A senior banker lifts the lid on Nigeria's shadow banking system, revealing how illicit funds blend into the economy through legitimate financial channels.

He agreed to speak with Axis Signal’s Samuel Osei under strict anonymity due to the risks involved.

He works for one of Nigeria’s tier-one banks, a household name with branches across the country and correspondent relationships stretching from London to Singapore. He has spent nearly two decades inside the machinery of Nigerian finance, rising through corporate banking, treasury operations and compliance oversight. What he has seen, he says, would make most international regulators physically ill.

“People think money laundering is about briefcases of cash and offshore islands,” he begins. “That’s cinema. Real laundering happens in boardrooms, through Excel sheets, across WhatsApp groups with six-digit balances and three-letter company names. It happens in plain sight, sanctioned by systems that pretend not to see.”

He agreed to this interview on strict terms. No recording. No names. No bank identifiers. Nothing that could be traced back to him or his colleagues. The risks are real. In Nigeria’s financial sector, whistleblowers don’t get protection. They get transferred, sidelined, or worse.

What follows is his account of how Nigeria’s shadow banking system operates, how dirty money gets laundered through legitimate institutions, and why the system resists reform at every level.

How does money enter the formal banking system if it originates from criminal activity?

“It’s never one transaction. It’s always a chain. Let’s say you have proceeds from oil theft, which is massive in the Niger Delta. You can’t just walk into a bank with 500 million naira in cash. So you break it down. You use Bureau de Change operators who are already in the ecosystem. They convert your naira to dollars in small batches, spread across multiple operators. Each transaction stays below reporting thresholds. The BDCs then deposit the funds into corporate accounts they control, accounts registered to trading companies, logistics firms, commodity brokers. On paper, these look like legitimate business revenues.”

“Once the money is inside a corporate account, it becomes malleable. You invoice for services never rendered. You pay suppliers who don’t exist. You loan it to another shell company and write off the debt. Every step is documented. Every step looks clean. The trick is volume and complexity. If I investigate one transaction, it’s fine. If I investigate 300 related transactions across nine corporate entities, I need months and a legal team. Most compliance officers don’t have either.”

What about Know Your Customer rules and due diligence?

“KYC in Nigeria is theatre. Yes, we collect documents. We verify IDs. We ask for utility bills and tax identification numbers. But the system is designed to be bypassed. A politically exposed person, a PEP, will never open an account in his own name. He uses proxies. A nephew. A business associate. A lawyer who sets up a limited liability company for him. The company has legitimate directors, a registered address, filed returns with the Corporate Affairs Commission. Everything checks out.”

“The problem is we don’t ask the second-level questions. Who benefits from this company? Where does the real money come from? We stop at the paperwork because if we go deeper, we find things we’re not supposed to find. And finding those things creates problems. Not for the customer. For us.”

Can you give an example without identifying anyone?

“Let’s say a state governor wants to move funds. Not his salary, his other funds. Election war chest, kickbacks from contracts, that kind of thing. He can’t wire 2 billion naira to his personal account. So his people set up a construction company. The company wins a road contract, which is publicly announced and looks legitimate. The contract gets inflated by 40 percent, standard practice. Payments are made in tranches through the state treasury into the construction company’s account at our bank.”

“Now the money is inside the formal system. The company then subcontracts portions of the work to other firms, also controlled by the same network. Money moves between accounts. Some of it gets converted to foreign currency and sent abroad for equipment purchases that never materialise. Some gets paid out as consultancy fees to offshore entities. What’s left eventually flows back to individuals through director’s loans, dividends, or salaries. By the time it reaches a personal account, it has passed through so many layers that tracing it back to the original source requires forensic accounting that no one is paying for.”

You mentioned fintech. How does that fit in?

“Fintech has been a gift to launderers. Not because fintech companies are criminal, but because they move fast and regulation hasn’t caught up. You have payment platforms, digital wallets, peer-to-peer transfer apps. They have lighter KYC requirements than traditional banks, especially for smaller transaction limits. So you take a large sum and fragment it. You send 50,000 naira here, 80,000 naira there, across 200 wallets, then consolidate on the other side.”

“Some fintech companies also operate like informal banks. They hold customer balances but aren’t subject to the same Central Bank of Nigeria oversight. That gap gets exploited. I’ve seen cases where cybercriminals, guys running romance scams or business email compromise, use fintech rails to move stolen funds out of victim accounts into agent networks, then cash out through POS operators in remote towns. By the time the victim reports it, the money has evaporated into the informal economy.”

What about real estate?

“Real estate is the classic laundromat. If you want to clean 500 million naira, you buy property. You pay cash or bank transfer to a developer who doesn’t ask questions. The developer is happy because he gets liquidity. You’re happy because you now own an asset that appreciates and can be resold or rented out legally. The property generates rental income, which is clean money. You declare it, pay tax on it if you’re smart, and now your wealth looks legitimate.”

