CBN wants Shell banks abolished in Nigeria

The Central Bank of Nigeria (CBN) has called for the abolition of shell banks in the country, saying they serve as institutions for money laundering.
Shell banks are institutions that carry out activities where they are not licensed.
The Governor of the CBN, Godwin Emefiele, made the request, in Abuja, on Tuesday, at a public hearing organised by the House committee on Banking and Currency on a Bill to amend the Banking and Other Financial Institutions Act (BOFIA) and other bills.
He said that the shell banks, apart from being used for money laundering, distort the banking system and might pose a problem to regulatory agencies.
Emefiele, represented by the Director, Legal Services Department, Johnson Akinwunmi, said “we wish to propose the introduction of new sub-sections 3(6) and (7) for the proscription of shell banks in response to the latest recommendations of the Financial Action Task Force (FATF) on money laundering.”
Similarly, the CBN is also seeking additional powers to revoke licences of banks and “power to inject funds into a falling bank by way of equity participation up to a level that guarantees control by CBN.”
The additional powers, according to the governor, is to enable the CBN acquire equity investment institutions and its ability to ensure a sound financial system.
The CBN also backed the House of Representatives in imposing stiffer penalties and terms of imprisonment of certain offences on erring commercial banks and their staff.
But, in his presentation, the Director of Legal/board secretary, Nigeria Deposit Insurance Corporation (NDIC), Belema Taribo, opposed the proposed fines saying they were too high.
“The NDIC, as a deposit insurer, supports the passage of the bill into law as the current fine does not meet contemporary realities.
“However, it is our submission that the proposed penalty of N200,000 is above 100 per cent increment from the current penalty. In view of the above, we propose a fine of N5,000.”
On the issuance of licence, NDIC proposed that the CBN should seek its consent before granting any application for banking licence.
“This is to enable the corporation have a prior evaluation of the applicants with regard to insurance of deposits.”
In his welcome address, Chairman of the House Committee on Banking and Currency, Jones Onyereri, said that increase in penalties to the bank operators would streamline the operations of such banks to conform to international best practices.
He said that the proposed amendments to the BOFIA Act 2017 was initiated by three lawmakers, which include Daniel Reyeneiju (Delta-PDP), Betty Apiafi (Rivers-PDP) and Jones Onyeriri (Imo-PDP).
Some of the penalties in the proposed amendments to the BOFIA Act 2017 include a fine of N20 million on banks that fail to comply with the conditions of the licence, a fine of N20 million on any director that fails to declare any property he/she owns that runs contrary to the Act.
“A fine of N10 million against a director or manager that fails to keep a book of account and a fine of N2 million on banks that fail to publish its annual report of its general meeting in two reputable national dailies among others”
While declaring the public hearing opened, the Yakubu Dogara, said that the House opted for stiffer penalties of millions of Naira as fine for commercial banks, which engaged in illegal deduction of spurious charges on customers accounts domiciled in such banks.
Dogara, who was represented by the House Deputy Minority Leader, Chukwuka Onyema, said that the process of law-making was dynamic, noting that bank customers have not stop complaining of spurious charges on their accounts.

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