The Securities and Exchange Commission (SEC) has directed capital market regulated entities in Nigeria to terminate correspondent banking relationships and restrict business dealings involving financial institutions in North Korea and Iran. The directive forms part of measures aimed at strengthening Nigeria’s anti-money laundering (AML), counter-terrorist financing (CFT), and counter-proliferation financing controls.
The directive was contained in a circular issued to Capital Market Regulated Entities (CMREs). It requires affected institutions to discontinue correspondent banking relationships with institutions connected to the specified jurisdictions and to exercise enhanced restrictions over transactions involving their financial institutions.
The SEC’s action follows updated risk assessments and statements issued by the Financial Action Task Force (FATF) concerning jurisdictions presenting significant risks relating to money laundering, terrorist financing and proliferation financing. The Nigerian regulator is therefore strengthening controls within the capital market to prevent the country’s financial system from being used to facilitate illicit financial activities.
For Nigerian capital market operators including fund managers, investment advisers, broker-dealers and other regulated entities the directive has important compliance implications. Firms are expected to review their existing relationships, counter parties and transaction flows to identify any exposure to restricted financial institutions and ensure that such relationships are appropriately terminated or restricted.
The directive also reinforces the importance of customer due diligence, sanctions screening, transaction monitoring and beneficial ownership checks within Nigeria’s capital market. Firms dealing with foreign counterparties will need to ensure that their compliance frameworks are capable of identifying jurisdictional and financial-crime risks before transactions are executed.
The SEC’s position reflects a broader international effort to prevent financial institutions from providing channels through which sanctioned or high-risk jurisdictions can access the global financial system. For Nigerian operators, compliance with the directive is particularly important because failure to implement regulatory requirements could expose firms to enforcement action, reputational damage and other regulatory consequences. The development comes as Nigeria continues to strengthen its financial-sector compliance framework and improve its alignment with international AML/CFT standards. Stronger controls are also important for maintaining confidence among international investors and correspondent financial institutions dealing with Nigerian capital market participants.
