Banks Shun ‘Payable on Death Mandate’ Requests from Customers, Set to Mop Up N500bn

As the Central Bank of Nigeria (CBN) is set to mop up about N500 billion in unclaimed bank balances, there are indications that Nigerian deposit-taking banks are not ready to honour requests from their customers to integrate Payable On Death (POD) mandate into their banking transactions.

Payable on Death (POD) is an arrangement between a bank and a client that designates beneficiaries to receive the client’s entire assets after the death of the client.

Some experts believe that by adopting the POD measure, the issue of unclaimed deposits in banks will be reduced to the barest minimum.

It was gathered that many customers have been mounting pressure on their banks since last week to integrate POD mandate into their banking transactions following a viral video that advises depositors to approach their financial institutions for a POD arrangement.

In the video, which was released early last week, a young individual advises any depositor to simply approach his bankers and demand to demand POD form, which upon completion, would make it possible for his named beneficiary or beneficiaries to gain access to the fund in his account upon his death without going through the complexities of the probate route.

Bank sources said a sizable percentage of the dormant bank accounts belong to individuals who died without leaving clear arrangements on how relatives and other beneficiaries could easily access the funds in their accounts.

While the CBN has attributed its move to a desire to ensure that such unclaimed monies in dormant accounts are put to good use and to also enhance the growth of the economy, the content of the guidelines has triggered anxiety in certain quarters.

Meanwhile, relationship officers in the banks who spoke with reporters last week claimed ignorance of such arrangements in their banks. One of them said: “We do not do POD sir, the closest is to have a simple Will that covers mutual funds, bank, and pension”.

When THISDAY contacted the CBN’s Director of Corporate Communication, Dr. Isa Abulmumin, he denied knowledge of such a provision, saying in a text message: “Findings indicate that there is no such provision for now”.

Further investigations suggest, however, that there are no laws restricting the banks from providing the service to a willing client but most banks are not just keen on the concept.

A high court judge who is also a private investor and who spoke under the condition of anonymity shared his experience with the banks on the service and said, “Yes I have heard of POD but from my experience as a lawyer and judge, all the banks honour it in the breach. In all the matters I have been involved in, the banks always insist on letters of administration or will and never honour the POD. That is why the bank holds billions of naira of depositors who have passed on and will do everything to make sure the families end up in litigation while the funds are sequestered in the vault with no interest paid”.

Meanwhile, Prince Yemisi Shyllon, a chartered engineer, stockbroker, legal practitioner, and investor has suggested that in the absence of the POD, the closest way out of this reality, is to go the way of living trusts instead of relying on the writing of a Will. According to him, a POD option can be integrated into a living trust arrangement.

However, a banker who is also versed in estate matters, said such a simple estate concept may not be immediately and easily applicable in Nigeria due to complications in the country’s estate process. He added: “There are so many ‘manifestations’ accompanying the administration of the estates of a deceased; we have seen a situation where many individuals unknown to the family of the deceased showed up with evidence as legitimate beneficiaries of the state of the deceased. And don’t forget, the government, especially the Federal Inland Revenue Services are also interested in how the money in the account of a dead person is distributed, especially if he was owing tax.”

Many analysts insisted that going through the probate court to access liquid assets left by dead relatives is tortuous, complex, and expensive, whereas the PODs are easy to follow and execute options.

Meanwhile, the CBN guideline states that banks and Other financial institutions (OFIs) are expected to transfer all unclaimed balances in accounts that have been dormant for up to 10 years into an Unclaimed Balances Trust Fund (UBTF) pool account which will be domiciled at the CBN.