On the 12th May 2022, President Muhammadu Buhari signed the Money Laundering (Prevention and Prohibition) Bill into Law.2 The Money Laundering (Prevention and Prohibition) Act 2022 (“the Act”) repeals and abolishes the Money Laundering (Prohibition) Act 2011 (as amended).3 The Act aims at providing a comprehensive legal and institutional framework for the prevention, prohibition, detection, prosecution and punishment of money laundering and other related offences in Nigeria.
The fundamental objective of the Act also includes strengthening the existing system for combating money laundering and related offences; making adequate provisions to prohibit money laundering; expanding the scope of money laundering offences and providing appropriate penalties. The new law also establishes the Special Control Unit Against Money Laundering (“the Unit”) under the Economic and Financial Crimes Commission (“EFCC”) for effective implementation of the money laundering provisions of the Act in relation to the designated non-financial businesses and professions.
This article examines some relevant provisions of the Act, and their likely implications on money laundering activities in Nigeria.
2. NOTABLE PROVISIONS IN THE ACT ON PROHIBITION OF MONEY LAUNDERING
2.1Limitation on Cash Payment
The Act prohibits individual and corporate bodies, except in a transaction through a financial institution, from making or accepting cash payment exceeding the sum of N5,000,000.00 or its equivalent and N10, 000,000.00 or its equivalent, respectively.4
Furthermore, the Act prohibits the conduct of two or more transactions separately with one or more financial institutions or designated non-financial Business and Professions (“the Relevant Institutions”) with the intent to avoid the duty to report a transaction which should have been reported under the Act or breach the duty to disclose information under the Act by any other means.5
2.2 Duty to Report International Transfer or Transportation of Funds, Securities and Cash
The Act makes it mandatory for both individuals and corporate bodies (including a money service business) to send a report in writing to the Unit, the Central Bank of Nigeria (“CBN”) and the Securities and Exchange Commission (“SEC”) where any transfer of funds or securities to and from a foreign country, exceeds the sum of US$10, 000 or its equivalent, within a day from the date of the transaction.6 This report shall indicate the nature and amount of the transfer, the names and addresses of the sender and the receiver of the funds or securities.7
Flowing from the above, the Act also makes it mandatory on all individuals engaged in the transportation of cash or negotiable instruments exceeding the sum of US$10, 000 or its equivalent to declare such fact to the Nigerian Customs Service. The Nigerian Customs Service shall report such declaration to the CBN and the Unit.8
Any individual who falsely declares or fails to make a declaration in compliance with the provision of the Act as stipulated above commits an offence and is liable upon conviction to forfeit the undeclared funds or negotiable instrument or to imprisonment for a term of at least two years or both.9
2.3 Identification of Customers
In addition to existing obligations on the relevant institutions to identify and verify the identity of their customers, the Act imposes further obligations on them to identify a customer, whether permanent or occasional, natural or legal person, or any other form of legal arrangement, using identification documents as may be prescribed in relevant regulations.
Furthermore, the Act requires that the relevant institutions verify the identity of these customers using reliable, independent sources, documents, data or information. The Act also requires these institutions to take reasonable measures to identify and verify the identity of any person purporting to act on behalf of a customer, and ensure such a person is duly authorized.10
The Act also requires the relevant institutions to undertake customer due diligence measures in the following circumstances:
- When establishing business relationships;
- When carrying out occasional transactions beyond the applicable designated threshold prescribed by relevant regulations, including transactions carried out in a single operation or in several operations that appears to be linked,
- When carrying out occasional transactions that are wire transfers,
- Where there is a suspicion of money laundering or terrorist financing regardless of any exemptions or thresholds and;
- Where there are doubts about the veracity or adequacy of previously obtained identification data.11
Moreso, the Act imposes an obligation on the relevant institutions, where they suspect or have reasonable grounds to suspect that the amount involved in a transaction is the proceeds of a crime or an illegal act, to require identification of the customer notwithstanding that the amount involved in the transaction is less than US$1,000 or its equivalent.12
2.4 Reporting Suspicious Transactions
The Act provides for circumstances where it shall be deemed that a transaction is suspicious and they include any of the following:
“Where a transaction-
- 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
- In the opinion of the relevant institutions or non-financial business and profession involves the proceeds of a criminal activity, unlawful act, money laundering or terrorist financing.13
Upon the occurrence of any of these circumstances, relevant institutions involved shall have a duty to immediately report the case to the Unit immediately.