“What makes it even easier is that Nigeria’s property market is opaque. Prices aren’t standardised. Title documentation is messy. Ownership structures are layered through holding companies. A single property might be owned by a trust, which is controlled by a company registered in another state, which is ultimately benefiting an individual whose name appears nowhere on paper. Good luck tracing that.”

You mentioned ransoms earlier. Are kidnapping ransoms actually laundered through banks?

“Not directly, but they enter the system eventually. Ransoms are usually paid in cash, often in rural areas where kidnappers operate. But you can’t spend 50 million naira in cash without attracting attention. So the money gets fed into the system gradually. Small deposits into multiple accounts. Purchases of goods that are resold for bank transfers. Payments to motorcycle spare parts dealers, petrol stations, small merchants who then deposit the cash as business revenue. Once it’s inside the banking system under the cover of commerce, it moves freely.”

Why doesn’t internal compliance catch this?

“Because compliance is under-resourced and conflicted. At most banks, the compliance unit reports to the same executive management that is generating revenue from these clients. If I flag a transaction as suspicious and recommend freezing the account, I’m stopping revenue. If that client is bringing in 200 million naira in monthly deposits, I’ve just cost the bank a lucrative relationship. The pressure, direct or indirect, is to let things slide unless it’s blatantly criminal.”

“Also, compliance officers are overwhelmed. We’re supposed to file Suspicious Transaction Reports, STRs, with the Nigerian Financial Intelligence Unit. But filing an STR is a bureaucratic nightmare. It requires documentation, justification, evidence. And after you file it, nothing happens. The NFIU is underfunded. They don’t have the capacity to investigate every report. So you file, it goes into a black hole, and the transactions continue. After a while, you stop filing because it feels pointless.”

What about international correspondent banks? Don’t they impose standards?

“They do, on paper. Correspondent banks in New York, London, Frankfurt, they all have strict AML requirements. They audit us. They ask for transaction reports. They threaten to cut us off if we don’t comply. But the reality is they need us as much as we need them. Nigeria is a huge market. Cutting off a tier-one Nigerian bank means losing access to billions in trade finance, remittances, and corporate flows. So they push us to improve, we write new policies, we train staff, we install new software. Then business continues mostly as before.”

“The other issue is that correspondent banks only see the final layer. When we send a wire transfer to a New York bank, they see a corporate entity paying another corporate entity for goods or services. They don’t see the ten transactions that happened before that in Lagos. They trust our due diligence. That trust is often misplaced.”

Do senior executives know what’s happening?

“Some do. Some prefer not to know. There’s a culture of plausible deniability. If you’re a managing director, you don’t ask your relationship managers how a client made their money. You just see the deposits. You see the fees. You see the profit line. Asking uncomfortable questions threatens that profit. So you set policies that look good on paper, you tell compliance to do their job, and you move on.”

“But yes, there are executives who actively facilitate this. They personally manage high-value clients who they know are problematic. They override compliance flags. They authorise transactions that should never be approved. These people are protected because they bring in revenue and because they’re connected. Firing them would create enemies. Keeping them keeps the money flowing.”

What would it take to fix this system?

“Genuine political will, which doesn’t exist. The people who benefit most from the current system are the ones in power. They rely on shadow banking to move their own money. Reforming the system would hurt them personally. So reforms are always cosmetic. New regulations get announced. Task forces are created. Then enforcement is weak, penalties are negligible, and nothing fundamentally changes.”

“You’d also need to properly fund and empower the regulators. The Central Bank of Nigeria, the NFIU, the Economic and Financial Crimes Commission, they all do important work, but they’re under-resourced and politically constrained. They can go after mid-level operators, but touching powerful people requires backing from the very top. That backing rarely comes.”

“Internationally, correspondent banks need to be more aggressive. If major global banks actually cut ties with Nigerian institutions that fail AML standards, that would force change. But they won’t, because the cost is too high. So the cycle continues.”

Why are you speaking now?

There’s a long pause. He looks out the window at the Lagos skyline, a chaotic blend of glass towers and crumbling infrastructure.

“Because I’m tired. I’m tired of being part of something I know is wrong. I’m tired of watching criminals get richer while ordinary people suffer. I’m tired of pretending this is just how business works. Maybe talking about it changes nothing. Probably it changes nothing. But at least someone will know. At least the story gets told.”

Before leaving, he offers one final thought.

“The money will always find a way. As long as there’s profit in crime and systems built to accommodate it, the shadow economy will thrive. The question isn’t whether Nigeria can eliminate money laundering. The question is whether anyone with power actually wants to.”

He walks out, disappearing into the crowd of office workers heading home. His name, like the billions that pass through Nigeria’s banks each year, remains hidden in plain sight.