INTERNATIONAL MONEY TRANSFER OPERATOR (IMTO)LICENSING IN NIGERIA UNDER THE NEW CBN REGULATIONS – ALL YOU NEED TO KNOW
On the 31st of January,2024, the Central Bank of Nigeria (CBN) released a new set of regulations governing the licensing and operation of International Money Transfer Operators (IMTOs) in Nigeria, repealing the former 2014 guidelines in the process and taking effect immediately.
If you’re seeking to acquire an IMTO license in Nigeria, this article will provide you with helpful information on :-
-The definition of IMTOs under CBN regulations.
-Personal & entities deemed ineligible by the CBN for IMTO licensing or ownership.
-Permissible & non-permissible activities for IMTOs under CBN regulations.
-Licensing stages for IMTO applicants & some of their documentation requirements.
-Financial requirements for IMTO licensing in Nigeria.
-Anti-Money Laundering (AML/ CFT/CPF) requirements for IMTOs in Nigeria.
-Becoming an IMTO agent under the CBN regulations.
-Overseas technical partnerships involving IMTOs.
-Money transfer regulations for IMTOs in Nigeria.
What is an IMTO according to the CBN?
-An IMTO is a company approved by the CBN to facilitate the transfer of funds from individuals or entities residing abroad to recipients in Nigeria, & the payment of a corresponding sum to a beneficiary through a clearing network to which the IMTO belongs.
Which persons or entities are deemed ineligible to engage in IMTO services or be employed by IMTOs in Nigeria?
The following persons/entities are prohibited from directly rendering IMTO services in Nigeria:-
-Banks(banks are however permitted to act as IMTO agents).
-Financial technology (Fintech) companies.
-Certain persons mentioned as excluded from employment in any bank or financial institution in the Banks and Other Financial Institutions Act (BOFIA).
What are the permissible & non-permissible activities for IMTOs in Nigeria?
Permissible Activities
-The acceptance of monies for the purpose of transmitting them to persons resident in Nigeria.
-Cross-border personal money transfer services, such as money transfer services towards family maintenance, money transfer services in favor of foreign tourists visiting Nigeria.
-Fund transfer services targeted at individual customers and the transactions supported by IMTOs shall be either on a person-to-person, business-to-person, & business-to-business basis, subject to review by the CBN.
Non-Permissible Activities
-Engaging in non-permitted business objects.
-Outboard transactions.
-Buying foreign currencies from the domestic foreign exchange market for settlement.
How do I become an IMTO agent as a start-up?
-An approved IMTO may conduct its business through an agent under the relevant CBN guidelines through an executed contract specifying the terms and conditions of the agent’s engagement.
What does the CBN say about overseas partnerships for IMTOs in Nigeria?
-Overseas partnerships involving IMTOs require prior CBN approval for indigenous IMTOs in Nigeria.
-For the technical partner, it must be a registered entity in its home country with an approval to carry on international money transfer services.
-The partner should be well established in money transfer business operations with a verifiable track record of operations.
-There should be a Memorandum of Understanding (MOU) stating the extent & burden of liability in the event of disputes and/or process failures.
-The CBN shall conduct appropriate due diligence checks on the promoters, directors and key officers of the proposed IMTO.
What does the CBN say on the issue of transfers involving IMTOs in Nigeria?
For inbound transfers:-
-All inbound money transfers to Nigeria shall be paid to beneficiaries in Nigeria through a bank account or cash.
-IMTO proceeds amounting to more than the equivalent of $200.00 shall be paid through an account.
-Cash payments shall be made upon the provision of a satisfactory means of identification.
-Where the beneficiary does not have an account with the IMTO agent bank, the agent bank shall credit the beneficiary’s account in another bank.
-The exchange rate shall be at the prevailing rate in the Nigerian FX market.
-The mode of settlement shall be agreed by both parties.
-Where a currency conversion service is offered before initiating a payment transaction or at the point of payment, the IMTO must disclose all charges,& the exchange rate to be used for converting the payment transaction.
Split Transactions
-These are not allowed for IMTOs by virtue of the CBN Anti-Money Laundering Combating The Financing Of Terrorism/Combating The Proliferation Of Financing For Weapons Of Mass Destruction (AML/CFT/CPF) Regulations.
Inward International Money Transfer Services
-Payments to customers are to be made ONLY IN NAIRA using the prevailing exchange rate on the date the transfer is received.
What are the stages of IMTO licensing in Nigeria and some of their documentation requirements?
-IMTO licensing in Nigeria is in 2 stages namely :-
a). The Approval-In-Principle (AIP) stage.
b). The Final Approval stage.
–For the AIP stage, its documentation requirements include the following:-
1).Proof of approval to render IMTO services in other jurisdictions or an agency agreements.
2). Evidence of tax clearance and Incorporation documents in Nigeria (for indigenous IMTOs) to include Certified True Copies (CTCs) of the applicant company’s Memorandum and Articles of Association (MEMART) and its primary object clause shall be indicated as the provision of money transfer services.
3). Ownership structure of the IMTO applicant company.
4). Company profile of the applicant company.
5). Approval of the Board of Directors of the applicant company to engage in international money transfer services.
6). Beneficial ownership information.
7). Forms C02(return on share allotments) and C07 (particulars of directors).
8). Credit reports from a licensed credit bureau for the shareholders and key officers of the money transfer services operator.
It should be noted that an AIP grant doesn’t allow an IMTO applicant to commence operations but will enable it to open bank accounts and process pre-operational processes.
–For the Final Approval stage, the following documentations are required:-
1). Names of authorized dealer banks to serve as local agents and a copy of the agency agreements.
2). A detailed business plan which is to include the following:-
a). The nature of the business.
b). Internal control systems and monitoring procedures.
c). Security features for IMTOs with offices in Nigeria.
d). A 3-year financial projection/market analysis for the company.
e). A breakdown of transaction and other charges to be borne by customers.
f). A diagrammatic illustration of transaction flows.
g). Consumer protection & dispute resolution mechanisms (to be prepared by a legal practitioner).
h). An Information Technology policy (to be prepared mostly by a legal practitioner supported by an IT/Cybersecurity professional )of the applicant company which should include:
i). a privacy policy;
ii). an information ownership/disclosure/loss policy;
iii). backup & restore policy;
iv). network security policy;
v). encryption policy;
vi). confidential data policy.
i). An enterprise risk management framework.
j). A draft agreement with participating parties.
k). A contingency & disaster recovery plan/business continuity plan.
l). A project deployment plan.
What are the financial requirements for IMTO licensing in Nigeria minus legal costs?
-The financial requirements for IMTO licensing in Nigeria are:-
1). A 10 Million Naira application fee.
2). A minimum share capital requirement of $1 Million for foreign IMTOs and the Naira equivalent of $1 Million for indigenous IMTOs.
3). An annual license renewal fee of 10 Million Naira.
Emmanuel Ifeanyi Ogbuka, Esq,a legal practitioner/consultant & practice manager of I.OGBUKA LEGAL, writes from Lagos, Nigeria.
Email :- info@ogbukalegal.com
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*******PLEASE NOTE******* This article is strictly for informative purposes and neither constitutes legal advice nor a valid lawyer/client relationship.