Published On: Mon, May 14th, 2018

Banks jittery over new anti-money laundering law

By OKEY ONYENWEAKU

Deposit Money Banks (DMBs) are groaning under the additional tightening of recent anti-money laundering rules introduced by the Central Bank of Nigeria (CBN). The nations chief financial regulator has decided to add further bite to its bark as its new rules inhibit banks from squeezing through previous loopholes.

Indeed financial institutions are squirming under the laundering rules as they find the opportunities to boost their bottom lines disappear.

So far CBN governor, Godwin Emefiele, and his management have scrupulously attacked the problem by monitoring foreign transfers and enforcing the currency laws.

Analysts have noted that the concept of money laundering is a bit nebulous but generally involves the concealment of the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses.

Indeed it is estimated that the amount of money laundered globally annually is between 2 and 5% of global GDP, or $800 billion or $2 trillion in current US dollars. Reports show that an estimated 400billion pounds of laundered Nigerian money is stashed away in Europe, Asia and America. Over time local banks have been suspected to be principal conduits through which the funds disappear from Nigeria.

CBN’s new rule specifically stipulate structured fines for banks, directors and other key officials for 48 enumerated infractions. The new regime is an improvement on the previous laws, which only stipulated fines against on institutions for laundering offences.

Several analysts have applauded the CBN  for improving the money laundering laws, which had hitherto only stipulated fines.

The new anti-money laundering laws are expected to ensure Nigeria’s compliance with Financial Action Task Force (FATF) recommendations No. 35 which states: “Countries  should  ensure  that  there  is  a  range  of  effective,  proportionate  and  dissuasive  sanctions,  whether  criminal,  civil  or  administrative,  available  to  deal  with  natural  or  legal  persons  covered  by    Recommendations  6,  and  8  to  23,  that  fail  to  comply  with  AML/CFT  requirements.  Sanctions  should  be  applicable  not  only  to  financial  institutions  and  DNFBPs,   but also to their directors and senior management.”

The CBN has stated that banks and their board members or chief compliance officers will all be sanctioned for 31 out of the 48 money laundering infractions listed in the new regime. For each of the 31 infractions, the new regime stipulates minimum fines ranging from N500,000 to N1.2 million on board members or chief compliance officers or the internal auditor, and fines ranging from N1 million to N20 million on the offending bank.

Director Financial Policy and Regulations Department of the apex bank, Mr Kevin N. Amugo, informed banks and other financial institutions  through a circular titled: “CBN Anti-Money Laundering and Combating the Financing of Terrorism (administrative sanctions) regulations, 2018.” The circular stated: “Banks and other financial institutions are by this circular, informed of the attached  ‘CBN AML/CFT Administrative Sanctions Regime’ the application of which comes into effect as at the date of the Gazette.

Kindly ensure compliance.” The infractions and penalties stipulated under the new regime include:    failure to approve the AML/CFT policies and procedures -a minimum penalty as follows: N1 million on each member of the board and N20 million on the Deposit Money Banks (DMB); Failure to review/ update the AML/CFT policies and procedures at least every three (3) years, a minimum penalty as follows: N750,000 on the Executive compliance officer in the for instance and N750,000 for each year that the contravention continues.

N500,000 on the Chief compliance officer in the first instance and N500,000 for each year that the contravention continues. N5 million on the bank in the first instance and N1 million for each year that the contravention continues; “Failure to communicate the AML/CFT program of the organization to the employees.

A minimum penalty as follows: N750,000 on the Executive compliance officer, N500,000 on the Chief compliance officer and N10 million on the DMB. ‘Failure of the board or its committee to supervise and ensure the effective implementation of the AML/CFT programme, A minimum penalty as follows: N500,000 on each member of the board and N10 million on the DMB.” “Failure of the officer to generate periodic reports on AML/CFT issues to the board or its relevant committee, a minimum penalty as follows: N750,000 on the Executive compliance officer, N500,000 on the Chief compliance officer and N5 million on the DMB; “Failure to classify ML/TF risks in the bank, failure to put in place guidelines for risk assessment and profiling of customers in institutions’ AML/CFT board approved program and failure to carryout risk assessment and profiling of each account, a minimum of N1 million on the Chief compliance officer of the DMB, a minimum penalty of N3 million on the DMB for failure to put in place guidelines for risk assessment and profiling of customers in AML/CFT program. A minimum of N100,000 per account for failure to carry out risk assessment and profiling of account.

Financial market observers believe that the new anti-money laundering rules will have broad implications for not only the banks but also customers.

The chief financial officer (CFO) of Wema Bank, Mr. Tunde Mabawoku, told Business Hallmark that the new anti-money laundering laws would force banks to strengthen monitoring and scrutiny of funds that come into the banks as transfers as well as improve the automated controls put in place to track illegal funds within the financial system.

Former Managing Director of one of the big banks, Mr, Emma Nwosu, said that banks are not usually guilty of money laundering because it is not easy to know when money is being laundered through them. But he advised banks to do more to curb or reduce illegal movement of funds through their systems.

On how the new anti-money laundering rules could cause problems for banks, Nwosu notes that any bank that is fingered to have committed a money laundering offence might suffer a permanent image damage. This, according to him, is in addition to depleting its shareholders’ funds or profits to pay fines as punishment when caught. Money laundering, he said also distorts the amount of money in circulation. However, ”banks at times carelessly allow illegal money to move through their system to fund religious activities and so on.”

”Most money laundering activities are inadvertent. It is difficult to know dirty money. However, banks at times carelessly allow illegal money to move through their system to fund religious activities and so on.” said Nwosu

Pioneer Chairman of the Economic and Financial Crimes Commission (EFCC), Nuhu Ribadu, had said in 2017 that several money laundering frauds happen in Nigeria with the active connivance of banks and their workers.

“Our banking system is prone to abuse by corrupt elements. As investigations revealed every now and then, almost no case of corruption occurs without the involvement of banks and bankers,” he said.

Ribadu explained that the country does not lack in laws and regulations, but on issues of compliance and enforcement.

“We have them in abundance. Even the EFCC Act, for example, amply tackles these issues, we also have the Money Laundering (Prohibition) Act, 2011, the CBN AML/CFT Regulation, 2009 (as amended), among others”, He also said

There is a consensus that Money laundering regulations date back to ancient times and is intertwined with the development of money and banking. It is first seen with individuals hiding wealth from the state to avoid taxation or confiscation or a combination of both.

In China, Wealthy merchants around 2000 BCE would hide their wealth from rulers who would simply take it from them and banish them. They, in addition to hiding it, would move it and invest it in businesses in remote provinces or even outside China.

This prompted many rulers and states to impose rules that would take wealth from their citizens and this led to the development of offshore banking and tax evasion.

As a result, States began to encourage law enforcement agencies to track and confiscate money.

Reportedly, the Economic and Financial Crime Commission (EFCC) had revealed that past Nigerian Politicians stole about US $521 billion and hid it in foreign banks while past military rulers of the country laundered about US $400 billion. EFCC also believes that these monies passed through the banks.

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