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Wanted: Laws on Cashless Economy

The Central Bank of Nigeria (CBN) has introduced a new policy on cash-based transactions, which stipulates a “cash-handling charge” on daily cash withdrawals or deposits that exceed N500,000 for individuals and N3 million for corporate bodies. The policy will mean an increase in the use of technology in financial transactions. However, considering the dangers associated with internet-based technologies, there are fears that the legal framework needs to be strengthened to protect consumers against fraud, losses and undue charges. Some lawyers think specific laws are needed to back the policy. ERIC IKHILAE, JOSEPH JIBUEZE and PRECIOUS IGBONWELUNDU sought their views.

The Central Bank of Nigeria (CBN) has effectively ended the regime of limitless cash withdrawals from banks under its monetary policy aimed at reducing the money in circulation.The pilot scheme has begun in Lagos. It is known as ‘cashless’ policy. In some countries operating the system, the policy is called ‘mobile wallet’, which is an alternative payment method that allows a consumer to use mobile phone to pay for a wide range of services.

According to the CBN, the cash-less system became necessary to promote the use of electronic means of transaction aimed at making Nigeria a cashless economy. It said the policy is to reduce the dominance of cash in the economy with the attendant cost implications for cash management in the banking industry; enhance securityand and stem money laundering, among others.

Effective from June 1, daily cumulative withdrawals and lodgments in banks by individuals would be limited to N500,000, while those by corporate customers is pegged at N3 million. Transactions above the fixed amount would attract special charges. The new cash policy was introduced for a number of reasons, including:

• To drive development and modernisation of Nigeria’s payment system in line with Vision 2020 goal of being amongst the top 20 economies by 2020.

• To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.

• To improve the effectiveness of monetary policy in managing inflation and driving economic growth.

In addition, the policy aims to curb some of the negative consequences of high usage of cash, including high cost of handling (estimated to be about N192 billion this year), high risk of usage and high subsidy.

However, as full implementation of penalty charges on deposit and withdrawal limits draws near, the various e-channels and applications like Automated Teller Machines (ATM), Point-of-Sale (PoS) terminals and mobile banking platforms that are supposed to facilitate electronic transactions have remained largely deficient.

There are still fears that ATMs and PoSs are yet to attain the desired efficiency to drive a cashless economy, maintain a working network and constant connectivity.There have been complaints that sufficient facilities have not been provided to make the system smooth. The e-payment system is said by many who have tried to use it to be filled with hitches.

Sometimes, one is charged for service not successfully rendered. There are, therefore, fears of possible loss of money through fraud. Then the poser: How would the market women and other small business owners who are long-accustomed to cash transactions, smoothly transit to the new policy by June?

Meanwhile, information security experts have said the infrastructure supporting the cash-less system may be 60 per cent vulnerable to fraud. This, according to them, is because the system is only 40 per cent protected as only one per cent of the operators involved has attained the Payment Card Industry Data Security Standard certification (PCI DSS).

PCI DSS is an information security standard for organisations that handle card holders’ information for major debit, credit, prepaid, e-purse, ATM and PoS cards. Digital Encode Director Mr Adewale Obadare said: “From the information security readiness perspective, I will say that the cash-less scheme is only about 40 per cent secured against rising cyber fraud on other channels beyond the cards.

“That is why operators need to do the PCI DSS certification because, in doing it, they will be giving the public the assurance that transactions via their networks are safe.” An official of Control Case, a United States based Qualified Security Assessor for PCI DSS, Mr Afy Merchant, agreed that 60 per cent of the cash-less system might be vulnerable. He, however, said it was better to stand by a 50:50 ratio because the cash-less initiative was new in Nigeria.

While modern day business is all about electronic transactions, experts are of the view that cyber laws, as well as those governing e-payment, which will protect users of the technology in the cash-less policy, are needed. They said there is the need for controls and firmness of the laws on the industry and the electronic deals.

Director, Middle East and Africa, Fico (an IT fraud solutions firm), Mr Robin Findlay, said Nigeria must pass cyber laws to maintain cyberspace integrity and protect consumers in the cash-less system.

“Each country has its cyber laws to protect online transactions, which also include online financial transactions. But as countries continue to come up with regulatory laws, the better it is for our economies. “To maintain Nigeria’s integrity in the cyberspace, there is the need for the country to put cyber-crime laws in place.

