IMF Warns CBN eNaira May Lead To Money-Laundering, Terrorism Fundng Risk

IMF warns that expansion of the eNaira’s use to cross-border cash transfers and agency bank networks could result in additional money-laundering and terrorism-funding risks.

iexclusive News Nigeria gathered that according to the report, Nigeria became one of the first countries in the world to adopt a central bank digital currency eNaira on October 25. (CBDC).

Despite the benefits, such as expanding financial inclusion, there are significant hazards associated with the eNaira that the Nigerian Central Bank must address.

The IMF praised the CBDC’s gradual implementation and emphasized the importance of maintaining vigilance against various dangers.

The risks include monetary policy implementation, bank funding, cyber security, operational resilience.

Also financial integrity and stability, through regular risk assessment and contingency planning.

IMF Fears About The eNaira

The IMF said, “Prospective expansion of eNaira use to cross-border fund transfers and agency bank networks may cause new money-laundering/financing of terrorism risks.”

The IMF, on the other hand, has stated that the CBDC is vulnerable to cyber security risks, unforeseen legal issues, and financial integrity risks.

“The eNaira is associated with cyber security risks.”

“Unforeseen legal issues, including those relating to private law aspects of its operations (e.g., the precise nature of the legal relationship between wallet providers and CBDC holders), may expose eNaira to litigation and operational risks,” it added.

According to the IMF, “there are financial integrity risks that can be mitigated by using a tiered identity verification system and applying more stringent controls to less verified users.”

The IMF emphasized the importance of being aware of the various risks.

Urging the CBN to address existing gaps in anti-money laundering legislation and combat terrorism financing.

“While preventive measures and the planned AML/CFT regulations for eNaira intermediaries are welcome,” the IMF said, 

“A money laundering/terrorist financing risk assessment of domestic and cross-border uses of eNaira,”

“The adoption and implementation of the regulation, as well as risk-sensitive mitigation measures, should be a priority.”

Furthermore, the Fund rated Nigeria high in terms of the likelihood of slow progress in combating corruption.

Tax evasion, and related money laundering, and encouraged the country to step up its anti-corruption/governance efforts and strengthen the AML/CFT framework.