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Forex: CBN’s new rule will curb money laundering – Experts

By Sunday Michael Ogwu, Philip Shimnom Clement (Abuja) & Abdullateef Aliyu (Lagos)   Financial experts have said the proposed operational guideline for Bureau de Change…

By Sunday Michael Ogwu, Philip Shimnom Clement (Abuja) & Abdullateef Aliyu (Lagos)


Financial experts have said the proposed operational guideline for Bureau de Change (BDCs) operators by the Central Bank of Nigeria (CBN) will bring sanity to the parallel market operations in the country and curb money laundering.

Their reactions followed the release of the draft guidelines, which will require, among other things, that sellers of $10,000 and above to BDCs will have to declare the source of foreign exchange.

Also, a beneficiary of BTA or PTA shall receive up to 25 per cent of the foreign currency in cash. In other words, at least 75 per cent of any sale of foreign currency by a BDC shall be transferred to the customer electronically (to the customer’s Nigerian domiciliary account or prepaid card).

Commenting on the latest intervention, the chief executive officer, Centre for the Promotion of Private Enterprises (CPPE), Dr Muda Yusuf, said the steps taken to sanitise the BDCs was a welcome development.

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“BDCs are very important in the entire forex chain. They are the ones that service the retail end of the market, so they have a critical role to play. But evidently, there is also a lot of malpractices going on in that space, which is also fuelling the speculative activities in the foreign exchange market. It is to bring some orderliness into that space and reduce the level of distortion and speculative activities in the BDCs.

“With what they have done, we are likely to see a smaller number of BDCs and it would be easier to monitor. I also saw that banks and other financial institutions are excluded from ownership of BDCs and this would also help to improve, provided they don’t set up another faceless company they would be using without declaring their interest in it.

“So, the whole idea is to bring sanity to the space because the forex environment is very challenging, where we have so many variables; some are not even very visible.”

He also welcomed the reduction in the amount of cash for basic travel and personal allowances, saying that with a dollar account, nobody needs cash to travel.

Implementation could be a problem – Financial expert

A financial expert and senior partner at SPM Professionals, Paul Alaje, noted that the directive by the CBN was a welcome development. He, however, noted that the implementation by banks could be an issue

Speaking with Daily Trust on Sunday on the issue, he said, “The circular by the CBN is a welcome development and targeted at boosting transparency in the forex market and curbing the incessant quest for foreign currency by Nigerians

“However, my only problem is how the CBN will supervise the implementation by banks because it is a big problem. There must be a mechanism put in place to ensure that the $10,000 threshold placed by the regulator is fully followed by the banks.”

On the recent raid by the Economic and Financial Crimes Commission (EFCC) on banks, he said it was part of the security agencies’ mandate to ensure that speculation was discouraged by players in the black market, adding that the move, however, may not stop people from further speculating.

Speaking further, he said that beyond these measures, “There is a need for increase in the supply side of the forex market and reduction in the Federal Account Allocation Committee (FAAC) allocations as it has a strong correlation with rising prices anytime the committee meets.”

Directive will curb money laundering – Uwaleke

On his part, a renowned economist and president of the Association of Capital Markets Academics of Nigeria (ACMAN), Professor Uche Uwaleke, noted that the regulations were designed to sanitise the BDC segment of the forex market, and should, therefore be supported by all stakeholders.

“The idea of using electronic channels and the banks for transactions exceeding $500US will help to curb money laundering and the payment of bribes using forex, thereby reducing corruption.

“The restrictions placed on cash payouts by BDCs in relation to PTAs and BTAs to a maximum limit of 25 per cent will help reduce frivolous demand for forex.

“The ban on street trading of forex and emphasis on documentation of its source equivalent to $10,000US is expected to curb round-tripping from the banks to BDCs,” Prof Uwaleke said.

He noted that the regulations would help to reduce the current volatility in the forex market and should have been in place long before now.

Draft regulations will eliminate unlicensed operators – ABCON

The president of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe, welcomed the draft regulations, saying the association would send its input to the CBN.

He also said the new regulations would eliminate unlicensed operators, even as he disclosed that BDC operators would resume operation on Monday after a week of sustained raids by the security agencies.

He said, “First, it is a draft and we have contacted them (CBN). They said our input was expected so that we could also advise. It is not cast in stone; they are expecting stakeholders’ inputs and advice. The concern they have is that they want to clean the subsector and make it strong and compliant; and having us in bits and pieces is a major concern.

“In the guideline, many opportunities have been provided for the successful ones. You can access different windows – CBN, NAFEM, domiciliary account windows. You know change is a moving wind. It has happened with many financial institutions, so we cannot be an exception. It is for us to put our house in order and come up with suggestions that would be a win-win for both the stakeholders and regulators.

“The good news is that we have just finished discussions to ensure that the BDCs are back into business. By next Tuesday, BDCs would return with CBN monitoring. Every BDC would now start doing something; and the reform is something that would take at least six months or one year. It is not something that will happen anytime from now.”

On the licensed operators, he said, “If we are now properly regulated you have good sources of money – what would take you to Karara market to buy. This is where you can have a competitive pricing convenience. At least the unlicensed will not be effective because the licensed ones would have liquidity.”