Navigating Nigeria’s Money Laundering (Prevention and Prohibition) Act, 2022

As part of its efforts to fight money laundering and other financial crimes, the Nigerian government enacted the Money Laundering (Prevention and Prohibition) Act of 2022. This blog discusses various provisions and aspects provided under this comprehensive act, which was implemented to enhance Nigeria’s regulatory framework against money laundering and financial crimes.

Objectives of the Nigeria’s Money Laundering (Prevention and Prohibition) Act, 2022

The government of Nigeria, in order to prevent the spread of money laundering, has enacted the Money Laundering (Prevention and Prohibition) Act, 2022, referred to as Nigeria’s MLA, 2022.

The objectives of Nigeria’s MLA, 2022, are to:

• Make available a legal framework for identifying, prosecuting or criminalising, preventing, and combating money laundering and allied crimes.
• Provide for means to obstruct the spread of money laundering.
• Penalise money laundering and related crimes.
• Set up the Special Control Unit against Money Laundering under the Economic and Financial Crimes Commission to oversee the implementation of Nigeria’s MLA, 2022, by Designated Non-Financial Businesses and Professions (DNFBPs).

Legal Obligations

The legal obligations prescribed under Nigeria’s MLA, 2022, are:

Limitation to Make or Accept Cash Payment

Nigeria’s MLA, 2022, mandates that no natural person or body corporate shall, except for transactions with a Financial Institution (FI), make or accept cash payment exceeding or equal to

• ₦ 5,000,000 (Five Million naira) in case of a natural person
• ₦ 10,000,000 (Ten Million naira) in case of a legal entity or a body corporate

either through a single transaction or a series of transactions to avoid reporting requirements under Nigeria’s MLA, 2022, or to avoid the responsibility of disclosing information under Nigeria’s MLA, 2022.

Duty to Report International Transfer or Transportation of Funds, Securities, and Cash

Nigeria’s MLA, 2022, requires natural persons and corporate bodies to report transactions in money service business exceeding or equal to US$ 10,000 (ten thousand US Dollars) to the Nigerian Financial Intelligence Unit (NFIU), Central Bank of Nigeria, and Securities and Exchange Commission in writing within 1 (one) day from the date of the transaction. Transportation of cash or negotiable instruments in excess of US$ 10,000 shall be declared to the Nigerian Customs Service.

Identification of Customers

The identification of customers forms part of the Customer Due Diligence (CDD) exercise that every DNFBP and FI needs to undertake during situations such as:

• Initiating a new business relationship with a natural person or a legal entity.
• Conducting infrequent or once-in-a-while types of transactions that are occasional in nature, exceeding the designated threshold given by relevant regulators, or conducted through wire transfers.
• Where there exists an element of suspicion that there might be involvement in money laundering or terrorism financing regardless of whether thresholds are in place or not.
• When any doubt arises regarding the authenticity or sufficiency of previously collected customer information.
• Nigeria’s MLA, 2022 requires DNFBPs and FIs to identify customers irrespective of whether the customer is a natural or legal person, the customer with whom the DNFBP or FI intends to establish a business relationship that is occasional or long-term in nature.
• Nigeria’s MLA, 2022, also provides for verifying customer details by relying on dependable and reliable sources. Nigeria’s MLA, 2022, states the requirement of DNFBPs to identify and verify the Ultimate Beneficial Owners (UBOs) of legal entities or legal arrangement customers with whom the DNFBPs intend to establish business relationships.
• The DNFBPs and FIs also need to ensure that if a person is acting on behalf of any customer, then such a person’s identification details are sought and verified to ensure that they are indeed who they claim to be, and the authority to act on behalf of the customer is legitimate.

