Enforcing Best Practices among BDCs

The Association of Bureaux De Change Operators of Nigeria recently organised a webinar where issues around regulatory compliance were discussed with the President, Alhaji Aminu Gwadabe listing major steps taken by the association to ensure that all licensed BDCs comply with extant regulations. Hamid Ayodeji provides the excerpts:

The Association of Bureaux De Change Operators of Nigeria’s (ABCON) recently held Annual General Meeting was opportunity for the President, Alhaji Aminu Gwadabe to restate the role played by Central Bank of Nigeria (CBN)-licensed BDCs in promoting exchange rate stability, forex liquidity and forex sale to retail end of the market.

Gwadabe spoke extensively about the N1 trillion turnover milestone achieved by BDCs which he said reaffirms the sector’s prime position in the economy. He also listed the challenges facing the sub-sector, especially the low transaction margins on dollar sales, which continuously threaten the survival of BDCs businesses.

The meeting, which had the backing of CBN Governor, Godwin Emefiele was also attended by the apex bank directors, Representatives of Nigerian Financial Intelligence Unit (NFIU), Economic and Financial Crimes Commission (EFCC), Financial Action Task Force (FATF), DataPro CEO and over 550 top BDC directors, traders and other attendees nationwide.

All the financial sector regulators, watchdogs and facilitators at the event took turns to chart a formidable future for BDCs. They were confident of a future for BDCs built on regulatory compliance, fight against illicit financial flows, and support for CBN’s exchange rate stability mandate.

The ABCON boss further highlighted the urgent need to foster better and positive image for the BDC sub-sector.

He said the BDCs needed a positive and rewarding image different from what the nay sayers have fed the public with.

“We need to tell everyone that ABCON members are different. Majority of BDCs are not criminals. We need respect from members of the public,” he stated.

He said with over 20,000 Nigerians employed by the sub-sector, there was need to support the BDC business for sustained economic growth and employment generation.

Gwadabe who spoke on the theme: “BDCS Operations: A Trillion Naira Sub-sector, Issues of Formalisation, Regulation & Way Forward,” said foreign currencies being transacted on by BDCs are derived from private sources and other sources which may include the CBN window as determined by the regulator from time to time for the purpose of funding Business Travel Allowance (BTA), Personal Travel Allowance (PTA), School Fees Payment abroad, Medicals, mortgage and subscription.

There are also other autonomous sources such as Diaspora Remittances, walk in customers and  bank sources.

He said ABCON is now training compliance officers to ensure they are acquainted with what is required of them, especially on monthly rendition of results and tracking illicit capital flows through compliance.

According to Gwadabe, BDCs are complying with the rendition of suspicious transactions reports as directed by NFIU, CBN, and EFCC.

“Directors of BDCs are being trained, and after training, whoever is found wanting will be recommended for sanctions,” he said.

He said BDCs are required to comply with all extant rules & regulations prescribed by the CBN, while the CBN closely supervises and monitors their operations.

“In compliance with the provisions of Bank and Other Financial Institutions (BOFIA) as amended, every BDC renders returns to the CBN in prescribed format and within the deadline stipulated by the CBN. The records of the BDCs are made readily available to the CBN examiners as and when requested including carrying out customer due diligence, corporate governance and tax returns,” he said.

He said ABCON has over the years established itself as a key player in the BDC industry, and has also made several commitments and sacrifices to ensure that the sector continue to thrive despite all odds.

“The recognition of the role of BDCs in Nigeria financial sector remains the first step to building a sustainable and viable forex market that is comparable to what is obtainable in other developed economies.

“But getting the Nigerian BDC sector to where it is desired to be demands hard-work, quality leadership, regulatory foresight and sound government policies,” he said.

Digitaliisation/Transaction Margin Review

Gwadabe said BDCs have achieved major success with the digitalisation of their operations, saying operators can now file their reports from convenient point without clustering at CBN’s offices.

He said ABCON digitised BDCs operations with the official launch and take off of the ABCON Live Run Automation Portal in Lagos. The project, which has the backing of the CBN ended decades of manual filling of regulatory reports by BDCs and enhanced global competitiveness of operators.

The portal, which he described as a game changer in the Nigerian BDC Industry, is the final phase of automating all BDCs’ operations and integrating them with the operations of CBN, NFIU and Nigeria Inter-Bank Settlement System (NIBSS) for improved compliance with regulation and seamless operations.

He said ABCON was working with its consultants to revamp the naijabdcs.com to MyBdc.com. This would make the site transactionary and informative.

Gwadabe also called on the CBN to review the transaction margin for BDCs to enable operators stay in business as the sector needs profitable margin to sustain operators’ businesses.

He disclosed the N2 per dollar margin currently earned by BDCs was discouraging insufficient to sustain their operations and discourages foreigners from investing in the sector.

