In a move aimed at safeguarding the interests of depositors and enhancing the operational standards of financial institutions, the Central Bank of Nigeria (CBN) has issued new guidelines for the management of dormant accounts and unclaimed balances.
This comprehensive regulatory framework, which supersedes the previous guidelines issued in 2015, seeks to address the growing concerns related to the accumulation and potential misuse of dormant account funds and other unclaimed financial assets within the banking sector.
Introduction and Rationale
The presence of dormant accounts and unclaimed balances in financial institutions has long been a subject of regulatory attention. These accounts, which exhibit no customer-induced activity over extended periods, present unique challenges. They not only tie up financial resources that could be utilised elsewhere but also increase the risk of fraudulent activities.
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The new guidelines by the CBN, effective from July 2024, are designed to mitigate these risks, ensure the proper management of these accounts, and ultimately protect the interests of depositors.
The CBN’s initiative is rooted in the authority granted by the CBN Act of 2007 and the Banks and Other Financial Institutions Act (BOFIA) of 2020. These laws empower the CBN Governor to establish regulations that promote the stability and integrity of the financial system.
The updated guidelines are a testament to the CBN’s commitment to maintaining rigorous oversight and operational standards within the financial sector.
Scope and Application
The guidelines apply to all financial institutions under the regulatory purview of the CBN. This includes deposit money banks, specialised banks, other deposit-taking financial institutions, and payment service providers. By encompassing a wide range of institutions, the CBN aims to ensure a uniform approach to the management of dormant accounts and unclaimed balances across the entire financial landscape.
Objectives of the Guidelines
The primary objectives of the guidelines are multifaceted:
- Identification and Reunification: One of the key goals is to systematically identify dormant accounts and unclaimed balances with the aim of reuniting them with their rightful owners. This involves setting up processes that facilitate the tracing and notification of account holders or their beneficiaries.
- Custodial Responsibility: The guidelines mandate financial institutions to hold dormant account funds and unclaimed balances in trust for the beneficial owners. This custodial responsibility ensures that these funds are managed prudently and are available for reclamation by the rightful owners.
- Standardisation: By establishing uniform procedures for the management of dormant accounts and unclaimed balances, the guidelines promote consistency and transparency across the financial sector. This standardisation is crucial for maintaining public trust and ensuring fair treatment of all account holders.
- Reclaim Procedures: The guidelines outline clear procedures for the reclamation of warehoused funds. These procedures are designed to be straightforward and accessible, minimising bureaucratic hurdles for account holders seeking to reclaim their funds.
Eligible Accounts and Exemptions
The guidelines specify the types of accounts and financial assets that are considered eligible for transfer to the Unclaimed Balances Trust Fund (UBTF) Pool Account, maintained by the CBN. Eligible accounts include:
- Current, savings, and term deposits in local currency.
- Domiciliary accounts.
- Deposits towards the purchase of shares and mutual investments.
- Prepaid card accounts and wallets.
- Government-owned accounts.
- Proceeds of uncleared and unpresented financial instruments belonging to customers or non-customers of financial institutions.
- Unclaimed salaries, wages, commissions, and bonuses.
- Proceeds of stale local and/or foreign currency drafts not presented for payment by beneficiaries.
- Funds received from a correspondent bank without sufficient details as to the rightful beneficiary.
- Judgement debts where the judgement creditor has not claimed the amount awarded.
- Any other deposits or financial assets that may be designated by the CBN.
Certain classes of accounts are exempted from being classified as dormant or subject to transfer to the UBTF Pool Account. These exemptions include:
- Accounts that are the subject of litigation.
- Judgement debts where the case is still active in court.
- Accounts under investigation by regulatory authorities or law enforcement agencies.
- Encumbered accounts, such as those held as collateral or under liens.
Roles and Responsibilities of Stakeholders
The guidelines delineate the roles and responsibilities of various stakeholders, including the CBN, financial institutions, and account owners.
Central Bank of Nigeria
The CBN plays a pivotal role in the management of dormant accounts and unclaimed balances. Its responsibilities include:
- Maintenance of the UBTF Pool Account: The CBN will open and maintain an account specifically designated for warehousing unclaimed balances. This account will be managed in accordance with stringent oversight and governance standards.
- Regulatory Oversight: The CBN will issue regulations, guidelines, and circulars pertaining to the administration of dormant accounts and unclaimed balances. It will also monitor and enforce compliance with these guidelines.
- Publication and Transparency: The CBN will publish annually on its website the list of owners of unclaimed balances that have been transferred to the UBTF Pool Account. This ensures transparency and provides a resource for account owners to check the status of their unclaimed funds.
