The Bureaux De Change (BDCs) operators were licensed by the CBN to engage in forex transactions to eliminate the illegal activities in the country. The operations of the BDCs were under the surveillance of the CBN to ensure compliance to apex bank regulations. In this report AMAKA IFEAKANDU writes on the roles of the BDCs in ensuring exchange rate stability in the country.
The Bureaux De Change (BDCs) segment of the nation’s foreign exchange market has remained a critical component of the Nigerian financial market playing a pivotal role to ensure exchange rate stability and job creation in the country.
Although BDCs are established globally to perform different roles but their primary mandate according to the Association of Bureau De Change Operators of Nigeria (ABCON), is to ensure forex availability to the critical retail sector of the forex market in terms of supply, to bridge the gap between the official and the parallel markets.
Why BDCs established
The Central Bank of Nigeria (CBN) in its manual described BDCs as a retail foreign exchange dealer carrying on the business of Personal Travel Allowance (PTA), Business Travel Allowance (BTA), medical and school fees, and also on inward and outward transfer.
This shows that the BDCs forex segment was established to support Nigeria’s economic growth agenda and the CBN’s commitment towards achieving exchange rate stability in the forex market.
Operators view
The operations of the BDCs according to operators have even gone beyond ensuring rate convergence and providing liquidity, to the achievement of the major policy of the CBN, which centred on exchange rate stability.
They stated that the attempt by any person or group to generalize all Bureaux De Change (BDCs) operators as weakest link in fight against illicit financial flow is unacceptable, stressing that erring BDC operators have severally been sanctioned by the Central Bank of Nigeria and Association of Bureaux De Change Operators of Nigeria in line with the industry’s zero tolerance for regulatory abuse.
The Association of Bureaux De Change Operators of Nigeria (ABCON) as a result rejected in totality, the recent report published by in one of the National newspapers titled: CBN’s Poor Regulation of BDCs Hurting the Economy’ to label BDCs as economic saboteurs and illicit forex traders.
The association insisted that money laundering and illicit funds transfer are illegal practices that predates the coming of licensed BDCs, stressing that these illegal activities are so pervasive and widespread that every segment and all operators in the financial industry is vulnerable to their operations and that is why many prominent financial institutions including global banks, and investment firms have been found culpable in this respect.
Commenting on the recent publication, ABCON President, Alhaji Aminu Gwadabe, said: “We also do not agree with the newspaper that the CBN has been “inexcusably weak in enforcing its own rules”, as the regulator has in the past, fined erring BDCs and insole extreme cases, withdrew their operating licenses”.
He said that contrary to the Punch Newspaper editorial, the resumption of dollar sales to BDCs has led to nearly N40 appreciation of the naira in the first week of the exercise, and saved the local currency from continued depreciation.
He said the CBN’s aim of easing pressure on supply and firming up the naira has succeeded and will continue to be achieved with improved liquidity in the market.
“The N2 margin earned by BDCs from every dollar sold is barely enough to cover their operating costs and keep over 15,000 Nigerians employed by the sector, hence the assertion that BDCs business is one of the lucrative businesses in the country is wrong,” he stated.
Gwadabe also said that the newspapers’ call for a moratorium on licensing new BDCs is unacceptable as any new operator that meets the requirement for registration should be given the opportunity to operate.
The ABCON president said that BDCs operate only within the allowable scope of transactions that is PTA, BTA, School fees, medicals, among others, adding that BDCs all over the world are an important retail sector of the foreign exchange market.
In his explanation, he said “The BDCs in Nigeria have over the years remained the most potent tool of exchange rate stability management of the CBN whenever the local currency suffers as seen in 2006, 2009, 2016 and 2020. The BDCs are not illegal operators but licensed with CAC and CBN and pay levies and taxes to the government. The over 5000 BDCs have created huge employment opportunities and remained a big threat to over one million unlicensed operators whose activities are usually misconstrued to represent the licensed players”
ABCON’s Role In BDCs Compliance
Gwadabe said ABCON is playing a stronger role in the BDC industry by ensuring that operators embrace effective self-regulation and compliance with extant Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) laws and regulations to mitigate the risks and vulnerabilities in the sub-sector.
He said that ABCON has also developed and implanted Code of Conduct for members to promote ethical practices and transparency while also continually advising the apex bank on market intelligence on key industry issues.
Gwadabe stated that ABCON had consistently advised BDCs to put in place and implement a system of internal policies, procedures and controls including Know Your Customer, Customer Due Diligence and reporting of all suspicious transactions to regulators.
He stated that ABCON is training BDCs on a regular basis on the need to keep transaction records, and get a designated compliance officer that has day-to-day oversight over AML/ CFT programmes. He said the Compliance Officers have been taught the rules in preparing Suspicious Transaction Reports (STRs), and rendering STRs’ returns to the Nigeria Financial Intelligence Unit (NFIU).
He said that BDCs have met and will continue to meet a number of compliance requirements specified by Financial Action Task Force (FATF) and local regulators, adding that the collation and reporting of foreign currency transactions and suspicious transactions by BDCs are now fully automated.
ABCON, according to him, had in 2019, launched its Live Run Automation Portal in Lagos. The technology automates all BDC Operations with those of Nigeria Inter-Bank Settlement System (NIBSS), NFIU and the CBN to improve the level of compliance of the BDCs with set regulations. ABCON, severally, organised training for its members, and at other times, partnered NFIU and the EFCC to build capacity for operators.
Report filling by BDCs
ABCON has continued to ensure that BDCs file their reports as and when due. The BDCs also do customers Know Your Customer (KYC) and due diligence reports.
Contrary to belief that BDCs are not well regulated , Gwadabe said there are increasing difficulties arising from over regulation and complex documentation requirements that licensed BDC operators are facing in carrying out their daily legitimate operation remain worrisome.
For instance, six units within the CBN are involved with BDC regulations, supervision, licensing, monitoring, saying this constitutes multiple regulation of a unit of the financial sub-sector that is only involved as a small market player”. He said a BDC operator renders daily, monthly, quarterly, half yearly and annual returns to these various departments of the same corporate body, which could be very cumbersome, repetitive and time consuming for both the operator and the regulator.
Understanding the Legitimate BDC Operators
In a statement, ABCON Executive Council said it considered the recent report which alleged weak regulation of the BDC sector, linking BDCs money laundering activities and illicit funds transfer; and condemned dollar sales to BDCs by the CBN as unfair and biased.
It described it as a product of ignorance of the role and contributions of the BDCs sector, as well as the various measures put in place by the Central Bank of Nigeria and ABCON to ensure strict regulation of the sector as well as compliance with all regulatory requirements especially anti-money laundering measures.
The report according to the BDC executive council failed to distinguish between licensed BDCs and illegal currency hawkers or money changers, adding that licensed BDC is registered as a corporate body with the Corporate Affairs Commission (CAC) and is licensed by the CBN to provide retail forex services across the counter.
