The practice of money laundering is not exactly new, with criminal organizations looking for ways to divert the profits from their crimes 10 decades ago in most societies.
But due to the dynamic nature of human ingenuity, especially with the advent of fintech, even in criminal activities, governments and law enforcement agencies have had to constantly update their methods to effectively combat money laundering.
In Nigeria, the regulatory framework on money laundering revolved around the Money Laundering (Prohibition) Act 2011 and the Prevention of Terrorism Act 2011. But recently, these laws have been repealed in favor of a new set of laws, even when many people do not yet fully understand the concept of money laundering and terrorist financing.
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So, accordingly, what this article aims to do is:-
– Provide a clear basic understanding of the concepts of money laundering and terrorist financing.
– Describe the new regulatory framework governing money laundering in Nigeria.
– Highlight some of the most important provisions of the new money laundering regulatory framework, including compliance requirements.
– Highlight the legal implications of the new regulatory framework on the practice of anti-money laundering (AML) in Nigeria.
What is Silver–Whitening?
While the ordinary definition of money laundering is “the concealment of the origin of money obtained illegally, usually through transfers or legitimate businesses”, Nigerian law defines money laundering as “the concealment, disguise, conversion, transfer or control of any funds or property intentionally knowing that such funds or property are or form part of the proceeds of an unlawful act”.
Terrorist financing, which forms the basis of the practice of counter-terrorist financing (CFT), is the act of providing support in the form of financing to terrorists and their networks to enable them to carry out effective operations. terrorists/acts of terrorism.
What is the New Regulatory Frame governing money laundering in Nigeria?
The legal framework on money laundering in Nigeria once revolved around the following laws:-
– The Money Laundering (Prohibition) Act 2011.
– The (Prevention) of Terrorism Act 2011.
These laws have been repealed in favor of these new laws:-
– The Money Laundering (Prevention and Prohibition) Act 2022.
– The Terrorism (Prevention and Prohibition) Act 2022.
– The Proceeds of Crime (Recovery and Management) Act 2022.
The new Money Laundering Act, along with the other laws mentioned above, was specifically drafted to reflect the recommendations of the Financial Action Task Force (FATF, created by the G-7 group in 1989) on the parameters and the foundations of an effective fight against money laundering. – Framework for the fight against money laundering and the financing of terrorism (AML/CFT).
What exactly is the concept behind AML/CFT Compliance practice?
AML/CFT compliance practice simply refers to the policies, processes and practices of business entities used to identify, assess and report as necessary or necessary money laundering/terrorist financing risks deemed possible by the nature of their business.
What are the more important/remarkable provisions & Compliance terms of the New Regulatory Frame on money laundering?
The most important/notable provisions and compliance requirements of the new money laundering regulatory framework are as follows:-
– Statutory support by the Special Money Laundering Control Unit (SCUML) Money Laundering Act 2022 which was previously under the Federal Ministry of Industry, Trade and Investment and is now a department of the Economic and Financial Crimes Commission (EFCC).
– The introduction of expanded know-your-customer (KYC) requirements which now apply to customers deemed to be “foreign politically exposed persons” and the requirement for proper identification and verification of persons presenting themselves as acting on behalf of these clients.
– Introducing a new mandatory reporting/disclosures line regarding monetary transactions worth more than 5 million Naira and 10 million Naira for individuals and businesses respectively. Financial Institutions (FIs) are now required to send their reports (Suspicious Transaction Reports/STR and Currency Transaction Reports/CTR) to the Nigerian Financial Intelligence Unit (NFIU) while Designated Non-Financial Businesses and Professions (DNFBPs) / DNFI) must submit their report to the SCUML.
– The provision for voluntary reporting of monetary transactions of N1 million and N5 million for individuals and businesses respectively.
– The SCUML category known as DNFIs (Designated Non-Financial Institutions) required to file AML reports has now been expanded under the new regulatory framework to include previously excluded professional and business categories such as jewellers, legal practitioners, casinos (digital casino app companies). and ship-based casinos included), notaries and trust companies, reversing an earlier judgment of the Court to the contrary specifically excluding attorneys from the scope of SCUML.
– The specific prohibition to conduct 2 or more monetary transactions separately or through 2 or more FIs or DNFBPs to deliberately circumvent the mandatory reporting requirement of the transaction which would normally be eligible for mandatory reporting to the relevant regulatory body .
– The Money Laundering Act also requires FIs and DNFBPs to have continuously developed AML/CFT compliance frameworks in place.
– All FIs are specifically required to have designated AML/CFT Compliance Officers.
– The new regulatory framework also requires the establishment of AML training programs for employees by all reporting entities.
– The requirement for an internal audit unit dedicated to ensuring compliance with the provisions of the law.
– The transfer of funds/cash, digital assets (excluding Stablecoins) or securities over $10,000.00 to and from a foreign country by a body corporate must be reported to the Central Bank of Nigeria, to the Securities and Exchange Commission and the EFCC within one day of the Trade Date.
Will be AML/CFT Compliance terms below the money laundering Law to apply same where there is Lawyer/Client privilege?
Yes, as long as it involves the management of client funds/assets/securities, the purchase or sale of real estate or business, the opening/management of bank accounts, fiduciary companies or of any proceeds of an unlawful act.
Do the New money laundering Law carry criminal punishments for delinquents?
Yes, in particular in the form of a minimum term of imprisonment of 4 years or 5 times the value of the proceeds of any illegal activity, applicable also to legal persons convicted of money laundering offences.
Conclusion:- While the description above is certainly not exhaustive, it can be seen that the legal framework governing money laundering has definitely been expanded to meet the ever-changing nature of financial crimes, which is more than enough as a reason for all FIs (Fintech companies included) in particular to seek additional guidance via consultations with trained professionals on all AML/CFT compliance requirements under the new regulatory framework going forward.