N10m application fee, exclusion of banks… highlights of CBN guidelines for IMTOs

The Central Bank of Nigeria (CBN) has reviewed the policy guiding the activities of international money transfer operators (IMTOs).

The guideline was first established in 2014.

CBN, in a circular to all authorised dealers, IMTOs, and the public on January 31, 2024, removed the allowable limit of exchange rate quoted by the money transfer operators.

The development comes amid the move to restructure the foreign exchange (FX) market, as well as strengthen the naira.

In the circular, the financial regulator said IMTOs are to quote exchange rates for naira payout to beneficiaries based on the prevailing market rates at the Nigerian FX market.

IMTOs are companies that accept cash to transmit to persons resident in Nigeria or another country. They also carry out cross-border transfer services for personal purposes such as money transfer services towards family maintenance and money transfer services for foreign tourists visiting Nigeria.

To regulate the activities of IMTOs, CBN, in another circular on January 31, 2024, provided guidelines to ensure responsible conduct and compliance with the regulatory framework.

Here are the major highlights of the guidelines.

N10M APPLICATION FEE, $1M MINIMUM SHARE CAPITAL REQUIREMENTS

In the new guideline, CBN said IMTOs seeking to apply for approval to carry on the business of international money transfer, should submit necessary documents to its director, trade and exchange department in Abuja.

The approval, according to the regulator is in two phases: approval-in-principal and final-approval.

“No person or institution shall operate international money transfer services unless such a person/institution has been duly approved by the CBN,” the document said.

The CBN said any institution or person that is not duly registered “is illegal”.

Other requirements include a non-refundable application fee of N10,000,000 or such other amount that the bank may specify from time to time — payable to the CBN through electronic transfer or bank draft.

“Evidence of tax clearance and incorporation documents in Nigeria (for indigenous IMTOS) to include Memorandum and Articles of Association (Certified True Copy), of which the primary object clause shall indicate provision of money transfer services,” CBN said.

Another requirement, according to the CBN, is a minimum share capital of $1 million for foreign IMTOs and the equivalent for indigenous money transfer operators.

The financial regulator said an IMTO approval is subject to annual renewal at a fee of N10,000,000 or any amount that the bank may specify from time to time; payable to the CBN through electronic transfer or bank draft on or before January 31 of the year.

“Renewal of IMTO approval shall be done within the first quarter of every year,” the central bank said.

“Where an IMTO fails to avail its agent bank a copy of CBN renewal of its IMTO approval for that year within the first quarter of the year, the bank should cease any further transaction with the IMTO.”

BANKS, FINTECHS BANNED FROM TRANSACTION

CBN also prohibited banks and financial technology companies (fintechs) from international money transfer services.

“All banks are prohibited from operating International Money Transfer services but can act as agents,” the apex bank said.

“Also, Financial Technology Companies are not allowed to obtain approval for IMTO.

“The provisions of BOFIA 2020 on the prohibition of employment of certain persons in banks shall also apply to IMTOS.” 

PERMISSIBLE AND NON-PERMISSIBLE ACTIVITIES

Providing further guidelines on operations, CBN said the transactions of IMTOs are limited to the acceptance of monies for the purpose of transmitting them to persons residing in Nigeria.

“The money transfer services shall target individual customers and the transactions shall be on “person to person”, “business to person” and “business to business” transfer basis which may be reviewed by the CBN from time to time,” the guideline reads.

However, IMTOs are not permitted to buy forex from the domestic FX market for settlement.

The financial regulator also said daily, weekly, and monthly returns must be submitted while suspicious transactions will be reported within 24 hours.

POSSIBLE SANCTIONS

CBN said unapproved money transfers would be tagged illegal.

According to the apex bank, any or all of the following sanctions against an IMTO, its board of directors, officers or agents can be taken.

The sanctions include withholding corporate approvals, financial penalties, suspension from money transfer operations, and revocation of the IMTO approval to operate in Nigeria.

The regulator said any IMTO without its approval shall be deemed to be operating illegally and such an individual or institution shall be appropriately sanctioned “and/or prosecuted in accordance with the provision of the Banks and Other Financial Institutions Act (BOFIA) 2020″.