Rapid fintech expansion in Nigeria is heightening regulatory scrutiny, as authorities push for stronger anti-money laundering compliance to safeguard the financial system, JUSTICE OKAMGBA reports

Banks, mobile money operators, international money transfer operators, and other financial institutions in Nigeria are now required to deploy automated anti-money laundering systems under new baseline standards introduced by the Central Bank of Nigeria.

The directive is part of a broader push by the apex bank, under its Governor, Olayemi Cardoso, to strengthen financial crime detection and ensure stricter compliance across the financial sector.

Regulators believe the initiative will not only reinforce safeguards against illicit financial flows but also improve investor confidence and attract greater foreign capital into the domestic economy.

Automation has increasingly become the backbone of efficient and sustainable business operations globally. In the financial services sector, particularly, automated systems provide faster, more accurate monitoring tools that strengthen oversight and reduce vulnerabilities to fraud and illicit financial activities.

When applied to financial crime prevention, automation enables institutions to detect suspicious activities more effectively while also reassuring stakeholders about the credibility and resilience of the financial system.

This thinking explains the recent decision by the Central Bank of Nigeria to strengthen anti-money laundering controls across banks, fintech firms, and other regulated financial institutions.

Strengthening compliance frameworks

The new guidelines issued by the apex bank reinforce the framework for implementing automated solutions designed to support AML, Combating the Financing of Terrorism, and Countering Proliferation Financing. The primary goal of the policy is to improve the capacity of financial institutions to detect, monitor, and report suspicious transactions in real time.

In a circular jointly signed by the CBN Director of the Banking Supervision Department, Olubukola Akinwunmi, and Olubunmi Ayodele-Oni of the CBN Compliance Department, the regulator stated that the standards are intended to strengthen adherence to existing AML, CFT, and CPF regulations while encouraging the adoption of emerging technologies to enhance financial crime risk management.

According to the circular, the implementation of the guidelines takes effect immediately from the date of issuance. Financial institutions are therefore expected to begin deploying automated systems that support transaction monitoring and regulatory reporting.

Under the framework, deposit money banks have been given an 18-month deadline to achieve full compliance with the new standards. Other financial institutions, including fintech companies and payment service providers, have been granted up to 24 months to complete the implementation process.

The CBN further directed all affected institutions to submit detailed implementation roadmaps to its Compliance Department within three months of the issuance of the circular. The plans are expected to outline how each institution intends to transition to automated AML systems.

Industry experts believe the move will significantly improve the speed and accuracy of detecting suspicious financial transactions while reducing the risks associated with money laundering, terrorism financing, and proliferation financing within the Nigerian financial system.

How AML systems operate

Automated AML systems typically rely on advanced analytics, data monitoring tools, and artificial intelligence to track vast volumes of financial transactions. These technologies are designed to identify unusual patterns, flag potentially suspicious activities, and generate alerts that can then be reviewed by compliance teams within financial institutions.

By analysing large datasets in real time, such systems help reduce the likelihood that suspicious transactions will go unnoticed. The new baseline standards issued by the Central Bank of Nigeria are intended to guide financial institutions in deploying these technologies in a structured manner while ensuring that their systems remain aligned with regulatory expectations.

The apex bank also noted that it will continue to monitor developments within the financial system and may issue additional guidance where necessary to ensure effective implementation of the framework.

“All stakeholders are required to ensure strict compliance with the guidelines and all other regulations,” the circular stated, noting that the measure forms part of the CBN’s broader efforts to promote financial system stability and integrity.

Nigeria has recently recorded notable progress in strengthening its anti-money laundering and counter-terrorism financing framework. The Financial Action Task Force recently removed Nigeria from its grey list of countries identified as having strategic deficiencies in addressing money laundering and terrorist financing risks.

Reacting to the development, Cardoso described the decision as a significant endorsement of Nigeria’s reform agenda. “The FATF’s decision to remove Nigeria from the grey list is a strong affirmation of our reform trajectory and the growing integrity of our financial system.

“It reflects a clear policy direction and the coordinated efforts of key national institutions working together to deliver sustainable, standards-based reforms. Our priority now is to consolidate these gains, ensuring that compliance, innovation, and trust continue to advance hand in hand to reinforce financial stability and strengthen Nigeria’s global credibility,” he said.

The FATF is the global body responsible for leading international efforts to combat money laundering, terrorist financing, and proliferation financing.

The 40-member organisation, which receives support from institutions such as the World Bank Group and the International Monetary Fund, establishes international standards designed to help national authorities trace and combat illicit funds linked to drug trafficking, illegal arms trading, cyber fraud, and other serious crimes.

For Nigeria, exiting the FATF grey list has opened greater opportunities within global financial markets. The Paris-based watchdog’s decision is widely regarded as a major step forward for Nigeria’s financial system, particularly as the country seeks to rebuild investor confidence, lower the cost of capital, and strengthen the credibility of the financial sector.

Other countries that have also been removed from the list include South Africa, Mozambique, and Burkina Faso.

“As of February 2025, the FATF has reviewed 139 countries and jurisdictions and publicly identified 114 of them. Of these, 86 have since made the necessary reforms to address their AML/CFT weaknesses and have been removed from the process,” the report said.

The organisation identifies countries or jurisdictions with serious strategic deficiencies in combating money laundering, terrorist financing, and the financing of proliferation activities.

