AML in Nigeria

Despite Nigeria’s efforts to strengthen its Anti-Money Laundering (AML) Framework, money laundering continues to be a significant challenge within the country. Nigerian criminals gained notoriety for pioneering advance fee fraud, but in recent years, individuals from various African nations and around the world have engaged in this type of fraud. Internationally, this fraud is commonly referred to as “Four-One-Nine” fraud, named after the fraud section in Nigeria’s criminal code. While there are multiple variations, the primary objective of 419 fraud is to deceive victims into paying an upfront fee by convincing them of receiving substantial benefits. Some victims have suffered financial losses, kidnappings, or even murder as a result of these “get-rich-quick” scams. 419 scammers have targeted businesses and individuals globally through the internet, and their activities persist. The Economic and Financial Crimes Commission (EFCC) has made efforts to combat 419-related cybercrimes, although the reported achievements have been limited.

In December 2002, Nigeria enacted three pieces of legislation in response to being placed on the Non-Cooperative Countries and Territories (NCCT) list and facing countermeasure recommendations from the Financial Action Task Force (FATF). These legislative measures include:

  1. Amendment to the 1995 Money Laundering Act, expanding its application to cover all proceeds of crime.
  2. Modification of the 1991 Banking and Other Financial Institutions (BOFI) Act, extending its scope to include stock brokerage businesses and foreign currency exchange services.
  3. The enactment of the Economic and Financial Crimes Commission (Establishment) Act, which established the EFCC and facilitated coordination in anti-money laundering (AML) prosecutions and information sharing. It grants the Central Bank of Nigeria (CBN) broader authority to deny bank licenses and enables the freezing of suspicious accounts.

These legislative developments aim to bolster Nigeria’s AML efforts and strengthen regulatory oversight in combating money laundering.

The main AML laws and regulations in Nigeria include:

  1. The Money Laundering Act.
  2. The 2012 Terrorism Prevention Act (as amended).
  3. Regulations on Terrorism Prevention (Freezing of International Terrorist Funds and Other Matters), 2013.
  4. The Economic and Financial Crime Commission (Establishment) Act of 2004, which establishes the Economic and Financial Crime Commission.
  5. The Banks and Other Financial Institutions Act (BOFIA) of 1991, which regulates financial institutions.
  6. AML/CFT Regulations of the Central Bank of Nigeria (CBN), 2013.
  7. The CBN Act of 2017.
  8. CBN Risk-Based Supervision Framework for AML/CFT, 2011.
  9. CBN Circulars and other regulatory messages.
  10. The National Drug Law Enforcement Act (1990) of the Drug Enforcement Administration.

These laws and regulations form the foundation of Nigeria’s anti-money laundering efforts, addressing various aspects related to money laundering, terrorism prevention, financial institution regulation, and drug enforcement.

Under the provisions of the Money Laundering Act, specific financial institutions and authorized businesses are obligated to establish compliance programs. The following are the essential anti-money laundering (AML) requirements:

  1. Designating an AML chief compliance officer at the executive level.
  2. Recognizing AML legislation and offenses.
  3. Understanding the intricacies of money laundering.
  4. Reporting indicators of potential money laundering (“red flags”) and suspicious transactions.
  5. Fulfilling reporting obligations.
  6. Conducting thorough customer due diligence.
  7. Adhering to a risk-based approach to AML.
  8. Maintaining proper record-keeping practices and adhering to a retention policy.

These AML requirements serve to ensure that financial institutions and authorized businesses actively combat money laundering activities and comply with relevant regulations and guidelines.

Nigeria has successfully addressed the strategic anti-money laundering weaknesses outlined by the FATF and is no longer included on their list of nations with such vulnerabilities. The FATF commends Nigeria for significant progress in enhancing its anti-money laundering and counter-terrorist financing regime. Nigeria has implemented the necessary legal and regulatory framework to fulfill its obligations as outlined in its Action Plan, which was developed to rectify the identified strategic flaws since February 2010. Consequently, Nigeria is no longer subject to ongoing monitoring by the FATF in relation to global anti-money laundering and counter-terrorist financing compliance. Nigeria remains committed to collaborating with GIABA (the Inter-Governmental Action Group against Money Laundering in West Africa) to address all aspects of anti-money laundering and counter-terrorist financing concerns highlighted in the Mutual Evaluation Report. The FATF conducted its most recent assessment of Nigeria’s compliance with AML/CFT criteria in 2007, concluding that Nigeria achieved Compliance for 2 and Largely Compliant for 7 out of the FATF’s 40 + 9 Recommendations.

Despite the Nigerian government’s proactive efforts in combating financial crimes, the country continues to face challenges as a major transit hub for drug trafficking and a significant center for financial and cybercrimes. Nigeria has recently intensified its endeavors to address enforcement issues within its anti-money laundering and counter-terrorist financing framework.