Highlights Of The Money Laundering (Prevention And Prohibition) Act 2022

The Money Laundering (Prevention and Prohibition) Bill, 2022, signed into law by Former President Muhammadu Buhari, repealed the 2011 Money Laundering (Prohibition) Act. According to section 1, the Act aims to enhance and strengthen Nigeria's current legal and institutional framework for fighting and preventing money laundering. We will closely highlight the Act's noteworthy provisions.

Virtual Assets

The Act includes provisions for virtual assets, which correspond to the growth of digital currencies such as Bitcoin, Ethereum, Solana, and more in the blockchain ecosystem. Section 30 of the Act defines virtual assets as `digital representations of value that can be digitally exchanged or transferred and utilized for payment or investment purposes,` but excludes digital representations of fiat currencies, securities, and other financial assets.

Expansion of Financial institutions' reach

One of the Act's major highlights is the expansion of the definition of `financial institutions` to include virtual asset service providers, as well as `designated non-financial businesses and professions` to include businesses in the hospitality industry, dealers in mechanized farming equipment, farming equipment and machinery, dealers in precious metals and precious stones, dealers in real estate, estate developers, estate agents and brokers, high-value dealers, and molecular biologists.

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Special Control Unit against Money Laundering (SCUML)

The statutory recognition of SCUML which was established by the Federal Government in 2005 under the Federal Ministry of Industry, Trade, and Investment, is one of the Act's milestones. SCUML collaborates closely with the Economic and Financial Crimes Commission (EFCC). The SCUML is in charge of ensuring that non-designated financial enterprises and professions comply with the Act's obligations.

Penalty for money laundering violations

Under the 2011 Act, individuals convicted of money laundering faced up to seven years imprisonment, a fine equivalent to the full proceeds of the crime, or both. However, the 2022 Act makes such a person subject to imprisonment for at least four years or a fine of at least five times the amount of the proceeds of the crime, or both. Corporate bodies who commit money laundering offenses face a penalty of not less than five times the value of the profits.

Evaluating New Technologies and Business Strategies for Money Laundering Risks

Financial institutions, as well as non-designated businesses and professions, are required to detect and analyze money laundering and terrorism funding risks that may arise as a consequence of the development of new technology, business practices, and products. To carry out this commitment effectively, the relevant Institutions must conduct risk assessments and implement acceptable risk management and mitigation procedures.

Attorney-client confidentiality

Under Section 192 of the Evidence Act and Rule 19 of the Rules of Professional Conduct, 2007, attorney-client communications related to briefs or instructions are protected. As a result, such correspondence cannot be divulged by the attorney unless the client consents. However, the Act states that attorney-client privilege does not apply to the following transactions: the purchase or sale of real estate, the purchase or sale of a business, the management of client money, securities, or assets, the opening or management of bank, savings, or securities accounts, the creation or management of trust companies or similar structures, or the proceeds of an unlawful act.

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Casinos

The Act mandates casinos to report financial transactions of customers to the Special Control Unit against Money Laundering (SCUML).

Persons with political influence

According to the Act, financial institutions and non-designated financial enterprises and professions must develop methods for identifying whether a client or a customer's beneficiary is politically exposed. Section 4(8) mandates financial institutions and non-financial businesses to follow specific protocols when dealing with foreign politically exposed persons (PEPs). These include obtaining senior management approval, identifying the source of income, and conducting ongoing monitoring of the relationship. The foregoing requirements also apply to domestic politically exposed people with whom there is a high-risk business connection.

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Customer identification

The Act requires financial and designated non-financial firms and professions to take reasonable steps to identify and authenticate their clients, as well as anybody claiming to act on their behalf.

International money, securities, and cash transfers

Section 3(1) of the Act states that any transfer of funds, securities, or cash in excess of $10,000 to or from a foreign country by a corporate body must be reported to the Central Bank of Nigeria, the Securities and Exchange Commission, and the Economic and Financial Crimes Commission within one day (the 2011 Act required such transfers to be reported within seven days).

Separate transaction execution:

Any single transaction in excess of N5,000,000 or its equivalent for individuals and N10,000,000 or its equivalent for corporate bodies must be reported to the Nigerian Financial Intelligence Unit and Special Control Unit against Money Laundering (`SCUML`) by financial institutions and designated non-financial businesses and professions. Section 30 of the Act defines `designated non-financial business and profession` as automotive dealers, hospitality businesses, casinos, clearing and settlement companies, consulting firms, real estate dealers, high value dealers, legal practitioners, licensed professional accountants, tax consultants, and so on. It should be noted that Section 2(2) of the Act clearly forbids splitting a single transaction into two or more distinct transactions in order to avoid reporting such transaction. Prior to the Act's passage, some people used transaction splitting to avoid reporting transactions that fell inside the specified monetary levels.

Conclusion

The Money Laundering (Prevention and Prohibition) Act, 2022, represents a significant step forward in Nigeria’s fight against money laundering and financial crimes. By addressing emerging trends such as virtual assets, expanding the scope of financial and non-financial institutions, and reinforcing compliance through stricter penalties and regulations, the Act strengthens the country’s legal and institutional framework for combating illicit activities. Businesses and professionals must stay informed and compliant with these provisions to avoid penalties and contribute to a more transparent financial ecosystem. As Nigeria continues to align with global best practices, the implementation of this Act sets the foundation for a stronger, more secure economic environment.