Financial technology (Fintech) companies are companies that use technology to provide, improve, and simplify financial services. They play an important role in providing Nigerians with revolutionary and affordable financial products, ultimately contributing to a more accessible and streamlined financial experience. Their efforts not only enhance the everyday financial lives of Nigerians but also position Nigeria as a significant player on the global stage for fintech innovation.
However, one of the major challenges for fintech companies in Nigeria is understanding and complying with the regulatory framework of the country. To operate legally, maintain consumer trust, and mitigate potential risks, these companies must ensure compliance with regulatory obligations and obtain requisite licenses and approvals.
Regulatory Compliance Requirements for Fintech Companies in Nigeria
Fintech companies in Nigeria operate differently from companies in other sectors, as there isn't a singular or centralised set of laws governing their business operations. Instead, they are subject to various laws and regulations applicable to different aspects of the company’s operations, some of which are general regulations applicable to all companies in Nigeria.
General Regulatory Obligations
Obligations to the Corporate Affairs Commission (“CAC”)
When establishing a company in Nigeria, obligations to the Corporate Affairs Commission (CAC) include registering or incorporating the company with the necessary documents. Ongoing responsibilities comprise filing annual returns, promptly updating the CAC on any changes, and ensuring timely payment of associated fees.
Obligations to the Federal Competition and Consumer Protection Commission (“FCCPC”)
These obligations involve adherence to competition and consumer protection laws. Companies must avoid anti-competitive practices, provide accurate information to consumers, and address consumer complaints promptly.
Obligations to the Federal Inland Revenue Service (“FIRS”)
The Federal Inland Revenue Service is the federal tax regulator in Nigeria. Fintech companies in Nigeria are obligated to file timely and accurate tax returns and ensure regular payment of corporate income tax, withholding tax, value-added tax, stamp duty payments, and other levies to the government.
Obligations to the Nigeria Data Protection Commission (“NDPC”)
Companies in Nigeria are obliged to adhere to the Nigeria Data Protection Regulation (NDPR). This involves ensuring lawful processing of personal data, implementing robust security measures, respecting data subject rights, promptly reporting data breaches, and appointing a Data Protection Officer (DPO) for oversight.
Sector-Specific Regulatory Obligations
In Nigeria, various fintech companies offer services ranging from banking and insurance to investments. Although they all fall under the fintech umbrella, the Central Bank of Nigeria, the National Insurance Commission, and the Securities and Exchange Commission regulate them separately. As a result, each type of fintech company has its unique set of rules and obligations based on the nature of the services they provide and the specific regulatory body overseeing them.
There are fintech companies in Nigeria who offer banking services, some offer insurance services, and some offer investment services. They are all fintech companies, however they are subject to different regulators - the Central Bank of Nigeria, the National Insurance Commission, and the Securities and Exchange Commission. Therefore, their regulatory obligations will differ.
So, apart from ensuring they have obtained the appropriate regulatory licenses and permits, the fintech companies must also ensure they observe the terms of their licenses and ensure they are up to date with any recurring filing obligations as set out in their license/permits.
Compliance with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) Guidelines
Anti-money laundering (AML) refers to those policies, laws, and regulations which are targeted at preventing individuals and businesses from engaging in money laundering. While Combating the Financing of Terrorism, or Counter Terrorist Financing (CFT) refers to the laws and regulations enacted to combat the financing of terrorist activity. Both AML and CFT have overlapping regulations and in general these regulations adopt the following measures to identify and combat money laundering and terrorism financing:
Compliance Programmes and Training – Fintech companies in Nigeria are required by law to have in place appropriate internal compliance documentation and training that would ensure their staff are able to identify instances of money laundering.
Know your customer (KYC) - Fintech companies in Nigeria are required to have proper customer identification and verification to ensure legitimacy of their customers. Higher risk products and services require more in-depth documentation.
Enhanced KYC - Certain classes of customers who have been classified as high risk are required to be under more scrutiny than regular customers, these include politically exposed persons.
Large currency transaction reporting - Fintech companies are required to file certain transaction reports when there are transactions which are conducted above a certain monetary threshold.
Suspicious activities monitoring and reporting - Fintech companies in Nigeria are required to monitor certain types of suspicious behavior as they could be indicative of criminal activity.
Are You Staying Compliant?
Regulatory compliance is becoming more complex and important, and you don't want to have your organization left behind by sticking to inefficient legacy approaches.
Fintech companies need to be proactive about how to manage their regulatory compliance.
For more information about how Regfyl can improve your organization's compliance - specifically around ensuring up-to-date filing of regulatory reports, a comprehensive KYC and onboarding process, and effective ongoing monitoring of customers and their transactions, please click here to book a demo and consultation with one of our Regfyl compliance experts.
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