A top Nigerian commercial bank has threatened to shut down an undetermined number of crypto-related accounts without providing any explanation. Lagos-domiciled Union Bank states that the decision to do so is in line with the Central Bank of Nigeria’s (CBN) previous warnings against digital currency trading.
Through a statement issued to account holders this week, the Union Bank of Nigeria (UBN) warns:
“In order to guarantee the security of our customers’ funds, Union Bank will monitor accounts being used for cryptocurrency transactions and may impose restrictions including closure of such accounts.”
UBN cites a string of cautionary statements issued by the country’s central bank, which actually do not entirely ban crypto trading, to support its decision.
CBN issued a circular to financial institutions in January last year, asking them not to use, hold, or trade cryptocurrencies awaiting “substantive regulation and or (a) decision by the CBN.”
A proceeding circular released in February 2018 repeated the same warning, but further stated “that virtual currencies are not legal tender in Nigeria … we wish to caution all and sundry on the risks inherent in such activities.”
Still, UBN’s abrupt decision to monitor accounts has stunned Nigeria’s cryptocurrency industry, which is the largest in the continent. Reports have begun circulating that anxious crypto investors are starting to withdraw their funds to avoid the risk of their accounts being frozen.
The co-founder of Lagos-based over-the-counter (OTC) Bitcoin trading platform Cryset LLC, Munachi Ogueke states that a number of crypto investors in Nigeria have already been notified by the Union Bank about a possible account shut down. Ogueke adds that many of these people are already emptying and closing down their accounts.
The motivation that resulted to Union Bank taking aim at crypto-associated accounts remains to be seen. In the wake of CBN’s warning, what makes UBN’s move even stranger is that both financial institutions have never declared that cryptocurrency transactions are illegal. However, Ogueke has indicated that the CBN may have given commercial banks “carte blanche” to shut down client accounts without providing any explanation, so long as their actions are in compliance with anti-money laundering rules.
Referring to a central bank circular released in January last year, Ogueke explains that banks and financial institutions, which have digital currency clients, have the power and may discontinue their association with such clients if the banks are unsatisfied with the AML/CFT controls that allow compliance with the identification, verification, and transaction monitoring stipulations.
Ogueke goes on to say that in the absence of any regulation from the CBN, one may safely say that the central bank’s circular has provided banks like UBN the authority to close crypto accounts if customers violate AML requirements or are found to have conducted shady transactions.
On the other hand, the Union Bank has stated that its decision to monitor accounts does not indicate that it suspects that several customers are breaking anti-money laundering laws. Instead, the bank states that it is becoming more cautious in protecting client funds. However, Ogueke remains cynical saying that this justification is “flimsy.”
So far, no other bank has made a similar threat.