The scope of the new AML/CFT(Anti-Money Laundering/Combating the Financing of Terrorism) regulatons in Nigeria recently got enlarged with the Central Bank of Nigeria CBN Regulations on Anti-Money Laundering passed on the 20th of June, 2022.
The regulations were passed by the CBN in order to be in alignment with the provisions of the Money-laundering (Prohibition) Act 2022 as well as the Terrorism Prevention Act 2022 and the Proceeds of Crime (Recovery & Management) Act 2022.
The objectives of these regulatons include the following :
– To provide AML CFT & CPF( Combating Proliferation Financing) compliance guidelines for FIs(Financial Institutions) under the regulatory purview of the CBN.
– To enable the CBN to diligently enforce AML, CFT & CPF measures and ensure effective compliance by FIs.
– To provide guidance on KYC (Know-Your-Customer) measures to assist FIs in the implementation of these regulations.
This article will thus be focused on the topics of:-
– The applicable scope of the regulations.
– The most notable provisions of these regulations.
– The effects of non-compliance with the Regulations.
What is the applicability scope of the Regulations?
The Regulations apply to all Financial Institutions under the jurisdiction of the Central Bank of Nigeria.
In what aspects did the regulations successfully align with the new Money-laundering Prohibition Act & the Terrorism Prevention Act?
The regulations cover the relevant provisions of the MLPA & TPA on areas that include :-
– Key AML, CFT & CPF policy areas.
– Development of compliance units & their functions.
– The designation and roles of a Compliance officer.
– Customer Due Diligence (CDD) conduct.
– AML, CFT & CPF employee training.
– The monitoring and filing of STRs (Suspicious Transaction Reports) to the Nigerian Financial Intelligence Unit (NFIU) & other reporting requirements.
What are the most notable provisions of the Regulations?
Some of the most notable provisions of the Regulations are :-
– STRs :- FIs are required to file STRs to the NFIU where funds, assets or properties are suspected to have been derived from any but not limited to the following –
a). Bribery
b). Fraud
c). Currency counterfeiting
d). Murder
e). Forgery
f). Extortion
g). Piracy
h). Insider trading.
– Terrorism Financing :- Terrorism Financing under the regulations is defined as either directly or indirectly and willingly providing, soliciting, acquiring, collecting, receiving, possessing or making available, property or funds with the intention or knowledge or having reasonable grounds to believe that it will be used in full or in part to finance a terrorist or terrorist group in line with the provisions of the TPA 2022.
– Chief Compliance Officer(CCOs) Designations for FIs :- FIs shall designate CCOs with the relevant competence, authority & independence to implement an FI’s AML/CFT/CPF compliance program.
The CCO is to be appointed to a management level capacity and will have the functions of :-
a). Receiving & vetting STRs from staff.
b). Filing STRs with the NFIU.
c). Rendering ‘nil’ reports where necessary to the CBN & NFIU to ensure compliance.
d). Ensuring the implementation of an FI’s compliance program.
– Anonymous Accounts :- FIs shall not keep anonymous accounts or accounts in fictitious names. FIs shall also not establish or continue correspondent relationships with shell banks with no physical presence in any country as shell banks are prohibited in operating in Nigeria by virtue of the MLPA.
– Foreign branches/Subsidiaries of FIs :- FIs shall ensure that foreign banks and subsidiaries observe AML CFT CPF measures consistent with the CBN Regulations and apply them to the extent that the host country of the foreign branch/subsidiaries allow.
– Customer Due Diligence (CDD) :- FIs shall undertake CDD measures when :-
a). Business relationships are established.
b). Occasional transactions by a customer above the applicable and designated threshold of $1000.00 occur.
c). Transactions that use transfers , cross-border or domestic, between FIs as well as credit/debit card money transfers.
– Know-Your-Customer (KYC) requirements:- FIs may adopt physical or electronic KYC (e-KYC) approaches to on-board customers and these e-KYC procedures shall comply with CBN e-KYC guidelines.
– Politically Exposed Persons (PEPs). :- FIs shall obtain senior management approval before establishing business relationships with PEPs and shall render monthly returns on all transactions with PEPs to the CBN and the NFIU
“Politically Exposed Persons” as a classification includes :-
a). Heads of Government
b). State governors
c). Legislators
d). Local Government Chairmen
e). Senior politicians
f). Senior Government, Judicial and Military officers
g). Royal Family members
h). International Organization executives
i). State Corporation executives
– Trusts, Nominees, Fiduciary Accounts & Offshore Trusts :- Trusts, Nominees, Offshore trusts & Fiduciary accounts pose a higher Money-laundering, Terrorism Financing & PF risk and thus require a unique set of “KYC Business” (Know Your Customer’s Business) procedures.
For Nigerian Trusts, Identification evidence shall be obtained from either :-
a). Those having control over the funds
b). The providers of the funds
c). A grant of Probate or a copy of a valid will where the settlor/provider of the funds is dead.
– Powers – of – Attorney :- Powers of Attorney are subject to Identification evidence requirements as well as verification and records of transactions undertaken in accordance with a Power of Attorney shall be maintained as part of the customer’s record.
What are the possible sanctions for non-compliance with the Regulations?
The sanctions for non-compliance with the provisions of the Regulations are derived from the general sanctions for non-compliance under the Banks and Other Financial Institutions Act BOFIA, The Money-laundering Prohibition Act, the Terrorism Prevention Act and other relevant laws/regulations .
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