Nigerian banks may start collecting customers’ social media handles after a court ruling. This suggests that a legal decision in Nigeria will potentially paved the way for banks and other financial intitutions to require customers to provide their social media account information.
The Federal High Court in Lagos has upheld a provision in the Central Bank of Nigeria’s (CBN) Customer Due Diligence Regulations 2023, which mandates that banks collect and verify customers’ social media handles as part of the Know-Your-Customer (KYC) process.
“For all it is worth, I do not see how asking a banking or potential banking customer to provide their social media handle can ever amount to a breach of privacy,” stated Justice Nnamdi Dimgba.
This follows a lawsuit filed by Lagos-based lawyer Chris Eke against the CBN, arguing that the regulation is undemocratic, unconstitutional, and violates a section of the 1999 Constitution. The applicant sought a perpetual injunction to prevent the CBN from enforcing the regulation. However, in a notice of preliminary objection, the CBN contested the suit’s validity, asserting that the regulation does not infringe on the applicant’s privacy.
In response, the Judge emphasized that providing a social media handle is akin to providing an email address, phone number, and other personal details required by banks. As a result, he dismissed the lawsuit, affirming that the regulation does not constitute a breach of privacy.
However, Section 6 (IV) of the CBN regulation mandates that Nigerian financial institutions collect and verify customers’ social media handles as part of the Know Your Customer (KYC) process. This measure aims to help combat financial crimes and terrorism while enhancing the accuracy and thoroughness of customer identification.
Here are some key points and possible implications of this development:
- Purpose of Collection: According to CBN, the collection of social media handles by banks is intended to enhance customer identification and verification processes. This measure might help in combating fraud, money laundering, and other illicit activities by providing banks with more comprehensive profiles of their customers.
- Legal and Regulatory Context: The court ruling indicates that there has been a legal endorsement or requirement for this practice. It could be related to existing financial regulations or new legislation aimed at increasing transparency and security within the financial sector.
- Privacy Concerns: This move is likely to raise significant privacy issues among customers. Many individuals may be concerned about the extent of information banks can access and how it will be used or protected. Questions about data security, the potential for misuse of personal information, and the boundaries of financial institutions’ oversight will be prominent.
- Operational Challenges for Banks: Implementing such a requirement could pose practical challenges for banks. They would need to develop systems and processes for collecting, storing, and managing social media information securely. Training staff to handle this additional layer of customer data responsibly will also be crucial.
- Customer Reactions and Compliance: Customers might be hesitant or resistant to providing their social media handles, viewing it as an invasion of privacy. If this directive is approve by Court’s ruling, Banks will need to communicate clearly the reasons for this requirement, how the information will be used, and what measures are in place to protect their data.
- Impact on Financial Services: However, if successfully implemented, this practice could lead to more robust customer profiles, enabling banks to offer more personalized services. However, it could also discourage some individuals from engaging with formal banking services, particularly if they have concerns about privacy.
- Global Comparisons: It’s useful to compare this development with practices in other countries. While some jurisdictions have stringent Know Your Customer (KYC) regulations, the inclusion of social media handles is relatively novel and may set a precedent for other countries contemplating similar measures.
In conclusion, while the court ruling potentially allowing Nigerian banks to collect social media handles from customers aims to enhance security and compliance, it brings about significant privacy and operational challenges. The effectiveness of this measure will depend on how it is implemented and managed, as well as how banks address the concerns of their customers.