CBN recently announced a new anti-money laundering and counter-terrorism financing rule that takes effect immediately. In the circular, it mandated banks and other financial institutions to identify, verify and keep records of beneficial owners of businesses and other affected accounts.
 

This decision was made as a strategic step to curb the growing use of corporate entities such as foundations, company trusts and more by criminals for money laundering and related financial crimes.
 

The apex bank also emphasized that the newly released guidelines strengthen Nigeria’s position in line with the Financial Action Task Force’s (FATF’s) demand that countries “ensure that adequate, accurate and timely information on” beneficial ownership is readily accessible for regulatory bodies to check for financial crimes. 
 

The circular read: 

“Legal persons and legal arrangements are susceptible to abuse for money laundering and terrorist financing. Hence, the need to identify, verify and have credible and reliable information on the legal and beneficial owners of all corporate vehicles and entities; to ensure that such information is available and easily accessible in a timely manner by competent authorities,”

 

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Key Points to Note for the Identification and Verification of Beneficial Ownership

 

According to CBN’s press releases Financial Institutions (FIs) and other affected entities should adhere to the following while verifying Beneficial Ownership (BO):

 

1. FIs are to carry out necessary customer due diligence (CDD) when identifying and verifying BO, particularly at the onboarding stage, based on the risk assessment of the customer and its BO and must take all reasonable measures in verifying the information on the BO. 
 

2. In identifying and verifying legal persons, FIs are required to adopt a three-step cascade approach in Regulation 21 of the CBN AML/CFT/CPF Regulations as detailed below: 
 

  • Identify and verify the natural persons, where they exist, that have an ultimate controlling ownership interest in a legal person, taking into cognizance the fact that ownership interests can be so diversified that there may be no natural persons, whether acting alone or with others, exercising control of the legal person or arrangement through ownership. 
     
  • In the event of doubt as to the persons with the controlling ownership interest as beneficial owners or where no natural person exerts control through ownership interests, identify and verify the natural persons, where they exist, exercising control of the legal person or arrangement through other means. 
     
  • Where a natural person is not identified, FIs shall identify and take reasonable measures to verify the identity of the relevant natural person who holds a senior management position in the legal person. 
     

3. For legal arrangements, identify and verify the identity of the settlor, the trustee, the protector where they exist, the beneficiaries or class of beneficiaries or persons in equivalent or similar positions, and any other natural person exercising ultimate or effective control over the legal arrangement including through a chain of control or ownership. 
 

4. FIs in verifying the identity of BO, must use reliable and independent documents from sources reliable sources as stated by the CBN.

 

What are the Red flags for Identifying Owners?

 

Below are some red flags/indicators for identifying BOs: 

 

  • An extract of a shareholder registry showing ownership; 
  • Any nominee agreement that shows who exercises real control behind a shareholder arrangement; 
  • A shareholders’ agreement that shows a natural person is able to control the shares of more than one shareholder, effectively giving control; 
  • Documentary evidence that a natural person is able to exercise a dominant influence over a legal person; 
  • Documentary evidence that the natural person has the power to appoint senior management; ▪ Documentary evidence (for example, an employment contract) that a director or employee is able to influence a legal person; and 
  • Documentary evidence of the exercise of dominant influence over the transactions of the legal entities/arrangements.
     

You can read up on the complete CBN UBO Press release.
 

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