2.5 Preservation of Records by Relevant Authorities
The Act imposes an obligation on the relevant institutions to preserve and keep at the disposal of any competent authority, and such other regulatory authorities or judicial persons as the Unit may specify by order published in the Federal Government gazette, the following records:
- 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 shall be sufficient to permit individual transactions to be readily reconstructed at any time by the competent authorities and be made available to them swiftly.15
2.6 Internal Procedures, Policies and Control Measures by Relevant Institutions to Combat Money Laundering
The Act requires that the relevant institutions develop and put in place necessary programmes to combat the laundering of the proceeds of a crime or other unlawful acts, and they shall include:
- The designation of compliance officers at management level at its headquarters and at every branch and local offices;
- The regular training programmes for its employees;
- The centralization 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
Failure to comply with the above provisions, the CBN, SEC, National Insurance Commission and the Unit may impose a penalty not more than N1, 000, 000.00 for designated non-financial businesses and professions, not less than N1, 000, 000.00 for capital brokerage and other financial institutions and N5, 000 ,000.00 in the case of a bank. These authorities may in addition to the above penalty suspend the licences of any of the relevant institutions that fail to comply with this obligation.17
2.7 Limitations to the Attorney-Client Privilege
In many instances, communications between an attorney and a client are absolutely privileged and confidential. Thus, such communications cannot be disclosed by the attorney except with the consent of the client or as permitted by law.18 The Act, however, introduces a limitation on this duty of an attorney not to disclose communications made by the Client in certain circumstances. It provides that the legal professionals privilege and client confidentiality shall not apply to the following transactions:
- 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
The effect of the above provision is that Attorney-Client privilege will no longer be sustainable in all of the listed transactions.
2.8 Surveillance of Bank Accounts
The Act empowers competent authorities under an order of the Federal High Court obtained upon an ex-parte application supported by a sworn declaration by an officer of the competent authority justifying requests to identify and locate the proceeds, properties, objects, or other things relating to the commission of an offence, to do the following:
- Place any bank account or any other account comparable to a bank account under surveillance;
- Obtain access to any suspected computer system; and
- Obtain communication of any authentic instrument or private contract, together with all bank, financial and commercial records, when the account, the telephone line or computer system is used by any person suspected of taking part in a transaction involving the proceeds of a financial crime or other crime.20
Furthermore, the Act in relation to the above stipulates that banking secrecy or preservation of customer confidentiality shall not be invoked as a ground for objecting to the measures set out above or for refusing to be a witness to facts likely to constitute an offence under the Act or any other law.21
2.9 Establishment of the Special Control Unit Against Money Laundering ("SCUML" or "the Unit")
The Act establishes a department under the EFCC to be known as the Special Control Unit Against Money Laundering (“SCUML” or “the Unit”) which shall be responsible for the supervision of designated non-financial businesses and professions in their compliance with the provisions the Act, relevant laws and applicable regulations.
The numerous functions of this department are stipulated in the Section 17(2) of the Act.
2.10 Punishment for the Offence of Money Laundering
Section 18(2) of the Act stipulates the acts or omissions by which any person or corporate body may be guilty of the offence of money laundering. Section 18(3) of the Act provides that any person guilty of the offence of money laundering shall be liable upon conviction to imprisonment for a term of not less than four years but not more than fourteen years or a fine not less than five times the value of the proceeds of the crime or both.
Meanwhile, Section 18(4) of the Act, states that a body corporate found guilty of the offence of money laundering shall be liable upon conviction to a fine of not less than five times the value of the funds or the properties acquired as a result of the offence committed. However, where the body corporate persists in the commission of the offence after the first instance, the regulators may withdraw or revoke the certificate or licence of the body corporate.
