Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market

With the introduction of a draft Baseline Standard for Automated Anti-Money Laundering Solutions yesterday, the Central Bank of Nigeria (CBN) is attempting to automate the processes of combating terrorist financing and anti-money laundering (AML/CFT) in the Nigerian financial system.

The CBN called for feedback on the draft, stating that the increased degree of digitalisation in the financial system has made automation inevitable.

The final framework will be released once stakeholders have had a chance to comment on the proposed standards until June 13, 2025.

Financial institutions will have a year from that date to complete compliance.

According to Dr. Olubukola Akinwunmi, Director of Banking Supervision, the goal of the standard, is to encourage financial institutions to comply with AML/CFT regulations and operate more efficiently.

The CBN stated that it would promote the use of new technologies to improve the real-time detection and reporting of suspicious transactions, pointing out that the proposed standards are consistent with international best practices.

AML solutions must be integrated with financial systems in order to comply with the standard, which will be applicable to deposit money banks, microfinance banks, mortgage banks, digital payment service providers, and other financial institutions.

As per the draft, the AML solutions should encompass risk assessment, identification and verification, sanctions screening, transaction monitoring, regulatory reporting, risk profiling, politically exposed persons, and other high-risk profiles.

Financial institutions must, therefore, implement AML systems with a centralized dashboard that provides case management, trend analysis, tracking, and real-time reporting.

Additionally, the technology "must integrate with domestic and global watchlists for sanctions screening" and will use AI-driven fuzzy matching algorithms to identify name variants and similarities.

“Institutions shall conduct periodic system stress testing and validation to ensure reduction of false positives. The institution should define a predetermined threshold for false positives and ensure that the false positive rate remains below this threshold.

“The AML solution shall have AI/ML capabilities for anomaly detection, behavioural pattern recognition, automated risk scoring, and adaptive learning to recommend improvements based on insights from flagged alerts and resolution outcomes.

“The solution shall have real-time alerts for cross-border transactions (where applicable), excessive cash deposits, crypto-related transactions, or other high-risk activities as defined in line with extant AML regulations. Time taken to screen and make decisions on such alerts shall not exceed the predetermined timeline.

“The AML solution must incorporate comprehensive transaction monitoring capabilities, using multiple risk scenarios based on configurable filtration rules and customer segmentation to detect suspicious activities.

“The AML solution shall have real-time access to the customer due diligence information for risk profiling, screening, and transaction monitoring. Financial institutions shall automate their onboarding process with real-time customer identification and verification in line with AML/CFT/CPF regulations. The system must have the capability for integration with BVN and/or NIN databases to ensure real-time identification and verification.”

In addition to this, the system must offer full KYC/KYB capability that includes transactional behaviour, historical data, automated customer risk profiling, and additional risk factors derived from ML/TF/PF risk assessments and typologies.

Legit.ng reported that despite continuous efforts to improve security systems, Nigerian banks reported a startling N52.26 billion loss to fraud in 2024, a situation that highlights the increasing sophistication of financial crimes.

According to the most recent report from the Nigeria Inter-Bank Settlement System (NIBSS), the banking industry is still seriously threatened by fraudulent activities such as insider collusion, account manipulation, and identity theft.

However, NIBSS and the Economic and Financial Crimes Commission (EFCC) were able to effectively recover N1.74 billion to stop these illegal actions and reclaim stolen cash.

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Source: Legit.ng