Money laundering has emerged as a pressing global issue, with criminal actors exploiting financial systems to obscure the origins of illicit funds. In response, Anti-Money Laundering (AML) framework’s comprising laws, regulations and enforcement mechanisms, have been developed to detect, deter and disrupt the laundering of criminal proceeds. These frameworks aim to safe guard the integrity of financial institutions and ensure that economic channels are not hijacked for unlawful purposes.

1. The Money Laundering (prevention and prohibition) Act,2022

This landmark legislation repealed the Money Laundering (Prohibition) Act of 2011. The Act was enacted to plug essential gaps in Nigeria’s previous AML regime and align the country’s level of compliance with international standards, particularly those of the Financial Action Task Force (FATF).

Some of the key provisions of the Act include:

• Prohibition of Cash Transactions: Prohibits cash transactions above ₦5 million for individuals and ₦10 million for corporate entities. Any transaction above these amounts must be conducted through financial institutions.
• Mandatory Reporting: Requires individuals and entities to report such high-value transactions to relevant authorities.
• Cross-Border Transfers: Any transfer of funds to or from outside a foreign country above $10,000 must be reported to the Nigerian Financial Intelligence Unit (NFIU) and the Securities and Exchange Commission (SEC).
• Declaration at Border Points: All cash or negotiable instruments above $10,000 must be declared to the Nigeria Customs Service.
• Customer Due Diligence: Mandates financial institutions and Designated Non-Financial Businesses and Professions (DNBPs) to identify customers and perform due diligence.
• Internal Controls: Institutions are mandated to implement effective internal policies and controls against money laundering.
• Special Control Unit Against Money Laundering (SCUML): The Act also validates the role of SCUML under the EFCC, to oversee compliance by non-financial businesses.

2. The Terrorism (Prevention and Prohibition) Act, 2022

This Act consolidates Nigeria’s counter-terrorism legislation by criminalizing the financing of terrorism and laying out the administration of assets belonging to terrorist organizations. It supersedes the earlier 2011 and 2013 versions and incorporates modern provisions to counter the financing of terrorism and weapons proliferation. Some of its key provisions are:

• Adherence to international standards, such as FATF recommendations;
• Establishment of the Nigeria Sanctions Committee (NSC) to impose sanctions on individuals and institutions linked with terrorism;
• Measures for identifying, freezing, and reporting assets related to terrorism.

3. CBN AML/CFT Regulations, 2013

Issued by the Central Bank of Nigeria, these regulations are guidelines for banks and financial institutions on how to comply with AML and Countering the Financing of Terrorism (CFT) obligations. They supplement the 2011 AML Act and provide supervisory tools for the CBN.

Key points are:

• Know Your Customer (KYC) policies;
• Suspicious Transaction Reporting (STR) to the NFIU;
• Internal audits, training, and compliance programmes;
• Cooperation with law enforcement agencies;
• Penalties for failure to comply.

4. Nigerian Financial Intelligence Unit (NFIU) Act, 2018

The Act establishes the NFIU as an independent entity distinct from the EFCC. The NFIU is Nigeria’s central agency for the collection, analysis, and dissemination of financial intelligence. Its key functions are:

• Receipt of financial information from reporting entities;
• Guidance and inspection issuance;
• Cooperation with domestic and international law enforcement;
• Providing training and capacity-building programs for institutions.

5. Economic and Financial Crimes Commission (Establishment) Act

The EFCC is Nigeria’s premier anti-corruption agency with broad investigative and prosecutorial powers over financial crimes. It operates in close collaboration with the NFIU and SCUML to enforce compliance and prosecute money launderers and other related crimes.

COMPLIANCE REQUIREMENTS FOR NIGERIAN BUSINESSES

Nigerian businesses—especially financial institutions and DNBPs—are under strict compliance requirements by the Money Laundering Act and its attendant regulations. These are as follows:

1. Cash Transaction Limits

Cash transactions should not be more than ₦5 million for individuals and ₦10 million for corporate entities. Transactions above these limits have to be done electronically or through financial institutions. Structuring or splitting transactions to circumvent these limits (so-called “smurfing”) is forbidden.

2. International Financial Transfers

Transfers exceeding $10,000 to or from Nigeria are to be reported within a day to the NFIU and SEC. Physical movement of funds in excess of this amount is to be declared to Nigerian Customs. Non-declaration or false declaration is punishable with penalties, including imprisonment or forfeiture.

3. Customer Identification and Due Diligence

All stakeholders must identify clients using reliable documentation (KYC). Due diligence is also being implemented in comprehending business relationships and transaction profiles. Fictional or anonymous accounts are not allowed.

4. Politically Exposed Persons (PEPs)

PEPs call for heightened due diligence. Financial institutions must take approval from senior management before getting into relationships with PEPs, determine sources of funds, and conduct ongoing monitoring of their actions.

5. Suspicious Transaction Reporting (STRs)

Suspicious transactions are to be reported to the NFIU within a period of 24 hours. These include transactions with unjustifiable complexity or frequency, no apparent lawful purpose, or which are not consistent with a customer’s known profile.

6. Record-Keeping

All transactions are to have their records maintained for at least five years. These are to be sufficient to reconstruct individual transactions and be produced on request by regulatory authorities.

7. Internal Policies and Control Mechanisms

Institutions must have effective compliance programs in place, including:

• Designation of a compliance officer;
• Staff training on AML policies;
• Centralized information systems;
• Prescription of internal audit functions.

Non-implementation of these measures will attract severe penalties:

• Suspension of operating licenses;
• Fines of up to ₦5 million for banks and ₦1 million for DNBPs;
• Additional penalties for multiple violations.

8. Risk-Based Approach

Entities must perform risk assessments on new technologies, products, or services. Identified risks must be adequately managed and mitigated before launch.

9. Sanctions and Penalties

Offences attract criminal sanctions. Offenders are liable to imprisonment for 4 to 14 years or a fine of at least fivefold of the sum of illegal money. Corporate entities risk cancellation of license in addition to monetary fines.

Anti-Money Laundering compliance in Nigeria is a continual, multifaceted process that demands rigorous adherence to both domestic law and international best practices. As a rising financial and commercial hub, Nigeria must ensure that its institutions are not exploited by criminals seeking to launder illicit wealth or finance terrorism. Vigorous enforcement of AML law, coupled with aggressive conformance on the part of business, is necessary to uphold the integrity of Nigeria’s financial infrastructure.

It is essential for Nigerian businesses, particularly those engaged in cross-border transactions, to keep up with AML legislation, ensure they have effective risk management practices, and encourage a culture of compliance. Not only will this minimize exposure to legal risk, but it will also enhance credibility and confidence in both domestic and international financial communities.

 

 

Contact us