Although Nigeria has taken many initiatives to enhance its Anti-money laundering (AML) remains a significant issue. Advance fee fraud was first made famous by Nigerian criminals, but, in recent years, natives of several African countries and others from all around the globe have begun to commit advance fee fraud. Internationally, this kind of fraud is known as "Four-One-Nine" (419 refers to the Nigerian criminal code's fraud section). While there are numerous variants, the fundamental purpose of 419 fraud is to deceive victims into paying an advance charge by convincing them that they would get a substantial advantage if they do so. Some victims have lost money, kidnapped, or murdered because of these "get rich quick" scams. 419 scammers have attacked businesses and individuals worldwide via the Internet, and they continue to do so. The Economic and Financial Crimes Commission (EFCC) has attempted to prevent 419-related cybercrimes, although only a few achievements have been reported as a consequence of its efforts.
AML Regulations in Nigeria
The key Nigerian AML laws and regulations are as follows:
- The Money Laundering Act.
- 2012 Terrorism Prevention Act (as amended).
- Regulations on Terrorism Prevention (Freezing of International Terrorist Funds and Other Matters), 2013.
- The Economic and Financial Crime Commission (Establishment) Act of 2004 established the Economic and Financial Crime Commission.
- The Banks and Other Financial Institutions Act (BOFIA) of 1991 regulates financial institutions.
- AML/CFT Regulations of the CBN, 2013.
- The CBN Act of 2017
- CBN Risk-Based Supervision Framework for AML/CFT, 2011.
- CBN Circulars and other regulatory messages
- The Drug Enforcement Administration's National Drug Law Enforcement Act (1990).
Nigeria implemented three pieces of legislation in December 2002 after being placed on the NCCT list and facing a FATF recommendation for countermeasures, which are:
- A reformation to the 1995 Money Laundering Act that broadens the law's application to include all consequences of crime
- A modification to the Banking and Other Financial Institutions (BOFI) Act of 1991 that extends the law's scope to stock brokerage businesses and foreign currency exchange services
The Economic and Financial Crimes Commission Act establishes the EFCC and coordinates AML prosecutions and sharing of information, gives the Central Bank of Nigeria (CBN) wider power to deny bank licenses, and enables the CBN to freeze suspicious accounts.
FATF Status and The Latest FATF Statement
On February 24, 2023, the Financial Action Task Force (FATF), an international organization focused on combating money laundering and terrorism financing, placed South Africa and Nigeria on its grey list. This move by FATF is essentially a warning to investors and the global community, signaling concerns about the adequacy of these countries' AML and CFT regulations, which could potentially enable money laundering and terrorist financing activities.
As a result of this development, the Rand's value in South Africa fell, reaching its lowest level against the US dollar since November, and the Johannesburg Stock Exchange experienced a week-long decline of almost 3%. It's important to note that the addition of South Africa and Nigeria to the "grey list" was not a surprise for many investors because it had already been taken into account in their investment plans months earlier.
The Nigerian Financial Intelligence Unit's (NFIU) Chief Executive Officer, Modibbo Tukur, highlighted the country's engagement with FATF in February 2023. Following this interaction, the FATF acknowledged the advancements made by Nigeria; as a result, a consensus was reached on a list of 15 specific actions that would make up the action plan for the nation. Compared to the 84 deficiencies initially noted in Nigeria's evaluation report, which was published in August 2021, this represents a sizable reduction.
Despite the Nigerian government's efforts to combat financial crimes, the country remains a major drug transit hub and a key center for financial and cybercrime. Nigeria has recently made a concentrated effort to overcome some issues in enforcing its anti-money laundering and counter-terrorist financing framework.
Bribery and Corruption in Nigeria
In Nigeria, corruption seriously hinders industry: enterprises are extremely likely to meet bribes and other corrupt acts. Corruption is a concern in all institutions but is particularly prevalent in the oil business. The Criminal Code and the Corrupt Practices and Other Related Offenses Act are the primary laws that criminalize corruption. Accepting or donating gifts and facilitation fees is unlawful, and people can face up to seven years in jail. Despite a powerful legal foundation, Nigeria's anti-corruption law is poorly enforced: gifts, bribes, and facilitation payments are widespread.
Based on the assessment of AML and CFT measures conducted during the on-site visit to the Federal Republic of Nigeria from September 2019 to October 2019, the primary predicate crimes for ML in Nigeria encompass a range of activities. These include pervasive issues like corruption, various forms of fraud (notably cybercrime such as advance fee fraud), drug trafficking, maritime offenses, armed robbery, arms trafficking, kidnapping, oil bunkering, and human trafficking. Of particular concern is the endemic and systemic nature of corruption, which permeates all sectors of Nigeria's economy, presenting both a standalone threat and facilitating other illicit activities.
It's important to note that most of these criminal activities have domestic origins, with the proceeds being laundered both within the country and abroad. While there are instances of funds from criminal activities conducted outside Nigeria being laundered into the country, the bulk of the proceeds originates within Nigeria and is subsequently transferred overseas. Despite these international elements, the focus remains on the significant scale of illicit financial flows within Nigeria itself.
Anti-Money Laundering Solutions for Nigeria
Nigeria has struggled for a long time with pervasive corruption, which has affected many industries. Financial institutions must be cautious and proactive in ensuring compliance with AML regulations because the challenge of corruption extends to AML efforts. Institutions can use Sanction Scanner's advanced features to address these issues and navigate Nigeria's complicated AML landscape. Our AML solutions enable businesses to fulfill their commitments successfully while gaining insightful knowledge about Nigeria's changing AML landscape. To see how Sanction Scanner's solutions can support AML compliance efforts in the face of Nigeria's particular challenges, such as corruption and its inclusion on the FATF grey list, contact us to request a demonstration.
