Court Order on Forfeiture of Monies Not Linked to BVN Unsettles Banks

•  Lenders may challenge order as liquidity squeeze looms  
• NIBSS data shows 18m accounts not linked to BVN  
• Policy not backed by law, order is illegal and unconstitutional, say lawyers, experts

By Obinna Chima    

There was disquiet in the banking sector at the weekend following a Federal High Court ex parte order in Abuja that all monies in bank accounts owned by corporate organisations, government agencies or individuals that are without bank verification numbers (BVNs) will be forfeited to the federal government in 14 days from the date the order was given should the owners of the accounts fail to show cause why their monies should not be forfeited.

Justice Nnamdi Dimgba Igwe had granted the order on October 18, 2017, following an application by the Attorney-General of the Federation, Mr. Abubakar Malami (SAN) on behalf of the federal government.

But investigations by THISDAY yesterday showed that the banks were contemplating filing a class-action suit to stop the federal government from appropriating funds that do not belong to it.

When contacted the Central Bank of Nigeria (CBN) chose to remain mum on the issue, but a director of the bank said he would not blame the banks if they chose to challenge the court order.

“If I were a banker, I would go to court to challenge this order. I will not blame them if they did so,” the director who preferred not to be named, said to THISDAY.

According to the Nigerian Interbank Settlement System (NIBSS), 52 million bank accounts had been linked to their BVNs as of February this year. The total number of bank accounts in the country was estimated at 70 million in 2016.

But speaking in a chat with THISDAY, a bank chief executive, who spoke on the condition of anonymity, questioned the legality of the move by the federal government.

According to the CEO, the move would discourage financial inclusion and might affect financial system stability.

“What of a situation where somebody has died and the matter is in administration, what do you want the bank to do? To give government the money and face litigation?

“What of Nigerians who are abroad and are still struggling to get their BNVs? What if we send the monies to government and we are sued by the customer(s)?

“And the 14-day time frame is very short. Why the rush? Why not give a time frame, maybe till 2018 for people to get their BVNs? These are the type of things that create uncertainty and instability in the market. We are just coming out of a recession and we try to discourage anything that would destabilise the system.

“We are trying to drive financial inclusion, but there are many people who are not in the banking system that may not want to open accounts once they hear of such things happening,” he said.

In his reaction, the chief executive of Financial Derivatives Company Limited, Mr. Bismarck Rewane also pointed out that if the decision by the court is implemented, it would lead to a liquidity squeeze in the market.

But Rewane stated that the court ruling would help sanitise the system.

“It does mean that all that money would be transferred to the central bank and that would drain liquidity. Let’s say it is N500 billion in all the banks and the banks are to comply by transferring the monies to the central bank account which is the federal government’s bank.

“The immediate impact is that of liquidity squeeze and the second impact is that it would sanitise the system and also improve the culture of honesty and transparency. However, it may encourage the banks to be dishonest in their returns,” he added.

But in his assessment of the development, the chief executive of the defunct Progress Bank, Mr. Okechukwu Unegbu argued that the ruling was “basically illegal”.

Unegbu wondered under what law the ruling was given. “Was there any federal gazette on that? Who was the case against?” he wondered.

He added: “In fact, if that is done to anybody’s account, the person has the right to go to court. But for me, if it is something the federal government wants to pursue, let them come out with a law.

“But I must tell you that we are still feeling the impunity of the military mentality. Remember that in banking, your relationship with the customer is confidential.

“However, if the government comes up with a policy to enable it to fight corruption, all of us would support it. But you don’t use draconian laws to enforce such things.”

According to Unegbu, the federal government ought to be developing policies that would encourage financial inclusion and not those that discourage it.

He added that some of the challenges around the BVN scheme ought to have been corrected before resorting to the courts.

“Even the BVN scheme has its problems. If you go to the bank most of the time, before you conclude it, it takes a lot of time. Atimes when you register, the bank will call you back to come and register again.

“The environment should be put right first. If the environment is faulty, there is nothing bank customers can do. Besides, this should be extended to the microfinance banks, where most of their customers do not have BVNs yet.

“So there are holes in the so-called court order. But any order from a court should be obeyed, but it can still be challenged.

“Honestly, I am disturbed because I see it as an order given without considering the challenges in the environment,” he noted

In his reaction, a former Managing Director of the defunct Liberty Bank, Chief Lawson Omokhodion welcomed the court order, arguing that it would help the government in its anti-corruption war.

When asked about what would become of the fate of bank customers in the diaspora, Omokhodion said: “People in the diaspora have not gone forever. They come home during Christmas, some come once a year and some come twice a year.

“So they have time to link their BVNs to their accounts. Also, the central bank created centres outside the country to enable them to do that.”

He added: “But the truth is that there is no person who genuinely worked for his money, who would not be concerned about the safety of his funds. If I have 25,000 pounds in a British bank account and they tell me there are things I need to do to preserve my money, I would run down there immediately.

“So why won’t you if you are truly the owner of this account? You would run back to sort things out and return. So for me government is doing the right thing. Government sometimes has been too soft. This country requires tough measures to create order.”

However, human rights lawyer, Ebun-Olu Adegboruwa described as illegal, the order granting the forfeiture of funds in accounts without BVNs to the federal government.

In a statement, Adegboruwa, citing Section 36(1) of the 1999 Constitution and Article 7 of the African Charter, said it was not proper to determine the rights of parties in their absence.

He said the BVN was a policy decision and not “backed by law”.

The lawyer also faulted the “bindingness” of the order on millions of bank customers who he said were not directly parties to the suit, reported The Cable, an online news site.

He said the quest to get revenue for the government should not be to the detriment of the constitutional and fundamental rights of the citizens.

“I am very well concerned about how we deploy interim orders for permanent purposes, such as to forfeit valuable assets without any or fair hearing from the person(s) concerned,” the statement read.

“I think it is improper to obtain interim orders to freeze the bank accounts of estates that are in dispute between the beneficiaries, of estates of deceased persons that are still being contested, of profits of companies that are still subject to litigation or other disputes, just to mention a few examples of the arbitrariness of these orders.

“There is nothing in Section 3 of the Money Laundering (Prohibition) Act 2011 that makes BVN a condition precedent for operating a bank account in Nigeria. Nothing at all. What the law requires is verifiable identity of the customer, such as name, address, photographs, identity cards, etc.

“BVN is a policy decision of the Central Bank of Nigeria and a court of law should not base its orders on executive policies that are not backed by law.

“I get truly worried with the way we adopt ex parte applications to determine very serious and weighty issues of law.

“The other point is the bindingness of an ex parte order upon the whole world and upon millions of bank customers in Nigeria, who are not directly parties to the suit.

“How proper is it for a court to seek to determine the rights of parties in their absence, in view of the clear provisions of Section 36(1) of the 1999 Constitution and Article 7 of the African Charter?

“Why this desperation, if one may ask? I support that money suspected to be proceeds of crime should be traced, isolated and forfeited if the owner cannot successfully account for it.

“But to proceed to seek to forfeit all monies in all banks meant for all customers in Nigeria on the grounds of absence of BVN is manifestly illegal.

“I therefore humbly urge the Honourable Attorney-General of the Federation to review this case with a view to tempering the tenor of these rather outlandish orders.

“The quest to scoop revenue for government should not be to the detriment of the constitutional and fundamental rights of the citizens. Which is why I have been praying that these orders are not real, but rather one of the usual social media gimmicks,” he said.