SEC urges stakeholders to align frameworks with FATF

The Director General of the Securities and Exchange Commission (SEC), Dr. Emomotimi Agama, has urged stakeholders to adapt regulatory frameworks to align with the evolving Financial Action Task Force (FATF) standards.

He cautioned that failure to do so would not only jeopardize the integrity of the capital markets but also pose a risk to Nigeria and the global financial system.

Dr. Agama made this statement at the Compliance Summit 2024, organized by the Nigerian Capital Market Institute, a subsidiary of the SEC, with the theme: “Navigating Regulatory Challenges: Aligning with Changes in FATF Standards in the Era of Virtual Asset Service Providers,” held in Lagos on Monday.

FATF guidance helps countries implement effective regulations that address risks associated with virtual assets.

Agama emphasized that as virtual assets continue to gain prominence, navigating regulatory challenges in this space requires proactive engagement with FATF standards. He added that collaboration between regulators, Virtual Asset Service Providers (VASPs), and stakeholders ensures effective implementation.

Dr. Agama stated that the event is a testament to the collective commitment of stakeholders to ensuring that the Nigerian capital market remains at the forefront of global financial integrity and efficiency while fostering an environment conducive to progress and innovation.

He disclosed that the rapid evolution of virtual assets and the emergence of related service providers have brought considerable changes to the financial landscape, creating opportunities while also presenting significant regulatory challenges that demand immediate attention.

According to him, “During this summit, we will explore critical topics such as the unique regulatory implications posed by Virtual Asset Service Providers, the importance of compliance in safeguarding our markets, and strategies for implementing effective risk management protocols. We will hear presentations and discussions on these issues from leading experts and professionals who will share their insights and experiences on industry best practices and regulatory developments.”

The SEC Director General noted that the Summit serves as a platform for all stakeholders—regulators, operators, financial institutions, and technology innovators—to collaborate, share knowledge, and chart a collective path forward. He stressed the importance of harnessing collective expertise to navigate the regulatory challenges ahead.

He pointed out that recent changes in FATF standards significantly impact Virtual Asset Service Providers, with key updates including: Expanded VASP definition (custodial wallet providers, exchanges, and peer-to-peer platforms are now recognized as VASPs), Travel Rule (VASPs must share customer information during transactions, enhancing transparency), Licensing and Registration (VASPs must register and obtain licenses, ensuring accountability), and Enhanced AML/CFT measures (strengthened regulations to combat money laundering and terrorist financing).

He further stated, “As we explore this critical issue shaping the financial landscape, we will delve into the evolving role of virtual assets, FATF’s regulatory framework, and key changes in its standards. The rise of virtual assets has transformed financial services, offering unparalleled opportunities. However, this growth also presents regulatory challenges. Governments and regulatory bodies must balance innovation with risk management to ensure financial stability and security.

“Let us work together to foster regulatory clarity, promote innovation, and enhance global cooperation. Embracing FATF standards strengthens trust and stability in virtual asset markets. Together, we can shape the future. By working collaboratively, we can build resilient systems that promote transparency, accountability, and sustainable growth in our capital markets.

“Thank you for your dedication and presence here today. Let us collectively commit to fostering a resilient and compliant capital market that meets global standards and supports Nigeria’s economic growth.”

Established in 1989, the Financial Action Task Force (FATF) sets global standards for combating money laundering, terrorist financing, and proliferation financing. FATF has been instrumental in establishing international standards to combat financial crimes, including money laundering and terrorist financing. FATF guidance helps countries implement effective regulations to address risks associated with virtual assets.

In a goodwill message, Director/CEO of the Nigerian Financial Intelligence Unit (NFIU), Hafsat Bakari, stated that as Nigeria continues to experience the transformative impact of virtual assets on the financial landscape, the nation is also reminded of the accompanying risks, particularly in the areas of money laundering, terrorist financing, and other illicit activities.

She said, “The rise of VASPs has necessitated not only a rethinking of our regulatory strategies but also the adoption of more dynamic, technology-driven approaches in the fight against financial crimes. As regulators, law enforcement agencies, financial institutions, and stakeholders in the fight against financial crime, we must ensure that our regulatory frameworks remain robust and effective.”

Represented by Dr. Mohammad Jiya, Chief Operating Officer of Emerging Technologies and Innovations at NFIU, Bakari noted that FATF has recently updated its standards to include virtual assets and VASPs within the Anti-Money Laundering, Combating the Financing of Terrorism, and Combating Proliferation Financing (AML/CFT/CPF) compliance framework. She added that in Nigeria, this requires continuous efforts to strengthen the regulatory environment to ensure that the challenges posed by these emerging financial products and services are effectively addressed.

“It is important to put necessary measures in place for the next Mutual Evaluation of the country’s AML/CFT/CPF Regime by FATF, which is scheduled to take place in 2027. Virtual assets, cryptocurrency-related activities, and VASPs will take center stage during the Mutual Evaluation because of Nigeria’s position in the Global Cryptocurrency Adoption Index.

“NFIU remains fully committed to collaborating with all stakeholders, including the SEC, financial institutions, and law enforcement agencies, to enhance the effectiveness of our AML/CFT systems,” she added.