A new regulatory framework established by the Central Bank of Nigeria (CBN) will allow it to seize billions of naira from dormant accounts, store them, and use the revenues to buy treasury bills and other government securities.
The CBN recently released a guideline that details the management procedures for funds trapped in dormant accounts, potential uses for the funds, pending customer refunds, compliance expectations, monitoring and evaluation, dispute resolution, and sanction for violations. The guideline is dated August 6 but was just released.
The Unclaimed Balances Trust Fund (UBTF), with a substantial management committee for the appropriate administration of the money, will be established by the apex bank, according to the circular signed by the Director of the Financial Policy and Regulation Department, Chibuzo Efobi.
The text specifies that eligible accounts are those with balances that have been in dormancy at financial institutions for at least ten years.
Savings, current, term, and domiciliary accounts dormant accounts/unclaimed amounts and other financial assets are impacted. Financial assets kept on cards and wallets, whether in the form of salaries, wages, bonuses, or commissions, would likewise be transferred to the UBTF Account Pool for CBN custody.
The regulator added that additional deposits or financial assets that the CBN may designate will also be included in the pool, including “funds received from a correspondent bank without sufficient details as to the rightful beneficiary and/or a recall of funds made to the remitting bank to which the Nigerian bank’s account had not been debited.”
It was disclosed that the money might be used to purchase Nigerian Treasury Bills (NTBs) and other securities, subject to the Unclaimed Balances Management Committee’s approval.
To begin the process of gaining access to the funds, a beneficial owner is required to visit any bank and complete an asset reclaim form. Financial institutions have up to 10 working days to examine and verify the claims after which the request is forwarded to the Central Bank.
The laws provide that after receiving payment, the apex bank must return the money to the financial institution that made the original request for payment to be forwarded to the claimant, who has an endless right to proceed, within another 10 working days.
It stated that any disputes would be resolved swiftly and within 15 business days.
“The CBN shall monitor and enforce compliance of financial institutions with this guideline through off-site surveillance as well as on-site routine and target examinations,” the regulation stated.
The document’s sanctions section said that any violation of a guideline will result in a fine of at least N2 million. Additionally, the offending party would pay a “further penalty of N200,000 daily until the directive is complied with or as may be determined by CBN” if CBN’s directive was not followed in relation to any infraction.
Similar to this, the Securities and Exchange Commission (SEC) has developed a model for holding and managing unclaimed dividends on behalf of investors. Investors accused the government of trying to gain backdoor access to seize private assets, which caused a lot of controversy surrounding the strategy.
Banks would lose custody of billions of naira that are now held in various types of dormant accounts as a result of the CBN’s new directive.
