Kuda Bank, Moniepoint, OPay, and Palmpay have temporarily suspended account openings for new customers. This decision comes in response to a directive from the Central Bank of Nigeria (CBN) following the blocking of 1,146 bank accounts involved in unauthorized forex dealings by the Economic and Financial Crimes Commission (EFCC) on Wednesday.
A notice on the website of a prominent fintech startup acknowledges the pause in new signups: “We’ve temporarily paused new signups on our platform. This means that you’ll be unable to open a new account at the moment. We apologize for any inconvenience this may cause.”
Despite this development, customer deposits and banking activities remain unaffected. However, the fintech industry has faced heightened scrutiny in recent months, particularly regarding their account opening processes. In October, Fidelity Bank blocked transfers to OPay, Palmpay, Kuda, and Moniepoint due to Know Your Customer (KYC) processes leading to increased fraud cases. Subsequently, the Central Bank introduced new KYC rules for all financial institutions, seemingly targeting fintech startups.
The recent directive to pause account openings is linked to an ongoing audit of the KYC process for these fintechs. An executive from an affected fintech described the pause as “temporary.” However, concerns remain about whether the Central Bank’s new KYC rules will effectively curb fraud.
On April 26, the Central Bank and the National Security Agency (NSA) engaged in talks with representatives from the affected fintechs. According to insiders, the CBN believes that some crypto traders were leveraging fintech platforms to disrupt the foreign exchange (FX) market. Additionally, the banks’ established relationships with regulators contrast with fintechs’ efforts to build similar rapport and improve their perception with the CBN.
An executive at one of the affected fintechs revealed that the directive is related to the EFCC’s ongoing investigation into unauthorized FX dealings involving bank accounts. Notably, an analysis of the 1,146 accounts blocked by the EFCC indicates that only 10% are operated by fintechs, with the majority belonging to commercial banks.
While an NSA spokesperson denies any link between the directive and their agency, the Central Bank has yet to provide an immediate response.
In March, the Central Bank raised concerns about the naira’s manipulation by speculators. Governor Olayemi Cardoso claimed that $26 billion flowed through Binance within a year from unidentified sources and users. Consequently, the Central Bank cracked down on the global cryptocurrency exchange. Subsequently, two Binance executives faced charges of tax evasion and money laundering, and Binance imposed restrictions on peer-to-peer trading.
Lastly, in December, the CBN mandated that all financial institutions collect ID cards before creating financial accounts. This move contradicted a 2013 central bank rule that allowed Nigerians to open accounts without identity cards. Furthermore, the Nigeria Inter-Bank Settlement System (NIBSS) instructed banks and mobile money operators to delist unlicensed fintechs from directly accepting consumer deposits.
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