HOW TO GET AN INTERNATIONAL MONEY TRANSFER LICENCE IN NIGERIA

This article highlights, in a question-and-answer format, the purpose of International Money Transfer Operator (“IMTO”) licence for inbound cross-border payment services including the requirements, costs and procedures that a potential investor in the sub-sector in Nigeria will undertake in order to incorporate and get the licence for an IMTO company as well as the other post-incorporations registrations and approvals the company must get before commencing operations in Nigeria.

What is an International Money Transfer Licence?

The IMTO licence is required for the provision of inbound cross-border payment services from overseas to Nigerians and foreigners in Nigeria. In Nigeria, no person or institution is allowed to provide international money transfer services unless such person or institution has been duly licensed by the Central Bank of Nigeria (“CBN”). 

The International Money Transfer licence allows its holders to do any or all of the following:

(a) To accept monies for the purpose of transmitting them to persons resident in Nigeria;  

(b) To provide inbound cross-border personal money transfer services, such as, money transfer services towards family maintenance and money transfer services in favour of Nigerians in Nigeria or foreign tourists visiting Nigeria; and

(c) To provide money transfer services that target individual customers mainly and the transactions shall be on “person to person transfer” basis to safeguard against corporate customers that might structure their transactions into smaller amounts to circumvent the statutory reporting threshold.

It is noteworthy that an IMTO shall not engage in any other business other than as authorized by the CBN. Specifically, an IMTO is not authorized to do the following: 

(a.) Acting as an authorized dealer in gold or other precious metals; 

(b.) Engaging in deposit taking and/or money lending business; 

(c.) Maintenance of current accounts on behalf of customers; 

(d.) Establishing of letters of credit; or 

(e.) Acting as a custodian of funds on behalf of customers. 

(f.) Engaging in institutional transfers. 

(g.) Buying of foreign exchange from the domestic foreign exchange market for settlement. 

The licensing and regulation of the International Money Transfer Operators (“IMTO”) in Nigeria are pursuant of the Revised Guidelines for IMTO 2024.

What are the permissible operations of an IMTO licence holder?

Please note that the money transfer services of an IMTO must target individual customers and the transactions shall be on “person to person”, “business to person” and “business to business” transfer basis which may be reviewed by the CBN from time to time. The permissible operations of International money transfer services shall focus on inbound money transfer transactions. The transactions shall consist of the following activities: 

(a)The acceptance of monies for the purpose of transmitting them to persons resident in Nigeria. Please note that the CBN in January 2024 has stopped all IMTOs from processing outbound payments to other countries.

(b)Cross-border personal money transfer services, such as, money transfer services towards family maintenance and money transfer services in favour of foreign tourists visiting Nigeria, etc. 

(c) The money transfer services shall target individual customers mainly and the transactions shall be on “person to person”, “business to person” and “business to business” transfer basis in order to safeguard against corporate customers that might structure their transactions into smaller amounts to circumvent the statutory reporting threshold. 

What are the Non-Permissible Activities of an IMTO licence holder?

A licensed IMTO company shall not:

a. Act as an authorized dealer in gold or other precious metals; 

b. Engage in deposit taking and/or lending money; 

c. Maintain current accounts on behalf of customers; 

d. Establish letters of credit; or 

e. Act as a custodian of funds on behalf of customers. 

f. Engage in institutional transfers. A money transfer service operator shall not engage in any other business other than as authorized by the Bank. 

g. Buy foreign exchange from the domestic foreign exchange market for settlement.

Is there any mandatory share capital for an International Money Transfer Service provider in Nigeria?

Yes, the required share capital for an International Money Transfer Service company in Nigeria is $1,000,000 (One Million US Dollars) for either a foreign or Nigerian company. 

The CBN requires promoters to make a deposit of the above sum in a designated account domiciled with the CBN as demonstration of the promoters’ seriousness about the business. The deposited sum will be refundable after the grant of the licence.

What are the requirements for incorporating an International Money Transfer Service company in Nigeria?

Please note that the Corporate Affairs Commission (“CAC”) will not incorporate an IMTO unless a provisional approval of the CBN called “Approval-In-Principle” (“AIP”) has been obtained. 

