Domestic legislation

Domestic law

Identify your jurisdiction’s money laundering and anti-money laundering (AML) laws and regulations. Describe the main elements of these laws.

The laws governing money laundering in Nigeria are the Money Laundering (Prohibition) Act, the Money Laundering (Prohibition) (Amendment) Act (together, the Money Laundering Act), the Economic and Financial Crimes Commission Act and the Central Bank of Nigeria (Anti-Money Laundering and Combating the Financing of Terrorism in Banks and Other Financial Institutions in Nigeria) Regulations. The main elements of these laws prohibit:

  • the conversion or transfer of resources or property derived directly from illegal and unlawful activity;
  • making or accepting cash payments of sums exceeding the statutory provisions;
  • collaboration in concealing or disguising the genuine nature, origin, movement or ownership of the resources, property or rights derived from the above-mentioned acts;
  • retaining the proceeds of criminal activity; and
  • conspiring to commit or the aiding and abetting of any offence under the Money Laundering Act.
Investigatory powers

Describe any specific powers to identify proceeds of crime or to require an explanation as to the source of funds.

Acting pursuant to a court order placing any bank account under surveillance, specific powers include:

  • to obtain access to any suspected computer system, to obtain communication of any authentic instrument or private contract together with all bank, financial and commercial records in order to identify and locate proceeds, properties, objects or other things related to the commission of an offence;
  • to determine in consultation the flow of transactions and identities of beneficiaries including the beneficiaries of individual accounts and of corporate accounts; and
  • to demand, obtain and inspect the books and records of any financial institution or designated non-financial institution (NFI) to confirm its compliance with the AML provisions.

Money laundering

Criminal enforcement

Which government entities enforce your jurisdiction’s money laundering laws?

The government entities that enforce the provisions of the Money Laundering Act are the Economic and Financial Crimes Commission (EFCC), the National Drug Law Enforcement Agency, the Central Bank of Nigeria, the Nigeria Police Force and the Nigerian Customs Service.

Defendants

Can both natural and legal persons be prosecuted for money laundering?

Yes, both natural and legal persons can be prosecuted for money laundering.

The offence of money laundering

What constitutes money laundering?

Money laundering is considered to be the conversion or transfer of resources or properties derived from criminal activity and collaboration by concealing or disguising the acquisition, use, retention or possession of such resources or properties.

Under the Money Laundering Act, acts and omissions will constitute criminal liability. A strict liability standard would apply to certain offences committed under the act.

A negligence standard can be applied to offences where the accused person has failed to carry out an imposed duty.

Financial institutions can be prosecuted or pursued for the money laundering activities of their customers under the Money Laundering Act.

Qualifying assets and transactions

Is there any limitation on the types of assets or transactions that can form the basis of a money laundering offence?

There is no limitation on the types of assets or transactions that can form the basis of a money laundering offence.

Predicate offences

Generally, what constitute predicate offences?

Any criminal activity would constitute a predicate offence because the Money Laundering Act refers to illegal or criminal activity. Since any criminal activity can serve as a predicate offence, it follows that where the violation of tax and currency exchange laws in Nigeria amounts to a criminal act, such violation would serve as a predicate offence (see sections 2 and 15 of the act).

Defences

Are there any codified or common law defences to charges of money laundering?

There are no codified or common law defences to charges of money laundering.

Resolutions and sanctions

What is the range of outcomes in criminal money laundering cases?

The sanctions for money laundering vary according to the offence. They include a term of imprisonment of between two and three years or a fine of at least 1 million naira for individuals and fines of 3 million to 25 million naira, the prosecution of the principal officers of the corporate body and its winding up or the winding up and forfeiture of assets and properties for legal persons.

Enforcement matters can be resolved through plea agreements, settlement agreements, prosecutorial discretion or similar means. The use of such methods remains in its infancy in Nigeria. Nigeria is a fede­ration, with power to legislate on criminal procedural matters vested in state legislatures, and only one state, Lagos, has thus far passed any legislation dealing with plea bargains. The Lagos state legislation was passed in 2011 and does not provide any detailed framework for plea bargaining.

