INTRODUCTION
The Money Laundering (Prevention and Prohibition) Act 2022 ("the Act") is modelled on the Money Laundering (Prohibition) Act 2011 (As Amended). The Act secured the assent of the President Muhammadu Buhari on 12th May 2022 repealing the old law, Money Laundering (Prohibition) Act 2011 and now includes provisions which reflect the current and modern realities in the digital financial world. The new Act contains 31 sections as opposed to 25 sections of the 2011 Act. Section 18 of the Act expressly prohibits money laundering in Nigeria. It stipulates the various offences that accumulate to form money laundering and the penalty for such contraventions.
The objectives1 of the Act are as follows: to provide for an effective and comprehensive legal and institutional framework for the prevention, prohibition, detection, prosecution and punishment of money laundering and other related offences in Nigeria; to strengthen the existing system for combating money laundering and related offences; to make adequate provisions to prohibit money laundering; to expand the scope of money laundering offences and provide appropriate penalties ; and to establish the Special Control Unit Against Money Laundering under the Economic and Financial Crimes Commission for effective implementation of the money laundering provisions of the Act in relation to the designated non-financial businesses and professions.
This article will examine the new and innovative provisions in the new Act as well as other salient provisions.
THE ESTABLISHMENT OF THE SPECIAL CONTROL UNIT AGAINST MONEY LAUNDERING
The Act establishes a department under the Economic and Financial Crimes Commission to be known as the Special Control Unit against Money Laundering (referred to as "the SCUML") which shall be responsible for the supervision of designated non-financial businesses and professions in their compliance with the provisions of the Act, relevant laws and applicable regulations.2
The functions of the SCUML are as follows: registration and certification of designated non-financial businesses and professions; the monitoring and supervision of designated non-financial businesses and professions; taking necessary enforcement actions to ensure compliance with the Act, relevant laws and applicable regulations; conducting off-site, on-site, and on the spot checks, inspection of designated non-financial businesses and professions for the purposes of money laundering control and supervision; establishing and maintaining a comprehensive database of designated nonfinancial businesses and professions; receive cash-based transaction reports and currency transaction reports from designated non-financial businesses and professions in accordance with the provisions of the Act; sensitize designated non-financial businesses and professions regarding their responsibilities; and perform other functions necessary to fulfill its responsibilities under the Act or any other relevant laws and applicable regulations.
LIMITATION ON CASH TRANSACTIONS
The Act prohibits any individual or company from making or accepting cash payment of a sum exceeding Five Million Naira (#5,000,000) and Ten Million Naira (#10,000,000) or their equivalents respectively, except through a financial institution.3 It is also against the law to conduct two or more transactions separately with one or more financial institutions or designated non-financial businesses and professions with the intent of avoiding the duty to report a transaction which should have been reported or the intent to breach the duty to disclose information under the Act by any other means.4
REPORT OF ANY INTERNATIONAL TRANSFER ABOVE US$10,000
The Act mandates that where there is a transfer of funds or securities by a person or body corporate including a money service business of a sum exceeding Ten Thousand US Dollars (US$10,000) or its equivalent to or from a foreign country, such should be reported to the Nigerian Financial Intelligence Unit, Central Bank of Nigeria and the Securities and Exchange Commission on the date of the transaction.5 The report must indicate the nature and amount of the transfer, the names and addresses of the sender and the receiver of the funds or securities.6 Also, the law compels anyone transporting cash or negotiable instruments in excess of Ten Thousand US Dollars (US$10,000) or its equivalent within or out of Nigeria to declare such to the Nigerian Customs Service who must further report such declaration to the Central Bank of Nigeria and the Nigerian Financial Intelligence Unit. Any individual who fails to make such declaration risks the forfeiture of such undeclared funds or negotiable instrument or to imprisonment for a term of at least two years or both.7
IDENTIFICATION AND VERIFICATION OF CUSTOMERS
As a means of preventing money laundering, the Act mandates financial institutions, designated non-financial business and professions to do the following: identify their customers, whether permanent or occasional, natural or legal persons or any other form of legal arrangements, using identification documents as may be prescribed in any relevant regulation; verify the identity of customers and identify the beneficial owners through the use of reliable, independent source documents, data or information to the extent that the institutions are satisfied that the information is true; take reasonable measures to verify that any person purporting to act on behalf of the customer is so authorised, identified and verify the identity of that person.8 The Act enumerates the circumstances when financial institutions, designated non-financial businesses and professions must undertake customer due diligence measures such as when establishing business relationships, when carrying out occasional transactions that are wire transfers or when there is a suspicion of money laundering or terrorist financing, regardless of any exemptions or thresholds.9
