Nigeria Faces Pressure to Tighten Crypto Regulations for Financial Crime Prevention

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Nigeria faces calls to go further in its efforts to clarify crypto regulation after a blockchain firm successfully finished training its fifth cohort of crypto compliance specialists last weekend.

Blockchain intelligence service provider A&D Forensics teaches a course on curbing financial crimes committed on-chain, particularly money laundering, hacking and sanctions evasion. It also teaches trainees about crypto compliance laws in various jurisdictions.

Speaking to the local press, the company’s co-founder Adedeji Owonibi said that the training will help ensure that banks are complying with recently passed guidelines on dealing with Virtual Asset Service Providers (VASPs).

Owonibi argues that a more comprehensive regulatory framework would help Nigeria reduce the rate of financial crimes in its territory. He added that the legal status of VASPs (like exchanges) is currently uncertain, as they don’t know whether they fit the definition of money transmission institutions, and are thus subject to the same regulations.

He also said that banks must thoroughly vet VASPs for any signs of criminal activity before opening accounts for them, since the Nigerian Central Bank’s guidelines implicates the banks as accomplices in cases of proven criminality.

Owonibi called on the state to “intensify her efforts” for comprehensive legislation, adding that “if there is no law, there is no offense.”

Speaking of his training work with A&D Forensics, Owonibi said: “We have had Law Enforcement agents, participate in our trainings, we have the cryptocurrency investigators course, where we had police officers and officers of the Economic and Financial Crimes Commission (EFCC) come and get trained and we are currently working with Nigerian Financial Intelligence Unit.”

Exciting update from Champion News on 3CS Training!

A&D Forensics just wrapped up training a new batch of Cryptocurrency Compliance Specialists.

Read insights from our facilitators and participants here!https://t.co/pdXHIo9nm0#CryptoComplianceTraining#NigerianTrainings

— A&D Forensics (@ForensicsD) February 10, 2024

Nigeria’s Incremental Path to Regulation

The Nigerian Central Bank (CBN) initially gave a cool reception to crypto back in 2021—the year of the bull run—by banning crypto payments within the territory. Later that year, it became one of the first central banks in the world to issue a central bank digital asset (CBDC).

However, the ban posed significant hurdles to the adoption of the eNaira CBDC; CBN overturned it earlier this year. At the same time, the central bank issued stringent requirements for Nigerian VASPs.

Under the requirements, VASPs can open bank accounts, but they can only use them for digital asset transactions. Account prohibitions include cash withdrawals and clearing third-party cheques.

Banks themselves are still prohibited from holding crypto. They have to file thorough periodic reports to the CBN on their VASP account holders. They also must also carry out risk assessments on their crypto clients to determine transaction limits for each account.

The CBN also requires financial institutions to conduct due diligence and continuous verification of addresses to help combat financial crime.

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