Forfeiture

Describe any related asset freezing, forfeiture, disgorgement and victim compensation laws.

The Economic and Financial Crimes Commission Act, the Corrupt Practices and Other Related Offences Act, the Criminal Procedure Act and the Money Laundering Act all have provisions dealing with the forfeiture of assets upon conviction for offences committed.

The Economic and Financial Crimes Commission Act permits the Commission to apply to a court for an order freezing an account where it believes the money to be the proceeds of committing an offence under the act.

Limitation periods on money laundering prosecutions

What are the limitation periods governing money laundering prosecutions?

There are no limitation periods for instituting criminal prosecutions in Nigeria.

Extraterritorial reach of money laundering law

Do your jurisdiction’s money laundering laws have extraterritorial reach?

Nigeria’s money laundering laws have extraterritorial reach. The offence of money laundering has been extended to apply to natural or legal persons outside Nigeria. See section 15(2) of the Money Laundering (Prohibition) (Amendment) Act.

AML requirements for covered institutions and individuals

Enforcement and regulation

Which government entities enforce your jurisdiction’s AML regime and regulate covered institutions and persons? Do the AML rules provide for ongoing and periodic assessments of covered institutions and persons?

The Central Bank of Nigeria, the Nigerian Drug Law Enforcement Agency, the EFCC and the Special Control Unit against Money Laundering are the main agencies engaged in the enforcement of anti-money laundering laws.

The AML rules provide for ongoing and periodic assessments of covered institutions and persons.

Covered institutions and persons

Which institutions and persons must carry out AML measures?

Institutions and persons who are obliged to carry out AML measures include, among others, banks, financial advisory firms, jewellers, chartered accountants, legal practitioners, hotels, casinos, supermarkets, tax consultants, car dealers, dealers in luxury goods, bureaux de change, insurance institutions, money brokerage firms, investment management firms, project consultancy firms, financial consultancy firms and pension fund management firms.

An appeal against a Federal High Court decision declaring the inclusion of legal practitioners as designated NFIs is pending at an appellate court. In December 2014, the Federal High Court held that the inclusion of legal practitioners as designated NFIs was unlawful and, therefore, invalid. An appeal to the Court of Appeal, filed on behalf of the Central Bank of Nigeria, which had issued regulations requiring NFIs to be registered with an agency under the Federal Ministry of Commerce and Industry, was dismissed and the Central Bank is understood to have appealed to the Supreme Court of Nigeria.

Compliance

Do the AML laws in your jurisdiction require covered institutions and persons to implement AML compliance programmes? What are the required elements of such programmes?

Yes, the Money Laundering Act requires covered institutions to implement AML compliance programmes. The basic elements of these programmes include:

  • designation of an AML chief compliance officer at management level;
  • identifying AML regulations and offences;
  • nature of money laundering;
  • money laundering ‘red flags’ and suspicious transactions;
  • reporting requirements;
  • customer due diligence;
  • risk-based approach to AML;
  • record-keeping and retention policy; and
  • monitoring of employees accounts.
Breach of AML requirements

What constitutes breach of AML duties imposed by the law?

Breaches of AML duties include the following:

  • a non-financial institution failing to verify the identity of a customer and submitting records of transactions within seven days of such transactions (section 5 of the Money Laundering Act);
  • failing to report transactions in excess of 5 million naira for individuals or 10 million naira for legal persons within the stipulated periods (section 10);
  • destroying or removing a register or record required to be kept under the act (section 16b); and
  • failing to report an international transfer of funds or securities required to be reported under the act (section 16e).

The law makes failure to comply with mandatory disclosure by financial institutions an offence punishable by a fine of not less than 250,000 naira and not more than 1 million naira for each day of the breach.

The law makes it an offence for a person to establish or operate a shell bank in Nigeria and for a financial institution to enter into a correspondent banking relationship with a shell bank and provides penal sanctions upon conviction of a term of imprisonment of between two and five years for individuals and for financial institutions or corporate bodies a fine ranging from 10 million naira to 50 million naira in addition to the prosecution of the principal officers of the corporate body and the winding up of the corporate body.