- Investment of Funds: The CBN will invest the funds in Nigerian treasury bills and other approved securities. The principal and interest earned will be refunded to the rightful owners upon request.
Financial Institutions
Financial institutions are required to adhere to a set of rigorous standards and procedures for managing dormant accounts and unclaimed balances. Their responsibilities include:
- Monitoring and Notification: Institutions must monitor inactive accounts and notify customers to prevent unauthorised usage. They should establish procedures to maintain continuous contact with customers to reduce the incidence of dormant accounts.
- Record Maintenance: Detailed records of procedures and efforts to contact customers must be maintained. This includes a register of dormant accounts and balances.
- Reporting: Quarterly reports on dormant accounts must be submitted to the CBN. Institutions must also publish details of dormant accounts on their websites and in national newspapers.
- Reactivation and Reclaim: Financial institutions must facilitate the reactivation of dormant accounts upon request by the account owner. They are also responsible for verifying claims and initiating refund requests to the CBN.
Account Owners
Account owners and beneficial owners of other financial assets have specific responsibilities under the guidelines:
- Updating Information: Account owners must inform financial institutions of any changes in their personal or business information, such as names, addresses, phone numbers, and email addresses.
- Reclaim Procedures: Owners seeking to reclaim unclaimed balances must complete the necessary forms and provide proof of ownership and identification.
Management of Dormant Accounts and Unclaimed Financial Assets
The guidelines outline detailed procedures for the management of dormant accounts and unclaimed financial assets. Financial institutions are required to:
- Policy Formulation: Develop policies for the recognition and management of dormant accounts and financial assets in line with the guidelines.
- Effective Controls: Implement effective controls to ensure surveillance and second-level authorization for the reactivation of dormant accounts.
- Record Keeping: Maintain comprehensive records, including a register of dormant account balances and the transfer of funds to the UBTF Pool Account.
The CBN, on its part, will manage unclaimed balances by maintaining records of beneficiaries, investing the funds, and processing refund requests in a timely manner.
Reactivation and Reclaim of Dormant Accounts
To reactivate a dormant account, financial institutions must follow a structured process:
- Completion of Reactivation Form: Account owners must complete a reactivation form in person, providing evidence of ownership and valid identification.
- Verification: The information provided must be verified by the financial institution.
- No Fees: Institutions are prohibited from charging any fees for the reactivation of dormant accounts.
- Approval: Reactivation requires the approval of two authorised officers, including the Branch Operations Manager.
- Notification: Account owners must be notified free of charge upon the reactivation of their accounts.
The reclaim process for unclaimed balances involves several steps:
- Accessing Information: Account owners can access the list of unclaimed balances on the websites of financial institutions and the CBN.
- Submission of Application: Owners must visit a branch of the financial institution and complete an asset reclaim form, providing necessary documentation.
- Verification and Initiation: The financial institution verifies the claim and submits the request to the CBN.
- Refund Processing: The CBN processes the refund within ten working days of receiving the request.
Compliance, Monitoring, and Dispute Resolution
The guidelines place significant emphasis on compliance, monitoring, and dispute resolution. The responsibilities for ensuring compliance are assigned to the Executive Compliance Officers (ECOs) and Chief Information Technology Officers (CITOs) of commercial, merchant, and non-interest banks. In the case of other financial institutions (OFIs), the responsibility is assigned to a senior management staff member.
The CBN will monitor and enforce compliance through off-site surveillance and on-site examinations. This dual approach ensures that financial institutions adhere to the guidelines and that any deviations are promptly addressed.
Dispute resolution is primarily the responsibility of the financial institutions. Consumer complaints must be lodged with the institutions for resolution within the timelines prescribed by the CBN Consumer Protection Regulations (CPR). If a complaint is not resolved within fifteen days or if the customer is dissatisfied with the resolution, the complaint can be escalated to the Consumer Protection Department of the CBN.
The issuance of these guidelines marks a significant step forward in the management of dormant accounts and unclaimed balances in Nigeria. By establishing clear procedures and responsibilities, the CBN aims to protect depositors, enhance the transparency and efficiency of the financial system, and mitigate the risks associated with dormant accounts.
The guidelines provide a robust framework that balances the interests of all stakeholders, including financial institutions, account owners, and regulatory authorities. As these guidelines take effect, it is expected that the incidence of dormant accounts will decrease, unclaimed balances will be more effectively managed, and rightful owners will have a streamlined process for reclaiming their funds.
The Central Bank of Nigeria remains committed to ensuring the stability and integrity of the financial system. These guidelines are a testament to that commitment, reflecting the CBN’s proactive approach to addressing emerging challenges and fostering a resilient financial sector.