African economies and businesses lose over $30.4billion annually to corruption and illicit financial flows. These two ills contribute immensely to the rising poverty and poor infrastructure on the continent because they rob governments and businesses of huge sums of money that could have been used for developmental purposes.
The activities of illicit forex traders are so pervasive and widespread that every segment and all players in the nation’s financial industry are vulnerable to their operations. That is why many prominent financial institutions, including global banks, and investment firms have been found culpable in this respect.
Knowing how corruption and illicit financial flows pummel nations and destroy people, the more than 5,000 Bureaux De Change (BDCs) operators in Nigeria and their umbrella body, the Association of Bureaux De Change Operators of Nigeria (ABCON), have consistently worked with the Central Bank of Nigeria (CBN) to frustrate economic saboteurs and illicit forex traders.
ABCON leadership has reiterated its support to the CBN’s ongoing investigation of some corporate bodies and individuals involved in forex infractions, adding that money laundering through the BDCs or any other financial institutions is unacceptable and those found culpable should be punished according to the law.
ABCON, based on its belief on the need to tighten and strictly enforce regulations in the foreign exchange market, has taken steps to punish erring members including recommending them to the CBN for sanctions.
Speaking on this, ABCON President, Alhaji Aminu Gwadabe, said: “We do not agree that the CBN has been ‘inexcusably weak in enforcing its own rules’ as the regulator had in the past, fined erring BDCs and in some extreme cases, withdrawn their operating licenses”.
According to Gwadabe, the resumption of dollar sales to BDCs led to nearly N40 appreciation of the naira in the first week of the exercise, and saved the local currency from continued depreciation.
He said the CBN’s aim of easing pressure on supply and firming up the naira succeeded and will continue to be achieved with improved liquidity in the market.
“The N2 margin earned by BDCs from every dollar sold is barely enough to cover their operating costs and keep over 15,000 Nigerians employed by the sector, hence the assertion that BDCs business is one of the lucrative businesses in the country is wrong,” he stated.
The ABCON boss said that BDCs operate only within the allowable scope of transactions, which are PTA, BTA, school fees, medicals and among others, adding that BDCs all over the world are important retail sector of the foreign exchange market.
“The BDCs in Nigeria have over the years remained the most potent tool of exchange rate stability management of the CBN whenever the local currency suffers as seen in 2006, 2009, 2016 and 2020. The BDCs are not illegal operators but licensed with CAC and CBN and pay levies and taxes to the government. The over 5000 BDCs have created huge employment opportunities and remained a big threat to over one million unlicensed operators whose activities are usually misconstrued to represent the licensed players,” he said.
In a statement, ABCON Executive Council said it considered linking BDCs with money laundering activities and illicit funds transfer as well as condemning dollar sales to BDCs by the CBN as unfair.
The council described those with such belief as operating from a point of ignorance of the role and contributions of the BDCs sector, as well as the various measures put in place by the CBN and ABCON to ensure strict regulation of the sector as well as compliance with all regulatory requirements especially anti-money laundering measures.
The council said such people failed to distinguish between licensed BDCs and illegal currency hawkers or money changers, as a licensed BDC is registered as a corporate body with the Corporate Affairs Commission (CAC) and is licensed by the CBN to provide retail forex services across the counter.
“The BDC sector is regulated by the CBN via its various enabling laws which applies to all financial institutions. These include the CBN Act, BOFIA, Anti-Money Laundering and Counter Financing Terrorism guidelines, Know Your Customer (KYC) requirements. In addition to these is the CBN guidelines on the operations of BDCs, which is specific to the scope and operations of the BDCs. To ensure compliance, the CBN requires that each licensed BDC render returns on periodic basis (daily, weekly, monthly and annually). Furthermore, BDCs are also required to render returns to the Nigeria Financial Intelligence Unit (NFIU), which plays a major role in the country’s anti-money laundering, counter-terrorist financing and counter-proliferation financing efforts,” it said.
It added that to ensure transparency in its handling of forex, ABCON created a platform, www.abconng.com, which is an online real time rendition of returns. The platform is presently used by over 4000 licensed BDCs to render returns to the CBN and NFIU.
Also, to ensure compliance with the Know-Your Customer (KYC) requirement, a critical element of the anti-money laundering guidelines, ABCON partnered with the Nigeria Interbank Settlement System (NIBSS), to onboard BDCs on the NIBSS platform for verification of customer information.
In addition to the above, and also to ensure transparency, ABCON created naijabdcs.com, an online live exchange rate platform, which also contains the addresses and contacts of all licensed BDCs. The platform publishes the current exchange rate in the retail foreign exchange segment, so as to ensure that forex end users have reliable information to guide them in their transactions with BDC operators.
Also speaking, former Executive Director at Keystone Bank, Richard Obire, said servicing the retail foreign exchange market through the BDCs is helping to stabilize the exchange rates.
“Generally, the supply and demand situation of forex shows that the forex rate set by the CBN doesn’t quite reflect demand and supply dynamics. Many who need forex can’t get it at the set rate and so are willing to get it elsewhere (possibly through BDCs) at higher rates,” he said.
Gwadabe said ABCON is playing stronger role in the BDC industry by embracing effective self-regulation and ensuring compliance with extant anti-money laundering/combating the financing of terrorism laws and regulations to mitigate the risks and vulnerabilities in the sub-sector.
He said that ABCON had also developed and started implementing code of conduct for members to promote ethical practices and transparency, while also continually advising the apex bank on market intelligence on key industry issues.
He said that ABCON had consistently advised BDCs to put in place and implement, a system of internal policies, procedures and controls including Know Your Customer, Customer Due Diligence and reporting of all suspicious transactions to regulators.
According to Gwadabe, ABCON is also training BDCs on regular basis on the need to keep transaction records, and get a designated compliance officer that has day-to-day oversight over AML/ CFT programme. He said the Compliance Officers have been taught the rules in preparing Suspicious Transaction Reports (STRs), and rendering STRs’ returns to the Nigeria Financial Intelligence Unit (NFIU).
He said that BDCs had met and would continue to meet a number of compliance requirements specified by Financial Action Task Force (FATF) and local regulators.
The ABCON boss said that the collation and reporting of foreign currency transactions and suspicious transactions by BDCs are now fully automated. ABCON had in 2019, launched its Live Run Automation Portal in Lagos. The technology automates all BDC Operations with those of Nigeria Inter-Bank Settlement System (NIBSS), NFIU and the CBN to improve the level of compliance of the BDCs with set regulations. ABCON had organised a number of trainings for its members, and at other times, partnered NFIU and the EFCC to build capacity for operators.
According to Gwadabe, ABCON has continued to ensure that BDCs file their reports as and at when due. The BDCs also do Know Your Customer (KYC) and due diligence reports.
Contrary to the belief that BDCs are not well regulated, Gwadabe said they are actually over-regulated as there are increasing difficulties arising from overlapping and complex documentation requirements that licensed BDC operators are facing in carrying out their daily legitimate operation.
The ABCON president said for instance, six units within the CBN are involved with BDC regulations, supervision, licensing, monitoring, noting that “this constitutes multiple regulation of a unit of the financial sub-sector that is only involved as a small market player.”
He said a BDC operator renders daily, monthly, quarterly, half yearly and annual returns to these various departments of the same corporate body, which could be very cumbersome, repetitive and time consuming for both the operator and the regulator.