INTRODUCTION

As part of the intensified efforts towards implementation of the Financial Action Task Force (FATF) recommendations on anti- money laundering and combating the financing of terrorism (the FATF Recommendations)1 in Nigeria, the President of the Federal Republic of Nigeria assented to the Money Laundering (Prevention and Prohibition) Bill, 2022. The Money Laundering (Prevention and Prohibition) Act, 2022 (the Act or MLA 2022) which repeals the Money Laundering (Prohibition) Act, No. 11, 2011, contains elaborate provisions which on the legal and institutional framework for the prevention and prohibition of money laundering in Nigeria. The Act also provides statutory backing for the establishment of the Special Control Unit Against Money Laundering under the Economic and Financial Crimes Commission (EFCC). Trajectorially, this would be the fourth reform of Nigeria's anti-money laundering legal regime – starting from 2003, its respective amendments in 2004, 2011 and now, 2022.

HIGHLIGHTS OF KEY CHANGES

Heightened Restrictions on Cash Payment Transactions: 
While retaining the erstwhile threshold value on cash payment transactions to a sum exceeding N5, 000,000 (five million naira) for individuals and N10,000,000 (ten million naira) for corporate bodies, the MLA 2022 criminalises any attempt at breaking up transactions in a bid to side-step the threshold value stated in the Act. In essence, multiple cash transactions may be summed up in determining whether the threshold value has been reached, and the prohibitory regime of the Act has been breached. This is not a strange approach in Nigeria, as a similar provision is contained in other laws in Nigeria.

For instance, the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act 1995 (FEMPA) mandates that payments for the purchase of land properties, securities, including stocks, shares, debentures and all forms of negotiable instruments; and motor cars, including other vehicles of any description whatsoever (together Relevant Transactions) must be made by means of bank transfers or cheques drawn on banks in Nigeria only.2 Also, within the Nigerian capital market, cash payments for the purchase of securities are limited to the threshold value of N50,000 (fifty thousand naira).3 In addition, multiple transactions by the same cash depositor, within a short period of time are required to be flagged by a stockbroker as a suspicious transaction with a mandatory reporting obligation to the Securities and ExchangeCommission.4

The implications of the communal read of the MLA 2022, the FEMPA, and the Investment and Securities Act 2007 are that: (x) all cash payments meeting the threshold value under the MLA 2022; (y) all cash payments that relate to the Relevant Transactions under FEMPA; and (z) all cash payments above the sum of N50, 000 (fifty thousand naira) in respect of transactions within the capital market, must be made through the banking payment system. The regime also permits the summation of multiple transactions below the threshold value in determining whether the mandatory obligations within the relevant laws have been breached.

Inclusion of New Categories of Businesses as Designated Non-Financial Business and Profession (DNBP)

Under the repealed Act, certain categories of business entities were defined as Designated Non-Financial Institution (DNFI). However, the MLA 2022 changes the nomenclature of DNFI to DNBP and notably expands the categories of businesses that qualify as DNBP to include 

  1. businesses involved in the hospitality industry,
  2. mechanized farming equipment,
  3. farming equipment and machineries,
  4. precious metals and precious stones,
  5. real estate, estate developers, estate agents and brokers,
  6. notaries
  7. mortgage brokers,
  8. practitioners of mechanized farming,
  9. trust and public service providers, and
  10. pools betting.

Also, as against luxury dealers which were recognised as DNFI under the repealed Act, high value dealers have been included in the MLA 2022. However, this term is not defined under the Act and there remains an ambiguity as to the parameters within which a business will be considered as a "high value dealer"5.

The implication of the foregoing is that businesses within the newly included categories which hitherto had no mandatory compliance obligations on anti-money laundering now bear compliance obligation under the Act as it relates to – amongst others- verifying the identity of customers (using reliable, independent source documents and data/information), undertaking elaborate due diligence and risk mitigation measures in its dealings with customers, and complying with relevant reporting obligations in respect of suspicious transactions.6

Enhanced KYC Requirement for Proxies/Agents and Politically Exposed Persons:
In addition to the erstwhile KYC requirements, the MLA 2022 obligates every financial institution (FI) and DNBP to take reasonable measures to ensure that any person purporting to act on behalf of a customer is so authorised, identified and verified.7 The FIs and DNBs are also mandated to take reasonable measures to establish the source of wealth and funds of customers and beneficial owners identified as Politically Exposed Persons (PEPs)8 and to conduct enhanced monitoring on such relationship.

KYC Compliance Requirements for Internet and Ship-based Casinos:
The MLA 2022 has extended its compliance framework to internet and ship-based casinos obligating them to also carry out KYC – due-diligence on the financial transactions of their customers.9

Extended Scope of Suspicious Transaction Reporting:
While the scope of suspicious transaction reporting was hitherto qualified by reference to suspicion of terrorism financing, frequency, unreasonableness or the economic value of the transactions, the MLA 2022 has extended the scope of suspicious transaction reporting to circumstances where the FIs or DNBPs is of the opinion that the transaction involves the proceeds of a criminal activity, unlawful act, or money laundering.10 Where such a circumstance occurs, the FIs or DNBPs are obligated to report such transaction.

