A New Regime For International Money Transfer Operator’s License In Nigeria
The Central Bank of Nigeria (“CBN”) on January 31st 2024 released a revised guidelines for international money transfer services in Nigeria (the “Guidelines”). The Guidelines provides requirements for obtaining the international money transfer operator (“IMTO”) license from the CBN, the organizational structure, principle of ownership, control and corporate governance standards, including permissible and non-permissible activities of IMTOs.
The review of the international money transfer guidelines was based on the CBN’s efforts to liberalise foreign exchange market, boost diaspora remittance, and enhance the ease of doing business by IMTOs.
We have therefore summarized the salient provisions of the Guidelines for the benefit of our clients and general public.
- Prohibition of Fintechs and Banks from operating IMTO license
The Guidelines expressly excluded fintech companies and banks from obtaining the IMTO license. Under the old guidelines, fintech companies were permitted to obtain and operate the IMTO license. However, effective from the date of the release of the Guidelines, fintech companies with IMTO licenses are prohibited from acting as international money transfer operators. While the Guidelines prohibited all banks from operating IMTO license, it did allow banks to act as agents to IMTO licensees.
- Requirement for obtaining IMTO license under the Updated Guidelines
The Guidelines defined IMTOs as companies approved by the CBN to facilitate the transfer of funds from individual or entities residing abroad to recipients in Nigeria and the payment of corresponding sums to beneficiaries through a clearing network to which the IMTO belongs. To obtain an IMTO license, an applicant must submit application to the Director, Trade and Exchange Department of the CBN, accompanied with documents listed below. Foreign applicants seeking for an IMTO license are required to have a minimum share capital of US$1million, while indigenous IMTOs shall have the Naira equivalent of the US$1million as their minimum share capital. The application fee for an IMTO license is set at Ten Million Naira (N10,000,000).
The application for an IMTO license shall be accompanied with the following documents:
- Evidence of approval to operate in other jurisdictions or agency agreements;
- Evidence of tax clearance and incorporation documents for Nigeria entities;
- Ownership structure of the IMTO;
- Board of director’s approval to operate IMTO license;
- Return on allotment of shares and particulars of directors;
- Profile of the company including the curriculum vitae of the Board and the management of the company;
- Information on beneficial owners of the company (where applicable)
- Credit reports from a licensed credit bureau for the shareholders and key officers of the IMTO;
Upon complying with the above requirements, the applicant may be granted approval in principle (“AIP”), allowing the applicant to open a bank account and process pre-operational processes. It is important to state that the AIP does not grant authorization for IMTO operations. Within three (3) months of obtaining the AIP, the applicant is expected to apply to CBN for final approval.
Upon the grant of final approval, the IMTO license must be renewed annually on or before the 31st of January in each year. The renewal fee for the IMTO license is set at Ten Million Naira (N10,000,000).
- Scope of activities under the update Guidelines
Under the 2014 guidelines, IMTOs were previously allowed to engage in both inbound and outbound transactions with a $2000 threshold for outbound transactions. The transaction was restricted to “person to person”. However, the updated Guidelines now exclusively authorize the IMTOs to undertake inbound transactions while prohibiting IMTOs from conducting outbound transactions. The Guidelines expanded the scope of the transaction to include “business to person” and “business to business” transactions.
Beneficiaries are to be settled in Naira through bank account or cash. If the proceeds exceed $200, payment is to be made through an account. The exchange rate for the IMTO transactions shall be the prevailing rate in the Nigeria foreign exchange market.
Further, the Guidelines explicitly prohibits IMTOs from undertaking split transactions deliberately intended to circumvent anti-money laundering regulations. Additionally, IMTOs are prohibited from buying foreign exchange from the domestic foreign exchange market for settlement purposes and are restricted from engaging in any business other than as stipulated in the Guidelines.
- Collaboration with Agents
The Guidelines stipulates that IMTOs may conduct its business through agents subject to the terms outlined in a formal agreement. The agreement shall contain the following terms:
- a statement that the IMTO is wholly responsible and liable for all actions or omissions of the agent;
- specific services to be rendered by the agent;
- appropriate policies and procedures to detect, prevent and report money laundering;
- responsibilities of the agent to deliver supporting transaction documents;
- a statement that the IMTO is the data controller with respect to information collected by the IMTO
- prohibition from charging the beneficiary any fees other than the fees agreed upon with the sender.
IMTOs are expected to notify the CBN upon the appointment of an agent. IMTOs are required to maintain a separate account with their agents which would hold customer funds meant for remittance.
- Records and Returns
The Guidelines mandates IMTOs to keep a comprehensive record of the management information system that facilitates efficient collection and processing of data required for audits trails. IMTOs are also to maintain accurate information on each transaction and issue receipts accordingly.
Furthermore, the Guidelines stipulates that both IMTOs and their agents shall submit daily, weekly and monthly returns using the prescribed template to the CBN. Additionally, IMTOs and their agents shall submit suspicious transaction report (“STR”) filed in the originating country within 24hours after the transaction.
The Guidelines requires IMTOs to transparently disclose to their customers details of applicable exchange rates, the commission, fees and any other charges imposed either by the IMTO or their agents in the remittances process. Additionally, these disclosures must explain the meaning of technical terms and acronyms used. The disclosure should explicitly state that the IMTO does not take deposit nor lend to the public.
- Compliance with Anti-money laundering
IMTOs must establish and implement internal policies stating their commitments to comply with anti-money laundering (AML), combating financing of terrorism (TF)and countering proliferation financing of weapons (PF) of mass destruction. These policies must align with the CBN Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation of Financing of Weapons of Mass Destruction in Financial Institutions Regulations 2022. The identification, assessment and management of AML, TF and PF risks must be approached from a risk-based standpoint.
- Collaboration with Foreign Technical Partners
An indigenous IMTO can only collaborate with a foreign technical partner upon the approval of the CBN. It is expected that the foreign technical partner must have the approval to carry out IMTO transactions in its home country and with a verifiable track record of engaging in IMTO businesses. The relationship between the indigenous IMTO and foreign technical partner must be formalized through a memorandum of understanding. The CBN shall conduct appropriate due diligence on the promoters, directors and key officers of the proposed IMTO.
- Dispute resolution
The Guidelines requires IMTOs to establish a complaint management unit to resolve disputes submitted by its customers. IMTOs shall assign a unique identifier to each complaint as well as provide dedicated phone, email and other means through which complainants may enquire about the progress of their complaints. IMTOs are also required to provide a monthly report to the CBN about the complaints received.
In the event that an IMTO breaches any provision of the Guidelines, the CBN may take remedial or corrective actions against the IMTO. In addition, the CBN may:
- Withhold corporate approvals;
- Place financial penalties or suspend the IMTO;
- Revoke the IMTO’s license to operate in Nigeria.