The first money laundering act was introduced in Nigeria in 2003 after decades of money laundering and criminal activities went unchecked. Since then, there have been four reforms of Nigeria’s anti-money laundering legal regime - beginning in 2003 and its subsequent amendments in 2004, 2011 and the latest, 2022.
The Money Laundering (Prevention and Prohibition) Act 2022 (MLA 2022) was introduced to enhance existing AML laws and introduce new ones to curtail evolving criminal activities. In this article, we discussed 7 key points that businesses need to know from the recently introduced act.
Understanding the Need for the Money Laundering (Prevention and Prohibition) Act 2022
The Money Laundering Act 2022 was introduced as part of the intensified efforts towards the adoption and implementation of the Financial Action Task Force’s (FATF) recommendations on combating the financing of terrorism and anti-money laundering.
The Money laundering (Prevention and Prohibition) Bill, 2022 or MLA 2022 annuls the Money Laundering (Prohibition) Act, No. 11, 2011, contains details on which the legal and institutional framework for the prohibition and prevention of money laundering in Nigeria.
Additionally, the act supplies statutory grounds for the establishment of the Special Control Unit Against Money Laundering under the Economic and Financial Crimes Commissions (EFCC).
What are the key changes in The Money Laundering Act 2022?
Here is a rundown of the top 5 key changes/ additions in MLA 2022:
1. Higher Restrictions on Cash Payment Transactions
The Money laundering Act 2022 retained the threshold value on cash payments and transactions sum exceeding N10,000,000 (ten million naira) for corporate bodies and N5, 000,000 (five million naira) for individuals. Additionally, it criminalises attempts at breaking up transactions into bits to circumvent the threshold value stated in the Act.
2. Adoption of Designated Non-Financial Business and Profession (DNBP)
In the annulled act, certain categories of businesses were classified as Designated Non-Financial Institutions (DNFI). However, the MLA 2022 changes the definition of DNFI to DNBP and expands the category to include the following:
- Pools betting
- Businesses involved in the hospitality industry
- Mortgage brokers
- Trust and public service providers
- Mechanised farming equipment
- Real estate, estate agents, developers and brokers
- Farming equipment and machinery
- Precious metals and precious stones
- Practitioners of mechanised farming
3. Enhanced KYC Requirements for Politically Exposed Persons (PEP) and Proxies/ Agents
The MLA 2022 act increases the previous KYC requirements by obligating every financial institution (FI) and DNBP to take reasonable to ensure every person acting on behalf of a customer is authorised, identified and verified.
Businesses in the category are also mandated to take reasonable measures to verify and establish the source of wealth and funds of beneficial owners and customers identified as Politically Exposed Persons (PEPs). They are also required to conduct enhanced monitoring of such relationships.
4. KYC For Internet and Ship-Based Casinos
This latest act also extended its compliance requirements to internet and ship-based casinos. Businesses in this industry are now obligated to carry out KYC due diligence on the financial transactions of their customers.
5. Expanded Scope of Suspicious Transaction Reporting
The now-annulled money laundering act stipulated that transaction reporting was dependent on suspicion of terrorism financing, frequency, the economic value of the transaction or unreasonableness. However, the MLA 2022 has extended this scope of suspicious transaction reporting to situations where DNBPs or FIs suspect that the transaction involves proceeds of criminal activities, money laundering or other unlawful acts.
6. Obligations on Financial Transaction Reporting and Disclosure
The MLA 2022 has increased the financial transactions reporting threshold to N10,000,000 (ten million naira) for corporate bodies and N5, 000,000 (five million naira) for individuals. DNPBs are mandated to report such transactions to the Special Control Unit Against Money Laundering domiciled within the EFCC while Financial institutions are compelled to report to the Nigerian Financial Intelligent Unit.
7. Special Control Unit Against Money Laundering (SCUML)
The EFCC has always been charged with the responsibility of coordinating several institutions involved in the fight against money laundering. They are also in charge of the enforcement of all laws related to economic and financial crimes in Nigeria. In 2005, the Federal Government established the Special Control Unit Against Money Laundering (SCUML), domiciled within the EFCC by executive order.
However, the MLA 2022 has now provided a statutory basis for the independent existence and operation of SCUML although its administrative operations still remain under the control of EFCC. This latest act designates SCUML as the body responsible for the supervision of DNBPs and their compliance with MLA 2022 provisions and relevant compliance laws. Essentially, the EFCC is responsible for financial institutions while SCUML focuses on regulating DNBPs.
Note that we only highlighted 7 key points that you should note as a business. However, the MLA 2022 transcends these 7 points.
You can read up on the full Money Laundering (Prevention and Prohibition) Act 2022.
Complying with the Money Laundering (Prevention and Prohibition) Act 2022 Through Youverify
The Money laundering Act 2022 comes with several updates to existing laws and new additions. It is important that businesses study these requirements and implement them immediately to prevent sanctions from the Federal Government of Nigeria. The standards were raised on transaction monitoring, reporting, KYC, PEP screening and more, making it even more difficult for businesses to satisfy all these requirements in-house. However, Youverify compliance solutions offer an efficient way out.
With Youverify, businesses can design and automate their compliance processes to meet the standards and obligations placed on their industry. This makes satisfying MLA 2022 compliance requirements easier without compromising on the customer onboarding rate or slowing down business processes for financial institutions and DNBPs.
This article summarises the latest Money Laundering Act 2022, highlighting a few important points and requirements for businesses in Nigeria. The act also comes with strict penalties for noncompliance, especially for businesses with mandatory obligations, therefore, it should be studied and implemented as soon as possible.