The Nigerian anti-money laundering, counter financing of terrorism, and counter-proliferation financing (AML/CFT/CPF) laws and regulations make it necessary for businesses coming under its surveillance, such as designated non-financial businesses and professions (DNFBPs) to have in place robust and efficient AML/CFT/CPF compliance measures. This blog aims to address the role of AML software in automating AML compliance for DNFBPs in Nigeria.
The blog defines DNFBPs, states examples of DNFBPs, takes into consideration the regulatory framework governing the AML/CFT/CPF requirements of DNFBPs and discusses in-depth the role of AML software in automating AML compliance for DNFBPs in Nigeria.
The Role of AML Software in Automating AML Compliance for DNFBPs in Nigeria
The use of software is not unknown for businesses aiming to automate their AML compliance processes and operations, which consume large amounts of time and resources when conducted manually.
AML compliance in Nigeria requires designated non-financial businesses and professions (DNFBPs) to carry out a substantial number of AML compliance processes. Let us first understand which businesses in Nigeria are classified as DNFBPs and the AML/CFT/CPF laws and regulations they must ensure compliance with.
DNFBPS in Nigeria and AML Compliance Requirements
Definition of DNFBPs: The definition of Designated Non-Financial Businesses and Professions (DNFBPs) is stated under the Money Laundering (Prevention and Prohibition) Act, 2022 referred to as Nigeria’s MLA, 2022 (MLPPA). Businesses and professions that are defined as DNFBPs are listed below as examples.
Examples of DNFBPs
The MLPPA covers the following businesses and professionals as DNFBPs:
- automotive dealers
- businesses involved in the hospitality industry
- casinos
- clearing and settlement companies
- consultants and consulting companies
- dealers in jewellery
- dealers in mechanised farming equipment, farming equipment, and machinery
- dealers in precious metals and precious stones
- dealers in real estate, estate developers, estate agents, and brokers
- high-value dealers
- hotels
- legal practitioners and notaries
- licensed professional accountants
- mortgage brokers
- practitioners of mechanised farming
- supermarkets
- tax consultants
- trust and company service providers
- pools betting
- any other businesses or professions designated by the Minister responsible for trade and investment.
The Regulatory Framework for DNFBPs in Nigeria
The regulatory framework for DNFBPs in Nigeria consists of key regulatory bodies and various laws and regulations concerning DNFBPs.
Key Regulatory Bodies
- Central Bank of Nigeria (CBN)
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- Responsible for supervision of:
- Deposit Money Banks
- Microfinance Banks
- International Money Transfer Operators
- Development Finance Institutions
- Payment Service Providers
- Primary Mortgage Banks
- Finance Companies
- Bureau De Change
- Special Control Unit against Money Laundering (SCUML)
- Is responsible for supervision of DNFBPs and Non-Profit Organisations.
- Ensures that all supervisory agencies operate with risk-based supervision in alignment with National Risk Assessment.
- Inter-Ministerial Committee on Anti-Money Laundering and Counter-Terrorist Financing (IMC)
- Operates under the charter of bringing together all public sector ministries, departments, and agencies responsible for overseeing the implementation of the country’s AML/CFT/CPF framework.
- Is responsible for coordinating AML/CFT/CPF policy in Nigeria.
Laws and Regulations Concerning DNFBPs
The government of Nigeria has the following laws and regulations in place to govern AML/CFT/CPF compliance by DNFBPs.
- Money Laundering (Prevention and Prohibition) Act, 2022 referred to as Nigeria’s MLA, 2022 (MLPPA).
- Paved the way for the establishment of the Special Control Unit against Money Laundering (SCUML).
- Previously excluded sectors brought under AML/CFT and CPF purview, such as:
- Online Casinos
- Designated Virtual Assets Service Providers (VASPs)
- Lawyers.
- Terrorism (Prevention and Prohibition) Act, 2022 (TPPA)
- Provides for implementation of Targeted Financial Sanctions (TFS) measures in alignment with the Financial Action Task Force (FATF) recommendations.
