Global Courant
The Central Bank of Nigeria (CBN) wants to get to know bank users more personally. Last week it rolled the Regulation Customer Survey 2023. Under the new regulations, banks now collect customers’ social media handles as part of the Know Your Customer (KYC) process.
The CBN claims that this policy will improve compliance with anti-money laundering (AML) and counter-terrorist financing (CFT) regulations. Nigeria loses $600 million annually to money laundering and $18 billion in financial crimes. So there is a real problem that needs to be addressed. However, the CBN’s approach has sparked controversy over whether it would be a solution or a different problem.
A primary concern is that the CBN wants to have its cake and eat it in different ways. Under its regulations, it asks banks to collect customers’ social media handles as proof of identity. She also expects the institutions to monitor the online behavior of customers, especially if they conduct the majority of their transactions online. However, the same body wants to reach 85% financial inclusion this year. And chasing such ambitious numbers, in the Nigerian context, requires fewer barriers, not more. Meanwhile, at the beginning of the year, only 14.3 percent of the population was on social media. That poetically leaves out more than 85 percent of Nigerians.
Poverty in Nigeria has been one of the biggest barriers to financial inclusion. And the CBN is aware. In 2009, it issued anti-money laundering rules requiring banks to know their customers, but it also realized that many people did not have formal IDs because they were too poor to afford them. So it came up with a smart solution in 2013: a Three level KYC system allowing low and middle income customers to open accounts with minimal requirements and only ask for more information as they spend more money.
But the CBN pays little attention to this system in its new regulation. It only mentions it in passing – in a cryptic section that refers to some old circulars and regulations. It does not explain how the new social media KYC requirement will affect different levels of customers or how it will protect their privacy and rights. What’s more, there are no clear guidelines on how banks should implement this requirement. So the CBN just focuses on the desired result without paying much attention to the process.
Then there is the overall efficiency concern. Social media KYC assumes that the online identity of customers is consistent, reliable and verifiable. But this is not the case. People use multiple social media platforms, often with different usernames, profiles, and purposes. They change their social media accounts, delete their accounts or create new ones. People also use pseudonyms, aliases or fake names to protect their identity or to express themselves. And that’s just the beginning. Nigerians also have a deep-seated distrust of their governments.
Dem says CBN wants to instruct banks to collect una SM handles as part of KYC.
Please don’t forget to list all WhatsApp and Telegram groups you belong to as they want to go crazy.
My bank account can’t collect payments from my social media income accts, but you need it for KYC.…— Akin Olaoye (@akintollgate) June 24, 2023
Digital rights are not luxuries. They are fundamental to our humanity and the core of our citizenship. We cannot stand idly by as CBN pursues the core of our digital rights, which is our privacy by collecting our social media footprints and linking them to our accounts.
— Yunusa Ya’u (@YZYau) June 26, 2023
After October 2020, CBN, which had never successfully tracked terrorism and kidnapped financiers, went after the Endars protesters and closed their accounts under the previous APC administrator. Under a new APC admin, we’re being asked to add our SM accounts to KYC, but you can’t see anything wrong . Same APV
— ‘Derin (@Aderinsola_AA) June 26, 2023
However, not everyone is against the idea. Dr. For example, Ope Banwo, who is often critical of the government, thinks that KYC on social media should not be a problem.
I don’t understand why many people are angry. CBN Asks Banks to Request Social Media Handles as Part of KYC? Isn’t everyone’s social handle already public? . In any case, you have already given the banks very personal things such as date of birth, your address, your work address, etc…
— dr. Ope Banwo (@opebanwo) June 25, 2023
One of his arguments is that the United States uses Social Security Numbers (SSNs), which are more comprehensive than the Nigerian National Identity Number (NIN). But Social Security Numbers have more defined purposes, such as taxes, benefits, credit reporting, etc. The use of social media KYC, on the other hand, has not been communicated beyond vague terms and communications. How it will help prevent money laundering and deal with terrorism is still unclear to the majority.
At the time of reporting, banks have not started asking customers for their social media handles. And it’s unlikely to get off the ground on a whim, because it’s up to the banks to figure out what works for them. Banks also have a tough job of retaining their young customers, who make up the majority of social media users. Traditional banks are currently engaged in a steaming battle with neobanks and fintechs for young users. How will all this unfold? Time will tell.
