Mobile Money Africa: The Importance of KYC Compliance in Mobile Money Fraud Prevention

The National Premium Identity Verification Platform (NPIVP) was introduced by Nigeria’s National Lottery Regulatory Commission (NLRC) in yet another transaction compliance and regulatory update to combat fraudulent actions in the gaming sector through the identity verification of its users. With the use of a Face Match solution, the new platform will be able to verify digital identities very instantly, reduce identity fraud, make AML KYC compliance easier, and promote greater industry engagement. 

In order to maintain the security of these online gambling platforms, NLRC will monitor all gaming operators to identify and verify the users of gaming platforms to make sure they are who they say they are and pass the compliance screening procedure. 

Through continuous transaction monitoring for AML CTF compliance, the NPIVP will notify questionable transactions, assisting in the fight against financial crime in the lottery sector.

What does Nigeria’s Regulatory Landscape look like in 2023??

Banks and other financial institutions in Nigeria are expected to comply with all local, national, and international legislation because of the heightened danger of financial crime. The Central Bank of Nigeria (CBN) released its “Supervisory Framework for Payment Services Banks (PSBs)” in 2021, which emphasises the use of identity verification and KYC technology before user onboarding. This framework also includes procedures for user risk management using AML CTF Screening, Transaction monitoring, and KYC Verification to ensure the security of customers’ funds with PSBs. 

Let us understand the latest regulatory mandates affecting the Nigerian mobile money and Fintech sectors, and delve into technologies that offer optimal compliance solutions in 2023. 

The latest look at Nigerian Laws and Regulations for PSBs

One of the main objectives of the latest compliance adjustments and requirement updates in Nigeria has been to provide transparency in operations, streamline workflows, and establish a workable structure for PSBs. To guarantee that only customers who comply with the rules have access to Mobile Money and FinTech services, the new regulations provide guidance on how to conduct Know Your Customer (KYC) and Anti Money Laundering (AML) screening.

CBN Regulations – Revised Definitions 

The meanings of important terminology used in financial rules have been modified by the Central Bank of Nigeria (CBN). Money, money transfers, beneficial owners, company accounts, dangers, high-risk clients, and politically exposed people are some of these. All types of assets, electronic transactions between financial institutions, and anyone who owns or manages a client participating in a transaction are all included in the updated criteria. Coordination between financial institutions and businesses that conduct numerous transactions is referred to as business accounts. Customer Risk is the potential for money laundering or funding terrorism, and high-risk clients are those who are not Nigerian citizens as well as those who have been flagged as such by law enforcement. The expanded categories also encompass those who are politically exposed.

Updated KYC and AML Guidelines 

The meanings of important terminology used in financial rules have been modified by the Central Bank of Nigeria (CBN). Money, money transfers, beneficial owners, company accounts, dangers, high-risk clients, and politically exposed people are some of these. All types of assets, electronic transactions between financial institutions, and anyone who owns or manages a client participating in a transaction are all included in the updated criteria. 

Coordination between financial institutions and businesses that conduct numerous transactions is referred to as business accounts. Customer Risk is the potential for money laundering or funding terrorism, and high-risk clients are those who are not Nigerian citizens as well as those who have been flagged as such by law enforcement. The expanded categories also encompass those who are politically exposed.

Three Tiered KYC

The CBN advises a three-tiered KYC on consumers under this rule, as opposed to the previous requirement that PSBs undertake traditional KYC on every customer.

• Tier One: The customer’s passport-size photo, name, date of birth, gender, place of residence, nationality, and phone number must be sent to the PSB. Limited ATM transactions and no overseas transfers are permitted under tier one. The maximum single deposit limit is N50,000, while the maximum amount allowed overall is N300,000.
• Tier Two: Similar to layer one, the fundamental information retrieval and verification method is used here. Additionally, it should be checked against official databases like those maintained by the National Identity Management Commission and the Independent National Electoral Commission, among others. These accounts don’t have a minimum initial deposit and can be linked to mobile devices. It has a balance of N500,000 overall and a single deposit limit of N200,000.
• Tier Three: This extends tier two by requiring PSBs to accept, examine, and keep all papers supplied by consumers. Customers can deposit a maximum of N500,000 at a time with no account balance restriction after tier three KYC verification. 

Best Practices and Compliance Technology for Nigerian 

Over the past several years, Nigeria has emerged as a significant fintech player. Five of Africa’s seven unicorns have been developed by the nation thus far, and its fintech startups alone garnered $1.5 billion in 2021. Additionally, Nigeria has the greatest global adoption rate for cryptocurrencies.

Nigeria also contributes significantly to both financial and cybercrime. According to recent research by the Civil Society Legislative Advocacy Center, bribery, cyber fraud, and tax evasion cost the nation over $18 billion annually.

Recent study results indicate that Nigeria has some of the highest incidences of identity fraud worldwide. Due to this, it would be more difficult for fintech businesses to sign up Nigerian consumers.

Up to 90 million, Nigerians have now enrolled for a national identity number, which is wonderful news. (NIN). This number should make it possible for fintech companies to confirm Nigerian citizens’ real identities without having to deal with possibly fake paperwork.

This post offers helpful advice on how to swiftly and efficiently conduct KYC checks on Nigerian consumers.

