The Central Bank of Nigeria (CBN) has announced that Commercial, Merchant, and Non-Interest Banks will face a minimum penalty of N3 million for failing to verify the status of customers before opening current accounts.

The directive forms part of the apex bank’s efforts to strengthen compliance and reduce the risk of financial losses arising from dud cheques.

Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs) are also subject to penalties based on their category. PMBs, whether state or national, are to pay a minimum of N1.5 million per infraction, while National MFBs face N500,000. State MFBs will pay N250,000, Tier 1 Unit MFBs N100,000, and Tier 2 Unit MFBs will also be liable for penalties in accordance with the CBN’s categorisation.

All affected financial institutions are required to perform thorough status checks on the dud cheque database on the Centralised Risk Management System (CRMS) or any other platform as designated by the CBN. In addition, banks must check at least two previous current accounts before opening a new current account for any customer.

The directive was issued in a circular and exposure draft titled ‘Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria’, signed by Rita I. Sike, director of the Financial Policy and Regulation Department at the CBN. The circular stated, “In exercise of the powers vested on the Central Bank of Nigeria (CBN) under the Central Bank of Nigeria Act, 2007 (CBN Act), the Banks and Other Financial Institutions Act (BOFIA), 2020, and other applicable laws, the CBN hereby issues for stakeholder comments and feedback the attached draft Guidelines on Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria.”

The draft Guidelines provide clarity and further guidance to banks and financial institutions on handling dud cheques, including regulatory requirements for reporting and barring issuers, the processes for updating and unbarring customers, and the penalties for noncompliance.

In addition to the penalties for failing to check customer status, the CBN emphasised that financial institutions must ensure cheques are drawn only on accounts with sufficient funds. Cheques issued on inadequately funded accounts will attract penalties such as returned cheque charges, in line with the provisions of the ‘Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions’.

For serial dud cheque issuers, the Guidelines impose stricter sanctions. Individuals barred for five years will be denied access to the clearing system, prohibited from obtaining credit from the banking industry, and restricted from opening new current accounts.

The CBN’s directive underscores its commitment to curbing financial risk in the banking sector, ensuring accountability, and protecting both financial institutions and customers from the effects of cheque dishonour. (BusinessDay)