Financial Institution AML Policies in Nigeria Remain Significant Concern
Despite numerous initiatives by the Nigerian government to combat money laundering, the issue remains a significant challenge for financial institutions operating in the country.
Rise of Advance Fee Fraud
The problem has been exacerbated by the rise of advance fee fraud, also known as “419” fraud, which was first made famous by Nigerian criminals. This type of fraud is internationally known as “Four-One-Nine”, referring to the Nigerian criminal code’s fraud section.
Efforts to Combat Money Laundering
Nigeria has implemented several laws and regulations aimed at preventing money laundering, including:
- The Money Laundering Act
- The Terrorism Prevention Act (as amended)
- Regulations on Terrorism Prevention (Freezing of International Terrorist Funds and Other Matters), 2013
- Others
However, despite these efforts, Nigeria remains a major drug transit hub and a key center for financial and cybercrime.
FATF Grey List
In February 2023, the Financial Action Task Force (FATF) placed South Africa and Nigeria on its grey list, citing concerns about the adequacy of their anti-money laundering and counter-terrorism financing regulations. This move is seen as a warning to investors and the global community, signaling potential risks for money laundering and terrorist financing activities.
Progress Made
The Nigerian Financial Intelligence Unit’s CEO, Modibbo Tukur, highlighted the country’s engagement with FATF in February 2023, following which a consensus was reached on a list of 15 specific actions to address the issue. Compared to the 84 deficiencies initially noted in Nigeria’s evaluation report, published in August 2021, this represents a significant reduction.
Challenges Ahead
Bribery and corruption remain major concerns in Nigeria, with corruption hindering industry growth and affecting all institutions. Despite a powerful legal foundation, Nigeria’s anti-corruption law is poorly enforced, and gifts, bribes, and facilitation payments are widespread.
Key Predicate Crimes for Money Laundering
According to an assessment of AML and CFT measures conducted during an on-site visit to the Federal Republic of Nigeria in 2019, primary predicate crimes for ML in Nigeria include:
- Corruption
- Fraud
- Drug trafficking
- Maritime offenses
- Armed robbery
- Arms trafficking
- Kidnapping
- Oil bunkering
- Human trafficking
Most of these criminal activities have domestic origins, with proceeds being laundered both within the country and abroad.
Conclusion
To address these challenges, financial institutions operating in Nigeria must be cautious and proactive in ensuring compliance with AML regulations. Institutions can use Sanction Scanner’s advanced features to navigate Nigeria’s complicated AML landscape and stay ahead of the evolving threats posed by corruption and money laundering.