Money Laundering in Nigeria: An overview of the Nigerian situation

Money laundering in Nigeria dates back to the independence era. With the spoils of politics being shared among the top politicians and their allies for more than six decades unchecked. Indeed, Nigeria’s corruption has a special kind to it; in addition to the usual stealing from politicians, the cankerworm of corruption is done by everyone who works for the government, whether it be federal or state, including the civil servants, police, airport employees, road transport workers, military and even cleaners.

Nigeria’s image is tarnished internationally by the embarrassing incident of corruption. Under the civilian leadership of former President Olusegun Obasanjo, the federal government was compelled to enact the Nigerian Anti-Corruption Law in response to this shameful act. The latest Money Laundering (Prevention and Prohibition) Act, 2022, which was signed into law by President Muhammadu Buhari, is the result of the evolution of Nigeria’s anti-corruption laws over time.

Examining money laundering in Nigeria, its history, prevention, prohibition, and other issues are the goals of this article.

History of Money Laundering in Nigeria

There have been allegations of corruption in Nigeria dating back to the colonial era, with claims that Nigerians were expected to tip the country’s police force, civil service, and other government agencies before they performed their duties. Consequently, there is historical proof of corruption dating back to the 1960s, the time of Nigeria’s independence.

Major Chukwuma Kaduna Nzeogwu called the first republic politicians “ten percenters” after the military overthrew the government on January 15, 1966. The term “ten percenters” was a metaphor for the claim that they had taken 10% as commission from the project money given to contractors. Politicians in Nigeria during this period led opulent lifestyles, entertaining the elite in luxurious homes and exotic cars.

Beginning with the Gowon regime, the military era saw unchecked corruption swing from one extreme to the other. Officers, their proxies, allies, and others now had the freedom to take as much of the national pie as they pleased thanks to the oil boom. Several of the Gowon government’s officers had been indicted by the Muritala government. By the time the military handed power over to Olusegun Obasanjo in the fourth republic, it was too late; corruption had permeated Nigeria’s very fabric and soul. This trend in corruption saw an increase under almost all military regimes.

The Nigerian Money Laundering (Prevention and Prohibition) Act 2022: An Overview

On May 12, 2022, President Muhammadu Buhari signed the Money Laundering (Prevention and Prohibition) Bill. The former Money Laundering (Prohibition) Act 2011 is repealed by the new Money Laundering (Prevention and Prohibition) Act 2022 (the Act). The Act aims to make Nigeria’s already robust legal system for combating money laundering stronger. The Special Control Unit against Money Laundering (the Unit), which would fall under the Economic and Financial Crimes Commission (EFCC), was established to effectively implement the Act’s provisions.

The Act includes the following significant provisions that are intended to address the problem of widespread corruption:

1. Cash Payment Limitation

The Act stipulates that, except for transactions carried out through financial institutions recognized by Nigerian law, neither individuals nor corporate bodies may accept payment in cash exceeding 5 million Naira for individuals and 10 million Naira for corporations. 

The Act forbids a single business from engaging in two or more transactions with one or more financial institutions, professionals, or non-financial companies to avoid having to report such transactions to the Unit as required by the Act. The Act forbids using any method to avoid the obligation to disclose information about transactions that exceed the applicable threshold.

2. Reporting International Transfers of Funds, Cash, or Securities

According to Section 3(1) of the Act, any amount exceeding $10,000 or its equivalent received from a foreign country must be reported in writing to the Unit, the Central Bank of Nigeria (CBN), and the Securities and Exchange Commission (SEC). The Act mandates that such a report be submitted no later than a day following the transaction. 

Following the Act, anyone transporting money worth more than $10,000 or its equivalent must notify the Nigerian Customs Service, the customs must then report to the Unit and the CBN.

3. Duty to report suspicious transactions

The Act requires relevant institutions to report suspicious transactions as soon as they occur. 

The Act also defines “suspicious circumstances” as transactions that have an unusual frequency, irrational conditions, lack a crucial economic justification, deviate from other well-known transactions, or appear to involve criminal activity in the institutions’ judgement.

4. Keeping Records and Internal Regulations

The Act requires all relevant institutions to keep transaction records for a minimum of five years, whether they are domestic or international. When necessary, the unit should have access to this record. 

The Act also mandates that relevant institutions set up policies to prevent money laundering within those institutions. Regular staff training, information centralization, the creation of an internal audit division, and other practices ought to be part of these procedures.

5. The right to monitor bank accounts

According to the Act, for the relevant authorities can identify the objects, or proceeds, associated with money that has been laundered. To get access to this, the relevant authorities must first obtain an order from the Federal High Court based on an ex-parte application and a sworn declaration from an officer with the competent authority. 

The authorities can monitor a bank account, gain access to the bank’s computer system, and obtain any privileged information, documents, contracts, or other information they require.

6. Attorney-Client Privilege Limitation

The Act’s restriction on the attorney-client privilege is arguably its most contentious provision. The attorney-client privilege is the client’s right to have any information given to the lawyer kept confidential. 

According to the Act, attorneys are required to disclose clients’ information about the sale and purchase of a business or property, the management of client funds, the creation and administration of trusts, the opening or administration of bank accounts, and anything else resulting from an illegal act.

Conclusion

Despite the numerous legal provisions, money laundering has thrived over the years. Money laundering is believed to flourish because the various money laundering laws are not consistently enforced and focus too much on private citizens and businesses rather than public servants.

Who are the relevant organizations, as identified by the Money Laundering (Prevention and Prohibition) Act?

These include businesses that are financial institutions as well as other organizations that store money, securities, or other assets for people or companies.

Does the Money Laundering (Prevention and Prohibition) Act cover cross-border transfers made from Nigeria to another nation?

Yes, the relevant institution must report transactions from Nigeria to foreign accounts that meet the limitation threshold under the Act to the Unit and the CBN.