1. Introduction

Further to our representation of Nuru Nigeria at an interview and sensitization session of Designated Non-Financial Institutions (DNFIs) at the Special Control Unit on Money Laundering (SCUML) of the Economic and Financial Crimes Commission (EFCC), kindly find a brief summary of the obligations required of organizations operating in Nigeria, as a DNFI, under the Money Laundering Prohibition Act 2011 (as amended).

2. About SCUML

Nigeria, as a largely cash-based economy, has vested the Federal Ministry of Commerce and Industry (now Federal Ministry of Industry, Trade & Investment) with the responsibility for monitoring money-laundering activities. The Ministry established the Special Control Unit on Money Laundering (SCUML) in 2005, through the Federal Government’s Presidential Inter-Agency Committee, to remedy identified inadequacies of legislation and institutional framework on Money Laundering.

            2.1. Statutory Responsibility of SCUML

SCUML, as expressed in its vision, is determined to be a world-class regulatory unit that becomes a benchmark in the supervision, monitoring and regulation of Designated Non-Financial Institutions in their compliance with Nigeria’s Anti Money Laundering laws as well as combating the financing of terrorism. SCUML does these through:

1. Registration and inspection of DNFIs on a risk-based approach;
2. Monitoring and supervising DNFIs activities in line with the Money Laundering Prohibition Act and the Prevention of Terrorism Act;
3. Analysis of statutory reports (cash-based transaction reports, currency transaction reports and suspicious transaction reports); and
4. Training and capacity building to create an enabling environment for the promotion of commerce and investment.

In this regard, SCUML collaborates with key stakeholders including Self-Regulatory Organizations (SROs), Non-Profit Organizations (NPOs), Civil Society Organizations (CSOs), the National Planning Commission (NPC), Corporate Affairs Commission (CAC), Economic and Financial Crimes Commission (EFCC) and the Nigerian Financial Intelligence Unit (NFIU).

2.2. Listed Businesses

The Central Bank of Nigeria (CBN) recently requested the registration of all Designated Non – Financial Businesses and Professions (DNFBPs) with the Special Unit on Money Laundering (SCUML). Thus, registration with SCUML is a regulatory requirement for corporate bank accounts and compliance is mandatory for businesses defined under section 25 of the Money Laundering Prohibition Act.

2.3. Documents Required for SCUML Registration

·         Certificate of Incorporation/Registration;

·         Articles & Memorandum of Association;

·         Tax Clearance Certificate or Tax Identification Number;

·         Company Profile;

·         Audited Financial Report;

·         Professional Certificate (for professionals); and

·         Constitution (for NGOs).

 

3. Designated Non-Financial Institutions

Section 25 of the Money Laundering Prohibition Act defines DNFIs as any business involved in the following areas:

a.    Jewelry;

b.    Cars and Luxury Goods;

c.    Precious Stones and Metals;

d.    Real Estate Development;

e.    Estate Surveyors and Valuers;

f.     Estate Agents;

g.    Chartered Accountants;

h.    Audit Firms;

i.      Tax Consultants;

j.      Clearing and Settlement Companies;

k.    Casinos and Lottery;

l.      Hotels and Hospitality Industry;

m.  Pool Betting;

n.    Supermarkets;

o.    Dealers in Mechanized Farming Equipment and Machinery;

p.    Practitioners of Mechanized Farming; and

q.    Non-Governmental Organizations.

or such other businesses as the Federal Ministry of Trade and Investment or appropriate regulatory authorities may from time to time designate.

4. Obligations of Designated Non-Financial Institutions under the Money Laundering Prohibition Act 2011
5. Limitation to Make or Accept Cash Payment

Section 1 provides that DNFIs shall not, except through a financial institution, make or accept cash payments of:

1. N5,000,000.00 or its equivalent, in the case of an individual; or
2. N10,000,000.00 or its equivalent in the case of a body corporate.

 

The penalty for breach of this is as prescribed by the Nigerian Financial Intelligence Unit (NFIU), which stipulates three (3) years imprisonment or banning of such DNFI indefinitely or for five (5) years from practice.

1. Duty to Report International Transfer of Funds and Securities

Section 2 provides that DNFIs shall report their international transactions to the relevant bodies indicating the nature and amount of the transfer, the names and addresses of the sender and the receiver of the funds or securities. 

It states:

“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 shall be reported to the Central Bank of Nigeria, Securities Exchange Commission or the Commission in writing within 7 days from the date of the transaction.”

