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Tuesday, March 28, 2023

CBN Bans BVN Verification for Paystack, Other Fintechs

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Central Bank of Nigeria (CBN) has banned Paystack and other non-bank financial institutions in Nigeria from providing the Bank Verification Number validation (BVN) service.

According to an email notification sent by Paystack, the new directive affects every non-bank that offers BVN validation services in the country.

This means that startups operating in the payment, crypto, saving, trading and loan spaces will be affected.

Paystack said, “We’ve recently been made aware of a regulatory directive  from the primary custodian of Nigeria’s BVN service to all their partners to suspend the provision of the BVN validation service to their third-party partners.

“This directive affects every non- bank in Nigeria that offers BVN validation service.”

The company said in line with the development, it has temporarily suspended its BVN validation service effective midnight of April 8, 2021.

Before now, the CBN AML/CFT Regulation 2018, allowed Banks and other companies to use Bank Verification Number (BVN) as forms of identification for users who wanted to open an account.

The verification of identity or Know Your Customer (KYC) according to regulations is a compulsory requirement before any financial institution can signup or start any business relationship with a customer.

All institutions wishing to establish account or business relationship with the Bank shall provide proof of address, while operators of the account shall be required to provide other forms of identification, such as international passport/driver’s license/national identity card and Bank Verification Number.

The verification, according to the apex bank, helps check risk and determine whether or not there is an element of money laundering, fraud and other corruption-related activities.

However, with the suspension of BVN, non-banks have lost one of the most comprehensive means of identity verification in the country.

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