Regulators and Banks to Ease Restrictions on Non-Profit Organizations in Nigeria
Regulators, financial institutions, and civil society groups have reached a consensus to standardize the process for onboarding non-profit organizations (NPOs) across Nigerian banks. This decision aims to alleviate restrictions that have long hindered the operations of charities and humanitarian groups, addressing concerns over overly broad anti-money laundering measures.
Multi-Stakeholder Meeting in Lagos
The agreement was finalized at the fourth general meeting of the Multi-Stakeholder Working Group on Charities (MSWGC), held in Lagos. Participants included representatives from the Economic and Financial Crimes Commission (EFCC), Special Control Unit Against Money Laundering (SCUML), Nigerian Financial Intelligence Unit (NFIU), Central Bank of Nigeria (CBN), Corporate Affairs Commission, commercial banks, and non-profit organizations.
Stakeholders highlighted that anti-money laundering regulations, intended to protect the financial system, are being applied too broadly. This has made it challenging for legitimate organizations to open bank accounts, receive donations, and implement their programs effectively.
Challenges Faced by Civil Society Groups
Victoria Ibezim-Ohaeri, Executive Director of Spaces for Change, emphasized the increasing difficulties faced by civil society groups. She noted that many organizations are unable to access funds despite operating within regulated channels. "Banks are making it difficult for NPOs to open bank accounts, to operate, to move money. Even when they receive donations, they cannot access those funds to implement their projects," she stated.
Ibezim-Ohaeri further explained that these organizations wish to remain within the financial system to ensure their transactions are monitored. However, some restrictions are pushing them out, creating barriers to their humanitarian efforts.
High-Risk Classification and Regulatory Issues
A key concern raised by participants is the continued classification of NPOs as high-risk customers by many banks. This leads to stringent due diligence requirements, regardless of the organization's size or activities. This practice contradicts the revised Recommendation 8 of the Financial Action Task Force, which discourages blanket risk categorizations for non-profits.
Pattison Boleigha, a consultant to the working group, attributed the problem largely to gaps in understanding updated global standards. He stressed that regulators and financial institutions need to align on expectations to ensure compliance without hindering legitimate operations.
Regulatory Uncertainty and Compliance Challenges
Stakeholders also pointed to regulatory uncertainty following amendments to the Money Laundering (Prevention and Prohibition) Act and the Terrorism Prevention Act in 2022. These amendments removed NPOs from the list of mandatory reporting entities. While regulators assert that the changes are clear, banks maintain they require formal directives from the apex bank before adjusting compliance procedures, citing the risk of heavy sanctions.
Despite these challenges, participants noted that engagement over the past four years has yielded progress. The ongoing dialogue aims to create a more balanced approach that safeguards the financial system while supporting the vital work of non-profit organizations.