The law makes tipping off customers an offence punishable by a term of imprisonment of between two and three years or a fine of 500,000 to 1 million naira (section 16).

Customer and business partner due diligence

Describe due diligence requirements in your jurisdiction’s AML regime.

To initiate a new client or business partner relationship the following steps must be followed:

  • the financial institution shall identify its customers and verify the customers’ identities using reliable, independently sourced documents or information;
  • where the client is a legal person or a legal arrangement, the financial institution shall identify any person purporting to have been authorised to act on behalf of that customer by obtaining evidence of the customer’s identity and verifying the identity of the authorised person;
  • identifying and verifying the legal status of the legal person or legal arrangement by obtaining proof of incorporation from the Companies Registry or similar evidence of establishment or existence;
  • identifying and taking reasonable steps to verify the identity of a beneficial owner; and
  • taking reasonable measures to understand the ownership and control structure of a legal person or legal arrangement and determining the natural persons that ultimately own or control the customer.

Covered institutions are mandated to obtain senior management approval before they establish or continue business relationships with politically exposed persons (PEPs) and they are required to render monthly returns on all transactions to the relevant regulatory authorities.

Covered institutions are also required to take reasonable measures to establish the source of wealth and funds of customers and beneficial owners identified as PEPs.

Covered institutions in business relationships with PEPs shall conduct enhanced and ongoing monitoring of the relationships and report any abnormal transactions as suspicious transactions.

For cross-border and correspondent banking relationships, covered institutions are required to obtain approval from senior management before establishing correspondent relationships, gathering sufficient information about a respondent institution to understand fully the nature of its business and determine from publicly available information the reputation of the institution and the quality of the supervision, document and assess the respondent institution’s AML and combating the financing of terrorism controls and ascertain that they are in compliance with FATF standards.

For wire transfers of US$1,000 or more, the ordering financial institution must obtain, identify and maintain records of the name, account number (or unique reference code) and address of the originator.

Enhanced due diligence is required for higher-risk customers, including non-resident customers, private banking customers, PEPs and legal persons that serve as personal asset-holding vehicles (see question 18).

In relation to existing client and business partner relationships:

  • a party must ensure that such client’s records are up to date and that in the event of a transfer of ownership of a corporate client it is aware of the identity of the natural persons who truly own or control the client; and
  • furthermore, the client could be asked to provide references and discreet investigations could be conducted with law enforcement agencies.
High-risk categories of customers, business partners and transactions

Do your jurisdiction’s AML rules require that covered institutions and persons conduct risk-based analyses? Which high-risk categories are specified?

Yes, the AML regulations stipulate that covered institutions and persons conduct risk-based analysis, document their risk assessment profile and keep the assessments up to date. The Money Laundering Act states that where the customer is a PEP, the financial or non-financial institution shall:

  • establish the individual’s identity by means of any identification document as prescribed in any relevant regulation;
  • verify the individual’s identity by means of reliable, independent source documents, data or information; and
  • put in place appropriate risk-management systems and obtain senior management approval during, and before establishing, any business relationship with the PEP.

A financial institution shall perform enhanced due diligence for higher-risk customers, which include:

  • non-resident customers;
  • private banking customers;
  • legal persons or arrangements that are personal asset-holding vehicles;
  • cross-border banking relationships; and
  • PEPs.
Record-keeping and reporting requirements

Describe the record-keeping and reporting requirements for covered institutions and persons.

Under the Money Laundering Act and other relevant legislation, covered institutions are required to maintain records including identification data, business correspondence and account files of all transactions both domestic and international for at least five years after completion of the transaction or such longer period as may be required by the regulatory authorities.

The components of the records of transactions to be maintained would include names and addresses or other identifying information, nature and date of the transaction, type and amount of currency involved and the type and identifying number of any account involved in the transaction.

