eNaira will cause money laundering, help finance terrorism —IMF

The eNaira will cause money laundering and financing of terrorism, according to the International Monetary Fund (IMF), as the global creditor revealed the digital currency possesses its own risk.

While IMF recognised the potential benefits of the Central Bank Digital Currency (CBDC) launched by Nigeria in October 2021, the body listed some risks similar to cryptocurrency.

In its staff country report titled ‘Nigeria: 2021 Article IV Consultation’, IMF stated that new activities related to money laundering and terrorism financing will spring up should the CBN deploy eNaira for cross-border fund transfers and agency bank networks.

“Prospective expansion of eNaira use to cross-border fund transfers and agency bank networks may cause new money laundering/financing of terrorism (ML/FT) risks”, the report stated.

IMF also asserted that operational risk, such as legal issues between wallet providers and CBDC holders, might trail the usage of eNaira, which is still struggling to appeal to person-to-merchant or merchant-to-person.

Read also: eNaira better than bitcoin, ethereum, others, IMF tells Nigerians

“Unforeseen legal issues, including for private law aspects of its operations (e.g., the exact nature of legal relationship between the wallet providers and CBDC holders), may subject eNaira to litigation and operational risks”, IMF stated.

The creditor explained further that, “There are financial integrity risks which are mitigated by using a tiered identity verification system and applying more stringent controls to relatively less verified users.”

IMF suggested risk-sensitive mitigation measures should be prioritised by Nigeria’s central bank relating to money laundering/terrorist financing risk.

“While preventive measures and the planned AML/CFT regulations for eNaira intermediaries are welcome, a money laundering/terrorist financing risk assessment of domestic and cross-border uses of eNaira and the adoption and implementation of the regulation along with putting in place risk-sensitive mitigation measures should be a priority.” IMF stated in the report.

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