Money Laundering Mitigation and Capital Formation in Nigeria: Relevance of Know Your Customer Instrument
The study investigated the efficacy of the money laundering mitigation instrument of Know Your Customer (KYC) on capital formation in Nigeria. The study deployed the Financial Action Task Force (G7 government) and the Nigerian Anti-Money Laundering Prohibition Act (2011) to benchmark the espoused nexus between the variables. The study is hinged on forensic investigation theory. The study adopted the ex-post facto research design and used quarterly data from '1Q' 2010 to '4Q' 2019, which was sourced from the Nigeria Inter-Bank Settlement Scheme (NIBSS), National Bureau of Statistics, and CBN statistical reports. From using the Correction Model (ECM) to analyze the data, it was observed that the KYC policy instrument has a negative non-significant effect on capital formation in Nigeria. Following this, the government must address the twin issues of proper mapping and delineation of all streets (in both urban and rural areas) towards creating a national directory (database), as well as creating a reliable national citizen database to facilitate KYC. Regulatory authorities must enforce sanctions against erring banks, and bank managements must divorce career growth from the number of new customers attracted and the volume of deposits mobilized. Keywords: Know Your Customer Policy, Capital Formation, Forensic Investigation Theory, Money Laundering