“Banks should have a fraud detective department and should invest heavily in it,” he added.

CBN Governor Sanusi Lamido Sanusi recently gave an indication that the CBN intends to push for the enactment of four bills by the National Assembly to tighten financial sector regulations. They are the Electronic Transaction Bill, the Financial Ombudsman Bill, the Nigerian International Financial Centre (NIFC) Bill, and the Alternative Dispute Resolution (ADR) Regulatory Commission Bill.

Sanusi said the Electronic Transaction Bill, if passed into law, would give effect to the admission in evidence of all electronically- generated statements of account which the Evidence Act currently forbids. The Financial Ombudsman Bill, he said, aims to facilitate faster resolution of financial disputes, while the Alternative Dispute Resolution (ADR) Regulatory Commission Bill is proposed to create an ADR Commission to promote and regulate the practice and use of ADR in Nigeria.

Sanusi said through what he called the Shared Services Initiatives, the number of ATMs is expected to increase, which should reduce the cost of operations and promote a cash-less society.

Lawyers are also of the view that the legal framework needs to be strengthened. A Senior Advocate of Nigeria (SAN), Dr Joseph Nwobike, said: “The current legal regime is clearly inadequate to regulate e-commerce transactions in Nigeria. “It is also understandable that the cash-less policy can be implemented without the need for a specific penal legislation for the purpose.

“However, I believe that there a number of legislation that can be applied to punish offenders.

“What the Central Bank should put in place is the mechanism which would assist law enforcement agencies to track and secure the conviction of those who commit offences using the platform.A lawyer, Mr Nojim Tairu, said existing laws are inadequate to protect consumers.

“As with most innovations in the world, we are barely tagging along in all respects on the e-payment system. There are presently no direct legal instruments to meet all aspects of the situations that are bound to arise from the cash-less policy. “Existing law of contracts, torts and criminal law would simply be inadequate in the circumstance even if they are stretched to apply to the novel context that the cashless policy has introduced.

“Nigeria will have to fashion out a fresh set of legislations based on the practical legal experiences, precedents in other climes and jurisdictions. But the moral is the need to be proactive rather than reactive as a nation.” For another lawyer, Richard Nduka Chukwuocha, the penal law is not enough  His words: “Imagine Nigeria without cash; a nation where almost every financial business transaction is done without cash. Such ways may include online banking, direct deposits, automated teller machines, debit cards, smart cards, etc.

“There is a high tendency for a cash-less economy to rely on information technology. Turning Nigeria into a cash-less economy has its advantages and disadvantages for the economy.” He went on: “In relation to theft, it will, to a large extent, act as security in protecting people’s money. However, many Nigerians are still afraid to use, for instance, the ATM because the security features are not enough, as yet, to prevent theft.

“The Penal Law in Nigeria is not adequate to protect customers in the cash-less regime. The reason is not farfetched. “With the advent of computer age, legislatures are struggling to redefine penal laws to cope with the menace of cyber-crimes and Nigeria is not an exception. “Nigeria needs to enact laws targeting cyber-crimes, as the traditional penal laws such as the Criminal Code and the Penal Code are not adequate to tackle the ever- evolving crimes associated with the computer.”

Chukwuocha added:”Amend-ments to our criminal statutes are unavoidable if the cash-less economy is to record resounding success. But as the penal law stands today, it is my opinion that Nigeria does not have an enabling legal framework for a successful cash-less economy.” Executive Director, Social and Economic Rights Action (SERAC), Dr Felix Morka, a lawyer, questioned CBN’s powers to set withdrawal limits. He argued that deep thinking did not go into making the policy.

He said: “I don’t think the CBN has invested time and energy in researching and analysing the consequences of the policy.”As far as legal position is concerned, I think it is very arguable that the CBN is going beyond its regulatory powers given to it by law to dictate how much money an individual has access to, and how much he/she can place in the bank. “When I have an account with a bank, I have a contract with it. I should be able to retrieve my money on demand. “I think that, overall, the CBN needs to think more critically about staying within the confines of its authority and its role as the apex bank without limiting my own rights and liberties as a citizen.

“The policy was announced without a lot of thinking and planning. That is why there have been controversies over it even before it’s implemented. They are beginning to realise they didn’t think it through. “I think that policy is very consistent with the way we do government business in this country, we act first before thinking.”

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