The CBN (Central Bank of Nigeria) in February 2013 pursuant to its mandate to maintain adequate and reasonable financial services to the general public issued its guidelines for the regulation of Agent Banking and Agent Banking Relationships in Nigeria (otherwise known as “agency banking”) – a financial inclusion agenda for the otherwise unbanked and under-banked Nigerians.

Given penalties for non-compliance to CBN’s guidelines for the regulation of Agent Banking and Agent Banking Relationships in Nigeria (the “Guidelines”) and the attendant consequences on the fledgling financial sector, we have developed a handy Checklist for drafting, reviewing and proofreading agency banking agreement between the financial institutions and the sole agent or sub-agent or super-agent. – This Checklist for proofreading and drafting agency banking agreement in Nigeria comes 7 (seven) years after CBN issued the Guidelines – a fruit of our combined industry insight with practice experience.

Generally, contract engineers and legal practitioners bear in mind the objectives of the Guidelines which include to provide minimum standards and requirements for agent banking operations and enhance financial inclusion as well as to provide for agent banking as a delivery channel for offering banking services in a cost effective manner.

Key Definitions
Agent Banking is the provision of financial services to customers by a third party (agent) on behalf of a licensed deposit taking financial institution or mobile money operator (principal).

Agent is an entity that is engaged by a financial institution to provide specific financial services on its behalf using the agent’s premises. – Provided that where there is a super-agent, an individual may act as an agent.

Associate of an FI may be an employee (current or former), his or her relations, including spouse, parent, children or any person with a pecuniary interest with the Financial Institution (FI).

FI means any institution licensed by the CBN to accept deposits and conduct banking or other financial services as defined by BOFIA and includes Mobile Money Operators.

Third Party Service Providers means any parties other than the principal and agent who are in contract with either the principal or agent specifically relating to the existing agent banking relationship.

Agent Banking Database means the database of all approved agent banking relationships, locations, agents and principal that exist in the country.

Super-Agent is an agent that has been contracted by the principal and thereafter may subcontract other agents in a network while retaining overall responsibility for the agency

Relationship

Sole Agent is an agent who does not delegate powers to other agents but assumes responsibilities for agency relationship.

Sub-Agent is a person to whom some or all aspects of the agency banking have been delegated by a Super-Agent.

