A Guide on Anti-Money Laundering and Counter-Terrorism Finance Compliance for Designated Non-Financial Businesses and Professions in Nigeria

Introduction

Money laundering and terrorist financing are major threats to national and global security, and Nigeria is no exception. Under Section 18(2) of the Money Laundering (Prevention and Prohibition) Act, 2022 (MLPPA), money laundering is defined as the act of concealing, disguising, converting, transferring, or controlling funds or property, knowing they are proceeds of an unlawful act. Terrorist financing on the other hand, refers to the provision of funds or financial support to individuals or groups to enable them commit acts of terrorism.

Financial institutions have long been the primary focus of anti-money laundering and counter-terrorism financing (AML/CFT) efforts by governments, it is however now widely recognized that several other sectors are also at risk of being exploited by illicit financial actors. These sectors include professionals, business support services and businesses that are not primarily engaged in financial services but are vulnerable to being used as channels for illicit financial flows. These businesses and professions, often referred to as Designated Non-Financial Businesses and Professions (DNFBPs), include lawyers, real estate agents, accountants, casinos, non-governmental organizations (NGOs), among others. Section 30 of the MLPPA defines DNFBPs as dealers in jewellery, cars and luxury goods, precious stones and metals, chartered accountants, audit firms, tax consultants, clearing and settlement companies, legal practitioners, hotels, casinos, supermarkets, dealers in real estate, audit firms, etc. and such other businesses as the Federal Ministry of Industry, Trade and Investment or appropriate regulatory authorities may from time to time designate.

To ensure effective regulation and oversight of these sectors, the Nigerian Special Control Unit on Money Laundering (SCUML) was established. SCUML operates as a unit under the Nigerian Economic and Financial Crimes Commission (EFCC) and is responsible for registering, monitoring, and supervising DNFBPs in accordance with the MLPPA, the Terrorism (Prevention and Prohibition) Act 2022, and relevant SCUML Regulations.

Legal and Regulatory Framework for AML/CFT in Designated Non-Financial Institutions

In line with international standards and global best practices, Nigeria has established a comprehensive legal and regulatory framework to address money laundering and terrorist financing within DNFBPs. This framework is designed to guide, regulate, and enforce compliance among DNFBPs. Key laws and regulations governing AML/CFT compliance in DNFBPs include:

The Money Laundering (Prevention and Prohibition) Act, 2022 (MLPPA): The MLPPA repealed the Money Laundering (Prohibition) Act, 2011 and introduced a more robust legal and institutional framework for combating money laundering and related offences in Nigeria. The Act establishes the SCUML as the regulatory authority responsible for supervising DNFBPs and ensuring their compliance with AML/CFT obligations. The Act mandates DNFBPs to implement internal controls, procedures, and policies to mitigate money laundering and terrorism financing risks, particularly in relation to new products or emerging technologies.

The Terrorism (Prevention and Prohibition) Act, 2022 (TPPA): This Act repealed the Terrorism (Prevention) Act, 2011. It provides for a unified and comprehensive framework for the detection, prevention, prohibition, and prosecution of acts of terrorism, terrorism financing, proliferation, and financing the proliferation of weapons of mass destruction in Nigeria. It complements the MLPPA and emphasizes customer due diligence and the reporting of suspicious transactions related to terrorism financing. The TPPA incorporated the Nigeria Sanctions Committee (NSC), tasked with identifying and publishing the names of individuals and entities linked to terrorism and proliferation financing in Nigeria. It mandates all DNFBPs to among other things, identify and freeze all funds, assets, and other economic resources belonging to listed individuals or entities, report such actions to the NSC, and file Suspicious Transaction Reports with the Nigerian Financial Intelligence Unit (NFIU) for further investigation. To support compliance, the NSC launched the Nigeria Sanctions List Alert System (NigSac), which provides real-time alerts to DNFBPs on designated persons and entities. Subscription to this alert system is considered a critical obligation under the TPPA for all DNFBPs.

Nigerian Financial Intelligence Unit Act, 2018: This Act established The Nigerian Financial Intelligence Unit (NFIU) as the central national agency responsible for receiving and analysing disclosures from reporting organizations, to produce financial intelligence to other agencies combating money laundering, terrorism financing, and other financial crimes. The NFIU is empowered to request financial information from a broad range of institutions and to issue guidance and directives to these institutions and to conduct on-site inspections to ensure compliance with anti-money laundering and counter-terrorist financing regulations.

The Economic and Financial Crimes Commission (Establishment) Act, 2004: This Act establishes the Economic and Financial Crimes Commission (EFCC) as Nigeria’s principal agency for investigating and prosecuting financial crimes, including money laundering. The EFCC works in collaboration with the NFIU and other regulatory bodies to enforce anti-money laundering, and prosecute offenders.