Making BDCs Payments Agents of Diaspora Remittances

ABCON President, Gwadabe also suggested to the CBN to make BDCs Diaspora Remittances Pay Agents.

He disclosed that the CBN introduced the Investors and Exporters (I &E) Window which allows foreign investors to freely bring their funds into the economy at a rate of their choice.

Similar plan was implemented by the CBN in 2016 /2017 and the impact was massive in boosting foreign capital flows to the economy and deepening exchange market liquidity.

Therefore, ABCON suggested that the CBN allows investors and Diaspora Remittances senders to freely interact with the BDCs bid and offer rates and make the BDCs pay out agents for remittances.

CBN, NFIU, NIBSS Speak

In his presentation, CBN Director, Williams Kanya, said the apex bank acknowledges the support of BDCs under ABCON adding that the apex bank has key interest in ABCON operations.

He said: “I am happy that BDCs and ABCON have become more professional. The ABCON team has understanding beyond what they do and this makes CBN’s work easy.

“We are happy with what they are doing to keep the exchange rate stable and promote sustained economic growth. The CBN remains the biggest supplier of dollars to BDCs and has pumped enough liquidity to the sector”.

Continuing, Kanya said the CBN stands with ABCON on balancing of rates.

“Speculation will be bad business going forward as people will keep losing money. Also, we need rendition of returns from BDCs not to witch-hunt anyone, but to take decisions that will favor the economy with the data”.

Acting Associate Director, Nigerian Financial Intelligence Unit (NFIU), Mohammed Jiya, urged BDCs to always file their returns on time, and even where there are no transactions to report, they can file Nil report.

He said the agency needs the data from BDCs returns to know what is happening in the sector and take decision that would favor the economy.

“The guideline clearly states that every BDC shall have an AML/CFT policy in compliance with AML/CFT Act 2011 for, amongst others, identification of customers using relevant means before carrying out a transaction or establishing a business relationship,” he said.

He said Compliance Officers are to ensure that there is a compliance programme, prepare suspicious transaction report and render returns on same to the NFIU and where there are no such transactions, a “Nil Return” shall be rendered monthly.

“All Licensed/Registered BDCs operating in the country are expected to register on goAML and NIL Reporting Portal to enable them respectively render Statutory Returns (STRs, SARs, CTRs and AIF) or NIL Return when there is no report for a given period,” Jiya advised.

He said the NFIU was poised to collaborate with ABCON in providing the needed Training and Technical Support for all the ensure compliance, registration on the NFIU Portals and rending the Statutory Returns of AML/CFT Reports as at when due.

In its presentation, DataPro, said data Protection is about data security. It ensures that personal data is safeguarded from unlawful access by unauthorised parties. The firm said that BDCs that collect personal data, have the responsibility of protecting same from unauthorised access.

Also, representatives of Other Financial Institutions Department of the CBN, Nigeria Interbank Settlement System, FATF, among others called for vigilance on the part of BDCs to ensure they follow regulations by conducting customer due diligence on all their transactions.

Challenges Before BDCs

Gwadabe said BDCs suffer from low level of formalisation of operations, whereby street traders are now competing for the forex market with CBN-licenced operators.

“The challenge of poor formalisation of BDCs operation makes us inefficient and difficult to fulfilling CBN’s mandate. We want the CBN to step in and formalise BDCs operations and make it difficult for street forex traders to operate,” he said.

Gwadabe said getting a BDC license costs around N40 million in Nigeria, when it costs only $5,000 to get same license in Kenya. Yet, both the public and regulators have continued to castigate Nigerian BDCs.

“We also appeal to the CBN to approve the ABCON Training Institute to provide more avenues for continues training of our members on current trends in illicit financial flows and anti-terrorist financing.

“ABCON appeals to the CBN to issue Letter of Consent to our proposed training institute. This is going to boost the current ABCON Management commitment to capacity building of its members meant to stimulate competency in the sector,” he said.

He said there was no way over 6,000 people can be trained in one hall, making the need for training institute crucial to achieve the desired capacity building gains for the industry.

Regulatory Compliance

Despite these challenges, Gwadabe advised BDCs to continually comply with all extant rules & regulations prescribed by the CBN, as the regulator closely supervises and monitors their operations.

“In compliance with the provisions of BOFIA as amended, every BDC renders returns to the CBN in prescribed format and within the deadline stipulated by the CBN.”

“The records of the BDCs are made readily available to the CBN examiners as and when requested including carrying out customer due diligence, corporate governance and tax returns.
“Where a BDC fails to provide the required records, appropriate sanctions shall be imposed. Every Director of BDC signs and executes the Code of Conduct and ensure strict adherence to the code,” he told the participants.

He said ABCON would continue to sensitise its member to comply with (CFT) guidelines which include registering on NFIU Portals and rendering returns. Compliance will be in the best interest the Operators, the Association and the Country’s Financial System.