With the passing of the Money Laundering (Prevention and Prohibition) Bill into law in 2022 by the President of the Federal Republic of Nigeria, Muhammadu Buhari, it is imperative to note the innovations introduced as it repealed the Money Laundering (Prohibition) Act 2011.
The Money Laundering (Prevention and Prohibition) Act provides a comprehensive legal and institutional framework for preventing and prohibiting money laundering in Nigeria. It establishes the Special Control unit under the Economic and Financial Crimes Commission.[i]
The Money Laundering (Prevention and Prohibition) Act is divided into Five Parts with thirty-one sections. It also includes the Objectives of the Act, which were notably absent in the repealed 2011 Act.
Some of the Notable Innovations of the Act include:
- Establishment of the Special Control Unit under the Economic and Financial Crimes Commission: As part of its objectives, the Act established the Special Control Unit, also known as the Special Control Unit Against Money Laundering (the SCUML), to be saddled with the effective implementation of the provisions of the Act about designated non-financial businesses and professions.[ii]
- Extra Measures for a Politically Exposed Person: While the repealed Act made provisions for a politically exposed person, it was not as detailed as the new Act. Moreover, the repealed Act did not differentiate between a domestically politically exposed person and a Foreign politically exposed person.
Section 4(8) of the new Act contains extra measures for a foreign politically exposed person to wit. Thus, in addition to the general KYC compliance required of financial institutions or designated non-financial institutions contained in sections 4(1) and 4(2) of the Act, financial institutions or designated non-financial institutions shall:
- Obtain senior management approval before establishing (or continuing for existing customers) such business relationships
- Take reasonable measures to establish the source of wealth and the source of funds of customers and beneficial owners identified as politically exposed persons and
- Conduct enhanced ongoing monitoring of that relationship.
Section 4(9) of the Act provided that in relation to a domestic politically exposed person or persons who have been entrusted with a prominent function by an international organization, the financial institution or designated non-financial institution shall, in addition to the general requirements, adopt the measures under subsection (8), where there is higher risk business relationship with such a person.
Also, a financial institution and a designated non-financial business and profession shall take reasonable measures to verify that any person purporting to act on behalf of the customer is so authorized and identified.[iii]
- Expansion of the Definition of Funds: In line with technological reality, the definition of funds under the Act has been expanded to include ‘virtual asset’. [iv] It also extends the definition of a financial institution to include ‘Virtual Asset Service Providers
- Confidentiality Between Lawyers and their Clients: The Act imposes a restriction to lawyer-client privilege by providing that ‘legal professional privilege and the invocation of client confidentiality shall not apply in connection with;
- The purchase or sale of property
- The purchase or sale of any business
- The managing of client money, securities, or other assets
- The opening or management of bank, savings, or securities accounts
- The creation, operation, or management of trusts, companies, or similar structures
- Anything produced in furtherance of any unlawful act.[v]
- Inclusion of New Businesses and Professions as Part of Designated Non-Financial Business and Profession (DNBP): The repealed Act referred it to as a Designated Non-Financial Institution (DNFI). The new Act has extended DNBP to include the;
- Businesses involved in the hospitality industry
- High-value dealers
- Mortgage brokers
- Pools betting
- Trust and company service providers
- Dealers in mechanized farming equipment, farming equipment, and machinery
- Dealers in precious metals and precious stones
- Practitioners of mechanized farming
- Notaries
- Dealers in real estate, estate developers, estate agents, and brokers
- Extension of Regulation to Internet Casino and Ship-Based Casino: Unlike the repealed Act, which did not specifically state the kind of casino to be regulated, the 2022 Act specifically includes internet and ship-based casino.[vi]
- Mandatory Disclosure: Unlike the repealed Act, which provides that financial institutions or designated non-financial institutions shall report to the Economic and Financial Crimes Commission (EFCC) when an individual or corporate body exceeds the financial threshold of N5,000,000.00 and N10,000,000.00 respectively; the new Act while retaining the financial threshold mandates financial institutions to report to the Nigerian Financial Intelligent Unit while designated non-financial business and profession are obligated to report such transactions to the Special Control Unit Against Money Laundering (SCUML).[vii]
- Assessment of New Products and New Business Practices: Financial Institutions and Designated Non-financial Businesses and Profession shall identify and assess the money laundering and terrorism financing risks that may arise in the development of new products and new business practices. [viii]
- Jurisdiction: The Federal High Court located in any part of Nigeria, regardless of the location where the offense is committed, shall have jurisdiction with respect to matters under the Act and offenses committed under the Act.[ix]
- Expansion of Jurisdiction Over Persons: The new Act equally expanded its jurisdiction to include where the alleged offense was committed on a ship, vessel, or aircraft registered in Nigeria by a citizen or non-citizen of Nigeria if the person’s conduct would also constitute an offense under a law of the country where the offense was committed and outside Nigeria where the alleged offender is in Nigeria and not extradited to any other country for prosecution.[x]
- Punishment for Money Laundering Offences: The repealed Act provided that a person who commits the offense of money laundering is liable upon conviction to imprisonment of a term of not less than 7 years but not more than 14 years imprisonment, while for a body corporate, a fine of not less than 100% of the funds and properties acquired as a result of the offense committed and withdrawal of license.[xi]
The new Act, however, provides that a person who commits the offense of money laundering is liable on conviction to imprisonment for a term of not less than four years but not more than fourteen years or a fine not less than five times the value of the proceeds of the crime or both and a body corporate is liable on conviction to a fine of not less than five times the value of the funds or the properties acquired as a result of the offense committed.
CONCLUSION
The innovations in the Money Laundering (Prevention and Prohibition) Act 2022 are commendable since it takes into consideration the changes in the Nigerian economy and current global trends. We are hopeful that there is an effective implementation of the Act. This would go a long way in reducing money laundering and therefore improving Nigeria’s economy.
[i] See the Long Title to the Act.
[ii] Objectives of the Act; section 1 of the Money Laundering (Prevention and Prohibition) Act. See also section 17 of the Act.
[iii] Section 4(1)(d) of the Act
[iv] Section 30 of the Act
[v] Section 11(4) of the Act
[vi] Section 5(3) of the Act
[vii] Section 11 (1) of the Act
[viii] See generally section 13 of the Act
[ix] Section 23 (1) of the Act
[x] Section 23 (2) of the Act
[xi] Section 15 of the Money Laundering Act 2011
Written by Rodiyyah Bashir for The Trusted Advisors
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