Duties of Casinos

The Money Laundering (Prevention and Prohibition) Act, 2022, requires casinos, whether they operate from a ship or from land-based establishments in Nigeria, to fulfil the following obligations:

• Identifying and verifying original customer identification documents containing customer name and address.
• Maintaining records and register of all transactions carried out by every customer in a chronological order that makes mention of the amount of funds and mode in which funds were used for every transaction with each customer’s forename, surname, and address which is to be provided to the Special Control Unit Against Money Laundering (SCUML).
• Ensuring that such records are maintained for a period of five (5) years from the date of the last transaction recorded in such a register.

Occasional Cash Transactions by Designated Non-Financial Businesses and Professions

In the context of occasional transactions, DNFBPs need to furnish a declaration to the SCUML regarding cash transactions with:

• A new business, prior to initiation of the business relationship or an existing business, and maintain records of such transactions for a duration of 5 (five) years after the last transaction is recorded in the transaction register.
• A standard data form filled by the customer and identified by the DNFBP before initiation of any transaction involving US$ 1,000 (one thousand US Dollars) or above, which is verified with their international passport, driving license, national identity card, or any similar kind of government-issued identification card that contains the customer or their UBOs photographs.
• Register or record such cash transactions in chronological order that clearly indicates customer name, surname, forename, and address.

Suspicious Transaction Reporting

When it comes to reporting suspicious transactions from the point of view of money laundering and terrorism financing (ML/FT), the FIs and DNFBPs need to report such suspicious transactions, whether executed or not,  involving any element of:

• Unjustifiable or unreasonable frequency of transactions.
• Unjustifiable or unreasonable complexity of the transaction.
• Transactions that cannot be justified in terms of the need for such a transaction to be executed in the first place.
• Transactions that are inconsistent or out of alignment with the nature of the business relationship or existing pattern of conducting transactions.
• Makes the DNFBPs or FIs suspicious about elements of proceeds of crime or unlawful activity involved with such transactions.

In writing to the Nigerian Financial Intelligence Unit (NFIU) within 24 hours, containing all relevant information on the suspicious transaction and take measures to curtail such an act within its capacity. The FIs and DNFBPs also need to ensure that if NFIU requires, they must supply additional information about such a transaction.

Record Keeping

The law prescribes DNFBPs and FIs to maintain records such as transaction records, cash transaction registers, and any form of files and business correspondences for a period of five (5) years at the minimum. Such records should be adequate to retrace the transactions and understand the business relationship.

Communication of Information

The documents maintained for fulfilling the record-keeping requirements need to be communicated as and when demanded by any competent or relevant regulatory or supervisory authority, such as the NFIU or the SCUML.

Internal Procedures, Policies, and Controls

The FIs and DNFBPs in Nigeria are required to formulate programmes to counter the proceeds of crime or illegal acts from entering the business by taking measures such as:

• Appointing a compliance officer at its head office with decision-making powers similar to those granted at the management level.
• Organising frequent training programs for their employees on Anti-Money Laundering (AML) measures.
• Centralisation of information collected.
• Having in place an internal audit unit that takes care of ensuring compliance and effective implementation of AML measures.

Failing which, the Central Bank of Nigeria, Securities and Exchange Commission, National Insurance Commission, and the SCUML may impose penalties up to:

• ₦ 1,000,000 (One Million naira) for DNFBPs;
• ₦ 1,000,000 (One Million naira) for capital brokerage and other FIs;
• ₦ 5,000,000 (Five Million naira) for Banks;

and suspend the license issued for non-compliance.

Mandatory Disclosure by Financial Institutions and Designated Non-Financial Businesses and Professions

Apart from other types of reports required from various regulatory or supervisory authorities, FIs and DNFBPs need to report to SCUML and the NFIU within seven days of carrying out transactions consisting of a single transaction, lodgment, or transfer of funds exceeding or equal to the amount of ₦ 5,000,000 (Five Million naira) in case of a natural person and ₦ 10,000,000 (Ten Million naira) in the case of legal entity or a body corporate.

Non-compliance with mandatory disclosure requirements would result in a minimum fine of ₦ 250,000 (Two hundred and Fifty Thousand naira) and not more than ₦ 1,000,000 (One Million naira) for every single day the non-compliance continues.

