Why Do Financial Institutions Need to Know Who You Are?
You have completed an application, provided your details and are ready to access a financial service. Then comes another request: submit a valid means of identification, confirm your address or complete an additional verification step.
For customers who have already gone through similar checks elsewhere, the request can feel repetitive. Why does another institution need to confirm who you are? And what happens to the personal information you provide?
The answer goes beyond administrative requirements. Every financial transaction involves questions of identity, ownership and accountability. A provider needs to establish that it is dealing with the person or organisation it claims to serve, while customers need confidence that their financial information and transactions are connected to the right identity.
In Nigeria, identity verification is also part of the regulatory framework governing financial services. Institutions are required to conduct customer due diligence to help prevent financial crimes, establish legitimate customer relationships and protect the integrity of the financial system.
Identity verification is not simply about collecting identification documents. It is about establishing trust, reducing the risk of impersonation and ensuring that financial services are accessed by the people authorised to use them.
What Is Identity Verification, and Why Is It Required?
Identity verification is the process of confirming that a person is who they claim to be. It involves checking information supplied by a customer against reliable documents, records or independent data sources.
This process forms part of what financial institutions commonly call Know Your Customer (KYC) and Customer Due Diligence (CDD).
Under Nigeria’s Money Laundering (Prevention and Prohibition) Act, 2022, financial institutions are required to identify customers and verify their identities using reliable, independent sources. The requirements also extend to identifying beneficial owners and confirming the authority of people acting on behalf of customers.
The Central Bank of Nigeria’s Customer Due Diligence Regulations, 2023 provide further guidance for banks and other financial institutions under its regulatory oversight.
These requirements serve several purposes:
- Establishing identity: Confirming that the person accessing a service is who they claim to be.
- Preventing impersonation: Making it harder for individuals to use another person’s identity or misrepresent who they are.
- Meeting regulatory obligations: Supporting controls against money laundering, terrorist financing and other financial crimes.
- Establishing accountability: Ensuring that accounts, transactions and business relationships are linked to appropriately identified individuals or organisations.
Identity checks are therefore not optional administrative preferences for regulated institutions. They form part of the obligations that help maintain confidence in the financial system.
How Verification Helps Protect Customers and Financial Institutions
Imagine someone attempting to access a financial service using another person’s personal details. Without appropriate identity checks, the institution may have difficulty establishing who is actually behind the request.
Verification helps reduce this risk by checking whether the information provided corresponds with reliable identity records. It can also help institutions detect inconsistencies, investigate suspicious activity and establish who is responsible for a particular account or transaction.
For customers, this creates an important layer of protection. Linking financial activity to a verified identity makes it easier to distinguish legitimate access from attempted impersonation and provides a more reliable basis for investigating disputed activity.
For financial institutions, the process supports risk management and regulatory compliance. It helps establish who they are serving, understand the nature of the relationship and identify activity that may require further examination.
However, identity verification is not a guarantee against fraud. It works alongside other safeguards, including transaction monitoring, secure authentication, access controls and customer education.
The Central Bank of Nigeria’s 2026 reforms reinforce this approach. Under measures announced in March 2026 and effective July 1, financial institutions are required to strengthen identity verification for online account opening and account reactivation, alongside other electronic payment security controls. This reflects the growing importance of confirming identity as financial services become more digitally accessible. See the CBN’s regulatory updates.
What Information Might You Be Asked to Provide?
The documents and information required during verification depend on the service, the type of customer and the applicable regulatory requirements. An individual and a registered business, for example, will not necessarily go through identical checks.
For individuals, verification may involve:
- A government-issued means of identification, such as an international passport, national identity card or driver’s licence.
- A National Identification Number (NIN) or other approved identification reference, where applicable.
- Proof of address, where required.
- Additional checks to confirm that the person submitting the application matches the identity information provided.
In Nigeria, the Bank Verification Number (BVN) and NIN are important identifiers within the financial system. The CBN introduced the BVN to provide customers with a unique identity across the banking industry and strengthen its Know Your Customer processes. Learn more about the BVN.
For registered businesses, verification may go further. Institutions may need to establish that the organisation legally exists, identify its beneficial owners and confirm that the individuals representing it have the authority to act on its behalf. This can involve corporate registration records, ownership information and relevant authorisation documents.
The important distinction is that a document does not simply satisfy a checklist. Each item helps establish a particular fact about the customer, their address, the organisation or the authority of the person submitting the request.
Requirements may also vary according to the level of risk involved. Nigeria’s CBN Customer Due Diligence Regulations provide for a risk-based approach, meaning the extent of verification can differ depending on the customer, service and circumstances.
Why Might You Be Asked to Verify Your Identity More Than Once?
Having completed verification with one financial institution does not automatically mean every other provider can rely on the same process without further checks.
Different institutions have their own regulatory obligations, customer records and verification procedures. They may also need to establish whether previously collected information is still accurate and relevant.
There are several reasons an additional check may be necessary:
- A new customer relationship: A provider needs to establish your identity before beginning a new relationship.
- Changes to your information: Updated contact details, address information or other significant changes may require confirmation.
- Unusual activity: A transaction or account activity that does not match the customer’s established profile may warrant additional checks.
- Account reactivation: A provider may need to reconfirm identity before restoring access to an inactive account.
- Incomplete or inconsistent records: Information that cannot be independently verified may require clarification.
