Posted by By Ayodele Aminu on
The Central Bank of Nigeria (CBN) has observed that some banks involved in the international money transfer scheme still cheat beneficiaries by engaging in various sharp practices.
The Central Bank of Nigeria (CBN) has observed that some banks involved in the international money transfer scheme still cheat beneficiaries by engaging in various sharp practices.
The apex bank made this disclosure in its 2004 annual reports and statement of accounts.
"Special examination on the level of compliance with the provisions of the guidelines on inward money transfers revealed that some banks breached the provisions," the report said. "The offences included deduction of arbitrary charges and commissions from the amount payable to beneficiaries, application of exchange rates that were lower than the CBN rates in the conversion of foreign currencies, splitting of remittances to evade reporting of the transactions under Section 2 of the Money laundering Act and payment to beneficiaries without the stipulated identification."
The CBN also noted that anti-money laundering and Know Your Customers (KYC) examinations revealed that banks violated various provisions of the law.
These violations, according to the apex bank, included non-disclosure of reportable transactions; late, incomplete and non-rendition of returns; inadequate training of staff on money laundering counter-measures and combating financing of terrorism, and inadequate customer identification.
Under the inland money transfer scheme, beneficiaries are expected to simply walk into any of the designated branches of banks offering the service, complete the required identification process, and then collect their money in US Dollars immediately. But the reverse has always been the case as some banks, especially the big ones, often offer beneficiaries the naira equivalent, which is lower than the parallel market rate, on the pretence that they do not have foreign exchange to give.
Banks had at various times lobbied the CBN to permit them to give beneficiaries local currency (naira) but the banking watchdog has vehemently refused.
It would be recalled that bankers under the aegis of the Sub-Committee on Monetary and Fiscal Policies had a couple of months ago appealed to the apex bank to review the international money transfer directive which stipulates that beneficiaries be allowed to receive their funds in hard currencies.
The sub-committee, which presented its report at the 260th meeting of the Bankers' Committee held in Lagos, had noted that the directive from the CBN that foreign exchange arising from inland transfers should be paid to the owner across the counter in the currency of choice was considered inappropriate.
This practice, they argued, "will be inimical to effective foreign exchange management as these funds may be collected by the owners and sold to the parallel market, making the market to thrive the more."
This policy, they stressed, "is capable of killing money transfer service as the margin (of profit) which banks make from the sales of the currency that sustains the service is very small."
In view of these observations, the sub-committee therefore recommended that in the interest of the economy and the banks, the CBN should reprieve the policy.
The CBN had on several occasions issued circulars directing banks in the international money transfer business to allow "all beneficiaries the option to receive or dispose of their funds in either cash, United States dollars, Travellers' Cheque (TCs), lodgment into beneficiaries' ordinary domiciliary accounts or sell to the receiving banks for the naira equivalent at the prevailing CBN IFEM rate."
Before December 13, 2001, when the CBN first gave the green light for beneficiaries to receive their funds in hard currencies, such transactions were open to abuse, chief among which is round tripping, a situation whereby hard currencies received at the official rate are sold at the parallel market, thereby distorting the economy by triggering a sharp increase in the exchange rate.