The practice of Money-laundering isn’t exactly new , with criminal organizations seeking ways to route off the profits from their crimes as far as 10 decades ago in most societies.
But due to the dynamic nature of Human resourcefulness, especially with the arrival of Financial technology, even in criminal activities, there has been a need for governments and Law enforcement agencies to constantly update their methods for combating Money-laundering effectively.
In Nigeria, the Regulatory Framework on Money-laundering revolved around the Money-laundering (Prohibition) Act 2011 in close proximity to the Terrorism (Prevention) Act 2011 . But recently, these laws were repealed in favour of a new set of laws, even when many people do not still fully understand the concept of Money-laundering & Terrorism Financing.
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So as a result, what this article aims to do is :-
– Give a clear basic understanding of the concepts of Money-laundering & Terrorism Financing.
– Outline the new Regulatory Framework governing Money-laundering in Nigeria.
– Highlight some of the most important provisions of the new Regulatory Framework on Money-laundering including Compliance requirements.
– Highlight the Legal implications of the new Regulatory Framework on Anti-MoneyLaundering(AML) practice in Nigeria.
What is Money–Laundering?
While the ordinary definition of Money-laundering is “The concealment of the origins of illegally obtained money, typically by means of transfers or legitimate businesses”, Nigerian law defines Money-laundering as “The concealment, disguise, conversion, transfer or control of any fund or property intentionally with the knowledge that such fund or property is or forms part of the proceeds of an unlawful act”.
Terrorism Financing, which forms the basis of Combating the Financing of Terrorism (CFT) practice, is the act of providing support in the form of funding to terrorists & their networks to enable them effectively carry out Terrorist operations/acts of Terrorism.
What is the new Regulatory Framework governing Money-laundering in Nigeria?
The Legal Framework on Money-laundering in Nigeria formerly revolved around the following laws:-
– The Money-laundering (Prohibition) Act of 2011.
– The Terrorism (Prevention) Act of 2011.
These laws have been repealed in favour of these new laws:-
– The Money-laundering (Prevention & Prohibition) Act 2022.
– The Terrorism (Prevention & Prohibition) Act 2022.
– The Proceeds of Crime (Recovery & Management) Act 2022.
The new Money-laundering Act, along with the other laws mentioned above, were specifically drafted to mirror the recommendations of the Financial Action Task Force(FATF, established by the G-7 group in 1989) on the parameters and foundations of an effective Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Framework.
What exactly is the concept behind AML/CFT Compliance practice?
AML/CFT Compliance practice simply refers to the policies , processes and practices of Business entities used in identifying, assess & report where required or necessary the Money-Laundering/Terrorist Financing risks deemed possible by the nature of their businesses.
What are the most important/notable provisions & Compliance requirements of the new Regulatory Framework on Money-laundering?
The most important/notable provisions & Compliance requirements of the new Regulatory Framework on Money-laundering include the following :-
– The Statutory support by the Money-Laundering Act 2022 of the Special Control Unit on Money-laundering (SCUML) which was formerly under the Federal Ministry of Industry, Trade & Investment and is now a department of the Economic & Financial Crimes Commission (EFCC).
– The introduction of expanded Know-Your-Customer (KYC) requirements which now apply to customers deemed “Foreign Politically Exposed Persons” and the requirement of proper identification & verification of people holding themselves out as acting on behalf of such customers.
– The introduction of a new line of reporting/Compulsory disclosures regarding Monetary transactions over the value of 5million Naira & 10 million Naira for Individuals and Corporate entities respectively. Financial Institutions (FIs) are now to send their reports(Suspicious Transaction Reports/STRs & Currency Transaction Reports/CTRs) to the Nigerian Financial Intelligence Unit(NFIU) while Designated Non-Financial Businesses and Professions (DNFBPs/DNFIs) are to file their reports to the SCUML.
– The provision for voluntary reporting of Monetary transactions of 1million Naira & 5million Naira for Individuals and Corporate entities respectively.
– The SCUML category known as DNFIs (Designated Non-Financial Institutions) required to file AML reports has now been expanded under the new Regulatory Framework to include previously excluded categories of professionals and businesses such as Jewelers, Legal Practitioners, Casinos (Digital Casino App companies & Ship-based casinos included) ,Notaries & Trust corporations , overruling a previous Court judgement to the contrary specifically excluding lawyers from the reach of SCUML.
– The specific prohibition of carrying out 2 or more Monetary transactions separately or across 2 or more FIs or DNFBPs to deliberately beat the requirement of compulsorily reporting the transaction which would ordinarily qualify for mandatory reporting to the relevant Regulatory agency.
– The Money-Laundering Act also requires the setting up by FIs & DNFBPs of constantly developed AML/CFT Compliance frameworks.
– All FIs are specifically required to have designated AML/CFT Compliance officers.
– The new Regulatory Framework also requires the setting up of AML training programs for employees by all reporting entities.
– The requirement of an internal audit unit dedicated to ensuring compliance with the provisions of the Act.
– The transfer of funds/cash, digital assets(excluding Stablecoins) or securities above $10,000.00 to and from a foreign country by a corporate body must be reported to the Central Bank of Nigeria, the Securities and Exchange Commission & EFCC within a day from the transaction date.
Will AML/CFT Compliance requirements under the Money-Laundering Act apply even where there is Attorney/Client privilege?
Yes, in so far as it involves the management of client funds/assets/securities, purchase or sale of property or a business, the opening/management of Bank accounts, Trust corporations or any proceeds from an unlawful act.
Does the new Money-laundering Act carry criminal sanctions for offenders?
Yes it does, specifically in the form of a minimum 4 year-imprisonment term or 5 times the value of the proceeds of any unlawful activity, applicable also to Corporate entities found guilty of Money-laundering offenses.
Conclusion:- While the above write-up is definitely not exhaustive, it can be seen that the Legal Framework governing Money-laundering had definitely been expanded to meet up with the constantly evolving nature of financial crimes, which is more than enough as a reason for all FIs(Fintech Companies included) in particular to seek further guidance via consultations from trained professionals on the full spectrum of AML/CFT Compliance requirements under the new Regulatory Framework going forward.