Key Provisions in Nigeria's New Anti-Money Laundering Law Startups Should Note

Nigeria's new Money Laundering Prohibition and Prevention Act 2022 became law in May. It contains key provisions that are relevant to business startups in the country. The legislation says international transfer of funds or securities to or from a foreign country exceeding $10,000 is to be reported within one day of the transaction.

Below are important provisions every startup should know about in the legislation.

1. Cash Limit: The law says no person or business (body corporate) shall make or accept cash payment of a sum exceeding N5 million or its equivalent, in the case of an individual; or N10 million or its equivalent, in the case of a body corporate. Such transactions are to be routed through a financial institution, and any lodgement of funds in excess of N5 million and N10 million, for individuals and body corporate respectively, must be reported by the banks within seven days.
2. Reporting Time: The law provides a 24-hour timeframe for all financial institutions or designated non-financial institutions to file suspicious transaction reports with the NFIU. The law defines designated non-financial businesses and professions as businesses involved in the hospitality industry, mechanized farming equipment, farming equipment and machineries, dealers in precious metals and precious stones, dealers in real estate, estate developers, estate agents and brokers, high value dealers, mortgage brokers, practitioners of mechanized farming, trust and company service providers, and pools betting.
3. Splits: It prohibits a situation where a person splits a single transaction into two or more separate transactions with the intent to avoid the reporting of such transaction.
4. International Funds & Securities: The legislation says international transfer of funds or securities to or from a foreign country exceeding $10,000 is to be reported within one day of the transaction.
5. Know Your Customer (KYC): The law stipulates that all financial institutions and designated non-financial businesses must conduct due diligence and identification of their customers, particularly persons alleging to act on behalf of customers, in order to scrutinise such transactions.
6. Virtual Asset: Under this law, funds include virtual assets. It defines virtual assets as a digital representation of value that can be digitally traded or transferred, and can be used for payment or investment purposes, but does not include digital representations of fiat currencies, securities and other financial assets.
7. Cash Movement: This law re-emphasises the existing requirement that transportation of physical cash or negotiable instruments, in or out of Nigeria, higher than $10,000 must be declared to Nigerian Customs. Failure to report this: such excess amount will be forfeited, or 2 years' imprisonment, or both.
8. Record-Keeping: It says financial institutions and designated non-financial businesses and professions shall preserve and keep necessary records on transactions, both domestic and international, account, files, correspondence and analysis for at least five years after completion of a business transaction or business relationship.
9. Anonymity: The law prohibits the opening or maintaining of numbered or anonymous accounts by any person, financial institution or body corporate. The operation of and establishment of a shell bank in Nigeria is also prohibited.
10. Identity: Casinos, including online and ship-based casinos, must verify the identity of customers carrying out financial transactions by requiring valid documents and forwarding records of financial transactions by customers to the Special Control Unit Against Money Laundering.
11. PEP: Financial institutions and non-designated financial businesses and professions must create mechanisms for determining whether a customer or a customer's beneficiary is a politically exposed person.
12. The Act defines politically-exposed persons to include individuals who are or have been entrusted with prominent public functions domestically or by a foreign country — for example, heads of government, politicians, senior government, judicial or military officials, senior executives of State-owned corporations and important political party officials.

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