Under the Money Laundering Act and other relevant legislation, where a transaction’s frequency is unjustifiable or unreasonable, appears to have no economic justification or lawful objective or is simply inconsistent with the known transaction relationship, the covered institutions or persons are required within 24 hours of the transaction to:

  • draw up a written report containing the identity of the principal and the beneficiary or beneficiaries;
  • take appropriate action to prevent the laundering of the proceeds of criminal conduct;
  • send a copy of the report and action taken to the Nigerian Financial Intelligence Unit (NFIU);
  • keep the record of a customer’s identification for a period of at least five years after the closure of the account or the severance of relations with the customer; and
  • keep the record and other related information of a transaction carried out by a customer for a period of five years after carrying out the transaction.
Privacy laws

Describe any privacy laws that affect record-keeping requirements, due diligence efforts and information sharing.

There is a law that governs banker-customer confidentiality. However, the Money Laundering Act makes it mandatory for the covered institutions and persons to send their records to domestic law enforcement agencies and the NFIU. A lawyer’s obligation not to disclose privileged communications with clients is also the subject of an express provision in the Evidence Act. In any event, and as noted in question 14, the present law in Nigeria is that lawyers are not included in the list of designated NFIs subject to the AML regime imposed by the Money Laundering Act and other relevant legislation. The Constitution contains a broadly stated guarantee of privacy, and its extent, with regard to AML and other laws has yet to receive judicial consideration.

Resolutions and sanctions

What is the range of outcomes in AML controversies? What are the possible sanctions for breach of AML laws?

The sanctions for breach of the Money Laundering Act range from the imposition of fines to terms of imprisonment. AML matters can be resolved through plea agreements, settlement agreements, prosecutorial discretion or similar means. There is, however, no formal framework regulating those procedures.

Limitation periods for AML enforcement

What are the limitation periods governing AML matters?

There is no limitation period governing AML matters.

Extraterritoriality

Do your jurisdiction’s AML laws have extraterritorial reach?

The AML laws have extraterritorial reach. The offence of money laundering under the Money Laundering Act has been extended to apply to natural or legal persons within or outside Nigeria. Consequently, the Federal High Court now has the power to hear and determine proceedings whether or not the offence was commenced in Nigeria and completed outside Nigeria.

Civil claims

Procedure

Enumerate and describe the required elements of a civil claim or private right of action against money launderers and covered institutions and persons in breach of AML laws.

There are no civil claims that equate directly to the criminal offences of theft and the handling of stolen property. However, there are established legal principles that can be used to recover money or property. Essentially, any person or body that has suffered loss as a result of any unlawful act may institute proceedings against the perpetrator of the unlawful act or persons who have assisted or otherwise enabled such unlawful act. In particular, a victim may have claims against third parties involved in money laundering for constructive trusteeship; money owned and received; and tracing in equity or conspiracy. The limitation period for the bringing of civil actions based in tort is six years from the time the cause of action arose. The period may be extended where, for example, a potential defendant has, through fraud, or some other unlawful act, concealed the unlawful act from a potential claimant. Awards of damages and restitution for losses suffered are the types of relief that will be available in civil actions.

International money laundering efforts

Supranational

List your jurisdiction’s memberships of supranational organisations that address money laundering.

Nigeria belongs to Interpol, the United Nations Office on Drugs and Crime and the United Nations Security Council Counter-Terrorism Committee. Its membership of the Egmont Group is currently suspended pending a review of the suspension at the next Plenary of the Heads of the FIUs of the Egmont Group in Sydney 2018. The suspension was the result of the NFIU being housed at the EFCC. The National Assembly recently passed a bill that removed the NFIU from the EFCC and placed it under the Central Bank of Nigeria (see question 27).

Anti-money laundering assessments

Give details of any assessments of your jurisdiction’s money laundering regime conducted by virtue of your membership of supranational organisations.

The Inter-governmental Action Group Against Money Laundering in West Africa published its last mutual evaluation report on Nigeria in May 2015. There has been no report published for 2017.

FIUs

Give details of your jurisdiction’s Financial Intelligence Unit (FIU).

The present address and contact details of the NFIU are set out below.

