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How KYC issues led to recent CBN ban on Opay, Kuda, 2 other fintechs

The fintechs include Opay, Moniepoint, Kuda and Palmpay.

How KYC issues led to recent CBN ban on 4 Fintechs (Image used for illustrative purposes) [OPay Nigeria]

According to several sources familiar with the incident, the Central Bank of Nigeria (CBN) yesterday, directed four fintechs which include Opay, Moniepoint, Kuda and Palmpay, to halt the onboarding of new customers over the Know-Your-Customer - KYC issues till further notice.

In simple terms, KYC means Know Your Customer and is a process that all financial institutions are required to carry out in order to identify and get more personal information like name, phone number, email address and home address of their customers.

Recall the apex bank in a circular dated December 1, 2023 to financial institutions directed that all funded accounts or wallets without BVN or NIN will be placed on “Post No Debit or Credit effective March 1, 2024.

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In order to meet the CBN deadline on enforcement of the KYC, some leading fintechs like Palmpay and Opay started sending messages to their customers to upgrade their KYC details.

In December 2023, OPay and PalmPay enforced the use of National Identity Numbers (NIN) and Bank Verification Numbers (BVN) before generating a wallet.

The Managing Director of PalmPay, Chika Nwosu, while supporting the CBN directive noted that the company was committed to ensuring compliance and fostering a secure financial ecosystem.

As a forward-thinking fintech platform, we believe that this measure will enhance the overall security of users’ wallets and the protection of users’ data while providing seamless financial services.” he added

A directive from Opay also notified their customers that effective March 1, 2024, it would block accounts not updated with NIN The company said it would block accounts without NIN.

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According to Opay’s director of Partnerships, Ikponmwosa Odiase, all its tier-1 account owners have been barred from transactions on Opay’s platform and mobile app until they provide their NIN.

The CBN’s instruction to halt all new customer onboarding has been linked to an ongoing audit of the Know-Your-Customer process in fintechs. This investigation into KYC processes in fintechs was raised over concerns about money laundering and terrorism financing.

In a follow up to the CBN’s threat to weed out illicit transactions in the banking system, the EFCC yesterday obtained a court order to block at least 1,146 bank accounts owned by various individuals and companies allegedly involved in illegal foreign exchange transactions.

According to The Punch, a source at one of the affected fintechs confirmed that the CBN’s directive to reassess their KYC processes has created a temporary pause in onboarding new customers.

The source also added that although there has been no official time set for any resolutions, the affected fintechs were awaiting further instructions from the CBN.

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