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July, 2010
Legal Alert –
Money Laundering Law in Nigeria To read this Alert in pdf format, please go to
http://oseroghoassociates.com/pdf/2010_07.pdf
In this Issue:-
- Legal Alert for July 2010 – Money
Laundering Law in Nigeria
- Subscribe & Unsubscribe to Legal Alerts.
- Disclaimer Notice.
LEGAL NEWS
The Lagos
State Government has signed into Law a bill
for the regulation, standardisation and
grading of Hotels and other Tourism
businesses in Lagos State. This new law
amends the Hotel Licensing Law 2003, and
requires that no person, whether corporate
or an individual, shall operate a Hotel
establishment or practice any form of
tourism business in Lagos State without it
first obtaining a license from the Lagos
State Hotel and Tourism Licensing Authority.
Any contravention of this law attracts a
fine ranging from N100,000 to N500,000 or a
term of imprisonment of two years.
LEGAL ALERT— Money
Laundering Law in Nigeria
There is no definitive statutory definition of
what constitutes a Money Laundering offence.
The Anti-Money Laundering/Combating
Financing of Terrorism Regulations 2009
however defines Money Laundering as the
process whereby criminals attempt to conceal
the origin and or ownership of property and
other assets that are or were derived from a
criminal activity or activities. These
regulations go further to acknowledge that
money laundering and terrorism financing are
now a global phenomena and malaise which
pose major threats to international peace
and security, national development and
progress, if left un-combated.
The combined provisions of the Money
Laundering Act, 2004 and the Anti-Money
Laundering/Combating Financing of Terrorism
Regulations 2009 provide a guide on what
financial activity could constitute money
laundering. While there is currently before
the Nigerian National Assembly the Money
Laundering Act (Repeal and Re-enactment)
Bill 2010 which Bill seeks to, among other
things, increase the cash amount(s) or
withdrawal(s) that a financial institution
or a non-financial institution must
statutorily report to the financial
regulators, a consideration of the existing
Money Laundering Law is vital to both
financial institutions and non-financial
institutions and their customers.
Money Laundering
(Prohibition) Act, 2004
The Money Laundering (Prohibition) Act, 2004
(“the Money Laundering Act”) makes various
provisions prohibiting the laundering of the
proceeds of a crime or of any criminal or
illegal activity, and provides for
appropriate penalties for money laundering
infringements.
According to the provisions of the Money
Laundering Act, no person or corporation or
organisation is allowed to make or accept
cash payments of a sum in excess of
N500,000.00 or its equivalent in the case of
an individual, and N2,000,000.00 or its
equivalent in the case of a corporation,
unless such cash payment or acceptance is
undertaken through a financial institution.
Also, a transfer of funds or securities to
or from a foreign country in excess of
US$10,000 or its naira equivalent must be
reported to the Central Bank of Nigeria (“CBN”)
or the Securities and Exchange Commission
(“SEC”) in the case of a public corporation.
The mandatory reporting of all monetary
transfers to or from outside the country
must indicate the nature of the transfer,
the amount of the transfer, the names and
addresses of the sender and the receiver of
the funds or securities that were
transferred, and the ultimate beneficiary of
the transfer if different from the latter
persons. The Nigerian Custom Service (“NCS”)
is also mandatorily required to forward all
monetary declarations it collates to the
Central Bank of Nigeria.
The Central Bank of Nigeria with the
Securities and Exchange Commission are in
turn required to forward weekly reports of
the above mentioned declarations, submitted
to them, to the Economic and Financial
Crimes Commission (“EFCC”). Despite this
provision, the EFCC is itself empowered to
directly demand and receive these reports or
declarations directly from the Financial
Institutions concerned.
Another money laundering prevention
mechanism is the requirement that all
financial institutions must verify their
customers’ identity and physical address
before establishing any business
relationship with such a customer or
customers. The business relationship
contemplated by this Act, between the
financial institution and the customer,
includes the opening of any form of account,
safe deposit box and other kinds of
fiduciary relationship accounts. The types
of a customer identification contemplated by
this Act include a valid official document
like a Driver’s License, an International
passport issued in the last three months
preceding its submission, utility bills, etc
all of which must bear the customer’s full
names and or photograph. A corporation on
the other hand is required to provide proof
of its legal existence by presenting its
certificate of incorporation and other valid
registration documents attesting to its
existence as a body corporate recognised by
law.
In the event that a financial institution
suspects or has reasonable grounds to
suspect that the amount involved in a
transaction is derived from the proceeds of
a crime or from an illegal activity, such
financial institution must require from its
customer physical evidence attesting to the
customer’s identification notwithstanding
that the amount involved in the transaction
is less than US$5,000 or its equivalent.
Where the customer is not acting on its own
behalf but for a principal, all the
information on the identity of the principal
must be obtained as if the principal were
the customer.
