Central Bank of Nigeria Launches Virtual Asset Pilot to Strengthen AML/CFT Compliance

The Central Bank of Nigeria (CBN) has initiated a supervisory pilot program to enhance AML and CTF compliance among selected virtual asset service providers (VASPs). The initiative involves six companies, including the Africa Stablecoin Consortium, Flutterwave, and Paystack. These VASPs will be required to submit monthly reports and undergo audits of their customer onboarding and transaction monitoring systems according to the CBN announcement.

The pilot does not confer regulatory approval or licensing but is designed to study business models and operational risks in the crypto and fintech space. The CBN emphasized the need to align with international FATF standards, particularly the Travel Rule, which mandates the sharing of transaction information between VASPs as part of the pilot program.

The CBN also introduced binding governance requirements for the use of AI and machine learning in compliance functions, ensuring human oversight and system effectiveness. Personal accountability has been tied to compliance system performance, with executives and boards held responsible if systems fail according to new regulatory guidelines.

What Are the Goals of the Supervisory Pilot?

The primary goal of the pilot is to assess how VASPs manage AML/CFT/CPF risks and align with global standards. This includes reinforcing the integrity of Nigeria's financial system and understanding cross-border digital asset flows. The CBN also aims to ensure compliance with the Nigeria Data Protection Act of 2023 as reported by Business Day.

The selected entities will engage with the CBN and the Nigerian Financial Intelligence Unit (NFIU). They will undergo detailed reviews of their governance structures, customer onboarding processes, and transaction monitoring systems according to the pilot program details.

What Do the New Automated AML Rules Require?

The CBN issued the Baseline Standards for Automated AML, CFT, and CPF Solutions, which require all Nigerian banks, fintechs, and payment companies to meet specific governance and technological requirements. These standards mandate the use of AI and machine learning in compliance functions with clear obligations for human oversight and independent validation according to the new standards.

These measures ensure that compliance systems are not only feature-based but also demonstrably effective. The CBN has also introduced personal accountability for executives and boards if compliance systems are found to be ineffective as part of the new rules.

The standards align with international benchmarks like ISO 42001 and reflect Nigeria's commitment to financial system integrity and regulatory modernization. This initiative positions Nigeria ahead of many jurisdictions in its regulatory approach to AI in compliance functions according to regulatory analysis.