The Act repeals the Money Laundering (Prohibition) Act, 2011 and enacts the Money Laundering (Prevention and Prohibition) Act, 2022 to provide comprehensive legal and institutional framework for the prevention and prohibition of money laundering in Nigeria and establish the Special Control Unit under the Economic and Financial Crimes Commission.
NOTABLE PROVISIONS OF THE ACT
- Prohibition of Transaction Splitting– Prior to the passing of the Bill, some individuals and corporate entities had adopted transaction splitting as a method to avoid the reporting of transactions that are within the monetary thresholds of N5,000,000 (Five Million Naira) for individuals and N10,000,000 (Ten Million Naira) for corporate entities stipulated by the Act. To address this, the Act in Section 2(2) (a&b) prohibits the conduct of two or more transactions separately with one or more Financial Institutions or Designated Non-Financial Business and Professions (the “Relevant Institutions”) with the intent to avoid the duty to report a transaction which should have been reported under the Act or breach the duty to disclose information under the Act by any other means.
- Identification of Customers-In addition to the existing obligations imposed on Relevant Institutions to identify and verify the identity of their customers, the Act in Section 4(1) (d) imposes a further obligation on the Relevant Institutions to take reasonable measures to ensure that anybody purporting to act on behalf of a customer is so authorised and verify the identity of that person.
- Determination of Politically Exposed Persons– Section 4(7) of the Act imposes an obligation on the Relevant Institutions to put in place appropriate risk management systems and procedure to determine if a customer or the beneficial owner of a customer is a politically exposed person. The Act further classify PEPs into foreign and domestic.
- Restrictions on Attorney- Client Privilege– Prior to the enactment of this Act, communications between an attorney and clients in respect of cases or transactions being handled by the attorney are privileged. Accordingly, such communications cannot be disclosed by the attorney except with the consent of his clients or as may be permitted by law. The Act in Section 11(4) now excludes the application of attorney-client privilege to the following specific transactions: (a) the purchase or sale of property, (b) the purchase or sale of any business, (c) the managing of client money, securities, or other assets, (d) the opening or management of bank, savings, or securities accounts, (e)the creation, operation or management of trusts, companies, or similar structures, and (e)anything produced in furtherance of an unlawful act.
- Duty to Assess New Products, Business Practices and Technologies for Money Laundering and Terrorism Financing Risks – The Act in Section 13(1) and (2) introduces the obligation for the Relevant Institutions to identify and assess the money laundering and terrorism financing risks that may arise from the development of new products, business practices, technologies, delivery mechanism and the use of new or developing technologies for both new and pre-existing products. To carry out this obligation, the Relevant Institutions are required to undertake risk assessments and take appropriate measures to manage and mitigate the risks.
- The Special Control Unit against Money Laundering– The Special Control Unit against Money Laundering (SCUML) was first established by the Federal Government of Nigeria in 2005 under the Federal Ministry of Industry, Trade and Investment, and it works in collaboration with the Economic and Financial Crimes Commission (EFCC). However, this Act now seeks to give statutory backing to the establishment of SCUML and charge it with the responsibility of supervising the Relevant Institutions in their compliance with the Act, relevant laws and applicable regulations.
Some functions assigned to SCUML according to Section 17 of to the Act are:
- Registration and certification of designated non-financial businesses and professions in accordance with the provisions of the Bill, relevant laws, and applicable regulations;
b. Taking the necessary enforcement actions to ensure compliance with the Bill, relevant laws, and applicable regulations;
c. Conducting off-site, on-site and on the spot checks, inspection of designated nonfinancial businesses and professions for the purposes of money laundering control and supervision;
d. Establishment and maintenance of a comprehensive database of designated nonfinancial businesses and professions;
e. Receipt of cash -based transaction reports and currency transaction reports from designated non -financial businesses and professions;
f. Sensitization of designated businesses and professions regarding their responsibilities under the Bill; and
g. Any other functions necessary to fulfil its responsibilities under the Bill or any other relevant laws and applicable regulations.
7. Expanded Scope of Designated Non-Financial Business and Profession and Property –
The Act expanded the scope of Designated Non-Financial Business Profession to include: (a) business involved in the hospitality industry, (b) dealers in mechanized farming equipment, farming equipment and machineries, (c) dealers in precious metals and precious stones, (d) dealers in real estate, estate developers, estate agents and brokers, (e) high value dealers, (f) mortgage brokers, (g) practitioners of mechanized farming, (h) trust and company service providers, and (i) pools betting.
Also, given the recent technological developments and the upsurge of virtual assets such as cryptocurrencies, Non-Fungible Tokens (“NFTs”) and the Metaverse, the Bill expanded the meaning of property to include virtual assets, defined by the Bill to mean a 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.
For: Starlion Legal