Nigeria ratified the UN resolution on money laundering on the 1st of November, 1989, and issued the first decree on Money Laundering - National Drug Law Enforcement Agency Decree 1989 (this was limited to proceeds of drug trafficking).
This was the first step in the journey to money laundering legislation in Nigeria.
The Nigerian government, however, enacted other legislation afterward, each repealing the last one. They are:
In this article, we will analyse the Money Laundering (Prevention and Prohibition) Act 2022 (we will subsequently refer to it as “the Act”), which repealed the Money Laundering (Prohibition) Act 2011. It became active in May 2022. We will identify how it applies to you as an individual, to your business, and to transactions with financial and non-financial institutions both locally and internationally.
The Act works hand in hand with other laws and regulations to curb financial crimes, especially terrorism. The Nigerian Financial Intelligence Unit (NFIU), the Economic and Financial Crimes Commission (EFCC), and the Central Bank of Nigeria (CBN) execute and enforce the Act.
The term “laundering” means cleaning. This translates money laundering literally to “money cleaning.”
Money laundering is, however, broadly defined as concealing the origin of illegally earned money by converting it into a legitimate source.
The perpetrators get most of these funds from illegal activities; for example, embezzlement, corruption, drug trafficking, kidnapping, gambling, etc.
The Act defines money laundering as an act carried out by a person or a company regarding any fund or property while trying to:
It specifies that for this to apply to you, you must have been intentional about your actions. It also applies to situations where you reasonably ought to have known that such a fund or property is part of the proceeds of an unlawful act. This includes taking part in or assisting someone else in the movement of funds to make the proceeds appear legitimate. It involves three steps:
The Act defines an unlawful act to include:
Regulatory authorities do not have to establish that a person committed a specific unlawful act to prove a money laundering offence. They can infer all elements of the offence from the facts and circumstances of the action.
The Act comprises 31 sections, divided into 5 parts.
This is the core aspect of the Act. It is aimed at five categories of corporate and non-corporate bodies:
We will focus mainly on the first three bodies. There is a threshold for the maximum amount of money that you can travel with or transact with, either as an individual or a company. Let’s discuss this alongside the obligations of financial and non-financial institutions in carrying out these transactions.
The Act defines businesses in the financial sector to include:
The specified non-financial businesses and professions fall under the ambit of SCUML. You can check the list here. It is referred to as the Designated Non-Financial Businesses and Professions in the Act, but for clarity, we will refer to them as “Non-financial institutions.”
Additionally, you should inform the Nigerian Customs Services (who will report it to the CBN and the NFIU) if you transport cash or negotiable instruments in that amount into or out of Nigeria. Failure to comply with this will lead to two years of imprisonment, forfeiture of money or other negotiable instruments, or both.
This also applies to any casual transaction involving more than US$1,000 or where they suspect that the amount of the transaction is the proceeds of an illegal activity, regardless of whether it is up to US$1,000.
Furthermore, a financial or non-financial institution must deem a transaction suspicious and report it to the NFIU right away and within 24 hours.
They should do this if the transaction, in the institution’s opinion, is unjustifiable, occurs more frequently than the account’s typical pattern, or involves the proceeds of an illegal act. The institution must:
The NFIU is empowered to place a stop order on such a transaction or issue an order within 72 hours if it is suspected to be an illegal act.
If the financial or non-financial institution does not receive a stop order from the NFIU within 72 hours or if the order has expired, they can carry out the transaction unless they get an order from the FHC. A criminal proceeding can be brought against such an officer of the institution if it is discovered he was involved in a conspiracy.
Unless an institution can prove that they were acting in good faith, failure to comply is an offense that is punishable by a fine of ₦1,000,000 (one million naira), for each day the offense goes unpunished.
Equally important is the fact that both financial and non-financial institutions are required to keep all records for five years following the completion of business and make them quickly available to relevant authorities where needed.