REPORTING SUSPICIOUS TRANSACTIONS
A financial institution, designated non-financial business and profession must report any suspicious transaction to the Nigerian Financial Intelligence Unit within 24 hours after the transaction10. The Act defines a suspicious as one which involves a frequency which is unjustifiable or unreasonable, is surrounded by conditions of unusual or unjustified complexity, appears to have no economic justification or lawful objective, is inconsistent with the known transaction pattern of the account or business relationship, or involves the proceeds of a criminal activity, unlawful act, money laundering or terrorist financing.11 It is immaterial whether the transaction is complete or otherwise.12 The Act penalizes any financial institution designated non-financial business and profession that fails to comply with the provisions of subsections (1) and (2) and will be liable on conviction to a fine of N1,000,000 for each day during which the offence continues.13
These institutions and professions are also to preserve all necessary records on transactions, both domestic and international, for at least five years following completion of the transaction and all records obtained under section 4 of the Act, including account files and business correspondence, and results of any analysis undertaken, for at least five years following the termination of the business relationship or after the date of the occasional transaction.14 These records must be sufficient to permit individual transactions to be readily reconstructed at any time by the competent authorities and made swiftly available to the competent authorities.15
INTERNAL PROCEDURES, POLICIES AND CONTROLS
The Act mandates every financial institution, designated non-financial business and profession to develop programmes to combat the laundering of the proceeds of a crime or other unlawful acts. They include the designation of compliance officers at management level at its headquarters and at every branch and local office; regular training programmes for its employees; the centralisation of the information collected; and the establishment of an internal audit unit to ensure compliance with and effectiveness of the measures taken to enforce the provisions of the Act.16
The law empowers certain governmental institutions such as the CBN, SEC, National Insurance and the SCUML, to impose penalties for failure to put in place policies and programmes to combat laundering or proceeds of unlawful acts.17 Any of these institution can impose a penalty not more than One Million Naira (N1,000,000) for designated non-financial businesses and professions, a penalty not less than One Million Naira (N1,000,000) for capital brokerage and other financial institutions and Five Million Naira (N5,000,000) in the case of a Bank or in fact, suspend the licence of such an entity for its failure of compliance.18
AN EXCEPTION TO THE ATTORNEY-CLIENT PRIVILEGE
The Act compels the disclosure to the relevant agency by a legal professional and stipulates the circumstances where legal professional privilege and the invocation of client confidentiality shall not apply. Such conditions include; the purchase or sale of property; the purchase or sale of any business; the managing of client money, securities or other assets; the opening or management of bank, savings or securities accounts; the creation, operation or management of trusts, companies or similar structures; or anything produced in furtherance of any unlawful act.19
PROHIBITION OF ANONYMOUS ACCOUNTS AND SHELL BANKS
The Act explicitly prohibits the opening or maintenance of numbered or anonymous accounts by any person, financial institution or body corporate,20 as well as the establishment and operation of a shell bank in Nigeria.21 A financial institution is also prohibited from entering into or continuing any correspondent banking relationships with shell banks. It must also ensure that a respondent financial institution in a foreign country does not permit its accounts to be used by shell banks.22 The penalty for non-compliance with the provision is, in the case of an individual, a term of imprisonment of at least two years but not more than five years23; in the case of a financial institution or body corporate, a fine of at least Ten Million Naira (N10,000,000) but not more than Fifty Million Naira (N50,000,000), in addition to the prosecution of the principal officers of the body corporate, and the winding up and prohibition of its constitution or incorporation under any form or guise.24
OFFENCES AND PENALTIES
Sections 18 – 22 of the Act provides for the various money laundering offences and the penalties for such offences. Unlawful acts from which money can be laundered which the law prohibits include; participation in an organised criminal group, racketeering, terrorism, terrorist financing, illicit trafficking in narcotic drugs and psychotropic substances, corruption, bribery, fraud, currency counterfeiting, murder, grievous bodily injury ; kidnapping, hostage taking, robbery or theft, insider trading and market manipulation.25 The penalty for any of these offences, for an individual, is an imprisonment for a term of not less than four (4) years but not more than fourteen (14) years or a fine not less than five times the value of the proceeds of the crime or both.26 If the offence was perpetrated by a body corporate, the penalty upon conviction is a fine of not less than five times the value of the funds or the properties acquired as a result of the offence committed. 27 Other offences include retention of proceeds of unlawful acts, conspiracy, aiding and abetting which carries the same punishment as others.
