Only 15% of Nigerians use social media but the CBN demands that banks verify handles as a KYC requirement

The Central Bank of Nigeria (CBN) has recently announced a new regulation that mandates banks to collect and verify customers’ social media handles as part of their Know Your Customer (KYC) requirements.

This development was revealed in the CBN’s report titled “Customer Due Diligence Regulations 2023.” The objective behind this decision is to take a decisive stance against financial crimes and enhance the accuracy and thoroughness of customer identifications.

Per the report, all financial institutions will be required to identify their customers, regardless of whether they are permanent or occasional clients, and regardless of whether they are natural persons, legal persons, or legal arrangements. This information, including customers’ social media handles, must be obtained by the financial institutions to comply with the new regulations. It said,

“For Individuals — legal name and any other names used (such as maiden name), permanent address (full physical address), residential address (where the customer can be located), telephone number, e-mail address, and social media handle; date and place of birth, Bank Verification number; Tax Identification number; nationality; occupation; public position held; and name of employer”

Analysing the CBN’s decision

The latest initiative by the Central Bank of Nigeria (CBN) is designed to enhance adherence to regulations about anti-money laundering (AML) and counter-terrorism financing (CFT), while also aligning with global standards.

The CBN aims to reinforce the compliance of financial institutions under its oversight with the relevant provisions of the Money Laundering (Prevention and Prohibition) Act (MLPPA) of 2022, the Terrorism (Prevention and Prohibition) Act (TPPA) of 2022, the Central Bank of Nigeria (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions) Regulations of 2022 (CBN AML, CFT, and CPF Regulations), and internationally recognized best practices.

The primary objective of this regulatory measure is to introduce additional customer due diligence measures for financial institutions, thereby strengthening their compliance efforts in accordance with the aforementioned laws, regulations, and global standards.

By requesting social media handles as part of the KYC process, financial institutions would be able to leverage the information available on social media platforms to enhance their due diligence efforts.

Social media can provide insights into customers’ financial behaviours, associations, and lifestyle choices, which may assist financial institutions in verifying the authenticity of customer identities and detecting suspicious activities.

Read Also: Why YouTube is the social media app with most users in Nigeria

But is this feasible with low social media adoption?

There is widespread speculation regarding whether this verification process will be mandatory for banks.

Despite significant growth in social media usage in Nigeria over the past decade, a report indicates that out of the country’s population of over 220 million citizens, only approximately 34 million (about 15%) individuals are connected to social media platforms.

An alternative view suggests that social media handles could be considered an extension of one’s address. While physical addresses encompass residences and offices, social media handles serve as online addresses. But the CBN report did not specify this.

However, challenges can arise when verifying accounts, particularly in cases where individuals use fake names that do not align with their official identities also, for people residing in rural areas who may not be familiar with social media platforms, especially as there is no law that mandates every individual to have a social presence.

The potential compulsory requirement of social media verification could have adverse effects on the government’s initiatives for financial inclusion, potentially widening the existing gap. Moreover, it raises concerns about the impact on the fundamental principle of “freedom of speech” that social media has long been associated with.

Some speculate that this verification tactic may serve as a means for the government to regulate and subtly impose sanctions on social media content distribution. Incorporating social media handles into the Know Your Customer (KYC) process should prioritize compliance with relevant privacy regulations and guidelines to safeguard customers’ personal information.

It is crucial to have policies in place to protect the personal and social lives of citizens, but there is no current evidence to suggest that such protective measures exist or are being actively implemented.