The International Monetary Fund (IMF) says the expansion of
eNaira for cross-border transfers and agency banking may boost
money-laundering/financing of terrorism.
The Bretton Woods institution said this in its recently
released staff country report titled ‘Nigeria: 2021 Article IV Consultation’.
In October 2021, the Central Bank of Nigeria (CBN) unveiled
the country’s first Central Bank Digital Currency (CBDC) known as the eNaira.
The IMF said the digital currency is envisaged to bring
multiple benefits, including increased financial inclusion, facilitation of
remittances, reduced informality and illegal activities as eNaira transactions
are in principle fully traceable.
It, however, said the eNaira carries macro-financial, cyber
security, operational, financial integrity and stability, and legal risks.
“Unforeseen legal issues, including for private law aspects
of its operations (e.g., the exact nature of legal relationship between the
wallet providers and CBDC holders), may subject eNaira to litigation and
operational risks,” the report reads.
“There are financial integrity risks which are mitigated by
using a tiered identity verification system and applying more stringent
controls to relatively less verified users.
“Prospective expansion of eNaira use to cross-border fund
transfers and agency bank networks may cause new money laundering/financing of
terrorism (ML/FT) risks.”
The IMF emphasised the need to fix existing deficiencies in
the anti-money laundering and combating the financing of terrorism (AML/CFT)
framework.
It also recommended that the apex bank prioritise
risk-sensitive mitigation measures.
“Staff welcomed the gradual rollout of the CBDC and
highlighted the need for vigilance to various risks, including for monetary
policy implementation, bank funding, cyber security, operational resilience,
and financial integrity and stability, through regular risk assessment and
contingency planning,” the report adds.
“The eNaira offers
low-cost and phone-enabled financial transactions outside established channels.
This could potentially increase financial inclusion over time in rural areas
and help meet the authorities’ ambitious target to increase the share of
financially included adults to 95 percent.
“While preventive measures and the planned AML/CFT
regulations for eNaira intermediaries are welcome, a money laundering/terrorist
financing risk assessment of domestic and cross-border uses of eNaira and the
adoption and implementation of the regulation along with putting in place
risk-sensitive mitigation measures should be a priority.
“Staff noted that a dynamic digital lending ecosystem
dominated by fintech implies greater competition with traditional service
providers but also raises consumer protection issues.”
Advertise on NigerianEye.com to reach thousands of our daily users
No comments
Post a Comment
Kindly drop a comment below.
(Comments are moderated. Clean comments will be approved immediately)
Advert Enquires - Reach out to us at NigerianEye@gmail.com