“For all countries identified as high-risk, the FATF calls on all members and urges all jurisdictions to apply enhanced due diligence, and in the most serious cases, countries are called upon to apply counter-measures to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing risks emanating from the country,” the report added.

By addressing regulatory gaps and strengthening enforcement measures against illicit financial flows, the four countries have now met the FATF requirements for delisting, improving their standing among global financial institutions and capital markets.

Nigeria and South Africa were added to the list in February 2023, while Mozambique joined the monitoring process in October 2022. Burkina Faso had earlier been included in February 2021.

Commenting on the development, President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, said the development demonstrates Nigeria’s commitment to implementing global standards.

“The recent announcement of the Financial Action Task Force on the removal of Nigeria from its Grey list, known as the Dirty Money list, shows Nigeria’s commitment to achieving the 40 FATF recommendations. The move has tremendously induced confidence and removed tension in the financial market,” he said.

Fintech’s expanding influence

Nigeria’s rapidly growing fintech ecosystem is increasingly seen as a strategic platform to promote inclusive economic growth, strengthen financial resilience, and position the country more competitively in the evolving global digital economy.

Financial technology provides an effective channel for expanding access to financial services, particularly among underserved and financially excluded populations.

With mobile phone penetration in Nigeria far exceeding access to traditional banking services, analysts believe there is a strong opportunity to bridge the gap between digital reach and financial inclusion.

A recent CBN Fintech Report titled “Shaping the Future of Fintech in Nigeria: Innovation, Inclusion and Integrity” identified several structural barriers that continue to limit broader financial inclusion.

These include challenges related to identity verification systems, affordability of digital services, and infrastructure limitations across parts of the country.

Addressing these constraints, the report noted, will be critical to unlocking more inclusive growth within the financial sector.

The report was developed through extensive consultations with stakeholders and supported by a nationwide ecosystem survey. It assesses the current state of Nigeria’s fintech environment, identifies strategic priorities, and outlines policy directions that could guide the sector’s next phase of development.

According to the research, Nigeria has the potential not only to lead in fintech adoption but also to shape the design of the global fintech landscape if it strengthens collaboration between regulators and innovators while improving infrastructure and policy frameworks.

The report also indicated that Nigeria could strengthen its role in setting continental standards and promoting mutual recognition frameworks that would support deeper regional integration within Africa’s digital economy.

Beyond regional integration, the country is increasingly positioned to contribute to the development of global digital finance corridors.

These ambitions, the report noted, highlight Nigeria’s opportunity to enhance its international reputation by demonstrating regulatory leadership in areas such as AML enforcement, consumer protection, and real-time payments infrastructure.

Cardoso said he had witnessed firsthand the transformative potential of digital finance to broaden economic participation, create employment opportunities, and improve the livelihoods of millions of Nigerians.

According to him, this experience has reinforced the determination of the Central Bank to harness fintech innovation as a catalyst for national development.

“Nigeria is undergoing a rapid and significant financial evolution. Over the past decade, our nation’s fintech landscape has grown from a handful of startups into one of Africa’s most vibrant innovation ecosystems. Even amid global economic headwinds, Nigerian fintech firms continued to attract investment and drive change,” he said.

He explained that improvements in the stability of Nigeria’s currency and domestic economy have further highlighted the potential of financial innovation to expand financial inclusion at scale.

“This report reflects the Central Bank’s commitment to fostering a thriving fintech landscape while safeguarding the stability of our financial system. It is the product of extensive engagement between regulators and industry stakeholders. By surveying fintech operators, financial institutions, and policymakers, we have gathered candid insights on what is working, what is not, and where we can do better,” he stated.

“The findings illuminate both our progress and the gaps we must address, from modernising regulatory frameworks and payments infrastructure to supporting startups in reaching Nigeria’s unbanked communities. The report is careful to contextualise Nigeria’s fintech journey within global trends, reminding us that we are part of a rapidly evolving digital finance landscape that offers immense opportunities as well as new risks,” he added.

Continuing, Cardoso stressed that innovation remains a strategic priority for the apex bank. “We are committed to creating an environment where new ideas can flourish under prudent oversight, and where inclusion is at the heart of our endeavours. Fintech must help deliver financial services to the last mile of our population, from the bustling cities to the rural villages, so that no Nigerian is left behind in the digital economy.

“As we embrace new technology, it is our responsibility to uphold the integrity of the financial system, maintaining strong governance, consumer protection, and risk management so that trust in our institutions remains firm. I am confident that the insights and recommendations in this report will guide us towards a stronger, more inclusive financial future,” he said.

“The Central Bank will further study the perspectives gathered, and we will continue to collaborate with the industry to refine our policies. This collaborative spirit, government and innovators working together, is the cornerstone of sustainable fintech development. Our goal is to strike the right balance: encouraging the creativity that sparks growth while ensuring robust measures that guarantee stability and public confidence.”

“Together, we can make Nigeria a model for fintech in Africa and the world, a country where digital finance supports broad-based prosperity and where regulatory foresight keeps our financial system secure. On behalf of the CBN, I thank all the contributors to this report for sharing their experiences and expertise. We look forward to the journey ahead, as we shape the future of fintech in Nigeria with optimism, purpose, and unwavering integrity.”

According to the report, financial technology, commonly referred to as fintech, involves the application of innovative digital technologies to deliver financial services.

It spans a wide range of segments, including digital payments, remittances, lending platforms, crowdfunding, insurance technology (InsurTech), investment and wealth management technology (WealthTech), as well as regulatory technology (RegTech).