ARTICLE
2 October 2023

Anti-Money Laundering: Nigeria's Open Central Register Of Persons With Significant Control

PL
Pavestones Legal

Contributor

Pavestones is a modern, full service, female led law practice with a particular focus on technology and innovation. The practice was borne out of a desire to meet the legal requirements of businesses by adopting a modern, cost effective and less archaic approach. Our key practice areas are Corporate and Commercial, Technology and Innovation, Data Protection and Compliance Services, Energy and Natural Resources and Banking and Finance.
In our previous newsletter, we discussed the provisions of the Central Bank of Nigeria's Guidance on Ultimate Beneficial Ownership which was released following the imminent threat of Nigeria being...
Nigeria Government, Public Sector

INTRODUCTION

In our previous newsletter, we discussed the provisions of the Central Bank of Nigeria's Guidance on Ultimate Beneficial Ownership which was released following the imminent threat of Nigeria being grey-listed for not properly combating money laundering and terrorist financing.

Taking a further step towards accountability and transparency, the Corporate Affairs Commission (CAC) launched Nigeria's Open Central Register of Persons with Significant Control (PSC Register) on Thursday 25, May 2023. This marked a significant milestone in the country's ongoing battle against corruption and its commitment to fostering transparency in the corporate landscape. The initiative is expected to assist citizens, financial institutions, law enforcement agencies, civil society organizations, and the media to access critical information about the ownership and control of business organizations.

In this newsletter, we have discussed key things to note about the PSC Central Register and how it helps the government in its fight against corruption in business organisations.

1. Who qualifies as a Person with Significant Control (PSC)?

According to the Persons with Significant Control (PSC) Regulations 2022 (the 'Regulations1'), a PSC is essentially synonymous with the concept of a Beneficial Owner which refers to the natural person(s) who ultimately owns or controls a company or limited liability partnership (LLP) or the natural person on whose behalf a transaction is being conducted and includes those natural persons who exercise ultimate effective control over a legal person or arrangement. A corporate entity cannot be a PSC.

A person is identified as a PSC if they:

  1. possess a minimum of 5% of the issued shares in a company or has an interest in a limited liability partnership, whether directly or indirectly;
  2. wield a minimum of 5% of the voting rights in a company or limited liability partnership, whether directly or indirectly;
  3. hold the direct or indirect authority to appoint or remove the majority of directors within the company or partners in the limited liability partnership;
  4. exert significant influence or control, whether directly or indirectly, over the company or limited liability partnership; or
  5. hold the right to exercise, or actively exercises, substantial influence or control over the operations of a trust or firm, regardless of whether it has legal entity status, and would meet any of the first four conditions if it were an individual.

2. How can the PSC Register be accessed?

The PSC Register is a free and publicly accessible database which can be accessed via https://bor.cac.gov.ng/.

The following information about a PSC is accessible: full name of PSC; date on which the reportable ownership or control started; date of declaration of significant influence or control; occupation; service address; nationality; nature of ownership or control in the company or limited liability partnership; and unique identifier.

3. When should the CAC be notified?

Every person who qualifies as a PSC is required to notify the company of the date it becomes a PSC. Such notification is required to be made within 7 days of becoming a PSC. The company in turn shall disclose this information to the CAC within one month of it's receipt2. Other important disclosures to be made to the CAC include when:

  1. a person no longer has or holds the minimum interest/shares threshold.
  2. the person is a Politically Exposed Person (PEP). A PEP is a person that has been entrusted with a prominent public position as well as his or her family members and close associates.
  3. the PSC is a state-owned entity SOE. The information to be submitted to the CAC in this instance shall include the same information of the Chief Executive Officer (CEO) of the SOE as is required of an individual who is a PSC.

4. How can the CAC be notified?

A company or LLP can notify the CAC through the Company Registration Portal (CRP). Information about persons with significant control (PSC) can be provided:

  1. during the incorporation process of a new company or LLP;
  2. when any changes in control details occur;
  3. when filing annual returns; or
  4. in any other case CAC may determine.

5. How does the PSC Register help fight corruption and promote transparency?

This register helps fight corruption and promote transparency in the following ways:

  1. Transparency of Ownership: By requiring companies to disclose their significant owners, the PSC register helps reveal the true beneficiaries behind corporate entities, making it difficult for individuals or entities to hide their involvement in potentially corrupt activities.
  2. Prevention of Shell Companies: It discourages the creation of shell companies used for money laundering or concealing corrupt practices since the ultimate beneficial owners must be disclosed.
  3. Enhanced Due Diligence: The register aids law enforcement agencies, financial institutions, and other stakeholders in conducting due diligence to identify potential corruption risks associated with a company's ownership structure.
  4. Deterrent Effect: The existence of the PSC Register acts as a deterrent to corruption, as individuals engaged in corrupt practices may fear exposure and legal consequences.
  5. Facilitating Investigations: When corruption allegations arise, law enforcement agencies can use the PSC Register to quickly identify and investigate the individuals or entities with significant control over a company.
  6. Promoting Fair Competition: Transparency in ownership can help level the playing field for businesses, preventing unfair advantages gained through corruption.

6. Are there any penalties for non-compliance with the provisions of the PSC Regulations?

Yes, there are. Some penalties and consequences imposed by the CAC for failure to submit, submitting late, or providing false information in the PSC include:

  1. Daily monetary fines between the ranges of N5,000 to N50,0000 on the PSC, Company or LLP, as well as on each of its officers.
  2. Reflecting the company or LLP's status as "INACTIVE" on the PSC Register and other pertinent online platforms of the Commission.
  3. Refusing to process any post-registration application submitted by the Company or LLP.
  4. Withholding the issuance of a "Letter of Good Standing" to the Company or LLP.
  5. In the event of false statements made to the Commission, convicting any officer of the Company or LLP and subjecting them to a two-year imprisonment sentence.
  6. Refusing to process any post-registration application submitted by the Company or LLP.
  7. Withholding the issuance of a "Letter of Good Standing" to the Company or LLP.
  8. In the events of late or non-submission of PSC information or false CAC made to the CAC, conviction of a two-year imprisonment sentence.

CONCLUSION

By shedding light on the ultimate individuals who wield significant influence or control, the PSC Register serves as a powerful tool in uncovering illicit activities and preventing the misuse of corporate entities for nefarious purposes. The stringent timelines and sanctions for non-compliance underscore the government's determination to ensure accountability.

It is important for registered business organizations to note that on the 31st of July, 2023, the Corporate Affairs Commission announced that any company that fails to comply with the provisions of Companies and Allied Matters Act 2020 by taking steps to file its annual returns up to date within 90 days of publication on the Commission's website shall be struck off the Register. Once a company is struck off , it shall be unlawful for it to carry on business unless it is first restored to the Register by an order of the Federal High Court.

The 90 days timeline is expected to elapse by the end of October 2023. Business owners are advised to contact their lawyers or relevant officers to ensure their annual returns filings are up to date.

Footnotes

1. Section 119(3) CAMA,2020

2. Section 14 Of Persons with Significant Control Regulations, 2022

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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