BANK OF GHANA DIRECTIVE ON GHANA CARD IN FIGHTING MONEY LAUNDERING SHOULD HAVE BEEN RISK BASED

 The Bank of Ghana (BOG) has issued a directive that from July, 01 2022 the only card that will be used to undertake transactions at all Bank of Ghana licensed and regulated financial institutions is the Ghana card. The objective as stated in the directive was to ensure the safety of the financial system, backing it with some relevant law, Regulation 7 of the National Identity Register, 2012 (L.I. 2111), Section 30 of the Anti-Money Laundering Act, 2020 (Act 1044) and Regulation 12 of the Anti-Money Laundering Regulations, 2011 (L.I. 1987). The BOG also intends to link National Identification Authority database to its financial monitoring platform to facilitate the identification of initiators/beneficiaries of transactions for track and trace purposes basically to fight money laundering.

Fighting money laundering is risk based, that is why we have the normal Know Your Customer (KYC) due diligence and an Enhanced KYC where the person is deemed to be of a higher risk profile as in Politically Exposed Persons or persons having transactions above certain thresholds. Using “belt and braces” approach in any system, because of safety, brings the very system to a halt. This is the very reason travelers have to declare monies they hold above a given threshold, USD10,000, and not all monies being carried. This does not necessarily mean the person carrying USD9,000 is not a money launderer but the system must flow so it does not affect the aviation industry with its unintended flight delays, global business not forgetting the frustration of travelers. This is an example of a Risk Based Approach to fighting and monitoring money laundering and not a “one-size fit all” approach the BOG seems to be doing with this directive which is likely to derail the financial inclusion agenda and should be a concern.

Regulation 7 of the National Identity Register, 2012 (L.I. 2111),

It seems L.I. 2111 is being implemented by all relevant authorities concurrently as projects with citizens moving all over the place to comply as if Ghana is about to shut down. The irony is the registration centers in the communities for the Ghana card itself is not readily available. This is causing untold stress on the daily lives of the citizens who also have to look for their daily bread amidst coping with this COVID-19 pandemic.

This law, covers mandatory use of national identity card, where identification is required. It specifically mentions certain services that will require the use of the national identity card, that is the Ghana card, and with respect to financial services are the following:

·       opening of individual or personal bank accounts;

·       purchase of insurance policies;

·       transactions pertaining to individuals in respect of pensions;

·       consumer credit transactions;

By L.I 2111 any organization that offers any of the above services shall demand the presentation of the Ghana card from the individual concerned before providing the relevant service to the individual.

Strictly speaking, with respect to banking, the law refers to only “opening of individual or personal bank accounts” and this directive can “stricto sensu” only hold for new accounts to be opened. For existing customers, once a customer has already opened an account with an identification that was valid at the time, she cannot be refused normal banking services. The customer is already known by the bank and the mandate to pay a cheque is the customer’s signature. Once the cheque is Complete and Regular on the face of it with signature verified, the bank faces a risk of not acting within the mandate of the customer.

Of course, the law as quoted by BOG gives exclusivity to the Ghana card with respect to “account opening” and new customers have no option but to comply. For other transactions aside “account opening” the BOG needs to make it the preferred identification card with others such as passport, driving license and even the voters card. The reason being that this same law, LI 2111, being quoted by BOG makes the Ghana card the only identification card to be used in acquiring passports, driving license and the voters card. This means the underlying source document for these other cards is the Ghana card. Why can’t they be used for other banking transactions aside “account opening”.

Foreigners that enter the country need not open bank accounts but may need to immediately engage in some form of financial transaction by buying cedis with a bank. What should they do? Are we going to be giving foreigners flexibility as against our own?

Identification with respect to banking transactions is about making sure you are dealing with the right person or who the person claims to be so the bank is not subject to fraud or conversion and nothing to do with nationality. I have no doubt an existing customer, who is outside the country for the period of this directive and cannot update his records with the bank but issues a cheque can sue the bank if the cheque is returned with a frivolous reason as “No Ghana card” or if the VISA card gets blocked hence unable to use it. This aspect of the law aside “account opening” that BOG wants to make the Ghana card compulsory, by cutting banking services to existing customers who do not update by the deadline would be tested in the courts. Banks beware.

The BOG may however want to invoke the Anti-Money Laundering Act, 2020 (Act 1044) to validate the directive covering non “account opening” transactions. Let us take a look at that.

Section 30 of the Anti-Money Laundering Act, 2020 (Act 1044)

This is one of the two laws BOG quoted in its directive. This law covers Customer Due Diligence and basically to make sure banks Know Their customers (KYC) on continuous basis.

 

It generally requires banks to apply customer due diligence measures in establishing business relations and when dealing with customers above certain applicable thresholds either as a single transaction or series on linked transactions. Also, where there is actual suspicion of money laundering or terrorist financing and the financing of the proliferation of weapons of mass destruction, regardless of any exemptions or thresholds, due diligence is required.

 

Where the bank has doubts about the veracity or adequacy of previously obtained customer identification data, customer due diligence measures must be applied. So if an existing customer has already opened an account with an identity that the bank does not doubt the veracity or adequacy then why cut services because she has not been able to update the records with a Ghana card.

 

Under Act 1044, banks are to put in place measures to identify politically exposed persons and other persons whose activities may pose a high risk of money laundering, terrorist financing or financing of proliferation of weapons of mass destruction. Also banks are to put in place systems to monitor complex, unusually   large transaction or an unusual pattern of transactions, which do not have an apparent or visible economic or lawful purpose. The emphasis under Act 1004 is on persons of high risk of money laundering and these are the people BOG must immediately address with the directive by the deadline given and not those who by nature do not even want to save with banks.