Preservation of Records and Reconstruction of Transactions:
The MLA 2022 provides the manner of preservation of transaction records by FIs or DNBPs within the retention period of five (5) years. The records of transactions are to be preserved in a way that ensures that individual transactions are readily reconstructed at any time by the competent authorities and swiftly available on demand, by the competent authorities, regulatory authorities or judicial persons as the Nigerian Financial Intelligent Unit or Special Control Unit Against Money Laundering may specify.11

Financial Transaction Reporting and Disclosure Obligations:
The MLA 2022 has altered the line of reporting of financial transactions exceeding the threshold of N5, 000,000 (five million naira) for individuals and N10,000,000 (ten million naira) for corporate bodies.12 FIs are mandated to report such transactions to the Nigerian Financial Intelligent Unit, while DNBPs are obligated to report such obligations to the Special Control Unit Against Money Laundering domiciled within the EFCC. Also, individuals, other than FIs, may – on a voluntary basis, provide any information on any transactions exceeding the threshold of N1,000,000 or its equivalent, in the case of an individual or N 5,000,000 or its equivalent, in the case of a body corporate.13

MLA Disclosures and Legal Practice:
 Until the enactment of the MLA 2022, it was settled by the Court of Appeal in CBN vs. Registered Trustees of the NBA14 (NBA Case) that legal practitioners are excluded from the definition of designated non-financial institutions as contained in the Money Laundering Prohibition Act, 2011. The Court held that Section 25 of the repealed Act which purports to extend the definition of DNFIs to include legal practitioners is inconsistent with Section 192 of the Evidence Act 2011 which though entrenches counsel-client privileged communication, however imposes an obligation on legal practitioners to disclose (x) any such communication made in furtherance of any illegal purpose; and (y) any fact observed by any legal practitioner in the course of his employment as such, showing that any crime or fraud has been committed since the commencement of his employment. The CBN has however appealed this decision.

As it stands, the MLA 2022 has legislatively sought to once again impose disclosure obligations on legal practitioners and notaries. By the MLA 2022, where financial transactions are mandated to be disclosed, legal professional privilege and the invocation of client confidentiality shall not apply in connectionwith:

  1. the purchase or sale of property;
  2. the purchase or sale of any business;
  3. the managing of client money, securities or other assets;
  4. the opening or management of bank, savings or securities accounts;
  5. the creation, operation or management of trusts, companies or similar structures; or
  6. anything produced in furtherance of any unlawful act.15

It appears that the approach of the MLA 2022 in pulling in legal practitioners took a new turn – such that legal practitioners are not only included within the definition of DNBPs16 which was the core of the dispute in the NBA Case but also have their counsel-client privilege disapplied in specific instances. In essence, asides from the specific disclosure obligations placed on legal practitioners in the preceding paragraph, the other obligations applicable to DNBPs generally would be applicable to legal practitioners. Another implication of this provision within the MLA 2022 is that the CBN appeal to the Supreme Court would appear to have been overtaken by legislative events.

Pre-Launch Assessment of New Products, Technologies, and Business Practices for MLA/CFT Compliance:
 Every FI and DNBP is obligated, to carry out pre-launch assessment of any new products, and business practices for money laundering and terrorism financing risks that may arise therefrom and take appropriate measures to manage and mitigate the risks. Where new technologies or delivery mechanisms are being deployed for existing products or business practices, such new technologies must also be assessed for money laundering and terrorism risks in accordance with the requirement of its regulator – where applicable.17

Establishment of the Special Control Unit Against Money Laundering (SCUML):
Historically, the EFCC as the designated Financial Intelligence Unit (FIU) in Nigeria, has always been charged with the responsibility of coordinating the various institutions involved in the fight against money laundering and enforcement of all laws dealing with economic and financial crimes in Nigeria – both for financial institutions and non-financial institutions.

However, for ease of operational efficiency, the Federal Government in 2005, by an executive order established the Special Control Unit Against Money Laundering (SCUML)18 domiciled within the EFCC, to specifically operationalise the functions of the EFCC as it relates to designated non-financial institutions (DNFIs)19. The SCUML oversees, supervises, monitors, and regulates DNFIs as regards their MLA compliance metrics in Nigeria. Until the enactment of MLA 2022, the establishment of the SCUML was rooted under the Federal Government executive order.

