CBN Probes Banks Over Restrictions on Domiciliary Account Withdrawals

The Central Bank of Nigeria (CBN) is examining complaints over restrictions allegedly imposed by some commercial banks on customers seeking to withdraw cash from their domiciliary accounts, raising questions about banking obligations, customer rights and regulatory compliance.

The development follows complaints from bank customers who said some financial institutions had introduced varying restrictions on foreign-currency cash withdrawals, ranging from partial limitations to measures that effectively prevent customers from accessing foreign currency held in their accounts.

The reported restrictions have heightened concerns about whether banks are complying with applicable CBN rules governing domiciliary accounts and foreign-currency transactions.

Financial-sector sources indicate that the apex bank is expected to intervene where customers make legitimate withdrawal requests, with banks required to process eligible transactions in accordance with prevailing regulations and their contractual obligations to account holders.

From a compliance perspective, the issue goes beyond whether individual banks have sufficient physical foreign currency available at their branches. It raises questions about whether restrictions are based on clearly established regulatory requirements, internal risk controls, operational limitations or decisions taken without adequate communication to customers.

Banks are required to maintain effective systems for managing foreign-currency transactions and should be able to demonstrate the regulatory or contractual basis for restrictions placed on customer accounts.

The distinction between legitimate regulatory controls and blanket restrictions is particularly important. Banks may have obligations relating to anti-money-laundering and counter-terrorist-financing controls, transaction monitoring, customer due diligence and reporting of suspicious transactions. Such controls, however, should be applied within the framework established by law and applicable CBN regulations.

For customers, the central issue is access to funds held in their names. Where a withdrawal request satisfies applicable regulatory and banking requirements, any refusal or restriction should be supported by a clear and defensible basis.

The reported intervention by the CBN also highlights the importance of consistent treatment across the banking sector. If individual banks are applying different withdrawal limits or procedures to similar domiciliary accounts, customers may face uncertainty over the rules governing access to their foreign-currency balances.

A key compliance question is therefore whether the restrictions being reported are the result of a sector-wide regulatory requirement or individual bank policies.

Another issue concerns disclosure. Banks that impose restrictions on foreign-currency withdrawals should clearly communicate the applicable limits, conditions and procedures to customers. Where a transaction cannot be completed, customers should be able to understand whether the reason relates to regulatory requirements, documentation, account conditions, availability of physical cash or another legitimate operational constraint.

The matter also has implications for banks’ internal governance. Compliance departments, branch operations and customer-service teams should operate from consistent policies, with adequate escalation mechanisms for disputed or delayed transactions.

Where restrictions are imposed because of suspected irregularities, banks must also ensure that customer accounts are handled in accordance with applicable anti-money-laundering and financial-crime rules rather than through arbitrary or indefinite restrictions.

The CBN’s reported review therefore presents an opportunity to clarify the regulatory framework surrounding cash withdrawals from domiciliary accounts and establish a consistent standard for banks and customers.

For financial institutions, the immediate compliance priority is to ensure that restrictions on access to foreign-currency accounts are lawful, properly documented, risk-based and transparently communicated.

For customers, the issue underscores the importance of retaining transaction records, account documentation and correspondence with their banks where withdrawal requests are delayed or rejected.

The broader regulatory question is whether Nigeria’s banking system has a sufficiently clear and consistently enforced framework for balancing customers’ contractual rights to their foreign-currency deposits with banks’ regulatory, liquidity, foreign-exchange and financial-crime-control obligations.

Any directive arising from the CBN’s review could therefore have implications beyond cash withdrawals, particularly for customer protection, bank conduct and confidence in the management of domiciliary accounts.