COURT WITH JURISDICTION
The Act confers jurisdiction on the Federal High Court located in any part of the country regardless of the location where the offence is committed to try offences, hear and determine proceedings arising under the Act.28 It also has the jurisdiction to impose any penalty provided for an offence under the Act or any other related law.29 The Act provides that the Federal High Court should adopt all legal measures to avoid unnecessary delays and abuse in the conduct of matters.30 To speed up the trial of such cases, the Act prohibits the Court from entertaining an application for stay of proceedings or for an interlocutory injunction in respect of any money laundering proceeding until the Court delivers its judgment on the matter.31
By section 24 of the Act, a competent authority may demand, obtain and inspect the books and records of a financial institution, designated non-financial institution business or profession to confirm compliance with the provisions of the Act.
INNOVATIONS TO THE NEW ACT
Due to the technological advancement in finance, the Act put into consideration certain provisions which encapsulate new realities and also to prevent money laundering through ways that are not provided for under the old law – Money Laundering (Prohibition) Act 2011 (As Amended). Most of these provisions are introduced through the Interpretation Section of the Act.32 They are as follows:
- The introduction of professions in addition to financial
institutions and designated non-financial business in order to
ensure that certain professions are saddled with certain
responsibilities which prevent them from aiding money
laundering.
- The numbers of designated non-financial businesses and
professions have increased from 10 to 19 and now includes;
businesses involved in the hospitality industry, consultants and
consulting companies, dealers in mechanized farming equipment and
machineries, dealers in precious metal and precious stones, dealers
in real estate, estate developers, estate agents and brokers,
notaries, licensed professional accountants, mortgage brokers,
trust and company service providers and pool betting.
- The designation of the National Drug Law Enforcement Agency
(NDLEA) in section 25 of the repealed law as the Agency has been
removed because the new Act has provided for the establishment of
the Special Control Unit against Money Laundering under the
Economic and Financial Crimes Commission (EFCC).
- The Money Laundering (Prevention and Prohibition) Act 2022
includes the definition of a Casino which was absent in the
repealed Act. Casino is defined as "whether licensed or
not includes an internet casino, a building or room used for
meetings, entertainment, gambling or dancing and equipped with
gambling devices, gambling tables."
- The new Act has amended certain definitions in order to include
digital financial services and digital assets. Funds are now
defined to include virtual assets; likewise the definition of
property now covers virtual assets and instruments.
- Virtual Asset is defined as "a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes but does not include digital representations of fiat currencies, securities and other financial assets."
CONCLUSION
The Act is a step in the right direction as it takes into account current realities to ensure that its provisions are wide enough to now criminalise unlawful acts which were outside the purview of the Act. The creation of the Special Control Unit against Money Laundering will enhance the capability of the Economic Financial Crimes Commission to apprehend and prosecute any individual or body corporate who is involved in any of the forms of money laundering. Although the old Act has been repealed, all regulations, orders, reports, ongoing investigations, prosecutions and other proceedings, actions taken and things done under the repealed Act will continue and have effect as if made, issued, carried on, taken or done under the new Act;33 the same goes for any conduct or activity which was a criminal conduct or activity under the repealed Act.34
Importantly, business persons such as hoteliers, accountants, real estate brokers, and jewellers, who are not compliant with the provisions of the Act are likely to contradict the Act especially due to the amendments to the Act to enable it apply to newer business models. Thus, trainings, legal advisory services and capacity building are essential for those in the categories mentioned in the Act.
Footnotes
1. Section 1
2. Section 17(1)
3. Section 2(1)
4. Section 2(2)
5. Section 3(1)
6. Section 3(2)
7. Section 3(5)
8. Section 4(1)
9. Section 4(2)
10. Section 7(2)
11. Section 7(1)
12. Section 7(3)
13. Section 7(10)
14. Section 8(1)
15. Section 8(2)
16. Section 10(1)
17. Section 10(1)
18. Section 10(2)(a)(b)
19. Section 11(4)
20. Section 12(1)
21. Section 12(2)
22. Section 12(3)
23. Section 12(4)(a)
24. Section 12(4)(b)
25. Section 18(6)
26. Section 18(3)
27. Section 18(4)
28. Section 23(1)
29. Section 23(3)
30. Section 23(4)
31. Section 23(5)
32. Section 30
33. Section 29(2)
34. Section 29(3)
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.