Prohibition of Numbered or Anonymous Accounts, Accounts in Fictitious Names, and Shell Banks

Nigeria’s MLA, 2022 mandates that the opening, operating, or maintaining of numbered or anonymous accounts by any natural person, FIs, or legal entities or body corporates is prohibited in Nigeria, and FIs shall not enter a correspondent banking relationship with shell banks and ensure that respondent FI in a foreign country also does not encourage or permit its accounts used by shell banks. The non-compliance with prohibition requirements also attracts heavy fines and penalties.

New Products, Business Practices, and Technologies

DNFBPs and FIs are required to identify and analyse the degree of money laundering and terrorism financing risk that could be posed by the introduction of new products and new businesses; for example, if a gold jeweller is planning to enter the silver jewellery market, then he must consider potential ML/TF threats associated with silver jewellery and its new supply chains, delivery mechanisms, and so on.

DNFBPs and FIs must be mindful of carrying out ML/TF risk assessments prior to launching, introducing, or getting into a new business, product, or service and implement adequate risk mitigation measures.

Directors and Employees of Financial Institutions and Designated Non-Financial Business and Professions

Where the DNFBPs and FIs have filed for reporting suspicious activity or transaction because it is not possible to identify the original source of funds, the Federal High Court may block such funds through the NFIU or the commission’s request.

If there is evidence that DNFBPs and FIs’ directors or employees are involved in a conspiracy surrounding such blocked funds, then the DNFBPs and FIs, along with their directors and employees, are criminally liable under the Money Laundering (Prevention and Prohibition) Act, 2022.

Surveillance of Bank Accounts

For the purposes of locating or tracing the proceeds of crime, properties and objects related to ML/TF offences and unlawful acts, the following can be accessed and obtained by any competent authority through an order of the Federal High Court:

• Bank accounts or any account like a bank account can be ordered to be brought under surveillance.
• Access to any suspicious computer system can be granted.
• Communication of instruments, contracts, and telephone records used by a person suspected of being involved in proceeds of crime.

In such situations, banking secrecy and confidentiality cannot be invoked, as doing so would amount to an offence under Nigeria’s MLA, 2022.

Determination of Flow of Transactions

The NFIU and the commission shall consult with the Central Bank and the Corporate Affairs Commission in order to understand how the flow of transactions or money took place and identify the beneficiaries of natural persons and legal entities or body corporate accounts.

Establishment of the Special Control Unit against Money Laundering and Functions

Nigeria’s MLA, 2022, provides for the establishment of SCUML and broadly charts out its functions, which include:

• Registration and certification of DNFBPs in alignment with applicable laws and maintenance of such a database.
• Monitoring and supervision of the DNFBPs’ compliance with applicable laws.
• Taking measures to implement and enforce compliance with Nigeria’s MLA, 2022.
• Conducting inspections such as on-site, off-site, and spot checks of DNFBPs to ensure compliance with Nigeria’s MLA, 2022.
• Receiving designated reports on cash-based transactions and currency transactions from DNFBPs.
• Spreading awareness of the importance of compliance with Nigeria’s MLA, 2022 among DNFBPs.
• Carrying out responsibilities required to ensure fulfilment of its responsibilities under Nigeria’s MLA, 2022.

Money Laundering Offences

According to the law, any natural person or body corporate, whether within or outside the geographical boundaries of Nigeria, is responsible for money laundering through Nigeria will be subject to:

• Natural Person: If a natural person is involved in money laundering, then imprisonment of a minimum of four (4) years to fourteen (14) years or a minimum fine of five (5) times the amount of proceeds of crime or both.
• Body Corporate: If a body corporate is involved in money laundering, it shall be liable for a minimum fine of five (5) times the value of proceeds of crime or properties gained as an outcome of the crime.
• Continuing Offence: Where a body corporate is in continuous violation after being convicted as a first-time offender, then the regulator may revoke the certificate or license of the legal entity or body corporate.

