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CBN Tightens Noose on Money Launderers, Terrorism Financiers

The apex bank issued guidelines on beneficial ownership.

The Central Bank of Nigeria (CBN) has unveiled an Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions) Regulations, 2022, (CBN AML/CFT/CPF Regulations) to check abuses in the financial system.
The apex bank stated that the objective of the guidance was to assist financial institutions in identifying and verifying the Beneficial Owners (BO) of legal persons and legal arrangements in line with extant anti-money laundering laws and regulations.
The CBN in a circular dated January 12, 2023, and directed to all banks and Other Financial Institutions (OFIs), which was signed by the bank’s Director, Financial Policy and Regulations Department, Chibuzor Efobi, said though the guidance was not exhaustive and would be amended as necessary, it however applies to financial institutions under the regulatory purview of the central bank.
The CBN defined BO as the “natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or legal arrangement”.
It stated that in line with the Financial Action Task Force (FATF), consideration must be given to the “natural person(s) who have ultimate (actual) ownership and control over the corporate vehicle, not necessarily the legal owner, or the person(s) entitled on paper to do so, but natural person(s) who exert effective control over the corporate vehicle, or on whose behalf the transaction is being conducted”.
Essentially, BO refers, among other things, to the natural person(s) who ultimately owns holds at least five per cent of the issued shares in the legal person either directly or indirectly; holds a right directly or indirectly, to appoint or remove majority of the directors or similar positions of the legal person, and on whose behalf a transaction is being conducted; and/or who exercise ultimate effective control over a legal person or legal arrangement – exercise significant influence or control, directly or indirectly, over the legal person.
Specifically, the guidelines apportioned responsibilities to financial institutions with respect to BO obligations.
Therefore, in line with the provisions of the CBN AML/CFT/CPF Regulations and global best practice, financial institutions, among other things, are required to identify and manage ML/TF/PF risks posed by legal persons and legal arrangements.
They are also mandated under the regulations to understand the nature of the customer’s business, its ownership structure; taking into cognisance the complex ownership structure where shareholders are multiple legal persons, or complex arrangements in different nominee shares, which when aggregated gives a controlling ownership in the entity.
The CBN further stated that in such circumstances, the financial institution is required to identify the natural person(s) with ultimate control.
The banks and OFIs are further required to identify and take reasonable steps to verify the identity of a BO, board members, senior management, settlor, trustee, beneficiary and other positions denoting control using relevant information or data obtained from reliable sources to satisfy itself that it has knowledge of the BO(s) of the customer; as well as apply Enhanced Due Diligence (EDD) on complex corporate vehicle structures that pose higher ML/TF/PF risks,
Furthermore, the banks are to ensure that relevant authorities have timely access to BO information, and ensure records of all relevant documents used in determining the BO for legal persons or legal arrangements are kept and updated periodically.
Also, financial institutions are to apply a risk-based approach in the identification and verification of BOs, adding that measures to be applied should be on the risk sensitive basis and should be set out in their AML/CFT/CPF framework.
The regulation also mandates the institutions to conduct enhanced CDD on BOs that pose higher risk and file a suspicious transaction report with the Nigerian Financial Intelligence Unit (NFIU) if there are reasonable reasons to suspect money laundering or terrorism financing.
They are also required to establish AML/CFT/CPF internal policies and procedures to mitigate identified risks relating to BO; have effective systems to determine whether a beneficial owner is a politically exposed person (PEP) or a family member or close associate of a PEP.
The new regulations provide that where a BO was determined to be in one of these categories, the financial institution must take additional measures to manage the risk.
“Such measures include obtaining senior management approval before establishing or continuing with the customer relationship, establishing the beneficial owner’s source of funds and source of wealth, and conducting enhanced ongoing monitoring of the customer relationship,” the guidelines stated.
In addition, financial institutions are expected to use the records or information collected through CDD or other sources to create a BO register of its customers that are legal persons and legal arrangements; ensure that the BO information in their register is periodically reviewed and updated annually or when there are changes, and flag and report inconsistency or discrepancies between the BO information in the public register and the BO information in their records to the Corporate Affairs Commission (CAC).
Moreover, the central bank also mandated the banks to provide, on request, information on BOs to the CBN and other competent authorities identified under the MLPPA, and to render periodic returns to the CBN on their customers along with details of beneficial owner(s) that are legal persons and legal arrangements in the prescribed format and frequency.

James Emejo