DESPITE REFORMS INTRODUCED BY ITS MONEY LAUNDERING (PREVENTION AND PROHIBITION) ACT 2022, NIGERIA AGAIN GETS GREYLISTED BY THE FINANCIAL ACTION TASK FORCE
On the 24th day of February 2023, the global money laundering and terrorist financing watchdog, Financial Action Task Force, placed Nigeria on its grey list for having insufficient measures to prevent money laundering and the financing of terrorist organisations. When a country is placed on a Grey list by the FATF, it implies that the country has not committed to resolve swiftly the identified strategic deficiencies within a stipulated timeframe and as such, will be subject to increased monitoring, subsequently.
Previously, Nigeria was placed on the grey list between 2002 to 2007 for the various loopholes discovered in its legal and regulatory framework for Anti-Money Laundering/Combating the Financing of Terrorism/Proliferation Financing (AML/CFT/PF) despite its existing regulatory regime in combating same. During this timeframe, a prominent Nigeran politician was discharged and acquitted by the Nigerian Court due to the narrow definition of the term “money laundering” as contained in the existing AML legislation. The judge in the refenced matter applied the ejusdem generisrule of interpretation of statutes and decided that because the funds for which the defendants were accused of laundering were not traceable to narcotics and psychotropic substances, the case of money laundering against the defendants must fail.
After much ado, Nigeria was subsequently removed from the Grey list on the 18th of October 2013 due to the concerted effort of relevant Federal Government bodies. The removal came after an onsite visit by the Financial Task Force International Cooperation Review Group (ICRG) to Nigeria were it was discovered that the country had substantially completed recommended activities in its FATF action plan and had achieved a sustained commitment to, and institutional capacity for the implementation of AML/CFT reforms.
Moving to present day, , President Muhammadu Buhari on the 12th May 2022, signed the Money Laundering (Prevention and Prohibition) Bill into Law. The Money Laundering (Prevention and Prohibition) Act 2022 (“the Act”) repeals and abolishes the Money Laundering (Prohibition) Act 2011 (as amended) in a bid to provide a comprehensive legal and institutional framework for AML/CFT/PF in Nigeria.
Despite the innovations that were introduced under this Act, Nigeria was again grey listed 10 months after its enactment.
INNOVATIONS IN THE ACT
The Money Laundering (Prevention and Prohibition) Act, 2022 contains elaborate provisions which focus on the legal and institutional framework for AML/CFT in Nigeria. The Act also provides statutory backing for the establishment of the Special Control Unit Against Money Laundering (SCUML) under the Economic and Financial Crimes Commission (EFCC). The Act introduced quite a number of innovations including but not limited to the following:
Statutory backing for the Operation of the Special Control Unit against Money Laundering (SCUML): This body was initially set up by the Federal Government in 2005 under the Federal Ministry of Industry, Trade, and Investment. Presently, the Act provides statutory backing for the independent existence and operation of SCUML as a department under the Economic and Financial Crimes Commission (EFCC). SCUML is mandated as the body responsible for the supervision of Designated Non-Financial Businesses and Professions (DNBPs) and their compliance with the provisions od the Act and other relevant laws.
KYC Compliance Requirements for Internet and Ship-based Casinos:
The MLA 2022 has extended its compliance framework to internet and ship-based casinos; obligating them to also carry out Customer Due Diligence on the financial transactions of their customers and to forward a register that records all such transactions to SCUML.
Suspicious Transaction Reporting:
The Act has extended the scope of reporting suspicious transactions. Under the repealed Act, the scope of suspicious transactions reporting was limited to suspicion of terrorism financing, frequency, unreasonableness or the economic value of the transactions. Now, where Financial Institutions (FIs) or DNBPs are of the opinion that a transaction involves the proceeds of a criminal activity, unlawful act, or money laundering, it must be reported to the necessary authorities.
Expanded Scope of Financial Institutions and Designated Non-Financial Businesses And Professions:
The Act changed the scope of reporting organisations from Designated Non-Financial Institutions to Designated Non-Financial Businesses and Professions and expanded the categories of businesses that qualify as DNBPs to include businesses involved in the hospitality industry, mechanised farming equipment, farming equipment and machineries, precious metals and precious stones, real estate, estate developers, estate agents, brokers, and high value dealers, legal practitioners and notaries, consultants and consulting companies, licensed professional accountants, mortgage brokers, trust and public service providers, and pools betting.
