Central Bank of Nigeria Issues Comprehensive Reversed Regulatory and Supervisory Guidelines for Bureau De Change Operations

…Stricter Regulations and Defined Boundaries Set to Govern BDC Activities

In a significant move to tighten oversight and streamline operations within the foreign exchange market, the Central Bank of Nigeria (CBN) has released a comprehensive set of reversed regulatory and supervisory guidelines for Bureau De Change (BDC) operations.

The guidelines, compiled by Mislaw, touch upon various aspects of BDC activities, from licensing to governance, sources of funds, forex transactions, reporting, and supervision.

Key Highlights of the Guidelines:

1. Non-Eligible Promoters: Banks, government agencies, NGOs, and certain entities are barred from having ownership stakes in BDCs.
2. Permissible Activities: BDCs are permitted to buy and sell foreign currencies, issue prepaid cards, and act as cash points for money transfer operators. However, they are restricted from taking deposits, granting loans, dealing in gold, or engaging in capital market activities.
3. Sources of Foreign Currencies: BDCs can source foreign exchange from authorized dealers, travelers, hotels, embassies, etc. Large transactions exceeding $10,000 require a declaration of the source.
4. Sale of Foreign Currencies: BDCs are authorized to sell foreign currencies for travel, medical bills, school fees, etc., up to specified limits per customer annually. At least 75% of sales must be via transfer, with 25% allowed in cash.
5. Categories of BDCs: The guidelines introduce two tiers of BDCs – Tier 1 with national presence, branches, and franchises, and Tier 2 restricted to one state with a maximum of three locations.
6. Financial Requirements: BDCs must meet minimum capital requirements of N2 billion for Tier 1 and N500 million for Tier 2. Other fees and deposits are also specified.
7. Licensing Process: The licensing process involves two stages – Approval in Principle and Final License, each with specified document requirements.
8. Corporate Governance: The guidelines outline board composition, propriety assessments, and fitness requirements for directors and senior management.
9. Operations: BDCs are required to verify customer identity, maintain transaction records, connect to CBN systems, and display rates clearly.
10. Supervision: Specific regulatory returns must be submitted, records made available for inspection, and compliance with guidelines is mandatory.
11. Franchising Standards: Standards are set for Tier 1 BDCs appointing franchises, covering policies, monitoring, branding, etc.
12. Prudential Requirements: Specified limits are imposed on open positions, fixed assets, borrowings, dividend payments, etc.
13. AML/CFT Requirements: BDCs must comply with Anti-Money Laundering/Combating the Financing of Terrorism regulations, with a focus on policies, monitoring, and reporting.
14. Penalties: Non-compliance with the guidelines may result in sanctions, including the revocation of licenses.

In summary, the newly released guidelines signify the CBN’s concerted effort to regulate all facets of BDC operations in alignment with the central bank’s objectives.

These regulations aim to instill discipline, transparency, and accountability within the BDC sector, fostering a more robust and compliant foreign exchange market.