Who can act as an Agent-banker
Even though an entity is required, that is, a corporate person or unincorporated person, who has been in business for not less than 12 (twelve) months prior to application to act as an agent-banker and, whose business is a going concern, the Guidelines, allow individuals to act as agent-bankers where the FI engages a super-agent.
Not-for-profit making organizations or any other organizations if appointed an agent may violate any laws, regulations or the objects of the entity is disqualified. This means that law firms or hospitals or BDCs are disqualified unless they obtain consents of their regulators.
Agents shall be morally and professionally suitable including the suitability of its sole proprietors, partners of any unincorporated company proposed to be appointed as agent or directors as well as CEOs and other officers of a corporate person.
Compliance Obligations
The FI who has adopted its agent structure, should proceed in accordance with traditional boiler plates to state its names and the agent’s name, agent’s location while itemizing all commercial activities the agent is currently engaged in, if any. Prior to execution of the agency banking agreement (“agreement”), the agent should have signed the declaration form.
Agents are required to submit updated information annually or as soon as any changes occur and to renew the agreement bi-annually. Insert a clause stating that any Agents’ continued use of your agency banking application after 6 (six) months amounts to a renewal of the agreement.
Create an obligation for agent to cooperate with the CBN or its authorized personal (perhaps in company of your authorized staff – to foreclose abuse by mischievous competitors) to inspect any of the agents activities including documents. This should include free, full, unfettered and timely access to agent’s reports, records, staff and premises of the agent in so far as agency banking business is concerned.
Clearly state that the FI is fully liable with respect to any agents’ customers. Bear in mind that FIs are allowed to use any 3rd parties to manage its agent network provided that the principal approves any sign ups of an agent. Agent should cooperate with any such 3rd – Set clear matrix on how to identify your 3rd party agent-managers.
Approved agency banking activities include:
Account opening, deposits and withdrawals
Fund transfer services and
Bills payments
State details of agent’s remunerations, fees and all charges in respect of agency banking as well as that Agents are not be permitted to charge any fees directly to customers.
Provide responsibility for payment of expenses (directly or indirectly) relating to the activities of the agency. – Expenses here include costs of mobile data plans, electricity bills for recharging mobile devices and sourcing of cash. Generally, these are obligations of the agents and, this appears to be enough grounds for the agent to directly charge its customers extra fees to cover infrastructural deficits and overhead costs.
Determine who provides infrastructure and procures 3rd party service providers including for any other services.
Include measures to reduce risks such as limits on customer transactions, how to manage cash liquidity and security as well as how to secure agent’s outlets together with insurance policies.
FI is responsible for all actions or omissions of the agent provided they relate to banking services or matters connected therein. Require agent to indemnify the FI for frauds or fraud related cases.
Agent is to comply with AML/CFT and KYC requirements and he is under obligation to deliver transaction support documents to the FI as well as to participate in any period periodic training especially on AML/CFT, financial literacy among others.
Include a confidentiality clause on customers and user information and, any data collected by the agent in respect of agency banking whether from the customers, the FI or from other sources, is the property of the FI.
Provide remedies open to the FI if agent fails to discharge its obligations. State Agent’s business hours and technical description of electronic devices – Agent is to provide update on technical description of device whenever he changes his device.
Clearly state agent’s remuneration with a clause that agent (or if its has employees) shall not be treated as employees of the FI.
Require agent to ensure safe-keeping of all relevant records, data, documents or files or alternately to ship all such records, data, documents or files to the FI’s office at agreed intervals.
State that no agent will relocate, transfer or close its agent banking premises without prior notice to the FI. Agent must give to FI 30 days’ notice of intention to relocate, transfer or close agent banking premises and a copy of it shall be posted at his premises. – This will reduce inactive agents profile for the FI.
Provide clauses on renegotiation of contract, events of default and termination together with a transition clause on surviving obligations of parties upon termination or cessation of the agency banking contract.
Insert a dispute resolution clause. Bear in mind that freedom of contract is permitted subject to the Guidelines.
Finally, state rules against non-exclusivity of agent banking relationship between the FI and agent because an agent may provide agent-banking services to as many FIs as he can accommodate at any given time and, the capacity of the agent to accommodate more FIs shall be determined by the incoming FI.
Prohibited Activities
State that an agent shall not:

Operate or carry out any transaction when there is communication failure with the FI
Carry out a transaction where a receipt or acknowledgement cannot be generated – FI may have to provide printing facilities or integrate e-receipts for each transaction.
Charge the customer any fees.
Give any guarantees
Offer banking services on its own accord.
Continue with the agency business when he has a proven criminal record involving fraud, dishonesty, integrity or any other financial impropriety
Provide, render or hold itself out to be providing or rendering any banking service which is not specifically permitted in the contract
Open accounts, grant loans or carry out any appraisal function for purposes of opening an account or granting of a loan or any other facility except as may be permitted by any other written law to which the agent is subject.
Undertake cheque deposit and encashment of cheques or transact in foreign currency.
Provide cash advances or be run or managed by an FI’s employee or its associate.
Sub-contract another entity to carry out agent banking on its behalf except where there is a super-agent structure in place provided that the FI may specify other activities, which the agent is prohibited from undertaking.
Required Documentations
Agent must identify customers with at least any IDs or PINs or passwords or payment card or secret code or secret message while performing any transaction requiring identification and, agents should report to the FI within 24 hours, all suspicious activities that come to his knowledge. – Agent must conduct banking business strictly within the transaction limits prescribed by the FI.
Signage and Branding
State that the agent shall display in a conspicuous place on its premises the following:

Name and the logo of the FI.
Banking services offered.
A notice to the effect that services shall be provided subject to availability of funds.
Charges or fees applicable for each service which are payable to the FI by the customers
Dedicated telephone numbers through which customers can contact the FI.
Name, telephone numbers and location of the institution’s branch to which the agent reports its agent activities.
Finally, on request by a customer, an agent shall show a copy of the approval letter issued by the Central Bank to the FI, a copy of its appointment letter as agent by the FI and the current license for the commercial activity being undertaken by the agent. These documents should be readily available in the agent banking premises. E-copies may be integrated on the agency banking application for ease and cost effectiveness.

Osita Enwe is a Managing Associate at SRJ Legal Practitioners and regularly advise and assist financial technology companies on broad range of issues.