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President Muhammadu Buhari assented to the Money Laundering (Prevention and Prohibition) Bill, 2022.1. The Money Laundering (Prevention and Prohibition) Act 2022 (the “Act”) repealed the Money Laundering (Prohibition) Act 2011 (the “2011 Act”).
According to section 1, of the Act, the objectives of the Act include expanding and strengthening the existing legal and institutional framework for combating and preventing Money Laundering in Nigeria. We shall carefully highlight the notable provisions in the Act.
The following are the notable provisions in the Act:
i. Conduct of separate transactions:
Financial institutions and designated non-financial businesses and professions are mandatorily obligated to report to the Nigerian Financial Intelligence Unit and Special Control Unit against Money Laundering (“SCUML”) any single transaction in excess of N5,000,000 or its equivalent for individuals and N10,000,000 or its equivalent for corporate bodies. Section 30 of the Act defines “Designated non-financial business and profession” to include automotive dealers, businesses involved in the hospitality industry, casinos, clearing and settlement companies, consulting companies, dealers in real estate, high value dealers, legal practitioners, licensed professional accountants, tax consultants, etc.
It should be noted that Section 2(2) of the Act expressly 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. Prior to the enactment of the Act, some persons had adopted transaction splitting as a method to avoid the reporting of transactions that are within the said monetary thresholds.
ii. International transfers of funds, securities, and cash
The Act provides in section 3(1) that the transfer of funds, securities or cash exceeding $10,000 to and from a foreign country by a corporate body must be reported to the Central Bank of Nigeria, the Securities and Exchange Commission and the Economic and Financial Crimes Commission within a day (The 2011 Act had provided to the effect that such transfers be reported within 7 days) from the date of the transaction.
iii. Identification of customers
The Act obligates financial and designated non-financial businesses and professions to take reasonable measures to identify and verify its customers as well as persons alleging to act on behalf of its customers.2
iv. Politically exposed persons
The Act provides that financial institutions and non-designated financial businesses and professions shall establish procedures for determining whether a customer or a customer’s beneficiary is a politically exposed person.3
Also, it provides in Section 4(8) that where a customer is a foreign politically exposed person, financial institutions or non-designated financial businesses and professions are to seek and obtain the approval of senior management before establishing or continuing such business relationship, identify the source of income of such foreign politically exposed person or their beneficiaries and conduct on-going monitoring of the relationship.
The above duties also extend to domestic politically exposed persons where there is a high-risk business relationship with such person.4
v. Casinos
The Act provides that Casinos are obligated to forward records of financial transactions by customers to the Special Control Unit against Money Laundering.5
vi. Attorney-client privilege
According to Section 192 of the Evidence Act and Rule 19 of the Rules of Professional Conduct, 2007, communications between an attorney and clients in respect of briefs or instructions being handled by the attorney are privileged. So, such communication cannot in anyway be disclosed by the attorney except with the consent of the clients. However, the Act provides to the effect that attorney-client privilege does not apply to the following transactions – purchase or sale of property, purchase or sale of any business, managing client money, securities or assets, opening or management of bank, savings or securities accounts, creation or management of trust companies or similar structures or any proceeds from an unlawful act.6
vii. Assessing new technologies, products, and business practices
Financial institutions and non-designated businesses and professions are to identify and assess money laundering and terrorism financing risks that may result from the development of new technologies, business practices and products.7 To efficiently carry out this obligation, the relevant Institutions are required to undertake risk assessments and reasonable measures to manage and mitigate the risks.
viii. Special Control Unit against Money Laundering (“SCUML”)
One of the milestones of the Act is the statutorily recognition of SCUML, which had been set up by the Federal Government in 2005 under the Federal Ministry of Industry, Trade, and Investment. It should be noted that SCUML works closely with Economic and Financial Crimes Commission (EFCC).
The SCUML is responsible for the supervision of non-designated financial businesses and professions in their compliance with the provisions of the Act.8
ix. Punishment for money laundering offences
It is worthy to note that under the 2011 Act, a person who commits the offence of money laundering is liable to imprisonment for a period of not less than 7 years or a fine of not less than 100% of the proceeds of the offence or both.
However, the 2022 Act has provided that such a person is liable to imprisonment for a period not less than 4 years or a fine of not less than five times the value of the proceeds of the offence or both. The liability of a fine of not less than five times the value of the proceeds also applies to corporate bodies guilty of money laundering offences.
Also, the Act provides to the effect that it shall not be necessary to establish a specific unlawful act for the purpose of proving money laundering as knowledge, intent or suspicion of money laundering may be inferred from objective factual circumstances.9
x. Expanded scope of financial institutions and designated non-financial businesses and professions.
One of the major highlights of the Act is the expansion of the scope of “financial institutions” to include virtual assets service providers and “designated non-financial businesses and professions” to include businesses involved in the hospitality industry, dealers in mechanized farming equipment, farming equipment and machineries, dealers in precious metals and precious stones, dealers in real estate, estate developers, estate agents and brokers, high value dealers, mortgage brokers, practitioners of mechanized farming, trust and company service providers and pools betting.10
xi. Virtual assets
The Act makes provisions for virtual assets, this is in tandem with the recent development of digital currencies such as Bitcoin and many others. The Act further defines virtual assets in section 30, to mean digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes but does not include digital representation of fiat currencies, securities and other financial assets.
CONCLUSION
The Money Laundering (Prevention and Prohibition) Act 2022 strengthens the existing system for combating money laundering and related offences. The new provisions included in the Act is a commendable innovation. We believe that the Act will go a long way in eliminating any form of money laundering and related offences in Nigeria.
Endnotes
Written by Olufe Popoola for The Trusted Advisors
Email us: info@cms.trustedadvisorslaw.com
Telephone Number: +234 810 159 9159