CBN Unveils Crackdown on FX Fraud, Targets Violators with Civil and Criminal Charges

The Central Bank of Nigeria (CBN) has announced plans to take legal action against individuals and institutions found to have violated foreign exchange rules, following the conclusion of a forensic audit into undelivered forward contracts.

According to a document published on the Bank’s website titled “Frequently Asked Questions (FAQ) on the Settlement of Undelivered Forward Contracts,” the CBN will collaborate with law enforcement and regulatory agencies to pursue civil, administrative, or criminal sanctions where applicable.

The forensic audit, conducted by Deloitte beginning in September 2023, investigated transactions under the Retail Secondary Market Intervention Sales (RSMIS) window. These contracts involved upfront naira payments in exchange for future US dollar delivery, many of which were not fulfilled.

The audit revealed widespread irregularities, including discrepancies in beneficiary identities, exaggerated FX requests, misuse or omission of Form M, and approvals for non-permissible imports. Some transactions were based on vague or false documentation, while others involved companies not authorized to import the listed items.

In some instances, the approved FX sale value surpassed the declared cost of goods, raising concerns of misrepresentation. The CBN emphasized that such infractions rendered the contracts void under Nigerian law and ineligible for foreign exchange settlement. Only verified and compliant transactions were honored.

The Bank noted that affected parties had been given the opportunity to respond during the audit before any contracts were invalidated. For those deemed non-compliant, the naira paid was refunded, but no foreign currency was disbursed.

The CBN further clarified that the audit process is now closed and not subject to appeal. It maintained that the audit was conducted independently by Deloitte and adhered to transparent and fair procedures. The firm consulted authorized dealer banks to obtain their explanations for each flagged transaction before making final decisions.

This move marks the CBN’s attempt to restore integrity in the FX market after years of controversy involving failed forwards, opaque practices, and alleged rent-seeking behavior. The Bank reiterated its commitment to honoring valid obligations while enhancing oversight and regulatory compliance across the financial system.