How to ensure proper Customer Due Diligence

Nigerian enterprises must adopt a number of AML procedures outlined in the Money Laundering (Prohibition) Act of 2011 and Securities and Exchange Commission rules of 2013 in addition to the CBN’s rules. (Capital Market Operators Anti-Money Laundering and Combating the Financing of Terrorism). As part of the AML requirements, these regulations mandate risk-based CDD processes, which include:

CDD in situations that conform to rules

CDD(Customer Due Diligence) is required at all stages of the client interaction. It also comes into play when there is already a customer relationship, such as when: 

• A transaction occasionally exceeds US$1,000 or the equivalent in other currencies, whether it is completed in a single operation or over the course of several operations that appear to be connected; 
• A transaction occasionally involves a wire transfer, whether it is domestic or international; 
• A suspicion that the transaction’s proceeds are being used for money laundering or terrorist financing.
• Businesses must also do CDD if they have any doubts about the veracity of previously acquired identification data.

Digital transactions performed remotely are also required to conduct CDD if the person is associated with risk for either national or international compliance regulations. 

Carrying out Enhanced Due Diligence (EDD) under circumstances permitted by law. 

Businesses must use extra screening for consumers that pose a higher risk like Non-resident clients, private banking clients, and politically exposed individuals (PEPs).

A number of additional steps are included in the client verification process known as “Enhanced Due Diligence”. Before making a decision regarding a potential customer, this involves soliciting top management approval or asking for sources of wealth or finances.

Know Your Customer (KYC) requirements

Nigerian firms must identify and authenticate their users in order to ensure adequate CDD. Businesses must request the following information, as appropriate, to identify Nigerian users: name, date of birth, address, phone number, email address, nationality, occupation, and employer name; unique identifier, such as the National Identification Number (NIN); bank verification number; type of account and nature of banking relationship; and signature.
In order to authenticate Nigerian users, firms must accept the following government documents as verification of users’ identities and addresses:

Proof of identity
Birth certificates, passports, identity cards, and social security records are all acceptable forms of identification.

Proof of Address
Tax assessment, bank statement, most recent utility bill (gas, electric, phone, or cell phone bill), and proof of residence
Other means of verification permitted by the CBN regulations include phoning the consumer to confirm their phone number or having a notary public or official from an embassy certify the customer’s identification.

Types of official Nigerian identity documents

Nigerian users can be verified using the following IDs:

• Electronic National Identity Card (e-ID card). The National Identity Management Commission issuing this. Nigerians who enlist in the National Identity Database and obtain a NIN are given this card. The user’s NIN and other information are embedded in the chip since the card is chip-enabled.
• A digital ID. A digital version of the National Electronic Identity Card is presented here. Only the official Mobile ID App is capable of verifying digital IDs. No proof of a tangible copy exists.
• e-Passport. The Nigeria Immigration Service issues electronic passports for Nigerian citizens using an ECOWAS design. The passport has an electronic chip that stores the owner’s biometric data. Government officials receive official passports, whereas regular residents receive normal passports
• National Driving Permit (NDL). The Federal Road Safety Commission issues this document to those who have successfully finished driving school. The National Digital Driver Licence, which is a smartphone app, is an optional addendum to the driver’s licence.
• Voter ID. To validate voters’ identities during elections, the Independent National Electoral Commission issues this document. By validating the VIN number on the Voter Verification Platform, this document may be verified.

How to securely onboard Nigerian users?

At the verification step, there are other risks than falsified documents. On the darknet, fraudsters may also buy legitimate papers, which complicates identity theft detection because no document altering is taking place. Let’s look at the technology being used currently for the most secure user onboarding process: 

• Document Verification API. Businesses should implement a trustworthy system that verifies papers and finds changes. Since automated methods are better able to handle high forgery rates, they are preferred.
• Government Database Check. Database screening should be used by businesses as an additional step to ensure completely secure onboarding. Governmental databases, PEPs, sanctions lists, and internal blocklists of other platforms may all be accessed and examined in order to do this.
• Facial biometrics. To guarantee that the legitimate document holder is present during the KYC verification, businesses might use liveness detection. Additionally, this stops fraudsters from obtaining verification using masks or deep fakes.

In conclusion, a secure onboarding procedure should include many techniques, including picture authenticity analysis, database screening, and biometric checks, all streamlined to work as a single verification workflow to reduce customer friction. 

How to onboard Nigerian users quickly

You may now quickly and easily verify the identity of Nigerian clients.
Through ID number validation and a liveness check, the Identity Verification solution from IDcentral provides real-time verification of PII (full name, address, date of birth, selfie) and is cross-verified with government databases to provide the user with a verification result. 

IDcentral’s KYC AML Compliance Solution

The Modern KYC and AML solution offered by IDcentral uses AI models to identify and authenticate users’ faces. A person’s identity is additionally verified using identification documents supplied by a government database. Optical character recognition (OCR) powered by AI ensures the document’s legitimacy.

Banks and other financial organisations may also enrol valid consumers in less than 30 seconds. To meet regulatory requirements and identify high-risk consumers, IDcentral’s KYC AML solution comprises screening through worldwide watchlists of PEPs, Real-time CTF AML transaction monitoring, Face Match Biometric Identity Checks, and KYC Verification. 

Try IDcentral’s AML KYC Compliance platform 

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