The Process Of Blacklisting In The Banking Sector

The Banking Sector deals largely with the storage of cash, credit facilities, investments, and other financial transactions. It is one of the main forces behind most economies in society, as it protects people’s money and makes money available to borrowers who make profitable investments. Financial institutions perform countless functions which include deposits and withdrawals, currency exchange, forex trading, wealth management, and risk management. Therefore, to address the issues of safety and stability of financial institutions, governments of countries have enacted laws, policies, guidelines, regulations, directions, etc., to regulate the activities of Banking Sector players, that is, both the Bank and its customers.

The Nigerian government has over the years enacted several laws to regulate the Banking Sector. The primary laws are; the Central Bank of Nigeria (Establishment) Act of 2007, and the Banks, and other Financial institution Act of 2020. Others include the Nigerian Deposit Insurance Corporation Act of 2006, Companies and Allied Matters Act of 2020, Foreign Exchange (Monitoring and Miscellaneous Provisions) Act of 1995, etc. these laws are provided to protect the interest of investors in the Banking Sector and also ensure that businesses are conducted with high standards and ethics.

This regulation also extends to the categories of persons that can be board members and staff of a financial institution. It also provides for certain crimes and punishments for workers in the bank commonly known as banking crimes. Persons who are found guilty of these crimes are liable to be blacklisted in accordance with the Operational Guidelines for Blacklisting. This article seeks to explain the process of blacklisting in the banking sector.

Blacklisting in the Banking Sector

The term blacklist refers to a list of people, organizations, or countries that are shunned or excluded by others because they are alleged to have engaged in unacceptable or unethical behaviour or activities. Such offences include fraud, forgery and dishonesty.[1] The practice of blacklisting in the banking sector is in furtherance to the requirements and provisions of Section 48, sub-section 4 of BOFIA CAP B3, LFN 2004 which states:

“Any person whose appointment with a bank has been terminated or who has been dismissed for reasons of fraud, dishonesty or convicted for an offence involving dishonesty or fraud shall not be employed by any bank in Nigeria”. This is to prevent the recycling of persons who have been found guilty of banking crimes within the Banking Sector and to ensure that only persons of integrity, trust, and proven character are employed and retained in the Banking Sector.

However, this has been abused by some employers in the banking space as names of staff guilty of late coming, abandonment of duty, etc have been forwarded to the Secretary of the Bankers Committee to be added to the blacklist. Also, due process and thorough investigation have not followed before the termination of an employee’s employment on the grounds of fraud, forgery, and dishonesty. This has led to several petitions to the Central Bank of Nigeria for the reversal of names in the Blackbook.

To curb this menace and abuse of power and process, the governor of the Central Bank of Nigeria in the exercise of his powers under “Banks and Other Financial Institutions and Central Bank of Nigeria Acts,” enacted the Operational Guidelines for Blacklisting in Nigeria. These guidelines are issued to provide a guide to the procedure for forwarding names to the Secretary of the Bankers’ Committee for inclusion in the Register of Terminated, Dismissed, or Convicted staff of Banks and Other Financial Institutions on the grounds of fraud, forgery, and dishonesty otherwise known as the black book.

PURPOSES OF BLACKLISTING

Blacklisting is intended to achieve the following purposes:

1. To prevent discredited and fraudulent staff from being recycled within the financial system.
2. To ensure that only staff with credible references are employed within the financial system.
3. To serve as a deterrent to other staff from committing fraud/dishonest acts.
4. To hold accountable individuals that fail to meet the expected standards of integrity and professionalism required of bankers.
5. To ensure operational compliance by banks and other financial institutions with Section 48 (4) of BOFIA LFN CAP B3 2004.

PROCESS OF BLACKLISTING

The CBN maintains a register called the “black book” containing names and details of such staff that were dismissed or terminated, in line with Section 48 (4) of BOFIA 2004. For a person’s name to be included in the black book, such a person’s employment in the Banking Sector must have been terminated for any of the following reasons:

1. Act of dishonesty.

Before a person’s name is included in the black book, due process must be followed. Which include:

1. A thorough investigation was conducted by a disciplinary committee to establish that the staff involved had committed an act of fraud and dishonesty.
2. The staff must have been granted a fair hearing throughout the disciplinary process by the disciplinary committee. He shall be notified in writing informing him of the following;
3. A complaint for blacklisting has been filed against him, stating the grounds for such and the consequences of being blacklisted.
4. The staff must be given the opportunity to present documentary or verbal testimony that may affect the decision.
5. The final decision of the committee must be communicated to the staff.

The bank shall then forward a report on the demised or terminated staff declaring that it had, followed due process before arriving at the decision. Banks are obligated to report to the CBN the names of staff who have been dismissed/terminated on grounds of fraud and forgeries. Such a report must be signed by the managing director. The report shall contain the following:

1. The names of the person(s) involved (which should be written in full without any abbreviation).
2. Date of birth.
3. Local Government of Origin.
4. State of Origin.
5. Offense committed.
6. Designation/Status; and
7. Unique identification details i.e. international passport, national identity, BVN, etc.

Documents of the investigation and the disciplinary committee’s final decision must also be submitted.

Upon receipt of such a report, the CBN would review the report and establish that due process was actually followed. Upon confirmation, the Head of the Bankers Committee shall subsequently blacklist the persons. However, if CBN determines that due process was not followed, or the offence listed is not a blacklistable offence, the CBN will sanction the erring bank for not adhering to the provisions of the Operational Guidelines for Blacklisting.

A blacklisted person can only be delisted upon CBN’s issuance of a Delisting Order emanating from a Court’s Order or a request from the bank following CBN’s concurrence to the motion for reconsideration.

In the case of CBN & Anor V Aribo,[2] the respondent was found guilty of illegal foreign exchange transactions while in employment by Equity Bank by the special committee set up by the bank to investigate his allegations. The respondent’s suit was to compel the CBN to use its discretion in his favour. It was herd per Eko JSC

The CBN cannot be compelled to exercise its discretion in a manner favourable to the respondent. I had earlier stated that in view of the report of the special committee which had indicted and found the respondent guilty of illegal foreign exchange transactions, it will amount to a dereliction of duty for the CBN to have cleared or recommended the respondent for appointment in another commercial bank. The respondent’s past reprehensible serious misconduct does not speak well for his appointment in another commercial bank. Characters like the respondent do not deserve a place in sensitive banking institutions over which the CBN is the regulatory body.

CONCLUSION

The Banking Sector is a sensitive and capital-intensive sector, it deals with large amounts of money which necessitate it to be highly regulated, to prevent dishonest persons and persons of questionable character from partaking in its management and rendering its services. To this end, the safety, stability, and investments of the players in the Banking Sector must be ensured.

SNIPPET

The Nigerian government has enacted several laws and regulations to ensure that businesses in the banking sector and other financial institutions, are conducted in a safe and sound manner by competent and trustworthy persons. Also, the black book was introduced to prevent the recycling of dishonest persons in this sector.

References: Bank blacklist, the Nigerian banking sector, Bank and fraudMr Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of Corporate Law Practice and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Joy Ayara

Joy is a member of the Corporate Team at OMAPLEX Law Firm. She also holds commendable legal expertise in Banking Law Practice

She can be reached at joy.ayara@omaplex.com.ng

[1] Blacklist Definition (investopedia.com) accessed 18/10/2022

[2] (2017) LPELR – 47932 (SC)