Regulations Impacting Digital KYC in Nigeria Unveiled in Smile ID’s Report

Africa’s top identity verification solutions provider, Smile ID (previously known as Smile Identity), published its H1 2023 State of KYC report.

The report offers valuable insights into the effectiveness of biometric verification, the increasing acceptance of digital identity, and the influence of fraud rates throughout the continent. Additionally, it emphasizes recent regulatory modifications impacting digital KYC practices in Africa.

During the initial half of 2023, Nigeria witnessed significant changes in its digital KYC landscape, demanding businesses to adapt for regulatory compliance and customer contentment.

Among these changes is a new policy by the Federal Executive Council, enabling commercial banks to issue debit cards functioning as NIN Identity cards. This policy aims to enhance access to physical ID documents for NIN enrollees and is likely to impact how businesses verify users in the future.

The introduction of the National Data Protection Bill to replace the Nigerian Data Protection Regulation (NDPR) is another crucial regulation to watch for businesses with data storage and processing requirements.

Despite having one of Africa’s most advanced Know Your Customer (KYC) regimes, Nigeria still has some way to go in its fight against money laundering and terrorism financing (ML/TF).

This much was evidenced by the Financial Action FATF’s recent mutual evaluation of Nigeria, which revealed that the country had up to 15 strategic deficiencies in its Anti-money laundering and counter-terrorism financing (AML/CTF) regime.

The mutual evaluation, which also led to Nigeria’s greylisting, is expected to yield regulatory reforms affecting digital KYC, especially with respect to customer due diligence reporting.

The State of KYC in Africa report, which cuts across several African countries, also discusses the trends in ID-related fraud behaviours within the H1 2023 period. Across Africa, onboarding fraud attempts dropped from a record high of 28 per cent in 2022 to 23 per cent in the first half of 2023.

The decline in fraud attempts has been largely attributed to a decline in marketing promotions which have been observed to trigger most fraud attempts.

Other pertinent issues covered within the African KYC compliance ecosystem include : the increase in gender inclusion across Africa, KYC compliance tips across 13 countries, Fraud trends across various industries, e.g. Payment, BNPL, Remittance, etc, How biometric verification reduces fraudulent users by up to 50 per cent , with facial recognition emerging as the preferred and most accessible option and how several African countries are making notable strides in adopting digital identification.