They are also required to combat the laundering of proceeds of crime by putting in place internal procedures, policies, control, and training of their employees to ensure
Failure to comply makes them liable on conviction to
Financial and non-financial institutions are tasked with the responsibility of identifying money laundering and terrorism financing risks. These risks may arise in connection with the development of new products/business practices. Financial institutions must ensure that receiving financial institutions in foreign countries don't allow their accounts to be used by numbered, anonymous, or shell banks.
They include the use of new delivery mechanisms and new developing technologies/mechanisms for both new and pre-existing products, as specified by regulatory authorities.
The assessment should be done before using or launching such products, technologies, or practices. It is expected that such institutions will take measures to manage and mitigate the risk.
The Act provides that financial and non-financial institutions should put risk management systems and procedures in place to determine whether a customer or a beneficiary is a politically exposed person.
If it is a foreign, politically exposed person, it is required that
These requirements also apply to a politically exposed Nigerian where the business transaction is high risk.
This brings us to the questions:
These questions will be answered in the next section.
Financial institutions are to report to the NFIU, while non-financial institutions report to SCUML, any single transaction, deposit, or transfer of funds that exceed:
All reports are to be given in written form. Failure to comply makes the affected institution liable to a fine of at least ₦250,000 (two hundred and fifty thousand naira), but not more than ₦1,000,000 (one million naira) for each day of non-compliance.
A person can voluntarily give information about transactions exceeding:
The Special Control Unit against Money Laundering (SCUML) is a department under the EFCC responsible for supervising Designated Non-Financial Businesses and professions (non-financial institutions).
The SCUML ensures compliance with the Act and other relevant laws and regulations.
The Act lists them as:
The above-named institutions that deal in cash transactions are required to:
Failure to comply within 7 days from the date of a transaction is an offence punishable on conviction by
The Act makes provisions for penalties for offenders who have been convicted of money laundering. The penalty takes three (3) forms. A convicted offender could be liable to one or all the forms of penalties. They are:
A company will be liable for the same fine. If the company persists after conviction of the first offence, the regulators may withdraw or revoke its certificate or licence.
If an officer of the financial or non-financial institution, whether a director or an employee, connives with or warns an offender to stop the statutory report to the NFIU, he is liable on conviction to a fine of ₦10,000,000 (ten million naira) or imprisonment for at least two years. Where a person or financial institution fails to make its findings and ends up transacting with a shell bank, such a person or institution will be liable on conviction to:
The Act places a lot of responsibilities on officers and management of financial and non-financial institutions. That being said, when an officer is found guilty of the following:
The officer or director of a financial/non-financial institution will be liable on conviction to imprisonment for at least 3 years or a fine of ₦10,000,000 (ten million naira) or both for an individual. A company will be liable for a fine of ₦25,000,000 (twenty-five million naira)
Such an officer or director will also be liable to
Anyone who wilfully obstructs officers of a competent authority in the exercise of their powers under the Act commits an offence and is liable on conviction to;
The Act empowers the Attorney General of the Federation (AGF) to prescribe sanctions for any breach of the Act. This takes precedence over any other sanctions imposed by existing regulations.
To sum it up, remember that the highest cash transaction you can do as an individual is ₦5,000,000 (five million naira) which is about US$11,816.18 today. As a company, the highest cash transaction you can handle is ₦10,000,000 (ten million naira). That is approximately US$23,632.36. You should do any amount higher than this through a financial institution. You can not invoke customer confidentiality on activities bordering on money laundering, as it is not applicable. If a person commits the acts making up the offence in various/different countries or places, the regulatory authorities can secure his conviction and sentencing in Nigeria.
Money laundering makes economic policy formulation more difficult and is associated with lower economic growth: a major reason the government strives to put legislation in place to curb it. As such, it is also your duty as a Nigerian citizen to report voluntarily any suspicious act of money laundering.
If you have questions about the Money Laundering (Prevention and Prohibition) Act 2011, its amendment we talked about, and how it relates to you, book a free session with an expert.
