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Compliance and the Challenges of e-Naira Adoption in Nigeria.

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Central Banks across the world control currency issuance, supply and stability; whilst it also formulates monetary policy. With Central Banks across the world ramping up research, development and deployment efforts of the digital currencies, Nigeria’s Apex Bank is not left out of the mix, especially as it battles the unregulated cryptocurrency landscape.Adedayo Adejobi looks at concerns raised on the centrality of the burgeoning digital economy,the platform’s integrity, cross-border dimensions,the challenges and possibilities therein for Nigerian Compliance Officers in adopting the e-Naira.

 

Following the Apex Banks adoption of the e-naira with its attendant flaws and setback, Nigeria’s compliance watchdog, Compliance Institute, Nigeria (CIN), in support of the Central Bank of Nigeria (CBN) in improving the adoption rate of the E-naira due to the benefits in improving financial inclusion, and the need to give comfort to the public on its safety given the vulnerability around virtual currencies; the institute has brought to the fore the unique essence of Compliance Officers’ in Financial Institutions’  and their role in e-Naira adoption; and how they could be prepared to mitigate attendant risks, challenges and possibilities.

In the webinar session moderated by Head, E-Business & Digital Compliance Unit, Access Bank Plc, Nigeria, Caleb Izedonmi, panelists across the Compliance, regulatory technology spectrum took turns to dissect the issues from Compliance, to Cybersecurity,. Terrorism financing, regulatory technology and Money laundering, amongst other important issues.

In the opening charge given by a globally recognised Public policy influencer and authority in digital assest regulation and blockchain technology Australia, Ms Loretta Joseph, enthused that, ‘‘Across Africa has been slow in adopting what works across the region.The biggest pain point is slow payment processing. The CBN’s currency has got an interesting operationally structure and cash could be taken out of the market. Its time to get more people to use digital currency as opposed to cash. The e-Naira is a digital version of the CBN’s cash supply, and it is more cost effecient, whilst bringing financial inclusion.The economic impact can be broad and varied. There are lots of risks and good things that can happen.’’

According to President, Compliance Institute, Nigeria (CIN), Pattison Boleigha in his opening remarks, he said, ‘‘Intitially, the adoption rate was very fast but it seems to have slowed down. We are optimistic that it will pick up again with the kind of awareness on safety the institute if giiving to it’. Meanwhile, the take on and use cases will increase especially with the youths. Cheap cost of transaction is an attraction, and with government pushing taxes and levies to be paid using the e-Naira, I foresee more users ’’

Sharing her thoughts on the unique essence of the e-Naira, Deputy Director & Head, AML/CFT Group (Onsite), Banking Supervision Deparment, CBN, Florence Abraham said “ we are in a global world and have experienced the changes that have come on board. The E-Naira will help facilitate our transactions and assist a more effecient banking system. It will go a long way to deepen the financail system, lower payment processing costs, whilst it will users will enjoy ease in diaspora remitances.’’

Reacting to the assertion that the buzz on the e-Naira is declining, Adewole Olufisayo Omotoyosi was emphatic is saying, ‘‘It hasn’t declined. People are reluctant to change. Some are averse to risk and so it can be responsible for the superficial decline. There is no decline. It depends on the area, merchants and some may not understand the architechture. Wether you like it or not, it has come too stay.A lot of conversations are on-going. By the time we go live on USSD which will target the unbanked, the registeration process will improve tremendously.’’

When asked if the e-Naira will replace cryptocurrency and how this currency helping to stabilise naira and forex, Adewole said, ‘’Crypto is a blockchain technology and highly speculative. A number of funds and people were converting thier monies to dollars and going to crypto excahanges whilst volume of forex exchanges were going to cryptocurrency. That way it was affecting our forex and reserve. That is why the CBN came up with the policy to contribute to the GDP.’’

A crucial fault line is the lack of how the e-Naira plarform works amodst fears associated with people asessing their funds when there is a downtime.

CBN’s Cybersecurity Bank Examiner, Adewole Olufisayo Omotoyosi,Omotoyosi has disclosed that the platform is secured and in a cloud. ‘‘We use one of the best cloud providers. There is no latency. The E-Naira platform thrives on the strength of mobile and network provider.We don’t expect to have a dowwntime. We are however open to feedback. The system is our national value.’’, she said.

Bringing a clear distinction on Crytocurrency and E-naira and wether it can be traded globally, Adeolu Fadele
Lead, Information Technology, Research and Innovations Unit, CBN said, ‘‘E-Naira is a digital version of the Nigerian naira. It has the same parity as naira. Crypto is private money space, but e-naira is a sovereign currency only because its leveraging technology. Cryptocurrrency is different in many respect. From its issuance and distribution, its typically controled, distributed and centralised. When a system controls money outside the financial system, it cannot be termed a legal tender. Think of doing a lot with the e-Naira as the same bank note without physical presence and handing you a physical notes. It comes with more possibilities that technology can bring.’’

On International trading, Fedele said,’’ As a legal tender, the cross border use is one of the most attractive potentials. When  jurisdictions are integrated on the Central Bank Digital Currency platform, making payments which were costly and stressful, would be quicker, faster, cheaper and facilitated with ease with the e-Naira.

Speaking on the vulnerabilities as it relates to money laundering, cybercrime and terrorism financing, Deputy Director and Head, AML/CFT Group (Onsite), Banking Supervision Deparment, CBN, Florence Abraham said, ‘’ we did a study in 2020 and realised that during the pandemic and lockdown, we had the highest accounts opend in the banks digitally. We noticed key things which affect this key change are digital literacy, identity theft, unsecured third part applications, email phisghin, increased cyber attacks, hackers, security breaches .They affect launching out to the digital space and its not peculair to the e-Naira. As Compliance officers, these are things we come to face. We have locations with high propensities of terrorim financing and customers with higher money laundering risks. Some transactions also pose higher risks of money laundering to financial institutions.’’

In its counsel to Compliance Officers on controls to infuse in adopting the e-Naira technology, ‘’I would advice that banks leverage smart technology automation to leverage the e-naira technology to enhance thier KYC. The best way to handle your money laundering rate is through Central Banks Digital Currency (CBDC0. We would always advice that we adopt a business approach, such that you are able to channel you resources to where the risks are with a view to mitigating them. We need to work on training, create awareness, look at the Anti-Money Laundering and terrorism Financing (AML/CFT) Program and ensure we adrress transaction monitoring , whilst reporting Suspicious Transactios (STR’s). This woud help mitigate transactions that would have emanated from the e-Naira platform’’ , Florence Abraham echoed.

According to Cybersecurity Bank Examiner, CBN, Adewole Olufisayo Omotoyosi, said ‘‘whenever there is a fraud, the bank has the responsibility on integrating their platforms to the e-naira platfom. Banks must be risk-averse. CBN doen’t micromanage banks and so, a lot of banks need to engage loads of developers.

It is said that good money would stimulate the economic activities and value, with growth, trade and revenue upsurge.

With an evolving threat landscape Compliance Officers who play a key role in the financial integrity of a good system across the Banks, have been advised to investigate, go through thier platforms ,and ensure their IT developers are trained and have an understading of AML/CFT.

 

 

 

 

 

 

 

 

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