Special Control Unit against Money Laundering SCUML The

Special Control Unit against Money Laundering (SCUML) The Role and Functions of SCUML as it relates to Non Profit Organizations (NPOs) under the AML/CFT Regime Being a presentation at the Regional Workshop for the Sensitization of Non-Profit Organizations on the Nigerian Anti- Money Laundering and Counter- Financing of Terrorism (AML/CFT ) Regime on 26 th February, 2018 at Denis, Wuse 2, Abuja. By Enu, Mathew SCUML

Outline • • • Introduction Establishment of SCUML Mandate of SCUML Structure of SCUML Institutional Framework for AML/CFT Supervision Functions of SCUML Role of SCUML Operational activities of SCUML AML/CFT Compliance obligations of NPOs Collaboration and Partners Conclusion

Introduction • The presentation would highlight the mandate and functions of the Special Control Unit against Money Laundering (SCUML). It would also bring to light the role of the SCUML in the implementation of the Anti- Money Laundering and Counter-Financing of Terrorism (AML/CFT) measures within the Non Profit Organizations (NPOs) sector in Nigeria. • It would also highlight the compliance obligations of the NPOs under the Nigerian AML/CFT regime and penalties for non-compliance.

Establishment of SCUML �SCUML was established by the Federal Government in September 2005 in compliance with the provisions of the Money Laundering (Prohibition) Act. 2004 �The Unit was created under the Federal Ministry of Industry, Trade and Investment to carry out the statutory role of the Ministry under the provisions of the Money Laundering (Prohibition) Act 2011(as amended) to monitor, supervise and regulate the activities of Designated Non- Financial Institutions (DNFIs) in Nigeria as regards to AML / CFT �SCUML is statutorily under the Federal Ministry of Industry, Trade and Investment but operationally domiciled within the Economic and Financial Crimes Commission (EFCC) as the Commission drives the operational activities of the Unit in line with its powers under Sections 6(C) and 7(2) of the EFCC Establishment Act, 2004.

Establishment of SCUML Cont. • Sections 6(c) and 7(2) of the EFCC Establishment Act. 2004 designates the EFCC as the agency responsible for the coordination and enforcement of all laws relating to economic and financial crimes in Nigeria including the Money Laundering (Prohibition) Act, 2011 (as amended). • SCUML was created as part of measures for the implementation of the Financial Action Task Force (FATF ) Recommendations on Anti- Money Laundering /Combating the Financing of Terrorism (AML / CFT ) in Nigeria. • The FATF requires Countries to implement 40 Recommendations which are considered as the international standard for combating money laundering and terrorist financing as well as the financing of the proliferation of weapons of mass destruction (WMD).

Establishment of SCUML Cont �The recommendations includes among others the establishment of Legal and Institutional framework for the effective implementation of the AML/CFT measures in all Countries. This led to the enactment of the EFCC Establishment Act. 2004, the Money Laundering (Prohibition ) Act, 2011 (as amended) and the Terrorism ( Prevention ) Act, 2011, (as amended ) in Nigeria. • SCUML implements specific sections of the Money Laundering (Prohibition ), Act, 2011 (as amended ) relating to DNFIs in line with the FATF Recommendations.

Mandate of SCUML

Mandate of SCUML Cont. • Estate Surveyors and Valuers • Dealers in precious stones and metals • Non- Profit Organisations (NGOs, FBOs, CSOs) • Importers and dealers in cars or any other automobiles • Construction companies • Consultants and consulting companies • Hospitality Industry • Real estate agents, Estate developers, Estate Agents and Brokers • Mortgage Brokers • Dealers in mechanized farming equipments and machineries • Practitioners of mechanized farming. The DNFIs are also known as Designated Non-Financial Businesses and Professions (DNFBP’s) under the FATF classification.

Mandate of SCUML Specifically, SCUML has the mandate to ensure compliance with the following sections of the Money Laundering (Prohibition) Act, 2011 (as amended) by DNFIs: • Section 1 - Limitation to accept or make cash payment • Section 2 -Duty to report international transfer of funds and securities of $10, 000 or its equivalent • Section 3 - Identification of Customers ( KYC & CDD) • Section 4 - Duties incumbent upon casinos • Section 5 - Occasional cash transactions by DNFIs (Declaration of activities /registration with SCUML & reporting requirements

Mandate of SCUML cont. • • • Section 6 - Suspicious Transactions Reporting (STR) Section 7 - Preservation of records Section 8 - Communication of Information Section 9 - Internal procedures, policies and controls Section 10 - Mandatory Disclosure by Financial Institutions ( CTRs by DNFIs )