Such report should be forwarded to agencies like the NFIU, Nigerian Custom Service, Securities and Exchange Commission or the Central Bank of Nigeria.

Failure to declare or false declaration of such transaction to the relevant agencies shall be liable on conviction to forfeiture of not less than 25% of the undeclared funds or negotiable instrument or to imprisonment of not less than 2 years or to both as contained under section 12 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act.

• Identification of Customers

Section 3 of the Act requires DNFIs to identify and update all relevant information on its customers as well as scrutinize all on-going transactions undertaken throughout the duration of the relationship in order to ensure that a customer’s transaction is consistent with the business and risk profile.

1. Registration with SCUML / Rendition of Occasional Cash Transaction by Designated Non-Financial institutions

Sections 5 of the Act requires DNFIs to:

1. Make declaration of business activities to SCUML before or within three (3) months of commencement;
2. Report transaction in excess of US$1,000 or its equivalent in cash to SCUML within seven (7) days of its receipt.

Failure to comply with the requirements of customer identification and the submission of returns as specified in the Act within 7 days from the date of the transaction shall amount to an offence that, upon conviction, is liable to:

1. A fine of N250,000.00 for each day during which the offence continues; and
2. Suspension, revocation or withdrawal of license by the appropriate licensing authority as the circumstances may demand.
3. Suspicious Transaction Reporting

Section 6 of the Act requires DNFIs to report transactions:

1. Involving a frequency, which is unjustifiable or unreasonable;
2. Which is surrounded by conditions of unusual or unjustified complexity;
3. Appears to have no economic justification or lawful objective; or
4. In the opinion of the Financial Institution or Designated Non-Financial Institution, involves terrorist financing or is inconsistent with the known transaction pattern of the account or business relationship.

This report should be made within seven (7) days after the transaction by:

1. Drawing up a written report containing all relevant information on the matters mentioned together with the identity of the principal and where applicable, of the beneficiary or beneficiaries;
2. Taking appropriate action to prevent the laundering of the proceeds of a crime or an illegal act; and
3. Sending a copy of the report and action taken to the EFCC.

Failure to comply with the provisions of this section is an offence and is liable on conviction to a fine of N1,000,000 for each day during which the offence continues.

1. Preservation of Records

Section 7 requires DNFIs to preserve and keep at the disposal of the authorities, the record of a customer’s identification for a period of at least five (5) years after the closure of the account or the severance of relations with the customer.

• Communication of Information

Section 8 requires that, on demand, DNFIs should communicate with agencies such as the Central Bank of Nigeria, National Drug Law Enforcement Agency and such other regulatory authorities or judicial persons as the Commission may, from time to time, publish by order in a gazette.

• Creating Awareness Among Employees of DNFIs

Section 9 of the Act requires DNFIs to develop programs to combat the laundering of the proceeds of a crime or other illegal acts, and these shall include:

1. The designation of compliance officers at management level at its headquarters and at every branch and local office;
2. Regular training programs for its employees;
3. The centralization of the information collected; and
4. The establishment of an internal audit unit to ensure compliance with and effectiveness of the measures taken to enforce the provisions of the Act.
5. Mandatory Disclosure

Section 10 of the Act mandates individuals, financial institutions and DNFIs to report to the Commission, in writing within 7 and 30 days respectively, any single transaction, lodgment or transfer of funds in excess of:

1. N5,000,000.00 or its equivalent, in the case of an individual; or
2. N10,000.00 or its equivalent in the case of a body corporate.

Failure of DNFI’s to report the above transaction within the specified period of       time shall be liable on conviction to a fine of not less than N250,000.00 and        not more than N1, 000,000.00 for each day the contravention continues.

The Act also encourages on-going monthly reporting of financial activities by DNFIs even when no financial transaction was conducted during the particular month.

Conclusion

Considering the foregoing, we believe it is pertinent for companies to appoint a compliance officer at management level, who shall serve as the company’s liaison with the SCUML office as well as coordinate the company’s compliance with Nigeria’s money laundering laws.

All Cash Based Transaction Reports (CBTRs) and Currency Transaction Reports (CTRs) can be sent to SCUML through the online SCUML reporting platform on www.scuml.org. Suspicious Transaction Reports (STRs) are to be reported directly to the Nigeria Financial Intelligent Unit (NFIU) via the NFIU website on www.nfiu.gov.ng.

 

We hope you find guidance in the foregoing. Please do not hesitate to contact us for further clarification.

Yours faithfully,

 

JENNIFER NANMAN

ASSOCIATE

ANDI DAZE LEGAL