SEC Ponders Use Of BVN To Fight Capital Market Fraud

SEC Ponders Use Of BVN To Fight Capital Market Fraud

By Tunde Osho 

The Securities and Exchange Commission (SEC), has started the process of amending capital market’s rules to pave the way for the admission of Bank Verification Number (BVN) as part of acceptable means of identification in the capital market.

A circular by the apex capital market regulator, has indicated that SEC has started preparing the draft of the “proposed inclusion of BVN as a valid means of identification of individual clients in the capital market” stipulates that a capital market operator shall use a combination of electronic and documentary checks to confirm different sources of the same information provided by the clients.

“The capital market operator may use the BVN as a means of verifying information provided by the clients,” the rule stated.

SEC noted that the adoption of BVN was based on the fact that BVN gives a unique identity that can be verified across the Nigerian banking industry and it is not peculiar to one bank alone.

According to SEC, the BVN is a nationally-acceptable means of identification implemented by all banks in Nigeria as directed by the Central Bank of Nigeria (CBN).

The Commission stated that the adoption of BVN would help to address issues of identity theft and reduce exposure to fraud while simultaneously promoting financial inclusion of unbanked clients.

The Economic and Financial Crimes Commission (EFCC) is currently investigating not less than 10 cases of investors’ impersonation. About 20 persons are being investigated by the anti-corruption agency for alleged impersonation and fraudulent attempt to convert investors’ shares into their names.

Many of the impersonators were operating as syndicates with links across the chain of the capital market transaction. Some of the impersonators had successfully converted and sold other people’s shares but were apprehended when the original owners of the shares reported the illegal transactions.

Although the details of the investigations are still sketchy because of the confidentiality of the investigations, a source in the know of the investigations confirmed that there were syndicates that took advantage of the dormancy of some investors’ account to surreptitiously prey on such accounts. The source said some of the impersonators specialised in fraudulent conversion of shareholding estates.

Capital market regulators have responded to recent cases of capital market frauds by tightening existing disclosure rules and sanctions as well as increased collaboration with the law enforcement agencies.