International Money Transfer Operator (IMTO) License in Nigeria: Procedure under the Revised Guidelines.

The Central Bank of Nigeria (“CBN”), on January 31^st, 2024, released revised guidelines for international money transfer services in Nigeria (the “Guidelines”). The Guidelines provide requirements for obtaining the international money transfer operator (“IMTO”) license from the CBN, the organizational structure, principle of ownership, control, and corporate governance standards, including permissible and non-permissible activities of IMTOs.

The review of the international money transfer guidelines was based on the CBN’s efforts to liberalise the foreign exchange market, boost diaspora remittance, and enhance the ease of doing business by IMTOs.

The objectives of the guidelines  are to:

1. Provide minimum standards and requirements for International money transfer services operations in Nigeria;
2. specify delivery channels for offering international money transfer services (inbound/outbound) in a cost-effective manner;
3. provide an enabling environment for international money transfer services in the Nigerian economy;
4. specify minimum technical and business requirements for various participants in Nigeria’s international money transfer services industry; and
5. provide broad guidelines for implementation of processes and flows of international money transfer services, from initiation to completion.

The guidelines provide, among other things, that:

• No person or institution shall provide international money transfer services unless such person/institution has been duly licensed by the CBN.
• Application for a licence to carry on the business of International money transfer services shall be submitted to the office of the Director, Trade & Exchange Department, Central Bank of Nigeria, Abuja.
• Prohibition of FinTechs and Banks from operating IMTO license: The Guidelines expressly excluded fintech companies and banks from obtaining the IMTO license. Under the old guidelines, fintech companies were permitted to obtain and operate the IMTO license.  The guidelines however, allow banks to act as agents to IMTO licensees.
• Overseas partnership requirements: An indigenous IMTO who wishes to engage a foreign technical partner shall obtain the prior approval of the CBN. The conditions for the technical partner include:
• Must be a registered entity, licensed in its home country to carry on money transfer activities.
• The overseas technical partner should be well established in the money transfer business, with a track record of operations.
• Have a minimum net worth of US$1 million, as per the latest audited financial statement, or as may be determined by the CBN from time to time.
• A Memorandum of Understanding should clearly define liabilities in the event of disputes and/or process failures.
• The CBN will further conduct appropriate due diligence on the proposed money transfer operator’s promoters, directors, and key officers.

What is an IMTO?

The Central Bank of Nigeria Guidelines on International Money Transfer Services in Nigeria, 2024 defines International Money Transfer Operators (IMTO) as companies approved by the CBN to facilitate the transfer of funds from individuals or entities residing abroad to recipients in Nigeria and the payment of a corresponding sum to a beneficiary through a clearing network to the IMTO belongs.

The International Money Transfer Operator (IMTO) license is necessary for running a lawful money transfer business in Nigeria. To operate as an IMTO in Nigeria, It is mandatory to first obtain a CBN license by submitting an application to the director of the Trade and Exchange Department as stated in the international money transfer services guidelines.

This article, therefore, serves to outline the procedure for obtaining an International Money Transfer Operator License in Nigeria under the revised guidelines.

Requirements for obtaining an International Money Transfer Services in Nigeria under the revised guidelines.

• The application for approval to carry on business of international money transfer services shall be submitted to the Director, Trade and Exchange Department, Central Bank of Nigeria, Abuja.
• No person or institution shall operate International Money Transfer Services unless such person/institution has been duly approved by the CBN.
• Any financial product involving international money transfer by any person or institution that is not duly registered with the CBN is illegal.
• The applicants must comply with the CBN Guidelines’ requirements for licensing banks and other financial institutions in Nigeria on Anti-money Laundering, Combating the Financing of Terrorism, and Countering the Proliferation of Weapons of Mass Destruction.
• The approval process shall be in two phases: Approval-in-Principle and Final Approval.

Required Documents for an International Money Transfer Operator (Approval-in-Principle)

• A non-refundable application fee of N10,000,000 (Ten Million Naira) or such other amount as may be specified by CBN from time to time, payable through electronic transfer or bank draft.
• Approval to operate in other jurisdictions or agency agreement (for all IMTOs)
• Evidence of tax clearance and incorporation documents in Nigeria (for Indigenous IMTOs) to include a Certified True Copy of MEMART, with the primary object clause indicating the provision of money transfer services
• The ownership structure of the IMTO
• Board of Directors approval to operate international money transfer service
• CAC Form C02 (Return of Shares) and C07 (Particulars of Directors)
• Profile of the company to include Curriculum vitae/bio data, contact and email address, and telephone numbers of the Board and Management of the company.
• Information on the beneficial owners of the company (where applicable)
• Credit reports from a licensed credit bureau for the shareholders and key officers of the IMTO
• Minimum share capital of US$ 1 million for foreign IMTOs and the equivalent for Indigenous IMTOs
• Any other information, document, or report as CBN may be specified occasionally.

An IMTO can open a bank account and begin pre-operational processes. The Approval-in-Principle application, however, does not grant the IMTO automatic right to start operations.; it may be withdrawn if the IMTO does not meet the requirements stated above as contained in the guidelines. Within three (3) months of obtaining the AIP, the applicant is expected to apply to CBN for final approval.