12 Ibrahim Taiwo Street

Aso Rock Villa

Federal Capital Territory

Abuja

Nigeria

Tel: +234 90 9730 3256

[email protected]

www.nfiu.gov.ng

The functions of the NFIU include trailing money transactions in banks and other financial institutions, promoting public awareness and understanding of matters relating to economic and financial crimes, money laundering and financing of terrorism activities, advising the government and regulatory authorities on the prevention and combating of economic and financial crimes, receiving and collecting currency transaction reports and suspicious transaction reports (STRs) and other information relevant to money laundering and terrorism financing activities from financial institutions and designated NFIs, as well as analysing and assessing the information and reports it receives.

The NFIU became a full member of the Egmont Group during the first quarter of 2007. Nigeria was suspended from the Egmont Group on 5 July 2017 and was disconnected from the Egmont Group secure website. The reasons given for the suspension were that the NFIU had repeatedly failed to address concerns regarding the protection of confidential information specifically related to the status of STR details and information derived from international exchanges as well as concerns on the legal basis and clarity of the NFIU’s independence from the EFCC. The NFIU was to remain suspended until corrective measures were implemented. In June 2018, the NFIU Act 2018 was signed into law. This act relocated the NFIU from the EFCC to the Central Bank and repealed section 1(2c) of the Economic and Financial Crimes Commission Act that had domiciled the NFIU with the EFCC. At its meeting in Sydney, Australia in late September 2018, the Egmont group lifted Nigeria’s suspension from the group and Nigeria is once more receiving reports from the group.

Mutual legal assistance

In which circumstances will your jurisdiction provide mutual legal assistance with respect to money laundering investigations? What are your jurisdiction’s policies and procedures with respect to requests from foreign countries for identifying, freezing and seizing assets?

Nigeria, under the Mutual Assistance in Criminal Matters within the Commonwealth (Enactment and Enforcement) Act, will provide mutual legal assistance with respect to money laundering investigations in the following areas:

  • location and identification of persons;
  • service of documents;
  • examination of witnesses;
  • production of judicial or official records;
  • appearance of witnesses in the country that requests it;
  • appearance of persons in custody;
  • tracing of the proceeds of criminal activities; and
  • confirmation and enforcement of orders for the forfeiture of the proceeds of criminal activity.

Update and trends

Enforcement and compliance

Describe any national trends in criminal money laundering schemes and enforcement efforts. Describe any national trends in AML enforcement and regulation. Describe current best practices in the compliance arena for companies and financial institutions.

29. Enforcement and compliance

Describe any national trends in criminal money laundering schemes and enforcement efforts. Describe any national trends in AML enforcement and regulation. Describe current best practices in the compliance arena for companies and financial institutions.

Nigeria was recently added to, and subsequently removed from, a European Union blacklist for countries where money laundering (and terrorism) are allowed to flourish. The move was opposed by the United States and other FATF members as out of order given the readmittance of Nigeria to the Egmont group and the ongoing processing of its FATF membership, which is pending the passing of a Mutual Legal Assistance Bill and the Proceeds of Crime Bill.

In the run-up to the election there were multiple incidents in which EFCC operatives seized money that was being transported around the country, allegedly to finance election expenses of various political parties, in breach of money laundering legislation.

There has been a recent push by the EFCC to get Bureau De Change operators (BDC) involved in the anti-money laundering process. This is because converting money into foreign currency makes it far more easily smuggled than it would be otherwise given the relatively low value of the most valuable naira bank note. As such there is a drive to see that authorities are aware of any large transactions. They are required to report large transactions similarly to the way that banks and other financial institutions are. There has been a push for them to digitise increasing the paper trail when large transactions are made. Intelligence gathered from the BDCs has led to some high-profile arrests, such as that of the lawyer of a high-profile politician. He was arrested on suspicion of money laundering based on information obtained from a BDC who had been caught allegedly moving US$2 million on the lawyer’s behalf.

To maintain membership in international groups, such as the Egmont Group, particularly with regard to AML, companies and financial institutions should follow international standards:

  • avoid making or accepting cash transactions;
  • publicly traded companies must be regularly audited;
  • limited companies must file returns at least annually with the CAC;
  • conduct customer due dilligence in line with ML/TF risk. The higher the risk the more customer information should be obtained and held on to. This process should be ongoing; and
  • appoint a compliance officer whose job it is to be aware of and ensure internal procedures comply with regulation, is vital.