Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, and embezzlement by converting it into a legitimate source. It is a crime in many jurisdictions with varying definitions. It is usually a key operation of organized crime.
In Nigeria, the Money Laundering (Prevention and Prohibition) Act of 2022 was passed into Law in the month of May 2022 to set standards and promote the effective implementation of legal, regulatory and operational measures for combating money laundering. The new Act has made an improvement on the earlier Act of 2011.
In this write-up, we shall briefly discuss the relevant provisions of the new Act below.
- Cash Limit
Section 2 of the Money Laundering (Prevention and Prohibition) Act, 2022 provides;
(1) No person or body corporate shall, except in a transaction through a financial institution, make or accept cash payment of a sum exceeding—
(a) N5,000,000 or its equivalent, in the case of an individual; or
(b) N10,000,000 or its equivalent, in the case of a body corporate.
(2) A person shall not conduct two or more transactions separately with one or more financial institutions or designated non-financial businesses and professions with intent to—
(a) avoid the duty to report a transaction which should be reported under this Act; and
(b) breach the duty to disclose information under this act by any other means.
- As seen from the provision above, the cash limit permissible for an individual to make or accept is the sum of N5,000,000(Five Million Naira) or its equivalent and N10,000,000(Ten Million Naira) or its equivalent in the case of a body corporate. Such transactions are to be routed through a financial institution, and any lodgment of funds in excess of N5,000,000 (Five Million Naira) and N10,000,000(Ten Million Naira) for individuals and body corporate respectively, must be reported by the banks within seven days.
- Splits: Subsection 2 above prohibits a situation where a person splits a single transaction into two or more separate transactions with the intent to avoid the reporting of such transaction.
- Section 3 of the Act provides that the international transfer of funds or securities to or from a foreign country exceeding $10,000(Ten Thousand Dollars) is to be reported within one day of the transaction. Funds refer to assets of every kind whether tangible or intangible, movable or immovable, howsoever acquired and legal documents or instruments in any form, including electronic or digital, evidencing title to or interest in such assets, including bank credits, travellers’ cheques, bank cheques, money orders, shares, securities, bonds, drafts or letters of credit and virtual assets. Virtual assets, on the other hand, mean a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes but do not include digital representations of fiat currencies, securities and other financial assets.
- Know Your Customer (KYC): For the purpose of carrying out the purport of this law, in Section 4 of the Act, financial institutions and designated non-financial businesses and professions must conduct due diligence and identification of their customers particularly persons alleging to act on behalf of its customers. Designated non-financial businesses and professions include (a) automotive dealers, (b) businesses involved in the hospitality industry, (c) casinos, (d) clearing and settlement companies, (e) consultants and consulting companies, (f ) dealers in jewelries, (g) dealers in mechanised farming equipment, farming equipment and machineries, (h) dealers in precious metals and precious stones, (i) dealers in real estate, estate developers, estate agents and brokers (j) high value dealers, (k) hotels, (l) legal practitioners and notaries, (m) licensed professional accountants, (n) mortgage brokers, (o) practitioners of mechanised farming, (p) supermarkets, (q) tax consultants, (r) trust and company service providers, (s) pools betting, or (t) such other businesses and professions as may be designated by the Minister responsible for Trade and Investment.
- The law provides for 24-hour timeframes for all financial institutions or designates non-financial institutions to file suspicious transaction reports with the Nigerian Financial Intelligence Unit (NFIU) which is the central unit responsible for receiving, requesting, analyzing and disseminating to the competent authorities disclosures of financial information concerning the suspected proceeds of crime and potential financing of terrorism. With regards to this reporting, section 7 provides thus:
Where a transaction— (a) involves a frequency which is unjustifiable or unreasonable, (b) is surrounded by conditions of unusual or unjustified complexity, (c) appears to have no economic justification or lawful objective, (d) is inconsistent with the known transaction pattern of the account or business relationship, or (e) in the opinion of the financial institution or non-financial business and profession involves the proceeds of a criminal activity, unlawful act, money laundering or terrorist financing, that transaction shall be deemed to be suspicious and the financial institution and designated non-financial business and profession involved in the transaction shall report to the Unit as the case may be immediately. (2) A financial institution or designated non-financial business and profession shall within 24 hours after the transaction referred to in subsection (1).
- The Act further spells out the punishment for failure to report and/or make a disclosure of acts of money laundering. Section 11 of the Act provides that any financial institution or designated non-financial business and profession that contravenes the provisions commits an offence and is liable on conviction to a fine of at least N250,000 and not more than N1,000,000 for each day the contravention continues. Also, Legal professional privilege and the invocation of client confidentiality shall not apply in connection with— (a) the purchase or sale of property; (b) the purchase or sale of any business; (c) the managing of client money, securities or other assets; (d) the opening or management of bank, savings or securities accounts; (d) the creation, operation or management of trusts, companies or similar structures; or (e) anything produced in furtherance of any unlawful act.
- The law prohibits the opening or maintaining of numbered or anonymous accounts by any person, financial institution or body corporate. The operation of and establishment of a shell bank in Nigeria is also prohibited. A shell bank means a bank that is not physically located in the country in which it is incorporated and licensed, and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision. Any person, financial institution or body corporate that contravenes the provisions commits an offence and is liable to conviction to, in the case of an individual, a term of imprisonment of at least two years but not more than five years or in the case of a financial institution or body corporate, a fine of at least N10,000,000 but not more than N50,000,000, in addition, there shall be 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.
- Furthermore, financial institutions and non-designated financial businesses and professions must create mechanisms for determining whether a customer or a customer’s beneficiary is a politically exposed person. The Act defines politically exposed persons to include (a) individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or Government, senior politicians, senior government, judicial or military officials, senior executives of State-owned corporations and important political party officials, (b) individuals who are or have been entrusted domestically with prominent public functions, for example Heads of State or of Government, senior politicians, senior government, judicial or military officials, senior executives of State-owned corporations and important political party officials, and (c) persons who are or have been entrusted with a prominent function by an international organisation and includes members of senior management such as directors, deputy directors and members of the board or equivalent functions and their family members and close associates, other than middle ranking or more junior individuals in the foregoing categories.
- Registration with SCUML: The new Act makes it mandatory for all non-designated financial institutions to register with the SCUML and make various statutory reports as provided by the Act.
Conclusively, the new Act seeks to remedy the lacuna that the former Act created. Based on the key provisions above, an individual and body corporate who makes or accepts transactions exceeding the amount stipulated in the Act commits an offence and is liable to punishment as prescribed.
The Act further seeks to put financial institutions on their feet in the discharge of their duties by placing a timeframe within which to report any suspicious transactions and failure to do so attracts a penalty as discussed above.
It suffices to say that the new Act does not encourage lackadaisical attitudes from persons or corporate bodies involved in any financial transaction.