Economic and Financial Crimes Commission (Anti-Money Laundering, Combating the Financing of Terrorism and Countering the Proliferation Financing of Weapons of Mass Destruction for Designated Non-Financial Businesses and Professions and Other Related Matters) Regulations, 2024: These Regulations cover the relevant provisions of the MLPPA, TPPA and any other relevant laws or regulations that provides for AML/CFT and Countering Proliferation Financing of Weapons of Mass Destruction (CPF), the conduct of Customer Due Diligence, monitoring and filing of suspicious transactions reports to the NFIU, etc. The Regulations designate the SCUML as the body responsible for the registration, monitoring and supervision of DNFBPs’ compliance with AML/CFT/CPF obligations. The Regulations mandate DNFBPs to implement risk-based AML/CFT/CPF programs proportionate to their business operations and ensure clients and customers are integrated into these systems., amongst other obligations.

SCUML Regulations 2013 (as amended by SCUML Regulations 2016): This is also known as the Federal Ministry of Industry, Trade and Investment (Designation of Non-Financial Institutions and Other Related Matters) Regulations, 2013. It was issued pursuant to the Money Laundering (Prohibition) Act, 2011. Despite the repeal of the enabling Act, the Regulations remain in force as subsidiary legislation. The Regulations designate specific businesses and professions as Non-Financial Institutions (NFIs) and impose key AML/CFT obligations, including customer due diligence, the establishment of internal compliance programs, and reporting requirements. The Regulations also established SCUML as the body responsible for registering, supervising, and monitoring DNFBPs. It should be noted that under this regulation, the SCUML was initially established as a department under the Federal Ministry of Industry, Trade and Investment. SCUML has now been re-established under the EFCC by the MLPPA, reflecting a more enforcement-driven approach.

Additionally, Nigeria actively collaborates with international bodies such as the Financial Action Task Force (FATF), the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), and the Egmont Group of Financial Intelligence Units to enhance and align its AML/CTF framework with global standards.

Statutory Obligations of Designated Non-Financial Businesses and Professions Under the AML/CFT Framework

Under Nigeria’s AML regime, DNFBPs are legally required to comply with several statutory obligations aimed at preventing money laundering, terrorist financing, and proliferation financing. DNFPBs are enjoined to comply with these obligations to avoid regulatory sanctions, including fines, penalties, or business closure. The key obligations imposed on DNFBPs include:

1. Registration: To register with the SCUML under the relevant category and be issued with registration certificate.
2. Customer Due Diligence: DNFBPs must implement risk-based customer due diligence measures. This involves verifying customers’ identities, identifying beneficial owners, and assessing risks associated with each customer.
3. Reporting Suspicious Transactions: DNFBPs are required to submit Suspicious Transaction Reports (STRs) to the NFIU when they detect transactions that may be linked to money laundering, terrorism financing, or other financial crimes within 24 hours after the said transaction.
4. Reporting International Transfer of Funds and Cash: DNFBPs are required to report in writing a transfer to or from a foreign country of funds or securities by a person or body corporate including a money service business of a sum exceeding US$10,000 or its equivalent to the NFIU within one day from the date of the transaction.
5. Record Keeping: DNFBPs must maintain records of transactions, customer identification data, and supporting documents for at least five years after the completion of the transaction. These records must be accessible for regulatory review.
6. Internal Procedures, Policies and Controls Compliance Programs: DNFBPs must establish internal AML/CFT compliance programs, including the development of policies, procedures, and controls to prevent financial crimes. Regular staff training and independent audits are also encouraged as they are essential to ensure ongoing compliance.
7. Risk Assessment: DNFBPs are mandated to undertake risk assessments for new products, business practices and technologies before launching them to identify and manage money laundering risks. DNFBPs must then take appropriate measures to manage and mitigate any identified risks.
8. Politically Exposed Persons (PEPs): DNFBPs must conduct Enhanced Due Diligence (EDD) on PEPs, requiring additional scrutiny of transactions, ongoing monitoring, and obtaining senior management approval before establishing or maintaining a business relationship.
9. Currency Transactions Reports (CTRs): DNFBPs are mandated to make Currency Transactions Reports to SCUML of any single transaction, lodgement or transfer of funds in excess of N5,000,000 or its equivalent in the case of an individual or N10,000,000 in the of body corporate within 7 days from the date of transaction.
10. Cash Based Transactions Reports (CBTRs): DNFBPs are required to make Cash Based Transactions Reports to SCUML on any single transaction in excess of $1,000 or its equivalent within 7 days from the date of transaction.

Conclusion

Designated Non-Financial Businesses and Professions (DNFBPs) play a critical role in Nigeria’s fight against money laundering and terrorism financing. Their statutory obligations under AML/CFT regulations include registration, record-keeping, reporting suspicious activities, conducting customer due diligence, amongst others. Non-compliance can result in various sanctions, including fines, suspension, revocation or withdrawal of operating license by the appropriate licensing authority. As DNFBPs in Nigeria continue to grow and engage with global markets, it is it is imperative they remain up to date with regulatory developments and adopt effective compliance practices. By doing so, they can mitigate legal and reputational risks, prevent financial crimes, and contribute to the country’s broader efforts to combat financial crimes.

Please note that the contents of this article are for general guidance on the Subject Matter. It is NOT legal advice.

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