CBN Guidance Note on Beneficial Ownership in Nigeria

The Central Bank of Nigeria on January 12,2023 launched a guidance note prescribing several regulations on the issue of beneficial ownership pursuant to the existing new legal and regulatory framework on Money-laundering, Terrorism Financing and Proliferation Financing in Nigeria.

This article will be dealing with the following topics of :-

– The objectives of the CBN Regulatory Guidance note on beneficial ownership.

– The scope of this guidance note.

– Determining who beneficial owners are and what constitutes beneficial ownership. 

– Responsibilities of Financial Institutions by virtue of this guidance note.

What are the objectives of the CBN Guidance note on beneficial ownership in Nigeria?

The CBN guidance note was issued to assist Financial Institutions with yardsticks for identifying and verifying the beneficial owners of legal persons and legal arrangements in line with extant Anti-Money-laundering/ Combating the Financing of Terrorism/Combating Proliferation Financing (AML/CFT/CPF) laws and regulations in Nigeria.

What is the applicability scope of the CBN Guidance note?

The guidance note applies to all Financial Institutions (FIs) under the regulatory jurisdiction of the CBN.

Who is a beneficial owner by virtue of this guidance note?

The term “beneficial ownership”  refers to the natural persons who ultimately own or control a customer and/or the natural person on whose behalf a transaction is being conducted. This also applies to the persons who exercise ultimate effective control over a legal person or arrangement.

In line with the requirements of the Financial Action Task Force (FATF) a beneficial owner must not be the legal owner of a corporate vehicle, but a person who exerts effective control over the corporate vehicle or a person on whose behalf a transaction is being conducted.

How is beneficial ownership determined?

This is to be done by identifying the following people :-

– Individuals owning or holding at least 5% of the issued shares of a corporate vehicle directly or indirectly.

– Individuals controlling a corporate vehicle.

– Individuals exercising at least 5% of the voting rights in a legal person (corporate vehicle) directly or indirectly.

– Individuals having a right to directly or indirectly appoint or remove majority of the directors of the legal person (corporate vehicle).

What are the means prescribed by the CBN Guidance note for identifying beneficial ownership?

FIs under the CBN Guidance note are to look at certain determinants to find out beneficial ownership which include :-

1. Certificates of Incorporation.

2. Particulars of Shareholders.

3. A corporate vehicle’s memorandum/articles of association.

4. Partnership Agreement.

5. Resolutions.

6. Nominee Director agreements.

7. The Internet & Social media.

What are the responsibilities of Financial Institutions (FIs) under the CBN guidance note?

The responsibilities of FIs by virtue of the CBN guidance note are :-

1. To identify and manage Money-laundering/Terrorism Financing and Proliferation Financing risks posed by legal persons and legal arrangements.

2. To apply Enhanced Due Diligence (EDD) on complex corporate vehicle structures that pose higher Money-laundering/Terrorism Financing and Proliferation Financing risks.

3. To understand the nature of the customer’s business, its ownership structure, taking into cognizance the complex ownership structure where shareholders are multiple legal persons or complex arrangements in different nominee shareholders.

Garnishee Suits in Nigeria

The whole process of litigation and lawsuits for the purpose of securing remedies for perceived wrongs would be utterly useless without the means or ability to enforce judgments obtained in court. 

This is why Judgment Enforcement techniques have been a core specialization area for many legal counsel, with the most commonly used method of judgment enforcement being the Garnishee Suit.

This article will be looking at what garnishee suits are, the parties to a garnishee suit, the differences in commencing garnishee suits against certain persons, and the process of commencing a garnishee suit.

What exactly is a garnishee suit?

A garnishee suit is simply a lawsuit commenced by a judgment creditor (a party in whose favour a monetary court judgment was passed) for the purpose of securing a judgment enforcement order in the form of an attachment of monetary assets belonging to a judgment debtor (a party against whom a monetary court judgment was given) and in the custody of a 3rd party known as a Garnishee, typically a bank. 

What is the major legal framework governing garnishee suits in Nigeria?

Garnishee suits in Nigeria are governed by the Sheriffs and Civil Process Act of Nigeria (or the “SCPA”) .

How are garnishee suits commenced?

Garnishee suits are commenced usually by heading to the same court that granted the original monetary judgment through an application made ex-parte(without the need to put the judgment debtor on notice) which when granted will be served or brought to the notice of the garnishee who is then required to appear in court and give returns to the court on the statement of the judgment debtor’s account domiciled with them if any.

Can garnishee suits be commenced against any judgment debtor without notice?

No. For some debtors like government agencies, it is presumed rightly that the appropriate garnishee would be the Central Bank of Nigeria (CBN). To commence such a suit against such bodies the prior consent of the Attorney-General of the Federation (AGF) must be sought.

What happens when a garnishee appears in court and lies that an account belonging to the judgment debtor is either empty or not domiciled with them?

This would qualify as perjury that can lead to criminal prosecution.

What happens when the judgment debtors are the banks themselves?

In seeking to enforce a monetary judgment against a bank via a garnishee order, the appropriate garnishee would be the Central Bank of Nigeria. 