Restrictions on Legal Professional Privilege:
Under Rules of Professional Conduct for Legal Practitioners in Nigeria, communications between a lawyer and a client cannot be disclosed except with the consent of the client or permitted by law. The Act however introduces a limitation on client confidentiality, and this applies to transactions for 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; or anything produced in furtherance of any unlawful act.
Mandatory Disclosures Reporting:
The Act reduced the reporting threshold for financial transactions compared with previously previous legislation. i.e., N5, 000,000 (Five Million Naira) for individuals and N10,000,000 (Ten Million Naira) for corporate bodies. Financial Institutions are mandated to report such transactions to the Nigerian Financial Intelligent Unit, while DNBPs are obligated to report such obligations to the Special Control Unit Against Money Laundering domiciled within the EFCC. In addition however, individuals, other than FIs may on a voluntary basis, provide any information on any transactions exceeding the threshold of N1,000,000 (One Million Naira) or its equivalent, in the case of an individual and N5,000,000 (Five Million Naira) or its equivalent, in the case of a body corporate.
Inclusion of Virtual Assets:
The Act introduces several definitions that recognise virtual assets and virtual asset service providers, as subject to its provisions.
This was not the case previously and as such widens the regulatory net in a move to keep up with the advancement of technology.
THE WAY FORWARD
The Financial Action Task Force has recommended an action plan for Nigeria to be removed from the list to which a high-level political commitment has been said to have been given by relevant local authorities to implement. The action plan prescribes that Nigeria must take the following actions:
- Completing its residual Money Laundering (ML/Terrorist Financing (TF) risk assessment and updating its national AML/CFT strategy to ensure alignment with other national strategies relevant to high-risk predicate offences;
- Enhancing Formal and Informal International Cooperation in line with ML/TF risks.
- Improving AML/CFT risk-based supervision of FIs and DNFBPs and enhancing the implementation of preventive measures for high-risk sectors;
- Ensuring that competent authorities have timely access to accurate and up-to-date Beneficial Ownership (BO) information on legal persons and applying sanctions for breaches of BO obligations;
- Demonstrating an increase in the dissemination of financial intelligence by the NFIU and its use by LEAs;
- Demonstrating a sustained increase in ML investigations and prosecutions in line with ML risks
- Proactively detecting violations of currency declaration obligations and apply appropriate sanctions and maintaining comprehensive data on frozen, seized, confiscated, and disposed assets;
- Demonstrating sustained increase in investigations and prosecutions of different types of TF activities in line with risk and enhancing interagency cooperation on TF investigations; and
- Conducting risk-based and targeted outreach to Non-Profit Organisations (NPOs) at risk of TF abuse and implementing risk-based monitoring for the subset of NPOs at risk of TF abuse without disrupting or discouraging legitimate NPO activities.
Nigeria’s grey listing will inevitably have an adverse effect on the economy by impeding Foreign Direct Investment due to the heightened risk. At best, it will introduce addition levels of scrutiny in the due diligence process.
Conversely, the grey listing could be viewed as a wake-up call for Nigeria to reform its AML/CFT/PF policies and regulations and ultimately enhance the integrity of its financial system. It has become apparent that merely having legislation in place in line with global standards does not suffice if implementation is not strictly followed through. It is hoped that cogent steps will continue to be taken by the relevant authorities to remove Nigeria from this list as soon as possible.
 See the case of Federal Republic of Nigeria v James Ibori, Tafa Balogun V EFCC
denoting a principle for interpreting legal texts that assumes that, if there is a general term accompanying a list of specific terms, then the general term is restricted to things of the same character as the specific terms.
 Section 17 of the MLA 2022
 Section 5 of the MLA 2022
 Section 11 of the MLA 2022
 Section 11(2) of MLA 2022
Authors: Yetunde Olasope – Partner, Lexworth Legal Partners
and Mary Ajibola – Associate , Lexworth Legal Partners
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