THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIA (Established by Act of Parliament No. 15 of 1965) KNOW YOUR MONEY LAUNDERING REPORTING RESPONSIBILITIES AN OVERVIEW FOR MEMBERS GUIDANCE
PREAMBLE The Institute is issuing this Guidance for the Members to enable them comply with the various provisions of the anti-graft Acts passed by the National Assembly. This booklet is designed to draw members attention to the obligations placed on them by the various Acts passed for the enforcement of all economic and financial crimes in the country. The statements here only serve as a guide to members and is by no means exhaustive. Members are advised to read the Laws and develop adequate procedures that would ensure their compliance. It is worthy to note that there remain unresolved questions when it comes to the practical implementation of some of the provisions of the Laws. The Institute however advise its members to try and comply with the provisions as much as practicable and where necessary they can seek legal advise. This guidance will be updated as and when the contentious issues become clearer. What is Money Laundering? Money Laundering is a process by which criminals attempt to hide or disguise the true origin and ownership of their ill-gotten wealth. The purpose is to avoid prosecution, conviction and confiscation of ill-gotten wealth. What are the illegal sources of funds? Drug trafficking Human trafficking Robbery Fraud Smuggling Corruption Tax evasion etc How Does Money Laundering Occur? A complete money laundering operation can be analyzed in three stages? Placement This involves the injection of illicit funds into the financial and designated non financial systems through deposits, purchasing items of value example, motor vehicles etc. Layering This is the process of separating illicit proceeds from their source by creating complex layers of financial transactions designed to make it difficult to trace the origin of the illicit funds.
In other words, at this stage, criminals attempt to further obscure the trace of criminally generated funds. Example includes wire transfers, buying and selling of investible products Integration At this stage, the ill-gotten funds are moved into the main stream of the economy through legitimate economic activities such as investment, purchasing shares tec. That is the illegal proceeds are reintegrated back to the economy. Where does Money Laundering Activities Occur? Banks Bureau De Change Securities Firms\Insurance Companies Accounting Firms Legal Profession Cash Intensive business How can Professional Accountants/Accounting Firms become Vulnerable? Less scrutiny attracts criminals as they may not be subjected to stringent AML requirements Protection of clients Promotes secrecy and anonymity which attracts criminals Lack of awareness/ignorance of the laws creates a weak link in combating money laundering Lack of or inadequate AML program No training on AML, inadequate internal control measures etc Collusion by unscrupulous Accounting professionals How do one Detect Money Laundering / Money Laundering Red Flags? Large sums of cash not consistent with client s business Unwillingness to provide complete information about self or business Client prefers to always deal in cash instead of using bank Client unwilling to reveal the identity of a third party on whose behalf he/she is acting Clients who change book keepers or accountants regularly without any justifiable reasons Companies always paying unusual consultancy fees to companies located offshore (not related to it) Payments to subsidiaries that are not within the normal course of business
Acquisition of assets which are not consistent with the ordinary business practice prevailing in that industry When a customer always receive invoices from companies located in countries with loosed AML/CFT regime What are the roles of Professional Accountants in preventing Money Laundering in Nigeria? Customer identification Know Your Customer (See MLPA, 2004 S3). Accounting firms/accountants are required to establish and verify th identity of a person or entity and the nature of business they do before entering into a business relationship Records Preservation (See MLPA 2004 S7) Accountants / accounting firms are required to maintain records of all transactions above threshold (N1million Individuals, N2million- Firms) for a period of at least five years after severance of relations Rendition of statutory reports (STRs and CTRs) (see MLPA 2004 S6 & 10) Requires all DNFIs to file Suspicious Transactions Report (STRs) and Currency Transaction Reports (CTRs) to the NFIU within seven days of any transaction. Such reports should include: i. The name of the reporting entity/accounting firm or accountant ii. iii. Full details of transaction and customer(s) Comprehensive statement of the issue giving rise to the suspicion (STRs only) Internal controls / Designation of compliance officers (see MLPA 2004 S9) i. Accounting firms are required to designate compliance officers at management level and at every branch office ii. They are also to establish internal audit unit to ensure compliance with relevant AML laws as well as the effectiveness of measures in their system Awareness raising and training (see MLPA 2004 S9) Regular training on AML program for all staff Limitation to make or accept cash payments (see MLPA 2004 S1) Accounting firms or Accountants are not to make or accept cash payments in any single transaction in excess of N0.5M (Individuals) and N2M (Corporate bodies) or equivalent except through a financial institution. This is to forestall illegal funds getting integrated into the economy
Registration with Special Control Unit Against Money Laundering (SCUML) This is for regulatory purposes What are the Costs of Non Compliance? Reputational risk This takes the form of loss of customers and investors, which could cause the collapse of the institution. Operational risk This exposes the institution to direct and indirect losses that could crumble the institution. Legal risk This will impinge on the image and integrity of the organization, which would have adverse effects on its operations. Who enforces the Acts The enforcement of the MLPA is by the EFCC while the NFIU is the prime agency that coordinates all AML issues in the country. The various Acts are listed below: Acts Contents Where can I find it? Economic And Financial Crimes Commission (Establishment) Act, 2004 The establishment of EFCC charged with the responsibility for enforcement of all economic and financial http://www.efccnigeria.org/ Money Laundering (Prohibition) Act, 2004 Advance Fee Fraud And Other Fraud Related Offences Act, 2006 Special Control Unit Against Money Laundering (SCUML) ICAN Members Guidance on Money Laundering crimes laws. Comprehensive provisions to prohibit the laundering of proceeds of a crime or illegal act An Act to prohibit and punish certain offences pertaining to Advance Fee Fraud and Other Related Offences Detailed guidance on the legislations and how they affect the accountant www.scuml.net www.ican-ngr.org Check list for Inspection List of documents to be www.ican-ngr.org
of DNFIs made available to the SCUML officials during Visits to the firm CONCLUSION Members of the Institute are to comply with the provisions of the Acts in assisting the ant-graft agencies and the economy.