The Central Bank of Nigeria (CBN) has directed all financial institutions to implement real-time transaction alert systems as part of enhanced anti-money laundering (AML) compliance.

The directive was conveyed in a letter dated May 20, 2025, with reference number BSD/DIR/CON/AML/018/033, and titled “Exposure of Draft Baseline Standards for Automated Anti-Money Laundering (AML) Solutions – Request for Comments.”

The letter, signed by Olubukola Akinwunmi, director of banking supervision, was addressed to all financial institutions and outlines the regulatory expectations for modern AML compliance.

The apex bank emphasised that the initiative is part of its broader commitment to safeguarding the integrity and stability of Nigeria’s financial system, especially in the face of rapid digital transformation and the rise of innovative financial products. The draft standards, which are now open to feedback from stakeholders, are designed to promote operational efficiency and ensure compliance with Anti-Money Laundering, Combating the Financing of Terrorism, and Counter-Proliferation Financing (AML/CFT/CPF) regulations. “This standard is informed by a comprehensive assessment of existing solutions within the industry and aligns with global best practices, including recommendations by the Financial Action Task Force (FATF),” the document stated.

According to the CBN, the draft baseline standards are developed with key objectives in mind. These include strengthening the AML capabilities of financial institutions through advanced, technology-driven solutions; encouraging the adoption of emerging technologies for real-time detection and reporting of suspicious transactions; reducing the inefficiencies associated with manual compliance processes; and ensuring alignment with evolving regulatory expectations both locally and internationally.

The draft document is available for download on the official website of the Central Bank of Nigeria, and all stakeholders have been encouraged to review and provide feedback. “We look forward to receiving your valuable feedback,” the letter noted, highlighting the collaborative approach to shaping the final version of the standards.

Among the critical requirements outlined in the draft are real-time alerts for transactions considered high risk. These include cross-border transactions, excessive cash deposits, cryptocurrency-related dealings, and other activities flagged under existing AML regulations.

The document specifies that the time taken to review and act on such alerts must not exceed a predetermined timeline, reinforcing the need for swift response and decision-making.

The CBN mandates that financial institutions implement transaction monitoring systems capable of supporting multiple risk scenarios. These systems should use configurable filtration rules and customer segmentation techniques to effectively detect suspicious behavior. Institutions are also required to conduct regular stress testing and system validation exercises to minimise false positives. “Each institution must define a predetermined threshold for false positives and ensure that the rate remains below this threshold,” the document stated, underlining the importance of maintaining a balance between alert sensitivity and accuracy.

The draft also mandates that AML solutions incorporate artificial intelligence and machine learning (AI/ML) capabilities. These technologies should support anomaly detection, behavioral pattern recognition, automated risk scoring, and adaptive learning based on insights from previously flagged alerts and their resolutions.

The aim is to ensure that the systems not only detect suspicious activity but also evolve over time to become more efficient and accurate.

Real-time access to Customer Due Diligence (CDD), Know Your Customer (KYC), and Know Your Customer’s Business (KYB) data is another essential feature prescribed in the draft standards. Financial institutions are expected to automate customer onboarding processes with real-time identification and verification in line with existing AML/CFT/CPF regulations. This includes integration with Bank Verification Number (BVN) and National Identification Number (NIN) databases to ensure instant verification.

Moreover, the draft outlines the need for comprehensive KYC and KYB functionalities. These must include automated customer risk profiling, transaction behaviour analysis, historical data tracking, and the inclusion of various risk factors derived from money laundering, terrorist financing, and proliferation financing risk assessments and typologies. The solutions must also enable continuous classification of customers into risk categories to facilitate more targeted and effective risk management.

The Central Bank’s move to expose the draft for industry-wide input reflects its intention to build a robust, technologically advanced AML compliance culture across Nigerian financial institutions. It signals a significant step towards enhancing transparency, operational efficiency, and international alignment in Nigeria’s financial regulatory environment. (BusinessDay)