Central Bank Of Nigeria Releases Revised Guidelines for Blacklisting Individuals in Financial Institutions

Introduction

In consideration of the current condition of the financial business environment in Nigeria, the Central Bank of Nigeria (CBN), under its powers under the Bank and Other Financial Institutions Act 2020 (BOFIA) issued the Revised Guidelines for Blacklisting for Banks and Other Financial Institutions in Nigeria (the “Revised Guidelines”) in March 2024  which repealed the Review of Operational Guidelines for Blacklisting 2016 (the “Old Guidelines”) and revised the regulatory framework on blacklisting for financial institutions. The Revised Guidelines aimed at introducing consistent regulatory requirements and transparency operations in the blacklisting process. We have listed below key provisions of the Revised Guidelines

At the core of the revised guidelines is the establishment of a centralized database known as the Black Book, managed by the CBN, which catalogs individuals barred from holding employment in any financial institution in Nigeria. This measure is designed to prevent the recycling of fraudulent or discredited individuals within the financial system and to uphold standards of integrity and professionalism among employees.

Key highlights of the guidelines include:

The Black Book: Similar to the Old Guidelines, the Revised Guidelines create a centralized database maintained by the CBN which contains the details of staff dismissed by financial institutions as a result of committing offenses listed under the Revised Guidelines. Individuals listed under the Black Book are barred from holding any employment in a financial institution in Nigeria.

Internal Policy on Blacklisting: Financial institutions are required to develop clear policies and procedures for blacklisting. The policies and procedures are subject to approval by the CBN and must be communicated to the employees.

Conditions for Blacklisting: The Revised Guidelines provide that financial institutions shall have the obligation to blacklist an employee where an investigative panel, domestic or international body, or a court finds the employee to have committed any of the following offenses: fraud, forgery, insider abuse, conflict of interest, breach of fiduciary duty, violation of banking regulations and laws, a deliberate breach of confidentiality and misuse of information, any offense under the AML/CFT/CPF laws, misrepresentation of facts, criminal breach of trust, misconduct that affects the stability of the financial system. Unlike the Old Guidelines which only provided for three offences, the Revised Guidelines expanded the conditions for blacklisting. However, we are of the view that some of the listed offenses may be quite ambiguous and subject to multiple interpretations such as “misconduct that affects the stability of the financial system”. The CBN may also blacklist any director, manager, or officer of a financial institution for any offense under the relevant provisions of the BOFIA.

Procedures for Blacklisting: Financial institutions are required to adhere to a structured process before making decisions to blacklist individuals. This includes conducting thorough investigations into the alleged offense, providing timely notification to the affected employee to enable the employee to respond, and setting up a Disciplinary Committee (DC) which shall provide the employee sufficient opportunity to appear before it and provide a defense to the allegations.

Independent Review Panel: To ensure impartiality and fairness, the Revised Guidelines introduced the Independent Review Panel (IRP) which shall meet monthly and shall be responsible for conducting a second-level review of decisions made by the DC of the financial institutions. The decision of the IRP shall supersede the decision of the DC and it shall have the power to invite parties or call for evidence.

Reporting Requirements to the CBN: Financial institutions must report individuals indicted for specific offenses to the CBN via monthly returns accompanied by evidence of compliance with the procedure of blacklisting. Financial institutions are also mandated to file returns where the employee was dismissed for an offense not provided under the Revised Guidelines.

Delisting from the Black Book: Individuals may be delisted from the Black Book upon an order of court, or a request for reconsideration from the financial institution (subject to the approval of the CBN) or, in the case of a person blacklisted by the CBN, a request for reconsideration by the individual (subject to the approval of the CBN).

Data Protection and Privacy: Financial institutions are required to take reasonable security and control measures to prevent the mismanagement of information and ensure compliance with the Nigeria Data Protection Act 2023.

Accountability and Responsibility: Managing Directors and Executive Compliance Officers of financial institutions are tasked with monitoring compliance with the guidelines and ensuring due process is followed. The guidelines also outline sanctions for financial institutions and responsible officers for non-compliance or engaging in practices to avoid blacklisting.