As this source puts it, “The United Nations Office on Drugs and Crime (UNODC) estimates that between 2 and 5% of global GDP is laundered each year.” That amounts to billions of naira in Nigeria. It perfectly explains why anti-money laundering is such a big deal and why several quarters are making joint efforts towards it.
In this article, you’ll get to know what Anti Money Laundering is, the Nigerian agencies concerned with enforcing it, and more importantly, requirement steps for institutions and entities that want to promote AML practices.
What is Anti Money Laundering (AML)?
Anti-money laundering, or AML, can be described as the efforts and strategies that help mitigate money laundering.
AML is spun from the term money laundering, which is an act or process of making money through fraudulent or illegal means that are made to appear legitimate.
In practice, anti-money laundering involves identifying and preventing all activities related to money laundering. It also considers the use of money for illegal activities such as terror financing, ensuring that the channels for these are blocked.
The Money Laundering (Prohibition) Act
Regulations surrounding AML procedures and practices are largely provided through the Money Laundering (Prohibition) Act.
For those who don’t know, there’s an active Money Laundering (Prohibition) Act in Nigeria.
This law is set to describe the scope of money laundering offences and iterate measures such as customer due diligence. It also seeks to strengthen existing AML systems and to develop an appropriate legal and institutional framework.
The Money Laundering (Prohibition) Act was first introduced in 2002 through the action of the National Assembly. Since then, a total of four reforms have been made. These reforms occurred in 2003, 2011, 2013, and 2022, with each one updating the law to cover more and more aspects.
List of Anti-Money Laundering (AML) Requirements
According to ICLG, Nigeria’s Anti Money Laundering requirements can be listed to include:
Designation of an AML Chief Compliance Officer at Management Level:
Businesses and organizations across the country are required to have an AML Chief Compliance Officer at the management level. This individual will coordinate and oversee AML plans and actions specific to their place of work.
Identifying AML Regulations and Offenses:
A key AML requirement is the identification of local and international AML regulations and offences. You want to know what is considered an obligation and what is considered a violation. This way, it becomes possible to take necessary steps towards compliance and enforcement.
Nature of Money Laundering:
To catch a thief, you must think like a thief. That is to say, it is impossible to combat money laundering without completely understanding its nature. You should investigate how money laundering works, what the modern day tweaks to it are, and what local channels are employed.
Understanding this will help put you on track as a business or government agency that intends to beat this evil.
Money Laundering “red flags” and Suspicious Transactions:
There are some subtle pointers to possible money laundering activities. These are termed “red flags”. The idea here is that seeing any of these pointers should raise concerns and the relevant authorities should be notified at once. Some money laundering red flags include:
- Large Cash Deposits:
Sudden large cash deposits may be indicative of money laundering. This is especially looked into when such significant deposits have never been by the user in question. In such a case, the user’s background, source of funding, and other critical details are scrutinized.
- Geographic inconsistencies:
Let’s say that a user in Nigeria has been receiving money consistently from someone in the UK. If it happens that they suddenly begin receiving money from someone in America, China, or wherever, there may be a need to check the new activity. Rapid and random changes in the region where a transaction occurs is a red flag. The reason is that money launderers will often switch accounts or move to new locations if they feel they are being tracked.
- Insufficient or Inconsistent User Information:
Fraudulent users of banking and financial services may provide incomplete information about themselves. They do this to scale background checks and gain unwarranted access to systems or services. In other cases, users may provide falsified information to misdirect authorities and keep them from uncovering their crimes of money laundering. This makes it super important for businesses and organizations in Nigeria to scrutinize customer or user data for inconsistencies and question missing details.
- Insufficient or Inconsistent Documentation:
Let’s say that a user is being required to provide tax or other types of documents. If they are involved in money laundering, chances are they will present incomplete documentation. Of course, anyone could innocently forget to include a required document for one transaction or the other. There’s no disputing that. But it doesn’t mean any case of this should be considered a simple oversight.
- Unusual/Suspicious User Behavior:
User behaviour is often an important pointer to fraudulent activities such as money laundering. Resistance to due process, hesitation about giving information to authorities, and frequent omissions in information or data provided are common responses that raise a red flag.
- Poor Media Appearance/Reputation:
The media sometimes serves as a helpful reference as to whether an individual is engaged in money laundering or not. A person’s picture and comment posts as well as news and other media publications about them, often say a lot. What this implies is that people who have earned a poor public reputation may have done something to deserve it. Good AML practice will require taking a deep critical look at such individuals.
Reporting Requirements:
Money laundering activities and any suspicion of such activities must be reported to the necessary authorities. The steps to follow in reporting such are issued by the CBN and EFCC.
Customer Due Diligence:
Customer Due Diligence is well explained in our article on KYC. It involves collecting customer information, conducting background checks, and making analysis to understand the potential risk presented by such a customer.
Risk-based Approach to AML:
A risk-based approach to AML involves assessing the level of exposure of a service or product to different types of risks. This includes customer, geographic, channel, and transaction risks, among others. It is recommended that AML-conscious entities utilize this approach whenever necessary.
Record-keeping and Retention Policy:
Good anti-money laundering practices include proper record-keeping. Information on a user’s activity and their personal data should be held safely.
Monitoring of Employees Accounts:
AML-enforcing agencies have the power to monitor employees’ accounts to check for suspicious activities. It doesn’t matter which organization these individuals work at or what level of government they serve.
Nigerian Agencies Concerned with Enforcing Anti-Money Laundering
Nigeria is increasingly strengthening its resistance to money laundering activities. One way in which this is happening is through Policy adoption. The other, however, is the establishment of agencies dedicated to this fight.
This section lists out the different Nigerian agencies laden with the responsibility of enforcing anti-money laundering.
Nigerian Financial Intelligence Unit (NFIU)
You may have heard the acronym NFIU in a news report or some other Nigerian TV program. The term is short for the Nigerian Financial Intelligence Unit.
Founded in 2004, the NFIU stands as the lead agency for intelligence gathering and investigations on financial matters. It was first established as a unit under the Economic and Financial Crimes Commission (EFCC). However, today, it is an autonomous body existing within the Central Bank of Nigeria (CBN).
The NFIU receives disclosures from reporting organizations, analyzes them, and produces intelligence, which it sends to relevant authorities. It focuses on anti-money laundering, counter Terrorist Financing, and Counter-Proliferation Financing (AML/CFT/CPF).
EFCC
The Economic and Financial Crimes Commission (EFCC), is a more popular agency involved in enforcing anti-money laundering. It was established in 2003 with the responsibility to prevent, investigate, and even prosecute economic and financial crimes.
The EFCC has succeeded in prosecuting countless money laundering cases. Under its wings is the Special Control Unit Against Money Laundering (SCUML). This unit specializes in supervising, monitoring, and regulating Designated Non-Financial Businesses and Professions (DNFBPs).
Penalty for Money Laundering in Nigeria
The topmost penalty for money laundering in Nigeria is a jail sentence. Individuals who are found guilty may be asked to serve time for their crimes. In this case, they will face a prison term of a minimum of four years and a maximum of fourteen years.
All assets linked to money laundering crimes are usually forfeited to the federal government.
In addition, money launderers may have one or more of their accounts frozen and they may be required to pay a fine. It is also possible that their access to certain services across the country may be permanently revoked.
Conclusion
Money laundering has been a serious problem in Nigeria. The good news, however, is that more and more collaboration is in effect to curb this nuisance. The use of advanced technology, coupled with stringent AML policies, and the interplay of relevant local and international agencies has helped to greatly mitigate such crimes through prevention, investigation, and prosecution.