Editor’s Note: The ADC had disowned this endorsement:” The African Democratic Congress (ADC) on Monday dissociated itself from the purported endorsement of other political parties and their candidates for 2023 by a faction of the party. This was contained in a statement by Patricia Akwashiki, the ADC Board of Trustees Chairperson in Abuja. Mrs Akwashiki described the alleged endorsements as fraudulent, void and of no effect since they were being carried by a faction of the party not known to law for pecuniary gains. She blamed a faction of the party, led by its immediate past National Chairman, Ralph Nwosu, for the anti-party activity.”

The African Democratic Congress (ADC) has endorsed the Labour Party’s presidential candidate, Peter Obi, for the February 25 election.

The endorsement is the latest for the Labour Party’s presidential flagbearer, who has recorded unprecedented popularity following massive support from the Nigerian youths.

The two parties, ADC and LP, had on Monday, formed an alliance with other partners that will see them support Obi and his vice Datti Baba-Ahmed. The alliance was witnessed by the ADC National Chairman, Chief Ralph Okey Nwosu; BoT Chairman, Dr. Mani Ibrahim, and LP chieftain, Prof. Pat Utomi.

The partners of the alliance; Nigeria Mothers for Good Governance, Fulani United, Nigeria Artisans, League of Imams, Nigeria Traders, Yoruba United, Mega Political Coalition, Kanuris United, Amalgamated Coalitions, CEG Groups and Nigeria Legions United, were part of the eventful signing of a Memorandum of Understanding between the LP and the ADC.

However, the ADC National Chairman explained that the partnership was only a collaboration and not a merger with the Labour Party.

However, a faction of the ADC has disassociated itself with the endorsement, describing it as fraudulent. A statement by Senator Patricia Akwashiki the Board of Trustees Chairman of the faction said the endorsement is void and of no effect since they were being carried by a faction of the party not known to law for pecuniary gains.

“They have divided themselves into three groups and collected money from APC, PDP and Labour. One party, three endorsements within the space of four days. Shameful,” the statement said.

The faction under the interim leadership of Senator Patricia Akwashiki, described the endorsement as “criminal and shameful” and those who made it happen as “renegades” who no longer belong to the party.

But a statement issued by the ADC BoT Chairman, Dr. Ibrahim, indicated that the decision is in line with the party’s values.

Read the statement below:

“We founded this party over 16 years ago and we knew it was not going to be easy, but we committed to invest ourselves in the struggle.

“At the time we were sure that the structures in place were so fluid, undisciplined, corrupted and frail to carry the country.

“Almost every Nigerian today shares that sentiment. Time has proved us so right.

“We told ourselves that we are going to be the grassroots political party with an inclusive culture and unique character that will champion the transformation of Nigeria and Africa;

“A party to birth a new Nigeria nation, where opportunities abound for all as a result of justice, rich diversity principles and values, and creative leadership with capacity to inspire the greatest innovative pursuit amongst our youths and entire people.

“A nation where every one of us and our future generation can dream big dreams and see their dreams come true. A nation where no one is oppressed.

“Are we succeeding? Sure yes. We never fooled ourselves that we were going to produce the President or governors in even 10 years. We knew that nation building in a highly corrupted space is a struggle.

“Things may be murky today; but the signs of the rainbow are beginning to be evident. To show that we have made good progress, in 2018, ADC emerged as a party of choice after a due diligence scrutiny conducted by eminent persons and leaders of civil societies in the country.

“Despite the struggles we’ve faced in the last six months as a party, our determination has made us come out stronger.

“We presently have over 1,400 candidates running for several positions: governorship, Senate, House Representatives and state assemblies.

“Within the last four months, different youth and women organizations have openly endorsed ADC and proposed to work with our candidates at the grassroots.

“Nigerians in Diaspora are solidly behind over 200 of our candidates that cut across all regions.

“Today, we come together as a family and as a formidable third force: our Grand Patrons and Board of Trustee members; our National Executive Council; our National Working Committee; our Diaspora Network and our National Youth Council to take stand in solidarity, moving forward for the viable presidential candidate the entire nation is clamoring for.

“After our due diligence and critical assessment of the 17 presidential candidates and what they have to offer Nigerians, and after consulting our Grand Patron and former President, Olusegun Obasanjo, we decided as a party that the Obi-Datti Movement is a worthy cause to endorse.

“Today, we form this Star Alliance for one purpose only: to ensure a loud victory.

“Ladies and gentlemen of the media, it has been over 22 years since we embraced democracy as a Nation. The first presidential election that heralded this republic was held on the 27th of February, 1999 and in a week time, we would be coincidentally marking the eve of that event in which General Olusegun Obasanjo, one of the highly respected military veterans, an Owu man from Ogun State, South West Nigeria, was elected President.

“This Star Alliance is significant, because we must decide to shape the space mindfully going forward or believe me, this country is doomed.

“A whole generation of 20/30 years has passed since, after the annulled June 12 election of 1993.

“This democracy was as a result of the combined efforts and sacrifices of many: civil society leaders, concerned professionals, labour, PRONACO and NADECO, Nigeria’s International friends, and many other individuals and patriots.

“We do not stand alone in this solidarity. Our Star Alliance Partners include the following: Nigeria Mothers for Good Governance, Fulani United, Nigeria Artisans, League of Imams, Nigeria Traders, Yoruba United, Mega Political Coalition, Kanuris United, Nigeria Professional Group, DG Global Groups, Amalgamated Coalitions, Groups and Nigeria Legions United.”