On money laundering: Know your customers, investors and partners

BY STANLEY ALIEKE

A client (excitedly) called me the other day saying that a prospective Nigerian investor wants to invest $2m into their investment and capital venture management company and asked me to prepare the necessary legal paperwork to set things in motion.

Out of due diligence, I asked him to disclose to me who the prospective investor is. I found out that the prospective investor is a “notorious” Nigerian politician who has a lot of money laundering and public funds embezzlement court cases around his neck. It will be safe to presume that he is likely trying to use my client’s firm to launder some of his alleged stolen funds. This will definitely be the first presumption of anti-financial crime agencies.

It is common knowledge that launderers use mostly real estate companies, financial institutions, startup companies, and investment management companies as a safe haven for money laundering both in Nigeria and around the world. This assertion has even been confirmed by the current Economic and Financial Crimes Commission chairman, Abdulrasheed Bawa, in one of his press briefings.

On that note, institutions — both financial and non-financial institutions — have been charged and are expected to carry out due diligence in identifying the source of funds a prospective partner or investor wants to channel into the organisation, and also identify the owner of the cash. What does the owner of the cash do for a living? Also verify if the cash is obtained from a legitimate or illegitimate source, etc. This is what is known as ‘know your customers’ (KFC) in financial organisations.

The EFCC has been empowered by the provisions of S. 6(d) of the EFCC act, 2004 “to identify, trace, freeze, confiscate or seize proceeds derived from terrorist activities, economic and financial crime related offences or the properties the value of which corresponds to such proceeds”.

Therefore, when a company or a firm is used as a conduit to launder money or embezzle funds, the anti-graft agency can come after that company and confiscate the belongings of that company on the ground that the belongings of that company are proceeds of crime. If any funds obtained by illegal means are traced to a company, the EFCC has been charged by the provisions of S.6 of the 2004 EFCC act to confiscate those funds and other funds and properties associated with it.

Subsequently, according to section 5 of the Money Laundering Act, cash-based transactions above the $1000 threshold should be subject to stringent identification procedures. Companies have to pay serious attention to these provisions because ignorance of the law is never an excuse.

The Economic and Financial Crimes Commission Act, 2004, the Money Laundering (Prohibition) Act 2011, and Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in Banks and Other Financial Regulations of 2013 are the extant laws regulating financial institutions and designated non-financial institutions (DNFI) in Nigeria on this subject matter — and every transaction is to be subjected to the stringent threshold that these legislations have already provided to avoid incurring the wrath of the law.

Stanley Alieke, a legal practitioner, can be reached via [email protected]