- Proceeds of Crime (Recovery and Management) Act, 2022 (POCA)
- Provides for management of the proceeds of criminal offences through mechanisms for management and disposal of the assets.
- Charts out recordkeeping requirements for proceeds of crime in alignment with FATF Recommendations.
- Companies and Allied Matters Act, 2020 (CAMA)
- Provides for registration of legal entities.
- Mutual Legal Assistance in Criminal Matters Act, 2019 (MLACMA)
- Provides the basis for international cooperation in identifying and seizing proceeds of crime in alignment with the UN Convention Against Corruption and other standards.
- Nigerian Financial Intelligence Unit (Establishment) Act, 2018 (NFIUA)
- Provides for the establishment of NFIU while empowering it to receive suspicious transaction reports and threshold-based reports from reporting entities.
- Empowers NFIU to analyse and disseminate data, statistics and information gathered to provide intelligence reports to law enforcement, anti-corruption, security, and intelligence agencies.
- Economic and Financial Crimes Commission (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction for Designated Non-Financial Businesses and Professions, and Other Related Matters) Regulations, 2022
- Regulates DNFBPs and Professionals in Nigeria for AML/CFT and CPF compliance.
How AML Software Can Help Automate AML Compliance for DNFBPs in Nigeria
Anti-money laundering software is software that businesses, particularly DNFBPs, can rely on to comply with the legal obligations placed on them by the Nigerian AML/CFT/CPF laws. Some of the AML compliance requirements that AML software can help in automating are:
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- The MLPPA, more commonly known as Nigeria’s MLA, 2022, requires DNFBPs to identify their customers by implementing a thorough Customer Due Diligence (CDD) process. This CDD process involves the collection of customer information, referred to as ‘Know Your Customer’ (KYC).
- AML software can be used to automate the KYC component of CDD as it facilitates the user of the software, i.e., the DNFBPs, to identify and verify the customer’s information by validating such information through reliable and independent sources of information.
- Traditionally, KYC is conducted through physical examination of identification documents. However, the use of AML software for KYC streamlines the document collection process by facilitating:
- Remote document collection
- Self KYC functionality
- Customisable document upload checklist
- Autofill, prefill, or auto-capture customer information across integrated software such as customer relationship management (CRM)
- Conducting identity verification through validation of documents from reliable third-party aggregators.
- Screening:
- DNFBPs in Nigeria need to screen their customers against the following:
- UN Sanctions
- Sanctions list under the Regulation for The Implementation of Targeted Financial Sanctions on Terrorism, Terrorism Financing, and Other Related Measures, 2022.
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- Use of software and application programming interfaces (APIs) for conducting sanctions screening, identifying politically exposed persons (PEPs), and carrying out negative media or adverse media screening.
- Relying on screening software helps screen customers against the sanctioned individuals and entity lists in real time.
- Use of a well-calibrated sanctions screening tool helps eliminate the occurrence or instances of unusually high false matches, resulting in relevant screening results.
- Risk Assessment:
- DNFBPs are required to assess the inherent money laundering, financing of terrorism, and proliferation financing (ML/FT and PF) risks on the basis of geography, delivery channels, customers, services, and products.
- The fulfilment of risk assessment obligation can be streamlined by the use of automation tools or customer risk assessment (CRA) software that helps with:
- Built-in risk assessment parameters, which can be fine-tuned and customised according to the needs and ML/FT/PF risks faced by the DNFBP.
- Configurability of risk profiling questions offered by CRA software.
- Ability to assign or allocate risk-weighting in accordance with business risk assessment parameters and CRA.
- Ability to define risk score and risk categories according to ML/FT/PF risk of the DNFBPs.
- Developing customer risk profile through calibrated risk weighting mechanism.
- Ongoing Monitoring:
- Ongoing monitoring of business relationships entails supervising the business lifecycle with customers to identify if any suspicious behaviour or transaction pattern emerges.
