Nigeria’s House of Representatives on Wednesday deliberated for the second time, a new legislative framework that seeks to prohibit all commercial lenders from further converting monies accrued in dormant accounts into their income.
Rather, the bill, which passed the second reading, proposes an amendment to the Banks and other Financial Institutions Act (BOFIA) Cap B3 Laws of the Federation of Nigeria 2004, to empower Central Bank of Nigeria (CBN) to establish a Deposit Fund where all unclaimed funds in dormant bank accounts would henceforth be domiciled.
Section 23(4) of the proposed amendment seeks to ensure that the accumulated funds would now be injected into the nation’s economy to serve as revolving funds when the account has not been operated after the expiration of five years.
The private bill is sponsored by Garba Mohammed and further seeks to “strengthen risk management and internal control process,” within the financial sector of the nation’s economy.
The bill categorises as dormant all “accounts that have no customer or depositor initiated transaction for a period of one year, while inactive account refers to account without transaction within six months.”
It also defines unclaimed funds to also include “proceeds of local and foreign currency drafts not yet presented for payment by the beneficiaries or funds received from a correspondent bank without sufficient details as to the rightful beneficiary or a judgement debt for which judgement creditor has not claimed the amount of judgment award.”
“The bill seeks to curb corruption, instil transparency and accountability in the financial sector and bring the Act in line with international best practices as well as put mechanism in place for control of abuse of dormant accounts and unclaimed funds through criminal misappropriation, breach of trust or any form of fraudulent transaction in official capacity and also provide appropriate penalties for contravention of the Act,” Mohammed argued in his lead debate.
The Nigerian Inter-Bank Settlement System (NIBSS) reports that from the total 94.388 million activated accounts domiciled with the financial institutions operating in the country, only 64.128 million accounts (68.7 percent) are activated, while 30.26 million (32.42 percent) remain unactivated.
In its year-to-date (YTD) analysis as at October 2016, NIBSS report showed that a total of 4.13 million accounts have become dormant within the period, thereby raising the dormant account from 26.042 million out of the 85.018 million accounts as at the end of fourth quarter, 2015.
Garba raised the concerns that “despite significant role played by BOFIA in transforming Nigerian banks towards optimal performance and after several amendments it has undergone from 1988 to date, it has still lacked adequate provisions to regulate dormant accounts and unclaimed funds lying in our banks.”
According to the bill, banks would be made to ensure that dormant account will continue to reflect in their books as deposit liabilities until the account holder eventually withdraws his deposit or the money and is disposed of on his instruction and is covered by deposit insurance scheme.
When established, every bank is expected to transfer the credit balances in deposit account with the details of the depositor that have not operated or any amount remaining unclaimed with interest accrued after the expiration of five years to the Fund.
The proposed amendment to section 26 of the BOFIA, also provides that “such fund realised shall be channels toward productive areas of the economy and thereby serve as a revolving fund.”
In case of recovery of such dormant account that has been transfered to the Depositor Fund, owner of such account already declared as dormant, the customer “shall approach the bank branch in which the account was opened and submit application for amount of unclaimed deposit along with details of deposit passbook, valid ID or any other documentary proof.”
However, Section 5 of the proposed amendment seeks to amend section 27 of the BOFIA Principal Act, by excluding “savings accounts which have no feature of both current and savings account; Government owned accounts and individual accounts that are subject of litigation.”
Subsection 2 of the proposed amendment further provides that “every bank shall institute control mechanism consistent with the internal banking policies when a savings account becomes inactive to prevent such accounts from being used for fraudulent purposes.”
To ensure adherence, section 6 of the amendment, provides that “any bank or person who contravenes the provisions of the bill shall be sanctioned in accordance with the provision of section 60 of the BOFIA.”
While ruling on the bill, Speaker Yakubu Dogara referred it to the House Committee on Banking and Currency for further legislative action.