Additionally, administrative sanctions prescribed in a regulation made by the Attorney-General of the Federation may also be imposed by supervisory and regulatory authorities on the relevant institutions for breach of any requirement in the Act.22
2.11 Publication of a Money Laundering Strategy Report
The Act provides that within two years of the coming into force of the Act and every subsequent two years, the Attorney-General shall cause to be prepared for submission to the President, a Nigerian Money Laundering Strategy Report (“the Report”) which shall contain contributions from all competent authorities.23
Section 26(2) of the Act provides extensively the details that are required to be included in the Report. Additionally, the report is to include further plans to substantially reduce the extent of money laundering and develop a better coordinated response to money laundering.24
2.12 Exclusion of Non-Profit Institutions from the Designated Non-Financial Institutions List
The non-inclusion of non-profit institutions within the purview of designated non-financial institutions under the Act is a laudable improvement that will positively impact the activities of these institutions. However, the Act also confers additional powers on the Minister responsible for Trade and Investment to expand the designated non-financial institution list by identifying such other businesses and professions as designated non-financial institutions.25 This raises the necessary concern that the list may be further expanded to include these non-profit institutions.
3. RECOMMENDATION AND CONCLUSION
The anti-money laundering regime in Nigeria has now been largely framed in line with the recommendation and expectation of the international Financial Action Task Force (“FATF”). However, it is suggested that the Act needs to address the issues surrounding strengthening the development and use of financial intelligence by all relevant authorities including the Unit and Law Enforcement Authorities, and prioritise money laundering investigations and prosecutions.
It is also suggested that the Act needs to address issues arising from the misuse of legal arrangements for money laundering or terrorism financing. Thus, the Act should contain provisions that ensures that there is adequate, accurate and timely information on legal arrangements such as express trusts, including information on the settlor/trustor, trustee and beneficiaries, that can be obtained or accessed in a timely fashion by competent authorities.
Additionally, the exclusion of non-profit institutions within the purview of designated non-financial institutions under the Act in the fight against money laundering, may be questionable considering that some of these entities may be utilized by corrupt actors to facilitate such proscribed conduct. It is recommended that there ought to be in place an adequacy of laws and regulations applicable to non-profit institutions as they are vulnerable to money laundering activities.
While the changes brought about by the Act are laudable, we hope that greater efforts will be put into the implementation of the provisions of the Act and the need to explore administrative and agency collaboration in achieving its targets.
Lastly, an effective and efficient implementation of the Act will also greatly diminish terrorism financing activities and hopefully checkmate the frequency of terrorist attacks Nigeria is presently facing nationwide.
1 Jeremiah Aderinto, Associate, Dispute Resolution Department, SPA Ajibade & Co, Lagos, Nigeria.
2 Deji Elumoye and Michael Olugbode, ‘Buhari signs three Bills to fight terrorism, money laundering, other financial crimes into law' This Day (Abuja, 13 May 2022) available at https://www.thisdaylive.com/index.php/2022/05/13/buhari-signs-three-bills-to-fight-terrorism-money-laundering-other-financial-crimes-into-law/ accessed 10th June 2022.
3 Section 29 of the Money Laundering (Prevention and Prohibition) Act [No. 14] 2022.
4 Section 2(1).
5 Section 2(2).
6 Section 3(1).
7 Section 3(2).
8 Sections 3(3) & (4).
9 Section 3(5).
10 Section 4(1).
11 Section 4(1).
12 Section 4(6).
13 Section 7(1).
14 Section 8(1).
15 Section 8(2).
16 Section 10(1).
17 Section 10(2).
18 Section 192 Evidence Act [No. 18] 2011, Rule 19 of the Rules of Professional Conduct for Legal
Practitioners, [No. 6] 2007.
19 Section 11(4) of the Money Laundering (Prevention and Prohibition) Act [No. 14] 2022.
20 Section 15(1).
21 Section 15(3).
22 Section 27(1).
23 Section 26(1).
24 Section 26(3).
25 Section 30.
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