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CBN wants shell banks abolished in Nigeria

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CBN wants shell banks abolished in Nigeria

…seeks more powers to revoke banks’ licences

The Central Bank of Nigeria (CBN) has called for the abolition of shell banks in the country, saying they serve as institutions of money laundering.
Shell banks are institutions that carry out activities where they are not licensed.
CBN governor, Mr. Godwin Emefiele, made the request yesterday at the public hearing organised by the House Committee on Banking and Currency on a bill to amend the Banking and Other Financial Institutions Act (BOFIA) and other bills in Abuja.
He said the shell banks, apart from being used for money laundering, distort the banking system and pose a problem to regulatory agencies.
Emefiele, represented by the Director, Legal Services Department, Mr. Johnson Akinwunmi, said: “We wish to propose the introduction of new subsections 3(6) and (7) for the proscription of shell banks in response to the latest recommendations of the Financial Action Task Force (FATF) on money laundering to read:
“Any bank or its subsidiaries without physical presence in the country where it is incorporated and licensed and is not affiliated to any financial services group that is subject to effective consolidated supervision, shall not be allowed to operate in Nigeria and no Nigerian bank orbits subsidiaries shall establish or continue any relationship with such bank or subsidiary.”
Similarly, the CBN is also seeking additional powers to revoke licences of banks and “power to inject funds into a failing bank by way of equity participation up to a level that guarantees control by CBN.”
The additional powers, according to the director, is to enable the CBN acquire equity investment institutions and its ability to ensure a sound financial system.
The proposal read: “Without prejudice to the provisions of subsection 2 of this section, and notwithstanding the provisions of section 34 of the CBN Act or anything written law or any limitations contained in the memorandum and articles of association of any bank, the bank shall have power, at any time, to acquire the shares of any bank up to a level that guarantees its control by the bank and management of the bank.
“Provided that the bank shall dispose of such equity investment in the bank when it is satisfied that the state of affairs of the bank concerned has improved.”
The CBN also backed the House of Representatives in imposing stiffer penalties and terms of imprisonment of certain offences on erring commercial banks and their staff.
But in his presentation, the Director of Legal/Board Secretary, Nigeria Deposit Insurance Corporation (NDIC), Mr. Belema Taribo, opposed the proposed fines, saying they were too high.
“The NDIC, as a deposit insurer, supports the passage of the bill into law as the current fine of N1,000 does not meet contemporary realities. However, it is our submission that the proposed penalty of N200,000 is above N100,000 per cent increment from the current penalty. In view of the above, we propose a fine of N5,000.”
On the issuance of licence, NDIC proposed that the CBN should seek its consent before granting any application for banking licence.
“This is to enable the corporation have a prior evaluation of the applicants with regard to insurance of deposits,” Taribo said.
Chairman of the House committee, Hon. Jones Onyereri, said the increase in penalties to the bank operators would streamline the operations of such banks to conform to international best practices.
He informed that the proposed amendments to the BOFIA Act 2017 were initiated by three lawmakers viz: Hon. Daniel Reyeneiju (PDP, Delta), Hon. Betty Apiafi (PDP, Rivers) and Hon. Jones Onyeriri (PDP, Imo).
Some of the penalties in the 70 proposed amendments to the BOFIA Act 2017 include: a fine of N20 million on banks that fail to comply with the conditions of the licence; a fine of N20 million on any director that fails to declare any property he/she owns that runs contrary to the Act; a fine of N10 million against a director or manager that fails to keep a book of account and a fine of N2 million on banks that fail to publish its annual report of its general meeting in two reputable national dailies, among others.
While declaring the public hearing open, Speaker Yakubu Dogara said the House opted for stiffer penalties of millions of naira as fine for commercial banks which engage in illegal deduction of spurious charges on customers’ accounts domiciled in such banks.
Dogara, who was represented by the House Deputy Minority Leader, Hon. Chukwuka Onyema, said that bank customers have not stopped complaining of spurious charges on their accounts.

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