Stock investors for terrorism link screening - THE NATION
Investors are to undergo screening for any possible link to banditry and other terrorist activities, it was learnt yesterday.
The move by the Nigerian capital market is to forestall the use of the market to launder illicit funds from terrorism.
The screening applies to all foreign and local investors.
Foreign portfolio investors (FPIs) hold significant positions at the Nigerian stock market, accounting for between half and one-third of total transactions from time to time.
Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), yesterday directed all capital market operators to screen existing and potential clients for any possible link to proscribed groups under the Federal Government’s official gazette on proscription of banditry and other global sanction lists.
In a circular to all capital market operators, the apex market regulator noted that in line with the requirements of the Terrorism Prevention Act (No. 10,2011) and Terrorism (Prevention) Proscription Order Motion, 2021, the Federal Government of Nigeria had declared the activities of “Yan Bindiga Group”, Yan Ta’adda Group and other similar groups in any part of Nigeria as terrorism and illegal, proscribing their existence and restraining any person or group of persons from participating in any manner whatsoever in any form in the activities of any of the groups.
“All capital market operators (CMOs) are required by this circular to screen and verify every client against the above proscribed groups and any other proscribed terrorist groups, United Nation Security Council Resolutions (UNSCRs) list, Office of Foreign Assets Control (OFAC) list, etc. prior to the on-boarding of a new client and when carrying out one-off transactions.
“All existing clients of CMOs shall be screened prior to executing any transaction from the date of this circular,” SEC stated.
The Commission directed that in line with the findings of screening, CMOs shall file suspicious transaction reports (STRs) immediately to the Nigerian Financial Intelligence Unit (NFIU).
The government had on January 5 officially declared bandit groups operating in any parts of the country as terrorists with the release of the Federal Government’s Gazette proscribing their existence and restraining any person or group of persons from participating in activities of any of the groups.
The Gazette was signed by the Attorney-General of the Federation and Minister of Justice, Abubakar Malami.
The latest directive further updated the existing know-your-customer (KYC) format at the capital market. The capital market had in 2020 began enforcement of a new investors’ identification regime aimed at enhancing transparency in the capital market.
Under the enhanced KYC format, no transactions will be effected on any existing investor’s account without updated and validated information as required under the approved KYC format and any stockbroking firm that trades on any such incomplete account shall be sanctioned.
All stockbrokers are required to capture full information in respect of new clients and update information of their existing clients.
The required information include bank account details, bank verification number (BVN), telephone number and email address.
“Such information should be validated against the Nigerian Interbank Settlement Systems Limited (NIBSS) BVN validation portal. Brokers should update their Order Management System to enable the system flag off accounts with incomplete KYC information,” SEC had stated.
According to the Commission, the clearing house for the stock market, the Central Securities Clearing System (CSCS) should forward an editable format of lists of clients with incomplete records to stockbrokers for them to update and return such to CSCS.
The regulator mandated the CSCS to ensure transmission of full information to the registrars following transactions while registrars must ensure that new or updated shareholders information transmitted to them are properly captured in the relevant company’s register of members.
SEC had noted that the new enforcement regime was in furtherance of its investor protection and market development mandate with a view to ensuring ensure accountability, transparency and stability in the capital market.