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How Regulatory Changes are Impacting Remittances to Nigeria from the UK

15 Aug 2024


Around 300,000 Nigerians are living and working in the UK. They earn a living and carry out a money transfer to Nigeria from UK to offer financial aid back home. Owing to the robust UK economy, many Nigerians are relocating to the UK for better jobs.

This has pushed the Nigerian government to redesign its regulatory framework for processing remittances. When the number of expatriates hailing from a single country increases, the quantum of inward remittances swells accordingly. Therefore, you must look at the regulatory frameworks in Nigeria and the UK to align the transfer of your remittances with these frameworks.

Looking at the Nigerian Remittance Regulatory Framework

For most developing countries, remittances serve as a financial lifeline. It means that inward remittances to certain countries like Nigeria are one of the pillars on which the economy stands. Due to such critical importance, governments have to regulate remittances for which frameworks are established. The Nigerian government has also created such a framework to:

Prevent people from using illegal means to transfer funds across borders

Properly document the economy

Preventing anti-money laundering which primarily fans terrorism

Provider protection to the funds, remitters, and recipients

It is in this context that remittance regulatory frameworks are created. Many unscrupulous service providers also operate in the global remittance industry. If you approach them you suffer financially. Moreover, you can also find several illegal channels that offer attractive and cost-effective deals to you when you send money to Nigeria online from UK.

But remember that these offers are never true. These only trick you into surrendering your hard-earned money to them. Since they operate illegally, you cannot do anything about them if they suddenly disappear after taking money from you.

Establishment of More Legal Remittance Service Operators

The first step the Nigerian government is taking as part of the drive to redesign its regulatory framework is to invite and encourage legal channels to operate in Nigeria. As part of this drive, banks in Nigeria are expanding their branch networks and operational presence.

Tax Incentives to Remittance Operators

The government and the financial authorities in Nigeria are also offering tax incentives to the remittance transfer providers. Any remittance operator working legally has to comply with the tax regime of the country they operate in.

The financial institutions including the Central Bank of Nigeria are relaxing the tax regulations and tax compliance policies for the remittance operators. This will encourage operators to come to Nigeria and offer legal remittance services.

Strict Know Your Customer (KYC) Policies

Every service operator – existing and likely to be established – is legally bound by the Nigerian government and several financial authorities to adhere to the Know Your Customer (KYC) guidelines.

A service provider by following the KYC protocols ensures that the details and credentials of the customers are properly documented. This record is essential for presentation to government authorities to ascertain the details of the customers as and when it is required.

But this does not happen frequently. All the customers submit their details to the service provider. Those who shy away from surrendering their details will first avoid approaching a legal channel and rather turn to illegal means that offer no safety of funds or transactions.

Awareness Campaigns on Media

The Nigerian government has launched awareness campaigns to educate and inform its people about what a money transfer to Nigeria from UK is like. This has helped many people distinguish between the legal and illegal ways of money transfers.

These media campaigns not only inform people about money transfers to Nigeria from abroad but also guide them about how to collect funds. Because both the sending and receiving of funds are an integral part of what constitutes a remittance transfer.

Crackdown on Illegal Means to Transfer Funds

As mentioned earlier, you will find several illegal service providers offering you remittance transfer services parallel to the legal channels. The Nigerian government has recently launched a crackdown against all of these illegal service providers.

Every illegal service provider is being apprehended by the law enforcement apparatus. Punishments and heavy penalties are being imposed on them. This has drawn people to the legal means and service providers operating within the Nigerian law.

A Look at the UK’s Remittance Regulatory Framework

The UK has a remittance regulatory framework that is comprehensive and covers several areas of cross-border remittance transfers. It is because the World Bank ranks the UK as the third largest host of expatriate workers after the USA and Canada.

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Millions of expatriates come to the UK to seek a high-quality education and prospective employment opportunities. The UK offers you jobs in several professional fields, thanks to its robust economy. The dense presence of expatriate workers means an excessive flow of remittances outside of the country. Therefore, the UK has created a framework to regulate the flow of remittances, the basics of which you should know about.

Anti-Money Laundering (AML) Laws and Regulations

Given that the outward remittances from the UK are an enormous amount, the UK government and its financial authorities have set strict anti-money laundering (AML) laws and regulations to ensure the legality of the process. Every remittance transfer service provider including the banks is required to adhere to these policies. Otherwise, punishments and financial penalties will ensue.

The biggest source of terrorism financing worldwide comes from cross-border payments. Where the traffic of cross-border payments is immense, there the chances for seepages are high. Therefore, the UK government is pretty concerned about its AML laws and regulations in its remittance regulatory framework.

Customer Due Diligence (CDD)

The Department for International Development (DFID) is an independent British institution responsible for overseeing the development of developing countries. Remittances play a significant role in it. Therefore, the institution makes it mandatory for the remitters to choose their service providers after due diligence.

If you are to choose a service provider in the UK to transfer funds back to Nigeria, you will have to see if the service provider is operating legally and ensure regulatory compliance. It is essential for you. Else you can be grilled by the UK financial authorities.

Choose Your Remittance Transfer Service Provider with Utmost Care

As mentioned earlier, you will find several remittance transfer service providers operating in the UK. They will make you some alluring offers to send money to Nigeria from UK that seem cost-effective. But you must pause before choosing a service provider and check whether the offers these service providers are making align with the remittance regulatory frameworks in the UK. Because, when you are trying to send money across borders from a country like the UK, you need to be extremely careful.

A slight mistake or lax attitude towards choosing a service provider can land you in grave financial trouble due to the tight regulations. Moreover, while choosing a service provider, keep in mind to select one that charges you a low fee in addition to offering you live and market-competitive currency exchange rates likely to get compensated for the fees you will pay for your online money transfers.

FAQs

What is a remittance regulatory framework?

A remittance regulatory framework is a set of laws, rules, and regulations that a government creates in collaboration with its financial institutions including the central banks. Through these regulatory frameworks, financial institutions ensure that every remittance transfer service provider offers legal services so that the process is documented from start to end.

How does such a framework impact the flow of remittance?

In the global remittance industry, remittance regulatory frameworks document the process. If remittances are not regulated by these frameworks, the process is not documented and the recipient economy does not benefit. Through regulations, however, the illegal means are filtered out and every transaction is documented and benefits the economy given that remittances are a financial lifeline for many developing economies.

What is the Nigerian remittance regulatory framework like?

With the increase in the number of Nigerian expatriates abroad, the quantum of inward remittances is only increasing. To cater to the needs of an increased remittance amount, the Nigerian government is making changes to its framework. It now includes lax tax implications, public awareness campaigns, crackdown on illegal means, incentivising remittance operators, and strictly following KYC protocols.

How does the UK regulate its remittance industry?

The UK primarily regulates its remittance industry through the Department for International Development (DFID). DFID is an independent British institution responsible for overseeing the development of poor countries including Nigeria. The UK has stringent anti-money laundering laws and also the remitters are bound to conduct Customer Due Diligence (CDD) while choosing a remittance transfer service provider.

What to consider while choosing an online service provider?

You must consider whether the service is operating within the regulatory framework and complies with the rules and regulations. Moreover, to clinch a cost-effective money transfer deal see that a service provider charges you a low fee and offers you live and market-competitive currency exchange rates that will likely compensate you for the fees you pay.

Resource(s)

·      Nigerians in the UK

(Why are there so many Nigerian immigrants in the UK? - Geographic Pedia (ncesc.com)


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