Revised Operational Guidelines for Bureau De Change 2016
On the 30th of November, 2015 the Central Bank of Nigeria released a circular containing revised operational Guidelines for Bureau De Change (BDC) in Nigeria which was to take effect from the 1st of January 2016 and supersede the 2002 BDC operational Guidelines.
These Guidelines were aimed at reducing and possibly putting an end to unregistered currency traders and in turn protecting citizens who are victims to the fraudulent activities of such persons.
Other than the clear disparity in time between the 2002 and 2016 Guidelines, the 2016 Guidelines contain very noticeable improvements and seem to have made progress as regards attaining the goal behind its creation.
Licence Requirements
The 2016 Guidelines reiterate the provisions of the 2002 Guidelines stating that no person shall carry on the business of Bureau De Change in Nigeria except with the prior authorization of the CBN.
The Guidelines also more distinctly categorize the stages for the application for a BDC licence into Approval-In-Principle (AIP) and application for a final licence. The concept of AIP exists in the 2002 Guidelines but was unclearly defined. The 2016 Guidelines remedies this by providing clear steps to be taken to obtain an AIP.
One of the steps includes the payment of a non-refundable application fee of N100, 000 (previously N10,000), which is in addition to a non-refundable licensing fee of N1,000,000 (previously N100,000) to be paid on the application for a final licence.
The new application process also increased the sum required for minimum paid up share capital and the mandatory caution fee deposit from N10,000,000 to N35,000,000 and N1,000,000 to N35,000,000 respectively.
These fees were propped by a 250% increase for the minimum share capital and over 1000% increase for the caution fee. This caution fee is to be maintained by the BDC throughout its subsistence as it would serve as a source for satisfying the complaints of bona fide claimants in the event of default or the liquidation of the BDC.
It is also important to note, that under the 2016 guidelines, prior to the grant of an AIP, the promoters of a BDC are only permitted to reserve the name of the BDC at the Corporate Affairs Commission. Incorporation is prohibited until after the AIP has been sought and obtained.
Another valuable point to note under the licence category is an increase in the licence renewal fee from N10,000 to N250,000. Also, the new sum is to be paid not later than 30 days after the end of each calendar year contrary to the previous Guidelines which required that same fee to be paid within the first quarter of the subsequent year.
Board/Management Requirements
Under the new guidelines, the number of directors for the board of a BDC remains a minimum of three (3) and a maximum of five (5) with any such appointment subject to the approval of the CBN.
However, the new Guidelines ushered in several welcome requirements as regards the position of members of the board and also for management staff. Clause 5.2.1 of the Guidelines reduces the number of post-graduation years required for a Managing Director or Chief Executive Officer from 5 years to 3 years. This reduction was also extended to the position of Senior Management Officers/ Managers, from 3 to 2 years.
An additional welcome inclusion not contained under the previous Guidelines is found under Clause 7.0 of the new Guidelines which states that any director of a BDC whose licence is revoked as a result of the breach of any of the conditions upon which the licence was granted shall not be eligible to apply for a BDC licence.
Bureau De Change Operations
Under the previous Guidelines, BDC’s were allowed to deal in different means which included banknotes, coins, buying and selling of Traveller’s cheques. Also, BDC’s were allowed to derive foreign currencies from private sources and other sources as may be approved by the CBN.
Persons under the previous Guidelines who wished to sell foreign currency to a BDC generally had no obligation unless “if so required” to disclose the source of such currency. However, under this clause, the BDC was required to ascertain the genuineness of the currency and may confirm a seller’s identity by the mere sighting of the seller’s passport.
The above paragraph has been replaced by a more efficient means of operating under the 2016 Guidelines. It provides that foreign currencies dealt with by a BDC may be derived from private sources and such other sources which may include the CBN window as is to be determined by the CBN. However, any person or individual wishing to sell foreign currency above the sum of $10,000 or its equivalent to a BDC shall be required to disclose the source.
The Guidelines also creates benchmarks for both Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) to $4,000 and $5,000 respectively and the purchases made by travellers are to be supported by their Bank Verification Number (BVN) validly issued and genuine travelling documents (ticket, passport and visa) and the sales receipt duly signed by the customer. The amount and date shall be endorsed on the passport and a photocopy of all relevant documents shall be kept and filed in sequential order by the BDC.
These new provisions in the Guidelines are to be commended as they ensure the accountability of the BDC’s in operation and also help to put a check on fraudulent practices which may be perpetrated by customers through BDC’s by ensuring the identity of each and every customer is confirmed and particulars crosschecked and preserved.
This practice is supported and reinforced under Clause 12.0 of the new Guidelines which provides that every BDC shall have an Anti-Money Laundering (AML) or Combating Financing of Terrorism (CFT) Policy in compliance with the AML/CFT Act 2011 for the identification of customers before carrying out any transaction. A BDC is also not allowed to deal with any anonymous customer under this clause, but if such a case were to present itself, a compliance officer put in place for such a scenario is to prepare a suspicious transaction report and render returns on same to the Nigeria Financial Intelligence Unit (NFIU). Where there are no such transactions a “nil return” is to be rendered monthly.
Branch Operations
A final and largely debated provision introduced in the 2016 Guidelines is that which allows BDC’s to operate only at its registered office which has been approved by the CBN. Clause 10.2 and 10.3 specifically provides that no BDC shall have a branch office outside its registered office and all branches which were in operation under the previous 2002 Guidelines were to be closed within 90 days from the commencement of the 2016 Guidelines.
The Guidelines also prohibited BDC’s from associating in any way with currency street traders and ensured that the breach of same resulted in a revocation of the said BDC’s licence. The aim of these clauses as stated by CBN was to weed and eventually fully eliminate foreign currency street traders which had become a rampant practice present in many states across the country.
Conclusion
Although a number of the new provisions in the 2016 Guidelines are commendable, much is still yet to be done in order to eliminate street hawkers of foreign currency and to make significant changes in the BDC market.
However, the licence fee hike under the 2016 Guidelines is definitely not an incentive to unregistered BDC operators or street traders who would like to obtain licences. A gradual increase would have been preferred rather than a sudden spike.
The immersion of the ALM/CFT Act into the new guidelines is very much recommended especially owing to the current rise in fraudulent activities involving foreign currencies within and outside the country. Hence continuous and consistent improvements would be welcome in that area to ensure a fraud-free currency market and reinstall customer confidence in the BDC businesses.
