Money laundering constitutes the act of processing criminal profits or illegitimate funds to disguise their illegal origin. Article 3.1. of the United Nations Vienna Convention 1988 defines money laundering as the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions.
Regulation of money laundering and counter-terrorism has undergone several legislative changes. In May 2022, the Nigerian President signed into law the Money Laundering (Prevention and Prohibition) Act, 2022, which repealed the Money Laundering (Prohibition) Act 2011. The Nigerian law applies to the following businesses: Financial institutions, including banks, investment and securities houses, virtual asset service providers, discount houses, insurance institutions, debt factorization and conversion firms, bureau de change, finance companies and money brokerage firms, automotive dealers, dealers in mechanized farming equipment’s, hospitality businesses, hotels, supermarkets, casinos, pool betting, dealers in jewelry, precious metal, and precious stones dealers, clearing and settlement companies, consultants, and consulting companies, real estate agents, high-value dealers, legal practitioners, and notaries, licensed professional accountants, tax consultants, mortgage brokers, trust and company service providers.
Curiously, legal practitioners are listed among the regulated entities under the previous (now defunct) laws with the duty to disclose threshold transactions. However, courts have held that lawyers are not bound by the duty to disclose threshold financial transactions. The Court of Appeal in Appeal No: CA/A/202/2015 upheld the decision of the Federal High Court in the case of Central Bank of Nigeria v. Registered Trustees of Nigerian Bar Association & A.G. Federation. In May 2021, the Court of Appeal in a different matter (Federal Republic of Nigeria v. Chief Mike Ozekhome SAN (2021) LPELR-54666 (CA)) reiterated its position and held that lawyers are not bound by the duty to disclose under the Money Laundering Act 2011.
The new law whilst retaining lawyers among the list of regulated entities goes further to state under section 11(4), that the Client-attorney privilege does not exempt the duty to disclose under circumstances such as: purchase or sale of property, purchase or sale of any business, managing of client money, securities or other assets, opening or management of bank, savings or securities accounts, creation, operation or management of trusts, companies or similar structures, anything done in furtherance of any unlawful act. It is not clear what the position of the Nigerian courts will be in view of the above provision, which limits the scope of client-attorney privilege. However, the purport of that section is to overreach the Nigerian court’s decisions exempting lawyers from mandatory disclosure of threshold transactions anchored on client-attorney privilege.
Section 3 provides that regulated entities have a duty to report transfers to or from a foreign country of funds or securities by a person for an amount exceeding US$10,000 or its equivalent to the Special Control Unit Against Money Laundering, Central Bank of Nigeria and Securities and Exchange Commission. Similarly, transportation of cash or negotiable instrument exceeding US$10,000 or its equivalent in or out of Nigeria shall be declared to the Nigerian Customs Service. It is important to highlight at this juncture, that the responsibility to declare is only limited to transportation in and out of Nigeria. In the case of the Economic Financial Crimes Commission (EFCC) v Dr. Martins Oluwafemi Thomas (Appellant) (2018) LPELR-45547, it was held thus:
“Furthermore, there is also no known offence for traveling with money legitimately earned within the country. The requirement of declaring sums beyond a threshold is only when you are traveling outside the country. Traveling from Lagos to Abuja is still within the territorial jurisdiction of the country known as Nigeria.”
The Act has also now made a provision for Suspicious Transaction Reporting (S.T.R.) whereby financial institutions are made to report a transaction that a financial institution suspects is unusual of the account holder. This may be because of the amount of funds, frequency of the transactions, lack of economic objective, or if “in the opinion of the financial institution or non-financial business and profession involves the proceeds of a criminal activity, unlawful act, money laundering or terrorist financing.” A typical example of this is a situation where an individual who earns less than a million naira per annum gets an inflow of over a billion naira into his account in less than a month. Making such reports will provide an opportunity for the Unit to conduct further and necessary investigations.
A major arm of money laundering is in the need for caution and confirmation by recipient of funds to carry out necessary due diligence and ensure that funds are not from an unlawful act. This is necessary because the law will hold a recipient liable if such person reasonably ought to have known that such fund or property is, or forms part of the proceeds of an unlawful act. Unlawful acts are defined under the Act to include racketeering, terrorism, terrorist financing, trafficking in persons, smuggling of migrants, sexual exploitation, sexual exploitation of children, illicit trafficking in narcotic drugs and psychotropic substances, illicit arms trafficking, illicit trafficking in stolen goods, corruption, bribery, fraud, currency counterfeiting, counterfeiting and piracy of products, environmental crimes, murder, grievous bodily injury, kidnapping, hostage taking, robbery or theft, and “any other criminal act specified in this Act or any other law in Nigeria including any act, wherever committed in so far as such act would be an unlawful act if committed in Nigeria”.
Despite the wide definition of the unlawful act, a major and curious introduction is that of section 18 (8) which states that “it shall not be necessary to establish a specific unlawful act, or that a person was charged or convicted for an unlawful act, for the purpose of proving a money laundering offence under this Act.” The problem with this provision of the law is that it that can easily leave the investigation and eventual prosecution to the realm of speculation and suspicion. This is also an easy bait to allow for witch-hunting which is a major issue in Nigeria’s judicial system.
In terms of punishment, the Act provides that a person found guilty of an offence is liable to imprisonment for a period not less than 4 years or a fine of not less than five times the value of the proceeds of the offence or both. The fine also applies to corporate bodies found guilty of money laundering offences.
Overall, the Act is a good step in the right direction in strengthening anti-money laundering laws. What many interested actors will be more interested in is the enforceability of these provisions. The relevant agencies need to ensure that proper due diligence and investigations are carried out before an accused is charged so that scarce public funds are not wasted on baseless prosecutions.
DISCLAIMER
This article does not create a Client/Attorney relationship. Readers are advised to seek advice from qualified Legal Practitioners, and legal counseling to any questions or concerns arising from their specific factual situation. You can reach ABL Partners at contact@ablpartnerslp.com or +234 8182 4007.