Other Offences

Any director or employee who indulges in informing the owner of funds or customer involved in any suspicious transactions, avoids filing a suspicious transactions report, or destroys a register containing transaction details and other necessary registers required under Nigeria’s MLA, 2022, or facilitates suspicious transactions by introducing false or fake information and identifying documents or violates regulations of the law, then such an employee or director shall be liable for conviction and fine of minimum ₦ 10,000,000 (Ten Million naira) or imprisonment for minimum three (3) years or both, and ₦ 25,000,000 (Twenty-five Million naira) will be fine for the body corporate.

Retention of Proceeds of an Unlawful Act

Nigeria’s MLA, 2022, extends to punishing any person who keeps with themselves the amount derived out of an unlawful act by imposing a fine of a minimum five (5) times the amount of proceeds of the unlawful act or minimum imprisonment for at least four (4) to a maximum of 14 (fourteen) years.

Conspiracy, Aiding, and Abetting

Nigeria’s MLA, 2022, punishes any person responsible for aiding, abetting, assisting, or facilitating money laundering, and other offences are punishable to the same degree and extent as the main offence itself.

Offences by a Body Corporate

When a body corporate or legal entity is found to be in violation of provisions under Nigeria’s MLA, 2022, due to any negligence or deliberate involvement of its directors, managing personnel, or officer, then such offence shall be punished accordingly. Upon conviction, a body corporate shall be wound up, and its assets shall be seized and given up to the Federal Government.

Jurisdiction to Try Offences Under Nigeria’s MLA, 2022

The Federal High Court in any part of Nigeria, irrespective of jurisdictional boundaries, can try and decide offences under Nigeria’s MLA, 2022.

Power to Demand and Obtain Records

All the relevant and competent authorities under Nigeria’s MLA, 2022, can demand and inspect the books and records of FIs and DNFBPs to ensure that they are compliant with Nigeria’s MLA, 2022.

Obstruction of Authorised Officers

When any person deliberately prevents or obstructs officers of any competent or regulatory authority from carrying out their responsibilities under Nigeria’s MLA, 2022 shall be punishable with a minimum of two (2) years and a maximum of three (3) years of imprisonment, and the FI or body corporate indulging in preventing or obstructing officers of any competent or regulatory authority shall be punishable with a fine of ₦ 1,000,000 (one million naira).

Periodic Furnishing Reports on Money Laundering

Nigeria’s MLA, 2022, requires the Attorney General to prepare a “Nigerian Money Laundering Strategy Report” and submit the same to the President at the frequency of two years.

Administrative Penalties

Nigeria’s MLA, 2022 empowers supervisory and regulatory authorities to impose upon FIs and DNFBPs or any officers working in such FI or DNFBP administrative sanctions and/or penalties prescribed under Nigeria’s MLA, 2022.

Regulations

Nigeria’s MLA, 2022, empowers the Attorney General to make rules, guidelines, orders, or regulations as considered necessary for the effective implementation of Nigeria’s MLA, 2022.

Repeals and Other Consequential Amendments

The present Money Laundering (Prevention and Prohibition) Act, 2022, is enacted by repealing the former Money Laundering (Prohibition) Act, No. 11, 2011, and all the ongoing investigations, reports, orders, and regulations under the repealed act are to be interpreted to have occurred under the present act.

Interpretation

The interpretation section of Nigeria’s MLA, 2022, contains definitions of terms used within Nigeria’s MLA, 2022.

Citation

The citation portion of Nigeria’s MLA, 2022, provides for describing the act as the Money Laundering (Prevention and Prohibition) Act, 2022.

Conclusion

In a nutshell, the Money Laundering (Prevention and Prohibition) Act, 2022, broadly outlines the responsibilities of DNFBPs and FIs regarding compliance with the act, along with the establishment and roles and responsibilities of the SCUML. The act also provides for regulatory reporting to the NFIU for reporting of suspicious transactions, along with powers of the Federal High Courts anywhere in Nigeria to try and resolve cases related to offences mentioned in the act.