TRANSACTIONS MONITORING AND COMPLIANCE LESSONS FROM THE OSUN STATE ELECTION

The Osun State election has come and gone. The winner has clearly emerged and congratulatory messages has poured in from likely and unlikely quarters. There are several lessons to be learnt in the just concluded election. However, I will like to restrict myself to the compliance segment particularly with regards to the events leading to that election.

The events around the Osun State governorship election in August 2026 provide a timely case study. The Economic and Financial Crimes Commission, EFCC obtained a court order to freeze accounts belonging to the Osun State Government citing concerns over suspicious movements of public funds ahead of the poll. The freeze triggered immediate political fallout, including the intervention of the Presidency to unblock the accounts citing the need to preserve public confidence and the integrity of the electoral process.

I shared the view that public purse should be protected against misuse and abuse, but I do not agree just like Mr. President that the timing was right. I would have preferred that the EFCC follow the transfers and withdrawals to private accounts receiving the funds if any and then instruct that Banks should put restrictions. By this, the fund if proven to be illegally taken can be confiscated and restituted back to the state after the election. By this and regardless of what played out in the media, financial institutions in my view are the first line of defense against the misuse of public resources by, or for, Politically Exposed Persons.

In banking, risk is rarely about the single transaction on the screen. It is about who is behind it, where the money came from, and what happens after the money moves. Nowhere is this clearer than in Nigeria’s political season, when public funds, corporate accounts, and private wealth suddenly become channels for influence.

If banks and other FIs had paid closer attention to transactions linked to corporates and individuals connected to PEPs before, during, and after that period, the crisis could have been managed earlier, with less reputational damage to both government and the financial system.

Who Are We Talking About and Why They Matter?

A PEP is not just a governor or minister. Under CBN and NFIU guidelines, PEPs include heads of state, ministers, legislators, senior judicial officials, senior executives of state-owned enterprises, and their immediate family members and close associates. The risk multiplies when PEPs use corporate vehicles, proxies, and trusted individuals to move money.

The reason is simple: PEPs control decisions on budgets, contracts, appointments, and regulations. That access creates opportunity for abuse of office, bribery, and diversion of public funds. When those funds enter the financial system, they often pass through company accounts, law firms, real estate, and even personal accounts of aides. If a bank does not know the link, it will treat the transaction as “normal business.”

Four Actions Every FI Must Strengthen

To a typical financial institution, the Osun case is not about politics. It is about process. To avoid being caught in the middle, financial institutions should double down on these four areas for all PEP-linked relationships.

1. Unmask the Ultimate Beneficial Owner (UBO)

Corporate accounts are the favorite vehicle. A state contractor, a consulting firm, or an NGO may look ordinary on paper. The real question is: who ultimately owns and controls it? FIs must go beyond CAC documents. They should verify UBOs using declarations, media screening, and adverse news checks. If a company suddenly receives large inflows from a state government and its UBO is a cousin of a commissioner, that is not a coincidence. It is a risk indicator. Document it. Escalate it.

• Establish Source of Wealth and Source of Funds

The relevant questions for source of wealth are: how did this person become rich in the first place? For a PEP, it should be salary, known businesses, inheritances, and declared assets. Source of fund will inquire into: where did the money for this transaction come from? A N500m payment from a state treasury to a vendor 10 days to election needs a contract, invoice, budget line, and approval trail. In the absence of genuine answers to these, a bank cannot tell legitimate government spending from pre-election cash deployment. And regulators will not accept “we did not know” after the fact.

• Transaction Monitoring Tuned for Political Risk

Standard AML rules are not enough during election cycles. FIs should activate heightened monitoring for: Government accounts especially with spikes in payments to new vendors. Round-number payments to multiple individuals, Corporate accounts linked to PEPs receiving public sector inflows then making quick cash withdrawals or transfers, Use of bureau de change and fintech wallets to break up amounts are possible redflags to be explored. A compliance officer must ask: does this fit the customer’s profile and the political calendar?

• Timely Reporting of STRs and SARs

The NFIU and EFCC rely on bank reports to connect dots across institutions. A suspicious transaction report is not an accusation. It is information. In the Osun scenario, early STRs on unusual state debits could have triggered regulatory engagement before a blanket account freeze became necessary. That protects the bank, protects public services, and protects democracy. Delayed reporting, or no reporting, leaves the FI exposed to sanctions, loss of license, and reputational damage.

The Business Case, Not Just Compliance

Some bankers worry that asking too many questions of government-linked clients will cost them business. The opposite is true. First, regulatory fines for AML failures in Nigeria now run into hundreds of millions and include management sanctions. Second, international correspondent banks could de-risk Nigerian institutions that cannot demonstrate PEP controls. Third, public backlash is real. Customers do not want their bank named in an EFCC press release.

Proactive compliance is therefore a competitive advantage. It builds trust with regulators, protects the balance sheet, and positions the bank as a partner in governance rather than a conduit for abuse.

Conclusion: From Reaction to Prevention

The Osun State account freeze and the presidential intervention were a reminder that politics and finance are intertwined, especially around elections. Financial institutions cannot claim neutrality by ignoring who their customers are connected to. By rigorously identifying UBOs, verifying source of wealth and source

of funds, tuning monitoring for political risk, and filing timely suspicious transaction reports, banks move from reacting to crises to preventing them. The goal is not to stop government business. The goal is to ensure that public money serves the public, and that when auditors, EFCC, or the media come asking, the bank can show a clear audit trail: we knew the customer, we knew the risk, and we acted.

In an election season, discipline is the difference between being part of the solution and being part of the problem.