed by Chibuzor Efobi, Director of the Financial Policy and Regulation Department, was issued on Friday.
The circular stated that “PEP accounts should be subject to periodic reviews as may be determined by the FI in line with risk assessment.
“Frequency of the periodic reviews should be determined by the risk of the customer and documented appropriately. FIs should also review their PEP database frequently.”
It added, “On a regular basis, transactions and account activities should be monitored and scrutinized for money laundering/terrorist financing/ proliferation financing risks.”
The Central Bank of Nigeria (CBN) clarified that domestic Politically Exposed Persons (PEPs) refer to individuals holding prominent public positions within Nigeria, while foreign PEPs encompass those holding prominent public positions in foreign jurisdictions.
The CBN acknowledged the high corruption levels in Nigeria, leading to a classification of domestic PEPs as highly vulnerable to financial risks, making them automatically categorized as high risk.
Regarding foreign PEPs and PEPs associated with international organizations, their risk levels should be determined by financial institutions based on assessments. The CBN emphasized the importance of conducting customer due diligence even after establishing a relationship with the customer.
To maintain compliance, financial institutions should ensure that customers’ behavior, transactions, and accounts align with expected activity levels. Continuous monitoring is crucial as a customer’s risk profile may change over time.
The CBN recognized that financial institutions regularly establish business relationships with PEPs as part of their normal operations. However, it emphasized that such relationships carry inherent risks of corruption, reputation damage, and financial crimes for the financial institution. PEPs present a significant risk of money laundering, terrorist financing, and proliferation financing due to the potential misuse of their power and influence for personal gain or for the benefit of their close family members and associates.
The CBN said, “Such individuals may also use their families or close associates to conceal illicit funds and assets.
“In addition, they may also seek to use their power and influence to gain representation and/or access to, or control of, legal entities for similar purposes.”