Identify your jurisdiction’s money laundering and anti-money laundering (AML) laws and regulations. Describe the main elements of these laws.
The laws governing money laundering in Nigeria are the Money Laundering (Prohibition) Act, the Money Laundering (Prohibition) (Amendment) Act (together, the Money Laundering Act), the Economic and Financial Crimes Commission Act and the Central Bank of Nigeria (Anti-Money Laundering and Combating the Financing of Terrorism in Banks and Other Financial Institutions in Nigeria) Regulations. The main elements of these laws prohibit: the conversion or transfer of resources or property derived directly from illegal and unlawful activity; making or accepting cash payments of sums exceeding the statutory provisions;
collaboration in concealing or disguising the genuine nature, origin, movement or ownership of the resources, property or rights derived from the above-mentioned acts;
retaining the proceeds of criminal activity; and
conspiring to commit or the aiding and abetting of any offence under the Money Laundering Act.
Describe any specific powers to identify proceeds of crime or to require an explanation as to the source of funds.
Acting pursuant to a court order placing any bank account under surveillance, specific powers include: to obtain access to any suspected computer system, to obtain communication of any authentic instrument or private contract together with all bank, financial and commercial records in order to identify and locate proceeds, properties, objects or other things related to the commission of an offence;
to determine in consultation the flow of transactions and identities of beneficiaries including the beneficiaries of individual accounts and of corporate accounts; and
to demand, obtain and inspect the books and records of any financial institution or designated non-financial institution (NFI) to confirm its compliance with the AML provisions.
Which government entities enforce your jurisdiction’s money laundering laws?
The government entities that enforce the provisions of the Money Laundering Act are the Economic and Financial Crimes Commission (EFCC), the National Drug Law Enforcement Agency, the Central Bank of Nigeria, the Nigeria Police Force and the Nigerian Customs Service.
Can both natural and legal persons be prosecuted for money laundering?
Yes, both natural and legal persons can be prosecuted for money laundering.
The offence of money laundering
What constitutes money laundering?
Money laundering is considered to be the conversion or transfer of resources or properties derived from criminal activity and collaboration by concealing or disguising the acquisition, use, retention or possession of such resources or properties.
Under the Money Laundering Act, acts and omissions will constitute criminal liability. A strict liability standard would apply to certain offences committed under the act.
A negligence standard can be applied to offences where the accused person has failed to carry out an imposed duty.
Financial institutions can be prosecuted or pursued for the money laundering activities of their customers under the Money Laundering Act.
Qualifying assets and transactions
Is there any limitation on the types of assets or transactions that can form the basis of a money laundering offence?
There is no limitation on the types of assets or transactions that can form the basis of a money laundering offence.
Generally, what constitute predicate offences?
Any criminal activity would constitute a predicate offence because the Money Laundering Act refers to illegal or criminal activity. Since any criminal activity can serve as a predicate offence, it follows that where the violation of tax and currency exchange laws in Nigeria amounts to a criminal act, such violation would serve as a predicate offence (see sections 2 and 15 of the act).
Are there any codified or common law defences to charges of money laundering?
There are no codified or common law defences to charges of money laundering.
Resolutions and sanctions
What is the range of outcomes in criminal money laundering cases?
The sanctions for money laundering vary according to the offence. They include a term of imprisonment of between two and three years or a fine of at least 1 million naira for individuals and fines of 3 million to 25 million naira, the prosecution of the principal officers of the corporate body and its winding up or the winding up and forfeiture of assets and properties for legal persons.
Enforcement matters can be resolved through plea agreements, settlement agreements, prosecutorial discretion or similar means. The use of such methods remains in its infancy in Nigeria. Nigeria is a federation, with power to legislate on criminal procedural matters vested in state legislatures, and only one state, Lagos, has thus far passed any legislation dealing with plea bargains. The Lagos state legislation was passed in 2011 and does not provide any detailed framework for plea bargaining.
Describe any related asset freezing, forfeiture, disgorgement and victim compensation laws.
The Economic and Financial Crimes Commission Act, the Corrupt Practices and Other Related Offences Act, the Criminal Procedure Act and the Money Laundering Act all have provisions dealing with the forfeiture of assets upon conviction for offences committed.