Documents Required for Final Approval

The IMTO shall submit an application for final approval to CBN within three (3) months of receiving the Approval-In-Principle from CBN, subject to the following requirements:

• Names of authorised dealer bank(s) to serve as local agent(s) and copy of agency agreement
• Submission of a detailed business plan to the CBN which shall include:

1. Nature of the business
2. Internal control systems and monitoring procedures
3. Security features for IMTOs with offices in Nigeria
4. Three (3) years of financial projection/market analysis for the company
5. Transaction and other charges that will be borne by the customers
6. Diagrammatic illustration of transaction flows
7. Consumer protection and dispute resolution mechanisms
8. Information technology policy of the company including:
9. Privacy policy
10. Information ownership/disclosure/loss policy
11. Backup and restore policy
12. Network security policy
13. Encryption policy
14. Confidential data policy
15. Password policy
16. Third-party connection policy
17. Incidence response policy
18. Physical security policy
19. Enterprise risk management framework
20. Contingency and disaster recovery plan/business continuity plan
21. Draft agreements with the participating parties
22. Project deployment plan (time, location, operation, etc)
23. Any other information as may be required by CBN from time to time

Annual Renewal of License

IMTOs must renew their licenses annually for an annual fee of N10,000,000 (Ten Million Naira), which must be paid every 31st January of each year. The renewal must also take place within the first quarter of the year.

Failure by an IMTO to provide a copy of the CBN renewal approval to its agent bank(s) within the first quarter of the year shall be grounds for such agent bank(s) to discontinue any further transactions with the IMTO concerned.

Permissible Activities of an IMTO License Holder

An international money transfer operator shall only be allowed to carry out inbound money transfers. The transactions shall be limited to the following operations:

• The acceptance of money to transmit it to a person resident in Nigeria or another country.
• Cross-border personal money transfer services, such as money transfer services for family maintenance and money transfer services in favour of foreign tourists visiting Nigeria, shall be allowed under this arrangement.
• The money transfer services shall target individual customers and the transactions shall be on a “person to person”, “business to person“and business to business” transfer basis which the CBN may review from time to time.

The following activities are not permissible by IMTOs:

• An IMTO shall not engage in any other business other than those stipulated above.
• An IMTO shall not engage in any outbound transaction.
• Buy foreign exchange from the domestic foreign exchange market for settlement.

Collaboration with Agents

The Guidelines stipulates that IMTOs may conduct its business through agents subject to the terms outlined in a formal agreement. The agreement shall contain the following terms:

• a statement that the IMTO is wholly responsible and liable for all actions or omissions of the agent;
• specific services to be rendered by the agent;
• appropriate policies and procedures to detect, prevent and report money laundering;
• responsibilities of the agent to deliver supporting transaction documents;
• a statement that the IMTO is the data controller with respect to information collected by the IMTO
• prohibition from charging the beneficiary any fees other than the fees agreed upon with the sender.

IMTOs are expected to notify the CBN upon the appointment of an agent. IMTOs are required to maintain a separate account with their agents which would hold customer funds meant for remittance.

Records and Returns

The Guidelines mandates IMTOs to keep a comprehensive record of the management information system that facilitates efficient collection and processing of data required for audits trails. IMTOs are also to maintain accurate information on each transaction and issue receipts accordingly.

Furthermore, the Guidelines stipulates that both IMTOs and their agents shall submit daily, weekly and monthly returns using the prescribed template to the CBN. Additionally, IMTOs and their agents shall submit suspicious transaction report (“STR”) filed in the originating country within 24hours after the transaction.

Disclosures

The Guidelines requires IMTOs to transparently disclose to their customers details of applicable exchange rates, the commission, fees and any other charges imposed either by the IMTO or their agents in the remittances process. Additionally, these disclosures must explain the meaning of technical terms and acronyms used. The disclosure should explicitly state that the IMTO does not take deposit nor lend to the public.

 Dispute resolution

The Guidelines requires IMTOs to establish a complaint management unit to resolve disputes submitted by its customers. IMTOs shall assign a unique identifier to each complaint as well as provide dedicated phone, email and other means through which complainants may enquire about the progress of their complaints. IMTOs are also required to provide a monthly report to the CBN about the complaints received.

Sanctions

In the event that an IMTO breaches any provision of the Guidelines, the CBN may take remedial or corrective actions against the IMTO. In addition, the CBN may:

• Withhold corporate approvals;
• Place financial penalties or suspend the IMTO;
• Revoke the IMTO’s license to operate in Nigeria.

Conclusion

Under the 2014 guidelines, IMTOs were previously allowed to engage in both inbound and outbound transactions with a $2000 threshold for outbound transactions. The transaction was restricted to “person to person”. However, the updated Guidelines now exclusively authorize the IMTOs to undertake inbound transactions while prohibiting IMTOs from conducting outbound transactions. The Guidelines expanded the scope of the transaction to include “business to person” and “business to business” transactions.

Beneficiaries are to be settled in Naira through bank account or cash. If the proceeds exceed $200, payment is to be made through an account. The exchange rate for the IMTO transactions shall be the prevailing rate in the Nigeria foreign exchange market.

Obtaining an IMTO license increases money transfer operators’ credibility and trustworthiness, allowing them to participate in Nigeria’s enormous and developing remittance sector. The license signifies compliance with regulatory prerequisites, fosters openness, and instills trust in the security and dependability of the services offered.

The Guidelines explicitly prohibits IMTOs from undertaking split transactions deliberately intended to circumvent anti-money laundering regulations. Additionally, IMTOs are prohibited from buying foreign exchange from the domestic foreign exchange market for settlement purposes and are restricted from engaging in any business other than as stipulated in the Guidelines.

 

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