Stakeholders who are critical to knowing your customers (KYC) compliance have been charged to adopt a collaborative approach towards deepening compliance in the country.
Speaking during an interactive session with journalists in Lagos, Co-founder and Chief Executive Officer, VerifyMe Nigeria, a digital identity and consumer analytics company, Esigie Aguele, discussed the slow compliance with KYC protocols in Nigeria.
He called on industry regulators, operators and businesses to work together to adopt global best practices to mitigate fraud in the financial system.
Aguele said: “According to anti-money laundering (AML) intelligence, money laundering is a big issue globally and about $1.6 trillion is lost to the menace yearly. The Human and Environmental Development Agenda (HEDA) also reports that Nigeria loses between $15-18 million each year, accounting for 30 per cent of Africa’s loss to illicit financial flow (IFF).
“While government and its regulatory arms are making concerted efforts to confront the challenge, the reality is that technology is ever evolving and criminals are constantly on the lookout for ways to circumvent existing structures. Particularly in Africa, regulation and policymaking must proactively evolve ahead of the new techniques and technologies deployed by the criminals.”
Aguele stated that while more organisations are adopting the KYC protocols, penetration is still about five per cent or less.
“This may be because the internal systems of many companies are not yet digitized or because the companies are mainly focused on a high-risk subset given the high cost of conducting full KYC in the country. The situation leaves many companies vulnerable to fraud and they end up losing a lot of money before they realize the importance of plugging into a KYC infrastructure such as VerifyMe,” he added.
He said KYC service providers had a responsibility to be compliant and protect their data.
He said: “I do not believe that the work of driving compliance should be left to the regulators alone. Operators must task themselves to understand the regulations and policies put in place to protect the system so that they can secure their internal processes and also advise their users rightly. This is why some stakeholders, including VerifyMe, came together to establish the Association of Data Verification Service Providers (ADVSP) to protect Nigeria and the interests of Nigerian operators.
“For example, I believe that there is a bit of complexity with the full application of AML. There is AML regulation in terms of what you have to do to onboard a customer so that they can have access to services, particularly financial services. This includes understanding that businesses have to use a system of processes to collect data with integrity such as conducting an address verification and having a company policy to use spoof-proof technology to do so. So, these AML processes begin at onboarding compliance and are probably most important at that point.
“For VerifyMe’s Tier 3 address verification solution, we have harnessed technology to ensure end-to-end monitoring of our agents. We monitor their movements, we make sure that they are within proximity of the location they are verifying in addition to other protocols. We are using AML compliance methods to collect the data, unlike some less compliant organisations who simply state that they have verified an address, with no empirical data showing the end-to-end process. That is the difference that a lot of people do not understand.”