Below are the requirements for incorporation of an IMTS company in Nigeria:

i. Two proposed names for the company: these names will be submitted to the Corporate Affairs Commission for name search, screening and approval. Upon approval, the promoters may thereafter proceed to the CBN to obtain an AIP after which they can register the company with the approved name;

ii. Proposed registered address, email address and phone number of the company;

iii. Details of the Shareholders, Director(s) and Company Secretary to include their names, Contact/Home address, Email address, Phone number, Date of birth, Occupation, National Identification Number (NIN), and electronic signatures respectively. Please note that for foreigners, an international passport will be sufficient for means of identification;

iv. Object of the Company: The proposed company must be registered as an International Money Transfer Service company.

You can learn more from our previous article on the REQUIREMENTS OF REGISTERING A COMPANY IN NIGERIA.

What are the Regulatory Frameworks for an International Money Transfer Service operator in Nigeria?

The principal body of laws regulating the International Money Transfer Service in Nigeria are contained in the following Legislations:

i. Central Bank of Nigeria Act 2007

ii. Bank and Other Financial Institution Act (BOFIA), Law of the federation of Nigeria, 2004.

iii. CBN Guidelines on International Money Transfer Services in Nigeria 2014

There are other regulations and circulars of the CBN which are applicable to the International Money Transfer Services in  Nigeria.

What are the post-incorporation regulatory registrations and approvals for an international money transfer service company in Nigeria?

Upon incorporation, the following are the three (3) main post-incorporation regulatory registrations and approvals for setting up and operating an international money transfer service company in Nigeria:

1. Registration with the Federal Inland Revenue Service (FIRS);

2. Registration with the Special Control Unit against Money Laundering (SCUML); and

3. Registration with the Central Bank of Nigeria (CBN);

What are the Licensing Registration Requirements for International Money Transfer Operator’s Licence in Nigeria?

Any company that is desirous of providing international money transfer services in Nigeria must apply and obtain the IMTO license from the CBN through the Director, Trade and Exchange Department of the CBN. 

The followings are the requirements for registration with the Central Bank of Nigeria:

• The names of Authorised Dealer Bank(s) to serve as local agent(s) and copy of the agency agreement;

• A copy of the applicant’s certificate of incorporation;

• Certified true copy of the company’s Memorandum & Articles of Association of which the primary object clause shall indicate the provision of money transfer services;

• Shareholding structure of the company;

• CAC Form showing Allotment of shares) and Particulars of Directors of the company;

• Information on beneficial owners (BO) of the company (where applicable);

• Profile of the Board and Management of the Company to include: CVs, functional contact e-mails and telephone numbers, ownership, governance and management structure;

• The organogram of the company;

• Business plan includes:

• The nature of business,
• Features of the scheme,
• Internal control systems and monitoring procedures,
• Security features that will be put in place,
• Three years of financial projections and market analysis for the company,
• Transaction and other charges that the company will bear
• Profit sharing agreement among the parties,
• Diagrammatic illustration of transaction flows,
• Consumer Protection and Dispute Resolution Mechanism.

• Information technology policy of the company, including:

• Privacy Policy
• Information Ownership, Disclosure, and Loss Policies
• The Backup and Restore Policy
• Network Security Policy
• Encryption Policy
• Confidential Data Policy
• Password Policy
• Third Party Connection Policy
• Incidence Response Policy
• Physical Security Policy

• Enterprise Risk Management Framework

• Contingency and Disaster Recovery Plan (business continuity plan)

• Draft agreements with the participating parties

• Tax Clearance certificate for three (3) years

• Project Development Plan (time, location, operation, etc.)

• Credit reports from a licensed credit bureau for the shareholders and key officers of the money transfer services operator

• Any information as may be required by the CBN from time to time

• Evidence of meeting the minimum paid-up share capital and application fee:

i. Evidence of payment of the sum of $1,000,000 (One Million Dollars) to the CBN; or 

ii. Evidence of payment of the sum of N10,000,000 (Ten Million Naira) being non-refundable Application Fee.

• Presence in at least seven (7) different countries (see previous Guidelines) and Approval to operate in other jurisdictions or agency agreements (for all IMTOs).

Can a local payment company engage in partnership arrangements with an overseas company for international money transfer services?