Casino owners, dealers in jewelry, cars,
luxury goods, professional consultants
including Lawyers, Doctors, Accountants,
etc, Hotels, Supermarkets and other
designated non-Financial Institutions are
required to also obtain and verify the
identity of their clients and or customers
by keeping a record or register of the
particulars of the names of these clients or
customers, their addresses and the nature of
each transaction. The Federal Ministry of
Commerce, to whom these records are
forwarded for non-Financial Institutions, is
required to in turn forward the reporting
records and or declarations to the EFCC. The
Register of this information, that is
collated or assembled, must be preserved by
the non-Financial Institutions for a period
of at least five years after the last
transaction recorded in the Register.
Where a designated financial institution
fails to verify the identity of its
customers or does not submit the returns of
financial transactions undertaken by its
customers with it, within seven days from
the date the transaction was undertaken,
such a financial institution commits an
offence, and if convicted is liable to a
fine of N25,000 for each day that the
offence continues un-remedied; this is in
addition to, and as may be appropriate, such
an institution suffering a suspension or
revocation or withdrawal of its operating
license by the appropriate licensing or
regulatory Authority.
Special money laundering surveillance and
investigation could occur where a
transaction or transactions involves a
frequency which is unjustifiable or
unreasonable, or is surrounded by conditions
of unusual or unjustifiable complexity, or
appears to have no economic justification or
lawful objective. The financial institution
or designated financial institution involved
in such a transaction must seek from its
customer information or clarification as to
the origin and designation of the funds, the
objective of the transaction and the
ultimate beneficiary. The reporting
institution must also draw-up a report which
it must forward to the EFCC. Where
necessary, the institution should take
action to prevent the laundering of the
proceeds of a crime or of any illegal
financial activity, whether the transaction
is completed or not. Such preventive actions
include the very short-term freezing of the
account of the customer pending when the
EFCC is informed and EFCC takes action.
Failure to comply with these provisions
attracts a fine, on conviction, of
N1,000,000 for each day during which the
offence continues.
The protective rules on banker/customer
confidentiality are not applicable to money
laundering investigations and prosecutions
especially where an ex-parte order of the
Federal High Court is obtained to place a
bank account or such other fiduciary account
under surveillance, tap every telephone or
electronic system of the suspected customer
or institution.
Any person who converts or transfers or
conceals or disguises or collaborates or
aids and abets the concealing or disguising
of the genuine nature, origin, location,
movement or ownership of a right, asset or
property which is derived directly or
indirectly from illicit traffic in narcotic
drugs or psychotropic substances or from any
other criminal or illegal activity is guilty
of an offence which on conviction carries a
prison sentence of not less than 2 years or
more than 3 years. The fact that the various
acts constituting the offence were committed
in different countries or places shall not
be a bar to the prosecution and conviction
of such a person neither will the
substantive illicit traffic in narcotic
drugs or psychotropic substances be exempted
from further separate prosecution and
conviction.
Also, any person who retains the proceeds of
a crime or of any illegal activity on behalf
of another person commits an offence and
will be liable on conviction to imprisonment
for a term of not less than 5 years or to a
fine equivalent to five times the value of
the proceeds of the criminal conduct or to
both such fine and term of imprisonment.
Where a corporation is convicted of an
offence under the Money Laundering
(Prohibition) Act, the Federal High Court
may order that the corporation be wound up
and its properties forfeited to the Federal
Government of Nigeria.
The Federal High Court has the exclusive
jurisdiction to try offences under the Money
Laundering (Prohibition) Act, 2004. In the
trial of offences under this Act, the
Federal High Court is authorise to admit
collaborating evidence establishing that an
accused person is in possession of property
for which he or she cannot satisfactorily
provide an account and which property is
disproportionate to his or her known sources
of income.
To facilitate the obtaining of evidence, the
Director of investigation or an authorised
officer of the Economic and Financial Crime
Commission (‘’EFCC’’), duly authorised in
that behalf, may demand, obtain and inspect
financial records of any financial
institution to confirm its compliance with
the provisions of this Act. Any willful
obstruction of EFCC or its authorised
officers in the discharge of their duties
under this Act is an offence which on
conviction carries a term of imprisonment of
not less than two years and not more than
three years in the case of an individual.
The punishment for a corporation is a fine
of One Million Naira (N1,000,000).
Conclusion
The provisions of the Money Laundering
(Prohibition) Act remains one of the most
effective measures to combating terrorism,
narcotic related crimes, embezzlement of
public funds, which latter offence is more
commonly known in Nigeria as corruption.
Unfortunately, the lack of sufficient
political will has not provided the minimum
enforcement results required. Of equal
concern are the human capacity capabilities
of the enforcing agencies in Nigeria in the
area of modern day sophisticated money
laundering technological advances. While
continuing amendments to our legislations,
including this one, are commended, greater
enforcement of the existing legislations is
urgently required in order for the minimum
levels of development and advancement that
Nigeria urgently requires, can be achieved.
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DISCLAIMER NOTICE: This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm.
Recipients are therefore advised to seek professional legal
counseling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
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EHIJEAGBON O. OSEROGHO
July, 2010.
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