May 8, 2024

A Guide to FATF Travel Rule Compliance in Nigeria

A Guide to FATF Travel Rule Compliance in Nigeria
  • The minimum threshold for Nigeria's Crypto Travel Rule is $1,000 (1,380,680 NGN).
  • Transactions below this threshold require only the names and wallet addresses of the parties involved.
  • All crypto transfers must be treated as cross-border and adhere to stringent wire transfer requirements.

Nigeria, grappling with high inflation and unemployment, has one of the highest crypto adoption rates. The crypto ownership in the country is expected to be as high as 46%, with almost 13 million cryptocurrency holders, more than any other African country. 

Yet, Nigerian regulators have yet to provide a clear framework. However, authorities have been working on it and have strict anti-money laundering (AML), countering the financing of terrorism (CFT), and counter-proliferation financing (CPF) compliance rules.

Crypto Travel Rule in Nigeria

In 2022, the Nigerian SEC outlined general requirements for VASPs, covering Know Your Customer (KYC), Customer Due Diligence (CDD), and the FATF Travel Rule. Under the FATF Travel Rule, regulators have issued guidelines for the licensing and registration of VASPs, allowing banks to provide accounts and offer services to these entities in Nigeria. The Central Bank can also impose sanctions such as fines, license suspension, and activity bans.To align with international attitudes, the regulator has also created an AML/CFT/CPF framework that requires entities to appoint a compliance officer, maintain a compliance manual, and implement employee education and training programs.

For CDD, entities must conduct ongoing due diligence, perform Enhanced Customer Due Diligence (ECDD) for higher-risk clients, and verify beneficial ownership at the outset of business relationships or transactions.  They must also establish risk management systems to identify Politically Exposed Persons (PEPs) and monitor and report any suspicious transactions. All transaction records and related information must be retained for at least five years.

Compliance Requirements

All crypto transfers are to be treated as cross-border transfers and must adhere to the requirements for cross-border wire transfers. These obligations also extend to non-VASP Capital Market Operators (CMOs) handling crypto transfers for customers.

Originating VASPs are required to obtain, verify, and retain complete originator and beneficiary information. This information must be transmitted securely and immediately to the beneficiary VASP and provided to authorities upon request.

Beneficiary VASPs must also secure and verify complete originator and beneficiary information, ensuring its accuracy and availability to authorities when needed.CMOs must acquire and verify the following originator information:

  • Full name of the originator
  • Originator’s wallet address
  • Physical address, national identity number, incorporation number, or business registration number if the originator is not a natural person

For beneficiaries, CMOs need to collect:

  • Beneficiary's name
  • Beneficiary's wallet address
  • These requirements apply to transactions exceeding $1,000 (1,380,680 NGN). 

Transactions below this threshold are exempt but must still include the names and wallet addresses of both the originator and the beneficiary.CMOs are also required to verify this information if there is any suspicion of money laundering or terrorist financing.

Moreover, VASPs, according to the Nigerian securities regulator, are required to be incorporated and maintain an office within Nigeria. In March 2024, the regulator suggested a fivefold increase in the registration fee to be submitted alongside license applications. Moreover, the CEO or managing director of the crypto exchange applying for a license must also reside in Nigeria. 

These proposed rule changes will apply to foreign operators targeting Nigerian users but not to financial portals or tech firms providing supporting infrastructure or software to crypto exchanges. 

Global Context and Comparisons

Over the past few years, Nigeria has initiated several steps to regulate the crypto space. These measures aim to remove Nigeria from the FATF’s Gray List. The IMF has found that gray-listing can have a “significant negative impact on a country’s capital flows,” with its GDP decreasing by as much as 7.6 percent.

The latest FATF report on the status of Travel Rule implementation rated Nigeria as 'partially compliant' based on its performance in several areas: 

  • Conducting a crypto and VASP risk assessment
  • Passing a law on VASP registration
  • Implementing AML/CFT measures
  • Adopting the travel rule for VASPs

Concluding Thoughts

Over the past year, a more than 68% drop in its fiat currency, the Naira, along with foreign exchange shortages, high remittance costs, recessions, and an unstable political situation, have increased the appeal of crypto assets in Africa's second-largest economy.

Driven by these factors, the Sub-Saharan African country has taken steps to establish a clear regulatory framework for crypto assets in accordance with international standards. This means that both local and foreign crypto companies must adopt these rules to cater to and thrive in Nigeria’s growing crypto market.

FAQs on Crypto Travel Rule NigeriaQ1: What is the Crypto Travel Rule in Nigeria?

The Crypto Travel Rule in Nigeria requires that any crypto transaction exceeding $1,000 must include detailed originator and beneficiary information to prevent money laundering and terrorism financing.

Q2: What are the requirements for crypto transactions under this rule?

For transactions above the $1,000 threshold, originating and beneficiary Virtual Asset Service Providers (VASPs) must obtain, verify, and retain complete information about the parties involved and ensure it is transmitted securely.

Q3: What happens with transactions that do not meet the minimum threshold for the Crypto Travel Rule?

Transactions below the $1,000 threshold are exempt from the detailed reporting requirements but must still include the names and wallet addresses of the originator and beneficiary.


‍About Veriscope

‍Veriscope, the compliance infrastructure on Shyft Network, empowers Virtual Asset Service Providers (VASPs) with the only frictionless solution for complying with the FATF Travel Rule. Enhanced by User Signing, it enables VASPs to directly request cryptographic proof from users’ non-custodial wallets, streamlining the compliance process.

For more information, visit our website and contact our team for a discussion. To keep up-to-date on all things crypto regulations, sign up for our newsletter and follow us on X (Formerly Twitter), LinkedIn, Telegram, and Medium.