Yes. A money transfer operator, who wishes to engage a foreign technical partner that will provide global or regional payment or money transfer platform, shall obtain a letter of no objection from the CBN. 

The following conditions shall apply to the technical partner:

a. The foreign technical partner must be a registered entity, licensed in its home country to carry on money transfer activities. 

b. It must 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. 

c. The Overseas technical partner should be well established in the money transfer business, with a track record of operations. 

d. There should be a Memorandum of Understanding (“MoU”) that clearly delineates liabilities between the partners in the event of disputes and/or process failures.

Note that the CBN will further conduct appropriate due diligence on the promoters, directors, and key officers of the proposed money transfer operator.

What happens when an IMTO licensee acts contrary to the CBN guidelines?

A money transfer service operator shall not engage in any other business other than as authorized by the CBN. If the operator or its agent fails to comply with these guidelines, the CBN may take any corrective action against the defaulters as may be prescribed from time to time. 

The followings are some of the sanctions the CBN may make against an IMTO, its board of directors, officers, or agents:

i. Withhold corporate approvals;

ii. Financial penalties;

iii. Suspension from the money transfer operation; and 

iv. Revocation of the money transfer service operation license.

What is the estimated cost for incorporation and licensing of an International Money Transfer Service Company in Nigeria?

What is the estimated timeline for the completion of the incorporation and licensing of an IMTS company?

The estimated timeline for obtaining the Approval-in-Principle of the CBN is between 3 to 6 months.

Final licence may also take similar timeline.

Can a Local IMTO Company partner with a Foreign Technical Partner?

Yes. An indigenous IMTO who wishes to engage a foreign technical partner shall obtain the prior approval of the CBN subject to the following conditions:

i. The technical partner must be a registered entity in its home country with approval to carry on international money transfer services;

ii. The overseas technical partner should be well established in money transfer services business, with a verifiable track record of operations;

iii. There should be a Memorandum of Understanding that clearly delineates the liabilities in the event of disputes and/or process failures; and

iv. The CBN shall conduct appropriate due diligence on the promoters, directors and key officers of the proposed IMTO.

Are there any transaction limits for IMTO companies in Nigeria?

Yes.

All in-bound money transfers to Nigeria shall only be disbursed to beneficiaries through bank accounts or mobile money wallets. Where the beneficiary does not have a bank account or mobile money wallet, payments shall only be made upon the provision of a satisfactory reference from a current account holder in a bank, confirming that the beneficiary is the bona fide owner of the funds.

The Revised Guidelines for IMTO 2024 now prohibits IMTO from processing any outbound international money transfer.

Where a currency conversion service is offered before initiation of a payment transaction or at the point of payment, the money transfer services operator must disclose all charges, as well as the exchange rate to be used for converting the payment transaction 

Can Transfer transactions be split in view of the limits set by the law?

A money transfer service operator shall not allow or process a transaction that appears to have been deliberately split into small amounts to avoid the reporting requirements under the provisions of the Anti-Money Laundering/Combating of Financial Terrorism Act. 

Is there any obligation to file returns by IMTO companies?

Yes. A money transfer service operator shall submit its returns to the Director, Trade & Exchange Department, Central Bank of Nigeria, Abuja. All transactions generated by the money transfer operator in the course of its business activities must be posted in its books of accounts and reported to the CBN. The returns entail accurate information on each transaction. Transaction information shall include: 

(a) Date of transaction; 

(b) Name, address and contact phone number of sender; 

(c) Name, address and contact phone number of beneficiary; 

(d) Acceptable means of identification; (i) Amount and currency; (j) Occupation of the sender; (k) Type (Sending or Receiving) and Purpose of the transaction; and (l) Source of funds. 

What are penalties for violating the conditions of the licence or the IMTO Guidelines?

If a Money Transfer Service Operator or its agent fails to comply with the conditions of the CBN licence or Guidelines, the CBN may take any corrective action against the IMTO as may be prescribed from time to time.

In addition to the use of remedial measures, the CBN may take any or all of the following sanctions against an IMTO, its board of directors, officers or agents: 

(a) Withhold Corporate approvals; 

(b)Financial Penalties; 

(c) Suspension from Money Transfer operation; and 

(d) Revocation of the Money Transfer Service operation licence.