The Economic and Financial Crimes Commission Act permits the Commission to apply to a court for an order freezing an account where it believes the money to be the proceeds of committing an offence under the act.
Limitation periods on money laundering prosecutions
What are the limitation periods governing money laundering prosecutions?
There are no limitation periods for instituting criminal prosecutions in Nigeria.
Covered institutions and persons
Which institutions and persons must carry out AML measures?
Institutions and persons who are obliged to carry out AML measures include, among others, banks, financial advisory firms, jewellers, chartered accountants, legal practitioners, hotels, casinos, supermarkets, tax consultants, car dealers, dealers in luxury goods, bureaux de change, insurance institutions, money brokerage firms, investment management firms, project consultancy firms, financial consultancy firms and pension fund management firms.
An appeal against a Federal High Court decision declaring the inclusion of legal practitioners as designated NFIs is pending at an appellate court. In December 2014, the Federal High Court held that the inclusion of legal practitioners as designated NFIs was unlawful and, therefore, invalid. An appeal to the Court of Appeal, filed on behalf of the Central Bank of Nigeria, which had issued regulations requiring NFIs to be registered with an agency under the Federal Ministry of Commerce and Industry, was dismissed and the Central Bank is understood to have appealed to the Supreme Court of Nigeria.
Do the AML laws in your jurisdiction require covered institutions and persons to implement AML compliance programmes? What are the required elements of such programmes?
Yes, the Money Laundering Act requires covered institutions to implement AML compliance programmes. The basic elements of these programmes include:
designation of an AML chief compliance officer at management level; identifying AML regulations and offences; nature of money laundering; money laundering ‘red flags’ and suspicious transactions; reporting requirements; customer due diligence; risk-based approach to AML; record-keeping and retention policy; and monitoring of employees accounts.
Breach of AML requirements
What constitutes breach of AML duties imposed by the law?
Breaches of AML duties include the following:
a non-financial institution failing to verify the identity of a customer and submitting records of transactions within seven days of such transactions (section 5 of the Money Laundering Act); failing to report transactions in excess of 5 million naira for individuals or 10 million naira for legal persons within the stipulated periods (section 10); destroying or removing a register or record required to be kept under the act (section 16b); and failing to report an international transfer of funds or securities required to be reported under the act (section 16e).
The law makes failure to comply with mandatory disclosure by financial institutions an offence punishable by a fine of not less than 250,000 naira and not more than 1 million naira for each day of the breach.
The law makes it an offence for a person to establish or operate a shell bank in Nigeria and for a financial institution to enter into a correspondent banking relationship with a shell bank and provides penal sanctions upon conviction of a term of imprisonment of between two and five years for individuals and for financial institutions or corporate bodies a fine ranging from 10 million naira to 50 million naira in addition to the prosecution of the principal officers of the corporate body and the winding up of the corporate body.
The law makes tipping off customers an offence punishable by a term of imprisonment of between two and three years or a fine of 500,000 to 1 million naira (section 16).
Customer and business partner due diligence
Describe due diligence requirements in your jurisdiction’s AML regime.
To initiate a new client or business partner relationship the following steps must be followed:
the financial institution shall identify its customers and verify the customers’ identities using reliable, independently sourced documents or information; where the client is a legal person or a legal arrangement, the financial institution shall identify any person purporting to have been authorised to act on behalf of that customer by obtaining evidence of the customer’s identity and verifying the identity of the authorised person; identifying and verifying the legal status of the legal person or legal arrangement by obtaining proof of incorporation from the Companies Registry or similar evidence of establishment or existence; identifying and taking reasonable steps to verify the identity of a beneficial owner; and taking reasonable measures to understand the ownership and control structure of a legal person or legal arrangement and determining the natural persons that ultimately own or control the customer.
Covered institutions are mandated to obtain senior management approval before they establish or continue business relationships with politically exposed persons (PEPs) and they are required to render monthly returns on all transactions to the relevant regulatory authorities.
Covered institutions are also required to take reasonable measures to establish the source of wealth and funds of customers and beneficial owners identified as PEPs.
