What money laundering means
Money laundering is the process of making the proceeds of crime appear legitimate.
It is conventionally described in three stages. Placement, putting the money into the financial system. Layering, moving it through transactions to obscure its origin. And integration, bringing it back out as apparently legitimate wealth.
Nigeria's framework is the Money Laundering (Prevention and Prohibition) Act 2022, which replaced the earlier legislation.
The framework does two things.
It criminalises laundering: concealing or disguising the origin of property known or reasonably believed to be proceeds of unlawful activity, and related conduct.
And it imposes compliance obligations on defined businesses, requiring them to know who they are dealing with, to keep records, and to report suspicious and large transactions.
The second part is what most businesses need to understand, because the obligations reach well beyond banks.
How it is used
The obligations on a covered business are a recognisable set.
Customer due diligence: identifying the customer, verifying that identity from reliable documents, and identifying the beneficial owner where the customer is an entity. Enhanced measures apply to higher risk relationships including politically exposed persons.
Record keeping: retaining customer identification records and transaction records for the period the Act requires.
Reporting: filing suspicious transaction reports with the Nigerian Financial Intelligence Unit where there are grounds to suspect that funds are proceeds of crime, and reporting transactions above the cash thresholds the Act sets.
Internal controls: a compliance officer, policies, training and monitoring proportionate to the business.
And registration, for designated non financial businesses and professions, with the Special Control Unit against Money Laundering.
The practical starting point for a Nigerian business is to establish whether it falls within a designated category, because the obligations follow from that and businesses frequently assume they do not.
Key features
- Disguising the origin of criminal proceeds
- Governed by the Money Laundering (Prevention and Prohibition) Act 2022
- Imposes obligations on financial institutions and designated non financial businesses
- Requires customer due diligence and identification of beneficial owners
- Suspicious transactions are reported to the Nigerian Financial Intelligence Unit
- Cash transactions above statutory thresholds must be reported
How this works in Nigeria
The reach into non financial businesses is the point most Nigerian operators miss.
Designated non financial businesses and professions include categories such as estate surveyors and agents, dealers in jewellery, precious stones and metals, car dealers, hotels and hospitality businesses, casinos, consultants, mortgage brokers, accountants and audit firms, and non governmental organisations, among others.
A business in one of those categories has compliance obligations regardless of its size, and registration with the Special Control Unit against Money Laundering is a practical requirement, including because banks ask for the certificate in connection with account operation for those categories.
The cash reporting thresholds are the second practical point. The Act sets thresholds above which transactions must be reported, with different figures for individuals and for corporate bodies, and a business handling significant cash should establish the current figures rather than assume.
The third is beneficial ownership. Customer due diligence requires identifying the natural person behind a corporate customer, which connects directly to the persons with significant control regime under CAMA 2020 and to the CAC beneficial ownership register.
For an ordinary Nigerian business the practical steps are proportionate: establish whether you are in a designated category, register with SCUML if you are, adopt a short written policy, identify and record who your customers actually are, keep the records, and know how to file a report if something looks wrong.
And for individuals, the practical point is different: large unexplained cash movements attract attention, and structuring transactions to stay under reporting thresholds is itself an offence.
Money laundering vs terrorist financing vs tax evasion
Three related financial crimes that are addressed together but are not the same.
Money laundering starts with criminal proceeds and disguises their origin so they can be used. The money is dirty and is being cleaned.
Terrorist financing may start with legitimate money and directs it to an unlawful purpose. The money may be clean and the destination is the offence, which is why the same reporting infrastructure covers both.
Tax evasion is the illegal non payment or underpayment of tax. It generates proceeds that may themselves be laundered, and the two interact, but evasion is a distinct offence under the tax framework.
A business subject to the anti money laundering regime is expected to have controls addressing all of them, and suspicious transaction reporting covers suspicions relating to each.
Limits and risks
Compliance is burdensome for small businesses, and the obligations are not scaled as clearly as operators would like.
Awareness in the designated non financial sector remains low, so many covered businesses are not complying and do not know they should be.
Enforcement is also uneven, which reduces the incentive to comply until a bank or a counterparty asks.
And customer due diligence depends on the reliability of identity documents, which is a practical constraint in a market where documentation quality varies.
Worth knowing
Check whether your business falls within a designated non financial category. Nigerian estate agents, car dealers, jewellers, hotels, consultants and NGOs carry anti money laundering obligations including SCUML registration, and most assume the regime applies only to banks.
Questions people ask
What is money laundering?
The process of making the proceeds of crime appear legitimate, conventionally described as placement into the financial system, layering through transactions to obscure origin, and integration as apparently legitimate wealth.
What law governs it in Nigeria?
The Money Laundering (Prevention and Prohibition) Act 2022, which criminalises laundering and imposes compliance obligations on financial institutions and designated non financial businesses and professions.
Which non financial businesses are covered?
Categories including estate surveyors and agents, dealers in jewellery, precious stones and metals, car dealers, hotels, casinos, consultants, mortgage brokers, accountants and audit firms, and non governmental organisations, among others.
What are the main obligations?
Customer due diligence including identifying beneficial owners, record keeping for the required period, reporting suspicious transactions to the Nigerian Financial Intelligence Unit, reporting cash transactions above the thresholds, and internal controls.
Are there cash reporting thresholds?
Yes, with different figures for individuals and corporate bodies. A business handling significant cash should establish the current thresholds rather than assume, and structuring transactions to stay below them is itself an offence.
Do I need to register with SCUML?
Designated non financial businesses and professions are required to register with the Special Control Unit against Money Laundering, and banks ask for the certificate in connection with account operation for those categories.