As part of efforts toward stemming money laundering in Nigeria, Central Bank of Nigeria (CBN) on Tuesday called for enactment of law that will prohibit operations of ‘shell banks’ across the country.
Shell banks are unlicensed financial institutions that carry out activities.
Godwin Emefiele, CBN Governor, gave the charge at the opening of two-day public hearing organised by House Committee on Banking and Currency on a bill to amend the Banking and Other Financial Institutions Act (BOFIA) and other bills, held in Abuja.
He said the shell banks, apart from being used for money laundering, distort the banking system and pose as major problems to the regulatory agencies.
Emefiele who was represented by Johnson Akinwumi, CBN’s Director, Legal Services Department, said: “we wish to propose the introduction of new subsections 3(6 and 7) for the proscription of shell banks in response to the latest recommendations of the Financial Action Task Force (FATF) on money laundering to read:
“Any bank or its subsidiaries without physical presence in the country where it is incorporated and licensed and is not affiliated to any financial services group that is subject to effective consolidated supervision shall not be allowed to operate in Nigeria and no Nigerian bank orbits subsidiaries shall establish or continue any relationship with such bank or subsidiary,” he observed.
The apex bank also sought for additional powers to revoke licences of banks and inject funds into a falling bank by way of equity participation up to a level that guarantees control by CBN.
The additional powers, according to the director is to enable the CBN acquire equity investment institutions and its ability to ensure a sound financial system.
“Without prejudice to the provisions of subsection 2 of this section, and notwithstanding the provisions of section 34 of the CBN Act or anything written law or any limitations contained in the memorandum and articles of association of any bank, the bank shall have power at any time to acquire the shares of any bank up to a level that guarantees its control by the Bank and management of the bank.
“Provided that the Bank shall dispose of such equity investment in the bank, when it is satisfied that the state of affairs of the bank concerned has improved”
The CBN also backed the House of Representatives in imposing stiffer penalties and terms of imprisonment of certain offences on erring commercial banks and their staff.
However in his presentation, Belema Taribo, Director of legal/board secretary for Nigeria Deposit Insurance Corporation (NDIC), opposed the proposed fines saying they were too high.
“The NDIC as a deposit insurer supports the passage of the bill into law as the current fine of N1,000 does not meet contemporary realities. However, it is our submission that the the proposed penalty of N200,000 is above N100,000 percent increment from the current penalty. In view of the above, we propose a fine of N5,000.”
On the issuance of licence, NDIC proposed that CBN should seek the consent of NDIC before granting any application for banking licence.
“This is to enable the corporation have a prior evaluation of the applicants with regard to insurance of deposits,” Taribo stated.
