Cross-border use of eNaira can fuel money laundering and terrorist financing – IMF

The International Monetary Fund says the potential expansion of eNaira’s use to cross-border remittances and bank branch networks could lead to new money laundering and terrorist financing risks.

The IMF revealed this in its report “Nigeria Staff Report for the 2021 Article IV Consultation”.

According to the report, while there are some benefits, such as promoting financial inclusion, there are also risks around eNaira, which the Central Bank of Nigeria needs to consider.

The Washington-based lender said: “Possible expansion of eNaira’s use to cross-border remittances and bank branch networks could introduce new money laundering/terrorist financing risks.”

eNaira was launched on October 25, 2021, making Nigeria one of the first countries in the world to introduce a central bank digital currency open to the public.

However, the IMF said the CBDC is exposed to cybersecurity risks, unforeseen legal issues, and financial integrity risks.

The latest report said in part: “There are cybersecurity risks associated with eNaira. Unforeseen legal issues, including for the private law aspects of its operations (for example, the exact nature of the legal relationship between wallet providers and CBDC holders), may expose eNaira to litigation and operational risk. .

“There are financial integrity risks that are mitigated by using a tiered identity verification system and applying tighter controls to relatively less verified users.”

The Washington-based lender stressed the need to be mindful of different risks, urging the CBN to address existing loopholes in the fight against money laundering and terrorist financing.

“Staff welcomed the gradual deployment of the CBDC and stressed the need to be vigilant against various risks, including for the implementation of monetary policy, bank financing, cybersecurity, operational resilience, integrity and financial stability, through regular risk assessment and contingency planning.

“Staff noted significant financial integrity risks that could arise from broad accessibility of eNaira and highlighted the need to address existing deficiencies in the AML/CFT framework that could exacerbate these risks.

“While the planned AML/CFT preventative measures and regulations for eNaira intermediaries are welcome, a money laundering/terrorist financing risk assessment of domestic and cross-border uses of eNaira and the adopting and implementing regulations as well as putting in place risk-sensitive mitigation measures should be a priority,” the IMF said.

Furthermore, regarding the likelihood of slow progress in the fight against corruption, tax evasion and related money laundering, the Washington-based lender rated Nigeria as high and encouraged the country to step up its efforts. anti-corruption/governance efforts and strengthen AML/CFT. framework.

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