- The use of software or automation tools helps DNFBPs to smoothen their ongoing monitoring requirements by helping with the following:
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- Setting up sector-specific red flags for instant identification of red flag indicators.
- Monitoring transactions on a real-time basis.
- Configuring monitoring rules in accordance with the risk appetite of the DNFBPs.
- Transaction Monitoring:
- Automation tools help with setting transaction monitoring thresholds to ensure that transactions by the customer are consistent with their profile, the risk posed by such customers and sources of funds for such transactions where necessary.
- Regulatory Reporting
- DNFBPs need to file:
- Currency Transaction Reports (CTRs) to SCUML online reporting platform if funds transferred are equal to or exceed:
- ₦ 5,000,000 (Five Million naira) in case of a natural person with the Nigeria Financial Intelligence Unit (NFIU).
- ₦ 10,000,000 (Ten Million naira) in case of a legal entity or a body corporate with the NFIU.
- Cash Based Transaction Reports (CBTRs) to SCUML when any cash transaction equals to or exceeds US$10,000 (ten thousand US Dollars) with the NFIU.
- Suspicious Transaction Reports (STRs) with the NFIU to report any suspicious activity indicating money laundering, terrorism financing, or proliferation financing through the goAML platform.
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- Automation and use of software helps eliminate the limitations in fulfilling regulatory reporting requirements such as:
- Incomplete records: The use of software for creating reports can eliminate incomplete records by auto-capturing available data from integrated AML software such as screening, KYC and CDD. Automation tools can help investigate and arrange suspicious activities and transaction information in accordance with the STR narrative.
- Time lags: The use of software for regulatory reporting can help eliminate time delays or lags in completing reports.
- Unreported cases: Many times, the sheer volume of suspicious activities and transactions is very high, causing humans to falter and make the error of missing to report a suspicious activity or transaction unknowingly. This possibility is eliminated while using the software as an integrated AML software would generate alerts and notifications through emails and mobile alerts, nudging the personnel responsible for executing report filing in a timely manner.
- Customising workflows according to the organisation structure of DNFBPs for seamless escalation to the compliance officer.
- Record-Keeping:
- The Economic and Financial Crimes Commission (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction for Designated Non-Financial Businesses and Professions, and Other Related Matters) Regulations, 2022, prescribes maintaining records of transactions by DNFBPs as well as risk profile of every customer and beneficial owner of legal entity customer that includes information obtained and validated with the:
- National Identification Number (NIN)
- International Passports
- National Identity Cards issued by the National Identity Management Commission (NIMC)
- Driving License issued by Federal Road Safety Corps (FRSC)
- Voting cards issued by the Independent National Electoral Commission (INEC)
- Records of ongoing investigations or transactions subject to disclosure.
- An AML case management tool helps with record-keeping of measures taken while conducting customer onboarding through KYC, CDD, and screening software.
- AML software helps with easy retrieval of customer records and compliance measures taken, such as regulatory reporting and enhanced due diligence (EDD) measures through a cloud storage facility, helping DNFBPs with record retention for a prescribed duration of 5 years.
- Independent Audits:
- The Economic and Financial Crimes Commission (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction for Designated Non-Financial Businesses and Professions, and Other Related Matters) Regulations, 2022, requires DNFBPs to establish internal audit unit, such an internal audit unit must be independent in nature or such responsibility must be assigned to an external consultant giving independent AML/CFT and CPF audit services.
- Such an independent AML audit should generate an audit report, specifically commenting upon the degree and extent of robustness of internal AML/CFT and CPF policies, ML/FT and PF control measures, along with remedial suggestions that help strengthen AML/CFT and CPF policies and procedures.
The use of AML software and automation tools helps generate reports necessary for AML audits in a quick and efficient manner, leaving no room for human errors.
Conclusion
DNFBPs in Nigeria need to be aware of the AML/CFT/CPF obligations to avoid being imposed with regulatory fines and penalties. Manual compliance processes are time-consuming, error-prone, and ineffective. AML software plays a pivotal role in automating AML compliance for DNFBPs in Nigeria.
