New Onboarding Restrictions in Nigeria Aim to Stop Crypto Investors from Evading KYC

Last Updated on May 1, 2024

Written by

Efe Bravo

Bitcoin crypto currency coin with cracked Nigeria flag. Crypto restrictions

Key Takeaways:

Regulatory Action: The Central Bank of Nigeria has instructed four major fintech companies—OPay, Kuda Bank, Moniepoint, and PalmPay—to stop onboarding new customers due to concerns over their KYC procedures and the impact on the Forex market.
Audit and Compliance: These directives are part of a broader audit encompassing traditional banks and fintech firms, initiated to combat tax evasion, money laundering, and unauthorized forex activities, including a freeze on 1,146 bank accounts.
Ongoing Developments: Despite the halt in new registrations, current customers can still conduct transactions. The fintech firms aim to resume normal operations after enhancing their KYC practices in line with regulatory requirements.

The Central Bank of Nigeria (CBN) has issued directives to four prominent Nigerian fintech companies—OPay, Kuda Bank, Moniepoint, and PalmPay—mandating them to halt the onboarding of new customers.

This measure comes in the wake of a comprehensive audit of their Know Your Customer (KYC) procedures, aiming to reinforce compliance across both crypto and conventional investment sectors.

Central Bank Of Nigeria Bans Moniepoint, Opay, Kuda, Others From Taking New Customers Over Cryptocurrency | Sahara Reporters https://t.co/SNAWSIyUbi pic.twitter.com/esN4pJ9DhB
— Sahara Reporters (@SaharaReporters) April 29, 2024

TechCabal, a leading African technology news outlet, reported that these restrictions were introduced following observations by the CBN that numerous crypto traders were utilizing these fintech platforms to destabilize the foreign exchange (Forex) market.

This claim was supported by a source familiar with the developments.

Additionally, the timing of these restrictions aligns closely with actions taken by Nigeria’s Economic and Financial Crimes Commission (EFCC), which recently froze 1,146 bank accounts linked to unauthorized forex activities.

JUST IN: The EFCC have successfully obtained an interim order from the Federal High Court in Abuja to freeze a total of 1,146 bank accounts linked to individuals and companies. The allegations against them include unauthorized foreign exchange transactions and other issues pic.twitter.com/G9kiuWlwUU
— Nigeria Stories (@NigeriaStories) April 29, 2024

Despite these restrictions, existing customers of the affected fintech firms remain unaffected in their ability to deposit and transfer funds.

In response to the ongoing audit, one of the fintech firms issued a statement explaining that the suspension of new account creations was a temporary measure, apologizing for any inconvenience caused to potential new clients.

Further analysis revealed that only a small fraction (about 10%) of the blocked accounts belonged to fintech operations, with the majority being accounts held by traditional commercial banks.

The CBN directs OPay, Palmpay, Kuda Bank, and Moniepoint to stop onboarding new customers pic.twitter.com/N0BXqoFAlH
— Nigeria Stories (@NigeriaStories) April 29, 2024

This audit and subsequent account suspension are part of broader efforts led by the CBN, with support from the National Security Agency and the EFCC.

In a related development, Fidelity Bank, a major Nigerian commercial bank, has also imposed restrictions on all outgoing transfers to the aforementioned fintech companies, citing similar KYC concerns.

These precautionary steps underscore ongoing issues with insufficient KYC measures, which have led to instances of tax evasion and money laundering.

CBN Halts Four Fintech Banks from Accepting New Customers for Forex Trading

The Central Bank of Nigeria (CBN) has instructed four fintech companies to halt the onboarding of new customers until further notice. These companies, namely OPay, Palmpay, Kuda Bank, and Moniepoint, are… pic.twitter.com/UvcqzggCkd
— CoreTV News (@coretvnewsng) April 30, 2024

The situation remains dynamic, with the fintech firms committed to resuming normal operations once the audit is completed and any necessary adjustments made to their KYC practices.

This pause in new registrations is designed to ensure that the firms can meet regulatory standards and prevent misuse of the financial system.

In other news from the Nigerian financial sector, the recent appointment of Emomotimi Agama as the new director-general of the Nigerian Securities and Exchange Commission has been met with positive reactions from the crypto and entrepreneurial communities.

UPDATE: Nigeria President Bola Ahmed Tinubu appoints pro-crypto Emomotimi Agama as the new Director-General of Nigeria's SEC. What does it mean for the crypto community in Nigeria? Find out…↓

#Nigeria (By: @ComposableD)https://t.co/xxtezexlQI
— BSCN (@BSCNews) April 26, 2024

This new leadership is expected to streamline the licensing processes for crypto platforms and bolster investor confidence in Nigeria’s capital markets.