Covered institutions in business relationships with PEPs shall conduct enhanced and ongoing monitoring of the relationships and report any abnormal transactions as suspicious transactions.
For cross-border and correspondent banking relationships, covered institutions are required to obtain approval from senior management before establishing correspondent relationships, gathering sufficient information about a respondent institution to understand fully the nature of its business and determine from publicly available information the reputation of the institution and the quality of the supervision, document and assess the respondent institution’s AML and combating the financing of terrorism controls and ascertain that they are in compliance with FATF standards.
For wire transfers of US$1,000 or more, the ordering financial institution must obtain, identify and maintain records of the name, account number (or unique reference code) and address of the originator.
Enhanced due diligence is required for higher-risk customers, including non-resident customers, private banking customers, PEPs and legal persons that serve as personal asset-holding vehicles (see question 18).
In relation to existing client and business partner relationships:
a party must ensure that such client’s records are up to date and that in the event of a transfer of ownership of a corporate client it is aware of the identity of the natural persons who truly own or control the client; and furthermore, the client could be asked to provide references and discreet investigations could be conducted with law enforcement agencies.
High-risk categories of customers, business partners and transactions
Do your jurisdiction’s AML rules require that covered institutions and persons conduct risk-based analyses? Which high-risk categories are specified?
Yes, the AML regulations stipulate that covered institutions and persons conduct risk-based analysis, document their risk assessment profile and keep the assessments up to date. The Money Laundering Act states that where the customer is a PEP, the financial or non-financial institution shall:
establish the individual’s identity by means of any identification document as prescribed in any relevant regulation; verify the individual’s identity by means of reliable, independent source documents, data or information; and put in place appropriate risk-management systems and obtain senior management approval during, and before establishing, any business relationship with the PEP.
A financial institution shall perform enhanced due diligence for higher-risk customers, which include:
non-resident customers; private banking customers; legal persons or arrangements that are personal asset-holding vehicles; cross-border banking relationships; and PEPs.
Record-keeping and reporting requirements
Describe the record-keeping and reporting requirements for covered institutions and persons.
Under the Money Laundering Act and other relevant legislation, covered institutions are required to maintain records including identification data, business correspondence and account files of all transactions both domestic and international for at least five years after completion of the transaction or such longer period as may be required by the regulatory authorities.
The components of the records of transactions to be maintained would include names and addresses or other identifying information, nature and date of the transaction, type and amount of currency involved and the type and identifying number of any account involved in the transaction.
Under the Money Laundering Act and other relevant legislation, where a transaction’s frequency is unjustifiable or unreasonable, appears to have no economic justification or lawful objective or is simply inconsistent with the known transaction relationship, the covered institutions or persons are required within 24 hours of the transaction to:
draw up a written report containing the identity of the principal and the beneficiary or beneficiaries; take appropriate action to prevent the laundering of the proceeds of criminal conduct; send a copy of the report and action taken to the Nigerian Financial Intelligence Unit (NFIU); keep the record of a customer’s identification for a period of at least five years after the closure of the account or the severance of relations with the customer; and keep the record and other related information of a transaction carried out by a customer for a period of five years after carrying out the transaction.
Describe any privacy laws that affect record-keeping requirements, due diligence efforts and information sharing.
There is a law that governs banker-customer confidentiality. However, the Money Laundering Act makes it mandatory for the covered institutions and persons to send their records to domestic law enforcement agencies and the NFIU. A lawyer’s obligation not to disclose privileged communications with clients is also the subject of an express provision in the Evidence Act. In any event, and as noted in question 14, the present law in Nigeria is that lawyers are not included in the list of designated NFIs subject to the AML regime imposed by the Money Laundering Act and other relevant legislation. The Constitution contains a broadly stated guarantee of privacy, and its extent, with regard to AML and other laws has yet to receive judicial consideration.
Anti-money laundering assessments
Give details of any assessments of your jurisdiction’s money laundering regime conducted by virtue of your membership of supranational organisations.
The Inter-governmental Action Group Against Money Laundering in West Africa published its last mutual evaluation report on Nigeria in May 2015. There has been no report published for 2017.