 

How does the “Kayayo” or coconut seller on the street who is already saving with a bank, savings & loans company or microfinance company fit into S30 of Act1044? Yes, they may be used by money launderers unknowingly but the money laundering risk management and monitoring systems by these banks, that the law requires these institutions to put in place will address this with respect to where a transaction is beyond the known status or station in life of the customer. If we do not take care, in the haste to want to please the “unseen or invincible hands” that we are fighting money laundering, we will be harming our own financial inclusion and eventually the poverty alleviation agenda.

 

Car manufacturers have not stopped manufacturing fast cars, or removed the accelerators, knowing they can kill, but have put in place more safety measures such as seat belts, speed warning lights, crush warnings etc. Also every car can potentially carry illegal drugs or arms but the police do not stop every vehicle on the street to search. They use intelligence else everything will come to a standstill.

 

BOG as a car manufacturer is attempting to remove the accelerators in all vehicles and fixing more brakes because it’s the accelerators that cause accidents and its dangerous. Also as police, BOG is attempting to stop and search all vehicles on the roads and this is chaotic. The present directive does not discriminate amongst high risk customers and the low risk, informal sector, customers by way of risk assessment in money laundering. This is likely to negatively impact on those in the informal sector who the banks have tirelessly tried to inculcate the habit of saving, just because they do not have the Ghana card to update their records for no fault of theirs.

 

WAYFORWARD

·       Make the Ghana Card Available

The use of the Ghana card in various aspects of our life is a laudable idea and instead of being educated on the benefits of having it so we voluntarily want to have it as a card of value, there seem to be some coercion and threats from the authorities on cutting services to us if we do not get it. This shows that the authorities have failed in their awareness and education of the citizenry.

The Ghana card is not readily available. There seem to be no registration points for the Ghana card in the communities but NIA is charging GHS250 for express registration at its head office which can be the Kayayo’s annual savings. The informal sector that will have to be protected and the target for financial inclusion will rather suffer with this approach by BOG.

The National Commission for Civic Education (NCCE) and the National Identification Authority (NIA) must embark on an awareness and education programme on radio and TV with the NIA setting up in every community or district to on-board us. Once we are sure every citizen has been given the opportunity to register for the Ghana card, BOG can then make it compulsory. This window for the informal sector can take two years.

·       Risk Based Approach

The type of customers likely to engage in money laundering I bet is about 20% or less of the bank’s customer base and money laundering risks can only be mitigated and not eliminated.

It takes risk management tools to fighting money laundering and the banks have invested heavily in anti-money laundering risk management softwares. The BOG must place the onus on them and supervise their operations. Wanting to centralize the monitoring at BOG is nice to do but should not be made to affect our daily lives. Have the banks failed in their risk management KYC tools for BOG to want to be in direct control? May be some jurisdictions are doing it and technology available but environments are different and we cannot just cut and paste on a wholesale basis.

Unlike Criminal law where the law is immediately implemented, certain Administrative law and even Constitutional law provisions allow for some a phased out implementation approach since they may be resource dependent or have cost implication. BOG must find a way to implement the laws with minimal interference on our daily lives especially in these times of COVID-19.

The irony is that those with the higher risk of money laundering will not be stressed or cut off banking services at the end of the July deadline since having used protocol or been able to pay GHS250 to get their Ghana cards, the banks will also be going to them to update their records in their homes and offices as high-net worth private customers.

Its again the coconut seller who does not have GHS250 to register for the Ghana Card that is most likely to suffer from this financial exclusion after the deadline. Let us not forget the stress on bank staff who are also struggling to register their SIM cards.

BOG should start with those of higher risk and leave the “simpua simpua” customers alone for now. Ghana is not shutting down, where is the rush.

CONCLUSION

The directive by BOG on the use of the Ghana card as the only form of identification for banking services might have been done with the motivation to combat money laundering which is good, however, the implementation of LI 2111, which is very specific on account opening and not strictly for other banking transactions, is fraught with potential legal risks for banks with their existing customers considering the various laws relating to banking. 

With respect to fighting money laundering, new customers should of course be made to use the Ghana card going forward but the implementation approach for existing customers should be risk based. High risk customers such as Politically Exposed Persons or those transacting above certain thresholds should be asked to update within the period specified. The rest of the existing customers should be allowed to just go about their business to update over a period of time or when their risk profile increases with the onus being on the banks to make that determination based on the continuous risk profiling of their customers and calling for an enhanced KYC as per the anti-money laundering laws. 

The high risk customers, mostly high net worth customers, need the banking services and would by all means update. The low risk customers would mainly be government workers that have accounts for the purpose of only receiving their salaries and those in the informal sector that the banks have toiled to on-board in their financial inclusion drive. These type of customers would ordinarily not voluntarily want the banking services.

This omnibus approach by BOG coupled with the e-levy tax, not forgetting the negative impact and trust issues that the collapse of some of the financial institutions has already created for the banking system, will let the informal sector withdraw their monies and go back to keeping money in their homes and stores.

Yes, BOG, you have the power of the law as you quoted but you are to serve the people and promote financial inclusion. This is administrative law and allows a risk based approach under your discretionary powers to let you balance the act instead of solving one problem just to create or derail another. Please review it and make it risk based.