The management of the Central Bank of Nigeria (CBN), last week introduced another major policy, "Unclaimed Balances Trust Fund (UBTF) Pool Account," which will henceforth see the transfer of balances in dormant accounts to the apex bank.
The response from the general was not unexpected, given the outcry that greeted a similar move by the federal government in 2021.
It is noteworthy to recall that the idea of providing a warehouse for dormant assets in Nigeria's financial institutions was first mooted via an October 7, 2015 circular. The objective was to "Curb abuses in the operation of dormant and inactive accounts and set operational standards."
The Banks and Other Financial Institutions Act, 2020 (BOFIA 2020) empowers the CBN to assume this function. Eight years after the idea was first mooted, it was revisited in a CBN circular of April 6, which drew further attention to the need to take action.
The latest move also mirrors the action of former President Muhammad Buhari, when he signed the Finance Act 2020 into law on 31st December 2020.
The Act introduced several far-reaching changes to the Nigerian fiscal landscape, including the establishment of the Unclaimed Funds Trust Fund.
From 1st January 2021, any unclaimed dividend of a public limited liability company quoted on the Nigerian Exchange and any unutilised amount in a dormant bank account (which has remained unclaimed or unutilised for a period of not less than six years from the date of declaring the dividends or domiciling the funds in a bank account) shall be transferred immediately to the Trust Fund.
Understandably, fears have been expressed that the government will hijack unclaimed dividends and cash in dormant bank accounts (which are private property owned by Nigerians) through the Trust Fund.
The government had argued that the sums paid into the Trust Fund shall be treated as a special debt owed by the federal government to the shareholders and owners of the dormant bank accounts respectively and shall be available for claim, together with the yield thereon at any time.
Speaking on the latest move by the Cardoso led CBN, Toni Kan, a PR expert who has worked in the UK Social Investment sector with the first Black Social Investment Vehicle said: "Many commentators, however, spoke from a position, if not of ignorance, then a lack of understanding, which was also informed by the seeming lack of clarity regarding the CBN's proposed policy
"The warehousing of dormant assets can be a force for societal good, in addition to curtailing fraud and financial losses."
He explained that the warehousing of dormant assets is not peculiar to Nigeria. "In the UK, the Dormant Assets Scheme has been in operation since 2011 and is held by the Reclaim Fund Ltd (RFL), which would be equivalent to the CBN's UBTF Pool Account. RFL is regulated by the Financial Conduct Authority (FCA), which regulates the financial services industry in the UK."
Since its inception in 2011, RFL has received £1.98 billion from 46 financial institutions, and £982m has been released via the scheme to various charities for social investment and other good causes that include Youth, Social Investment, Community Wealth Fund, Climate change; Environmental; Sustainability; and the Voluntary Community & Social Enterprise (VCSE) Sector.
In the UK, to qualify as a dormant asset, a bank or building society account must have been inactive for 15 years. Other financial institutions have other dormancy periods.
What the CBN intends to do with the UBTF funds
According to the CBN's July 19 2024 circular announcing the "Guidelines on Management of Dormant Accounts, Unclaimed Balances and other financial assets in banks and other financial institutions in Nigeria," it is setting up the UBTF pool account with clearly stated objectives that include: Identify dormant accounts/unclaimed balances and financial assets with a view to reuniting them with their beneficial owners; Hold the funds in trust for the beneficial owners; Standardize the management of dormant accounts/unclaimed balances and financial assets; and Establish a standard procedure for reclaim of warehoused funds.
Under this scheme, unclaimed balances are defined as "Account Balances and other financial assets that remained dormant for a minimum of ten (10) years in the books of financial institutions and qualify for transfer to CBN."
The detailed circular went on to add that the "CBN shall treat unclaimed balances (dormant accounts and financial assets) as follows: Open and maintain the 'UBTF Pool Account'; Maintain records of the beneficiaries of the unclaimed balances warehoused in the UBTF Pool Account; Invest the funds in Nigerian treasury bills (NTBs) and other securities as may be approved by the 'Unclaimed Balances Management Committee'; Refund the principal and interest (if any) on the invested funds to the beneficiaries not later than ten (10) working days from the date of receipt of the request; where it is imperative to extend the timeline, a notice of extension shall be communicated to the requesting FI stating reasons for the extension."
Kan said; "Cardoso's CBN in issuing the July 19, 2024, circular has shown leadership in two distinct ways; one is that monetary policy leadership is a continuum especially where the health of a country's financial system is concerned. Secondly, the CBN is showing that tough actions need to be taken to ring fence dormant assets and unclaimed dividends from criminal activity.
According to the circular, "Dormant and unclaimed balances are increasingly susceptible to fraudulent transactions or abuse" putting undue pressure not just on the financial system but causing financial losses to the affected financial institutions.
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Commenting further on the susceptibility of dormant accounts to the activities of fraudsters, the CBN governor noted at the 296th Monetary Policy Committee (MPC) meeting said, "With respect to dormant account... most times, they are more susceptible to fraudsters copying your identity and trying to gain hold of the system to grab your money. So, that is a problem I think most money banks face".
Like the RFL, the CBN plans to invest the UBTF funds. In this case, they would be invested in "Nigerian treasury bills (NTBs) and other securities as may be approved by the 'Unclaimed Balances Management Committee'.
CBN to publish names of owners of unclaimed balances annually
The apex bank has further informed that it would publish the names of owners of unclaimed balances in dormant accounts that are being transferred to the Unclaimed Balances Trust Fund (UBTF) Pool Account.
CBN disclosed this among other things in a statement titled: "Frequently asked questions on the guidelines for the management of dormant accounts, unclaimed balances and other financial assets in banks and other financial institutions in Nigeria.
The apex bank said: "The CBN shall publish annually on its website, the list of owners of unclaimed balances that have been transferred to the 'UBTF Pool Account', the procedure for reclaim of warehoused funds and other financial assets; and publish annually a notice in three national daily newspapers inviting members of the public to check details of outstanding unclaimed balances in its custody.
