CBN Creates Compliance Department to Tackle Financial Crimes

The Central Bank of Nigeria has announced the formal establishment of a Compliance Department, a move seen as part of its wider strategy to strengthen oversight of the financial sector, reduce risks associated with financial crimes, and address emerging threats in governance and technology.

According to a circular signed by Olubunmi Ayodele-Oni, the department was created in the first quarter of 2025 and began full operations in the second quarter. The CBN said the initiative reflects its broader institutional reforms, which aim to consolidate oversight functions, define responsibilities more clearly, and focus more closely on areas that fall outside traditional prudential supervision.

The Compliance Department is expected to bring greater discipline to Nigeria’s financial system by serving as a central authority for issues such as anti-money laundering enforcement, countering the financing of terrorism, cybercrime risks, and compliance with international sanctions. It will also provide closer monitoring of how banks and financial institutions treat their customers, how they disclose information, and how they manage complaints and advertising.

In addition to financial crime supervision and market conduct monitoring, the department will also oversee enterprise security, including cybersecurity, data protection, and risks that come from reliance on third-party service providers. Another important focus area is corporate governance and sustainability practices, which will involve monitoring the effectiveness of boards and ensuring that financial institutions incorporate environmental, social, and governance considerations in their policies.

The CBN has directed all financial institutions it regulates to henceforth channel every report, inquiry, or correspondence relating to these issues directly to the Director of the Compliance Department. The apex bank said institutions will be given further details on points of contact and the process for submitting information.

In the circular, the bank explained that setting up this unit is a strategic step to embed regulatory discipline in the system and to ensure that risks outside the core balance sheet of banks are adequately managed. The regulator assured stakeholders that the move would be implemented in collaboration with financial institutions to guarantee a smooth transition and that it remains committed to enforcing high standards of compliance across the industry.

The announcement comes at a time of growing concern over fraud and illicit activity in Nigeria’s financial sector. In July, the CBN disclosed that the country had experienced a sharp increase in financial fraud cases, rising by 45 per cent within a single year. According to the CBN Governor, Olayemi Cardoso, who spoke through the Deputy Governor for Economic Policy, Muhammad Sani Abdullahi, at a lecture organized by the Economic and Financial Crimes Commission, about 70 per cent of the financial losses were traced to digital platforms. Many of these, he said, are unregulated virtual asset platforms that provide opportunities for criminals to exploit gaps in oversight.

The findings, drawn from the CBN’s 2024 Financial Stability Report, painted a worrying picture of the risks created by rapid digital innovation. Cardoso admitted that while technology has expanded financial inclusion and given more people access to banking services, it has also created new vulnerabilities that require constant attention. The Compliance Department, therefore, is expected to play a leading role in addressing these challenges by ensuring financial institutions adopt robust security measures, improve customer protections, and comply with both local and international regulatory standards.

In addition to fraud prevention, the new department will also monitor governance practices and how financial institutions incorporate environmental and social considerations into their operations. This reflects a growing global recognition that regulators must ensure banks and other players in the sector do not just pursue profits but also act responsibly towards their customers, employees, and the environment.

Observers believe that the creation of the department shows the CBN is adapting to international best practices, where central banks and regulators are expected to take a broader view of financial stability beyond just capital adequacy and liquidity. By paying close attention to issues such as data privacy, third-party risks, and advertising standards, the bank is signaling that it will not tolerate weak practices that expose customers and the economy to unnecessary risks.

The announcement also comes shortly after the CBN issued another directive requiring all participants in Nigeria’s payment ecosystem to complete the transition to the ISO 20022 global messaging standard by October 31, 2025. This new standard, which is being adopted globally, will improve the quality of financial data shared between institutions and enhance security across transactions. The same circular also mandated financial institutions to adopt geo-tagging of payment terminals to improve monitoring and reduce fraud.

The directive affects a wide range of players, including deposit money banks, microfinance banks, mobile money operators, payment switching and processing companies, terminal service providers, super agents, and other licensed operators in the financial services industry. With this, the CBN is tightening oversight across the entire payments ecosystem to ensure that fraud and abuse do not derail the progress made in financial inclusion.

Industry experts say the decision to establish the Compliance Department could not have come at a better time. The rise of digital banking and financial technology in Nigeria has created opportunities but has also widened the room for abuse, especially in areas such as online scams, identity theft, and cross-border fraud. A department solely dedicated to compliance is expected to make monitoring more efficient and strengthen the regulator’s hand in enforcing discipline.

Financial analysts also note that the focus on environmental, social, and governance supervision signals that Nigerian regulators are catching up with global trends. Around the world, regulators now expect financial institutions to incorporate sustainability in lending, investment, and operational practices. By creating a department that specifically monitors ESG compliance, the CBN is positioning Nigeria’s financial system to meet international expectations, attract foreign investment, and reduce risks tied to poor governance.

For the CBN, however, the immediate challenge remains the surge in financial fraud. By placing issues like anti-money laundering, terrorist financing, and cybersecurity under a single department, the bank is hoping to build a coordinated strategy that strengthens resilience across the financial sector.

As financial institutions adjust to the new structure, it remains to be seen how quickly the department will begin to make visible impact. What is clear, however, is that the Central Bank of Nigeria has sent a strong message: compliance and governance are no longer side issues but central to the stability of the country’s financial system.