This does not mean customers should be asked to resubmit the same documents without reason. The CBN’s due diligence regulations allow financial institutions to rely on verification previously completed in certain circumstances, provided there are no doubts about the accuracy of the information or material changes that require further review.
The objective should be to maintain accurate customer records while avoiding unnecessary repetition.
Your Personal Information Deserves Protection
There is another side to identity verification that customers should understand: the information they submit must be handled responsibly.
Identification documents, addresses, contact information and biometric records can expose individuals to significant risks if improperly accessed, disclosed or misused. A process designed to protect customers should not create unnecessary risks for their personal information.
Nigeria’s Data Protection Act, 2023 establishes requirements for how organisations collect, use, store and protect personal data.
Among its key principles are:
- Purpose limitation: Information should be collected for specific, legitimate purposes.
- Data minimisation: Organisations should collect only information that is adequate and necessary for the intended purpose.
- Storage limitation: Personal information should not be retained longer than necessary for the lawful purpose.
- Data security: Appropriate safeguards should protect information against unauthorised access, disclosure, loss or misuse.
The Act also requires organisations to inform individuals about relevant aspects of data processing before collecting their information. This includes the purpose and lawful basis for processing, recipients of the information, applicable retention periods and the individual’s data protection rights.
Customers should therefore feel comfortable asking reasonable questions about how their information will be handled. Where identity documents or biometric information are requested, the provider should be able to explain why they are needed and how they are protected.
Verification creates responsibility for both sides: customers must provide accurate information, and institutions must handle that information with care.
What Should a Good Verification Experience Look Like?
Regulatory compliance should not mean making the onboarding process unnecessarily difficult.
A well-managed verification process should make it easy for customers to understand what is required and why. They should receive clear instructions, know which documents are acceptable and have access to an appropriate channel for submitting their information securely.
For financial service providers such as Dealmakers, this is where compliance and customer experience meet. Customers should know the documentation required for individual or business onboarding, understand why each item is requested and receive clear guidance when additional information is needed.
A business customer, for example, should not have to make repeated enquiries to establish which corporate records are required or whether the person submitting the application must provide additional authorisation. Clear instructions from the beginning can reduce incomplete applications, repeated submissions and avoidable delays.
The objective is to make verification thorough without making it unnecessarily complicated.
Customers also have a responsibility to protect their information. Before submitting identification documents, they should:
- Confirm that they are communicating through the provider’s official website, office or verified communication channel.
- Understand why the requested documents are needed.
- Submit information only through the provider’s authorised and secure channels.
- Avoid sharing passwords, PINs or one-time verification codes with individuals claiming to assist with onboarding.
- Contact the institution directly if a request appears unusual or inconsistent with its established process.
A secure process should protect the institution while giving customers confidence that their personal information is being treated appropriately.
Verification Is the Beginning of a Responsible Financial Relationship
Identity verification establishes the foundation for a financial relationship. It helps institutions know who they are dealing with, supports efforts to prevent financial crime and gives customers an additional layer of protection against impersonation.
But the responsibility does not end when documents are collected. Institutions must also ensure that verification is proportionate, clearly explained and supported by responsible data handling.
When customers understand why their information is required and how it will be protected, verification becomes more than another onboarding requirement. It becomes part of building a financial relationship grounded in accountability and trust.
Knowing who you serve is essential. Protecting the identity and information they entrust to you is just as important.
Frequently Asked Questions
Why do financial institutions ask for identity verification?
Financial institutions use identity verification to establish who their customers are, meet customer due diligence requirements, reduce the risk of impersonation and support controls against financial crimes.
What is the difference between KYC and identity verification?
Identity verification is one part of Know Your Customer (KYC). KYC is broader and can include confirming a customer’s identity, understanding the purpose of a business relationship, identifying beneficial owners and monitoring activity throughout that relationship.
Why might I need to provide my BVN or NIN?
BVN and NIN serve as important identity references in Nigeria. Financial institutions may use them, alongside other approved documents or verification methods, to confirm customer information in line with applicable requirements.
Is identity verification the same for individuals and businesses?
No. Individual verification focuses on establishing a person’s identity and relevant details. Business verification may also involve confirming the organisation’s legal existence, identifying its beneficial owners and verifying the authority of the people acting on its behalf.
How can I protect my identity documents when submitting them?
Use only the provider’s official and secure submission channels. Understand why the documents are required, avoid sending them to unverified contacts and never disclose your passwords, PINs or one-time verification codes to someone claiming to represent a financial institution.
References
Central Bank of Nigeria. (n.d.). Bank Verification Number. https://www.cbn.gov.ng/PaymentsSystem/BVN.html
Central Bank of Nigeria. (2023, June 20). Central Bank of Nigeria Customer Due Diligence Regulations, 2023. https://www.cbn.gov.ng/Out/2023/CCD/CBN%20Customer%20Due%20diligence%20Reg.%202023-combined.pdf
Central Bank of Nigeria. (2026). Reforms and initiatives. https://www.cbn.gov.ng/AboutCBN/Reforms.html
Federal Republic of Nigeria. (2022). Money Laundering (Prevention and Prohibition) Act, 2022. Nigerian Financial Intelligence Unit. https://nfiu.gov.ng/LawsAndRegulations
Nigeria Data Protection Commission. (2023). Nigeria Data Protection Act, 2023. https://ndpc.gov.ng/ndp-act-2023/