Expert Highlights Importance of KYC, Due Diligence in Combating Cybercrimes, Terrorism
A finance Information Communication Technology (ICT) expert and Guest Speaker at the Town and Gown Seminar of the Department of Banking and Finance, Covenant University, Mr. Akanni Adeniyi, has called on major players in the nation’s financial sector to intensify their Know Your Customer (KYC) strategy and appropriate due diligence operations if incidences of cybercrimes and money laundry must be reduced to the barest minimum.
Mr. Adeniyi made the call on Friday, March 29, 2019, at the seminar, where he delivered a lecture titled ‘KYC, Due Diligence and Money Laundering’. He noted that undertaking KYC was a major regulatory requirement before an account was opened for any customer and, when it was appropriately done, it helped the bank to reduce the incidence of fraud and other financial crimes.
He posited that non-adherence to KYC requirements posed a reputational risk to financial institutions, which could result in the bank and staff coming under regulatory sanctions. “Be reminded that the country also stands the risk of being blacklisted for non-compliance to KYC requirements by Financial Action Task Force and therefore isolated by the international community,” he added.
Mr. Adeniyi noted that incidences of money laundering and cybercrimes had contributed significantly in the rise of global terrorism, and until they are stemmed the fight against terror would remain a futile effort.
According to him, common indicators of money laundering that had contributed to fueling terror campaigns in one form or another included unsubstantiated wealth, large amount of cash, suspicious banking, no apparent jobs but with lots of money, business not producing income yet living extravagant lifestyle, owning and investing in cash businesses, use of nominees to purchase assets and irregular work and travel patterns.
He identified placement, layering and integration as three key stages through which criminal syndicates try to execute money laundering. He said that launderers, in the first phase, went about depositing the illicit cash into a financial institution or bought expensive assets such as cars, real estate, etc.
The second phase, he explained, entailed perpetrators of money laundering buying securities or other expensive assets or wire the funds across the world through various accounts held in different banks, possibly by several shell companies under their control. According to him, the final stage in such scheme was the integration of the illicit funds into the legitimate economy, so that they now appeared as clean and legitimate assets. The purpose, he said, was to allow the criminal to use the funds without raising suspicion that might trigger investigation and prosecution.
The Guest Speaker said that, “With a decline in revenue and support from disgruntled state elements to perpetrators of terror, terrorists now rely increasingly on private sources to finance their operations. Funds for terrorists may originate from legal or illegal activity, which complicates the task of identifying suspicious transactions, donations from legitimate companies and individuals make up a share of the funds that support terrorists and terrorist organizations, and above all fundraising that involves the collection of relatively small amounts of cash that are difficult to detect and trace”.
Mr. Adeniyi, citing the 2018 Nigeria Inter-Bank Settlement System (NIBSS), noted that the evolvement of the current cashless policy of the Federal Government, had seen banks record losses amounting to over 12.3 billion naira to fraudsters in four years, which meant that with the adoption of the cashless society, there was a transference of risk to various electronic channels of banking transactions that must be addressed.
In combating cybercrime from customers’ perspective, the Guest Speaker urged customers engaging in online transactions to firm up their passwords and security PIN on email, phone and debit/credit cards, avoid using ATMs at night, particularly where the ATM locations are quiet and dark, abstain from opening emails or links asking you to provide online banking details and not to respond to SMS or calls asking you to provide your card details.
In addition, he advised that customers should ensure they are acquainted with their bank’s actual website so as not to stray into a cloned website, noting that when in doubt, a call should be put through to the customer care unit of the bank to verify the actual web address or Uniform Resources Locator (URL).
The financial ICT expert counseled financial institutions in the country to intensify their customer due diligence measures, promote continuous monitoring of transactions, report suspicious transactions to relevant authorities, ensure training and retraining of staff in KYC and due diligence operations, maintain proper records keeping process, cooperate with the regulators and law enforcement agencies, and institute regular independent audit of operational processes to ensure adherence to laid down procedures.