CBN stop banks from criminal conversion of dormant account funds

*Central Bank of Nigeria, CBN.

*Central Bank of Nigeria, CBN.

12 October 2015, Abuja – The Central Bank of Nigeria (CBN) has banned banks from converting funds in dormant accounts to income. Consequently, the apex bank directed that banks that in the last five years converted such funds to income should reclassify them as deposits. The ban was contained in the Guidelines on the Management of Dormant Accounts and Other Unclaimed funds by banks and other financial institutions in Nigeria, released on Friday by the CBN.

The guidelines stated, “Dormant account shall continue to be reflected in the book of banks as deposit liabilities until they are eventually withdrawn by the account holders or disposed of, on their instructions.

“Banks that have, in the last five years, from the date of these guidelines, appropriated credit balances in dormant accounts to income are to reclassify such accounts to deposits not later than six months from the effective date of the guidelines

“Notwithstanding the provisions above, banks shall retain the records of all dormant accounts irrespective of the number of years of dormancy of the accounts, and shall reactivate such accounts upon request by the bona fide account holder or his /her legitimate representatives.”

Defining what can be classified as a dormant account, the guidelines stated, “A bank account shall be classified as dormant if there has been no customer or depositor-initiated transactions in it for one year after the last customer or depositor-initiated transaction.”

The guidelines however stated that bank accounts that have no customer or depositor-initiated transaction for a period of six months shall be classified as an ‘Inactive Account.

It added that while the owner of an Inactive Account should not be required to provide documentation to reactive the account, the owner of a dormant account must provide satisfactory documentary evidence of account ownership including means of identification and present place of residence, before the dormant account can be reactivated.

The guidelines also stated that when an account becomes dormant or inactive, “the bank shall elevate controls on the account in line with its precautionary policies, which may include surveillance procedures and second level authorisation. On the treatment of dormant accounts, the guidelines stated, “Hence forth, revalidation of inactive/dormant accounts shall not attract any cost to the account holder (as the bank would have made ample use of the idle funds);

“Interest bearing accounts shall retain their interest earnings status during the period of dormancy; Deposit taking financial institutions shall continue to monitor accounts that show tendencies of inactivity and initiate action for the reactivation or protection from wrong usage. Such actions shall include, though not limited, to any of the following: SMS, email, visitation, and/or phone calls. In all cases, the cost of monitoring the accounts and contacting the customers shall be borne by the bank.”

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