CBN Imposes N3m Penalty on Banks for Failing to Verify Customer Status

The Central Bank of Nigeria (CBN) has introduced new compliance measures that will see Commercial, Merchant, and Non-Interest Banks pay a minimum penalty of N3 million for failing to verify the status of customers before opening current accounts. The directive aims to reduce financial risks linked to dud cheques and strengthen the country’s financial integrity.

In addition to commercial banks, Primary Mortgage Banks (PMBs) and Microfinance Banks (MFBs) will also face category-based sanctions. State and National PMBs will pay at least N1.5 million per violation, National MFBs will pay N500,000, State MFBs N250,000, while Tier 1 Unit MFBs and Tier 2 Unit MFBs will incur penalties according to CBN regulations.

The CBN mandated all financial institutions to conduct detailed status checks on the dud cheque database within the Centralised Risk Management System (CRMS) or any other approved verification platform. Institutions must also review at least two previous current accounts before opening a new one for any customer to minimise risk exposure.

According to the circular titled Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria, the new rules outline reporting requirements, processes for barring and unbarring offenders, and penalties for noncompliance. The exposure draft, signed by Rita I. Sike, Director of the Financial Policy and Regulation Department, invited feedback from stakeholders as part of the ongoing reform process.

The guidelines also stress that cheques must only be issued from accounts with sufficient funds. Any cheque drawn on an inadequately funded account will attract sanctions, including returned cheque charges, in line with the Guide to Charges by Banks and Other Financial Institutions.

For serial offenders, the penalties are even stricter. Individuals who repeatedly issue dud cheques may be barred for five years, lose access to the national clearing system, be denied credit facilities, and be restricted from opening new current accounts within the banking sector.

The CBN says these measures are designed to tighten financial accountability, protect banks from unnecessary losses, and safeguard consumers from fraudulent or negligent account holders. The reforms come at a time when Nigeria is intensifying efforts to reduce financial misconduct and boost confidence in the banking system.