The MLA 2022 has, however, provided a statutory basis for the independent existence and operation of SCUML – even though its administrative operations remains under the purview of the EFCC. The MLA 2022 designates SCUML as the authority directly responsible for the supervision of DNBPs in their compliance with the provisions of the MLA 2022, relevant laws, and applicable regulations. In essence, the EFCC – as a whole is responsible for FIs, while the SCUML regulates DNBPs.20

Determination of Guilt:
 The MLA 2022 contains provisions on the process for the determination of the guilt of a person charged with a money laundering related offence. Section 18(8) provides that it shall not be necessary to establish a specific unlawful act, or that a person was charged or convicted for an unlawful act, for the purpose of proving a money laundering offence.

Also, knowledge, intent, purpose, belief, or suspicion required as an element of money laundering may be inferred from objective factual circumstances.21

In addition, in any trial of a money laundering-related offence, the fact that a defendant is in possession of pecuniary resources or property for which he cannot satisfactorily account and which is disproportionate to his known sources of income, or that he had at or about the time of the alleged offence obtained an increase to his pecuniary resources or property for which he cannot satisfactorily account, may be proved and taken into consideration by the Court as corroborating the testimony of any witness in the trial.22 From an evidential perspective, it appears that the Act has attempted to reduce the strict standard of proof ordinarily obtainable in criminal cases which is proof beyond reasonable doubt.

Jurisdiction and Place of Trial:
While there are divergent judicial views on the interpretation of Section 45 of the Federal High Court Act on the appropriate judicial division of the Federal High Court for the trial of charges within the substantive jurisdiction of the FHC,23 the MLA 2022 has now laid to rest, the point that the Federal High Court located in any part of Nigeria regardless of the location where the offence is committed shall have jurisdiction to try offences under the MLA 2022 or any other related enactment; and to hear and determine proceedings arising under the Act.

Jurisdiction over Persons:
 Contrary to the erstwhile position under the repealed Act – that only citizens of, or persons residents in Nigeria, or in transit or has link within Nigeria or dealing with or on behalf of the Government of Nigeria can be prosecuted for money laundering in Nigeria, the MLA 2022 has expanded its scope of coverage to include where the alleged offence was committed— (a) in Nigeria ; (b) on a ship, vessel or aircraft registered in Nigeria; (c) by a non-citizen of Nigeria if the person's conduct would also constitute an offence under a law of the country where the offence was committed ; or (d) outside Nigeria where the alleged offender is in Nigeria and not extradited to any other country for prosecution.24

Administrative Fines:
The MLA 2022 empowers any supervisory and regulatory authorities to impose - for any breach of any requirement of the MLA 2022, by any FI or DNBP or any officer of an FI or DNBP - such administrative sanctions as may be prescribed in a regulation made by the Attorney-General of the Federation under the Act.

Proceeds of Crime-Reflective Fines:
As an alternative to, or in addition to imprisonment for non-compliance by individuals or where the non-compliance is by a corporate body, the MLA 2022 prescribes the payment of a fine which is not less than five (5) times the value of the proceeds of the specific crime.25

CONCLUSION

In this newsletter, we have set out the enhanced MLA compliance requirements under the MLA 2022 and highlighted how each of the requirements affects businesses in Nigeria – and off the coast. Considering the stringent penalty provisions, it would be necessary that individuals, and compliance officers in enterprises particularly the new categories of businesses that have been imposed with mandatory compliance obligations under the Act, take active steps to update their regulatory books to forestall any regulatory clamp down.

Footnotes

1. The recommendations are considered as international standard for combating money laundering and terrorist financing as well as the financing of the proliferation of weapons of mass destruction.

2. Section 22 of the FEMPA

3. See, Section 97 of the Investment and Securities Act 2007 and Rule 346 of the Securities and Exchange Commission Rules and Regulations 2013 (SEC Rules)

4. See, Rule 346(2) of the SEC Rules 2013

5. Section 30 of the MLA 2022

6. Section 4 of the MLA 2022.

7. Section 4(1) (d) of the MLA 2022.

8. Section 4 (8) and (9) of the MLA 2022.

9. Section 5(3) of the MLA 2022.

10. Section 7(1) (e) of the MLA 2022.

11. Sections 8(2) and 9 of the MLA 2022.

12. Section 11(2) of the MLA 2022.

13. Section 11(3) of the MLA 2022.

14. (unreported) Appeal No. CA/A/202/2015.

15. Section 11(4) of the MLA 2022.

16. See, the definition of DNBPs in Section 30 of the MLA 2022.

17. Section 13 of the MLA 2022.

18. This was established as part of measures for the implementation of the FATF Recommendations in Nigeria.

19. Sections 6 (c) and 7 (2) of the EFCC Act.

20. Section 4(1) (d) of the MLA 2022.

21. Section 18(9) of the MLA 2022.

22. Section 23(6) of the MLA 2022.

23. Ibori v. Federal Republic of Nigeria (2009) 3 NWLR (Pt. 1128) 94 and Abiola v. Federal Republic of Nigeria (1995) 1 NWLR (Pt. 382) 203

24. Section 23(2) of the MLA 2022.

25. Section 18(3) and (4) of the MLA 2022.

Originally published June 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.