Structure of SCUML The unit is divided into five sections for operational convenience namely; Director Legal Services and Cooperation Compliance and Enforcement Sensitization and Public Enlightenment Information and Data Management Finance and Administration

Institutional framework for AML/CFT Supervision of the NPO sector in Nigeria Special Control Unit against Money Laundering (SCUML)AML/Supervision Ministry of Budget and National Planning. Monitors Funds and Programmes of International NGOs Federal Inland Revenue Service. Monitors abuse of tax exemption status granted to the NPOs Central Bank of Nigeria (CBN)Mandates all banks and other financial institutions to demand evidence of registration with SCUML from NPOs before availing them of account facilities. Corporate Affairs Commission – Enforces identification of promoters/prospective trustees of NPOs by demanding for valid means of ID as part of the incorporation requirements

FUNCTIONS OF SCUML Monitor Supervise Operational Registration, certification, receipt and analysis of reports, maintenance of transaction database, strategic analysis Compliance Inspection (offsite, onsite), enforcement, information exchange with LEAs Regulate Enlightenment & Sensitization Training, workshop, SRO engagement

Functions of SCUML

Functions of SCUML cont. • Establishment and maintenance of comprehensive database of DNFIs and their financial transactions to support tactical, operational and strategic policy options in combating ML/FT. • Provision of relevant and valuable information developed from the strategic analysis of available data on emerging trends and patterns in money laundering and terrorist financing within the DNFI sector. • provision of vital information relating to DNFIs financial transactions to assist criminal investigations by law enforcement agencies in order to boost the fight against economic and financial crimes within the DNFIs sector in Nigeria;

Roles of SCUML in AML/CFT Supervision of NPOs in Nigeria NFIUreceives reports from SCUML EFCCOperational support, enforcement & Prosecution SCUML MDAs i. e CBN, Lottery Commission etc Collaboration, Information Sharing, enforcement etc Federal Ministry of Industry, Trade & Investment. Policy Support

Roles of SCUML in AML/CFT Supervision of DNFIs in Nigeria 1. Coordinates AML/CFT compliance in the NPO sector by ensuring adherence to domestic laws and international standards. 2. Anchors AML/CFT awareness creation and capacity building within the NPO sector 3. Serves as a platform for engagement with NPOs on AML/CFT issues. 4. Bridges the compliance gap between the Nigerian AML/CFT architecture and the informal sector of the economy. 5. Coordinates statutory transaction reporting within the NPO sector. 6. Provides support for compliance by issuing guidelines and advisory on technical subjects of compliance and emerging issues. 7. Collaborate with other Law Enforcement Agencies, Ministries, Department and Agencies on issues bordering on NPO compliance. 8. Support criminal investigation involving NPOs. 9. Provide strategic analysis to support policy making for the sector. 10. Enhances the national AML/CFT combating ability by providing support typology studies within the NPO sector.

OPERATIONAL ACTIVITIES OF SCUML compliance inspections Awareness Creation and Training Enforce sanction(s) for non-compliance Receive statutory reports Forward Reports to the NFIU

Compliance Operation SCUML is required to ensure. the compliance of DNFIs and for it to actualize this mandate , SCUML does the following; Ø Registration Ø Sensitization/ Public Enlightenment/ Training Ø Inspection Ø Enforcement

Sensitization/ Public Enlightenment / Training Ø Sensitization Ø Public Enlightenment Ø Training Methods of Sensitization, Public Enlightenment and Training Ø Stakeholders (NNNGOs) through their annual general meetings, conferences, seminars, workshops, etc Ø SCUML’s organizes conferences, seminars, workshop, etc Ø Electronic and print media, (TV, jingles, Fliers, Bill Boards, Adverts, etc)

Compliance Inspection Types of Inspection � Off-site Inspection � On-site Inspection (Spot-check and routine) Before embarking of inspection of a DNFI, questionnaires are administered to DNFIs, this is usually done immediately after registration & sensitization. The information received from the questionnaires are inputted into SCUML Risk Matrix Table. This determines the categorization of DNFIs in terms of vulnerability to ML/TF i. e. High, medium or Low Risk.

Enforcement With SCUML operationally domiciled within the EFCC, this has afforded it the power under the EFCC Act 2004 and ML(P)A 2011 section 15, 16, 17, 18, 19, 21, and 22 not to only ensuring compliance to the AML/CFT regime but are also able to enforce the Law.

OBLIGATIONS OF NPOs UNDER THE ML(P) ACT 2011 (as amended) SECTION OBLIGATION SANCTION FOR NON COMPLIANCE Section 1 DNFIs shall not, except in a Limitation To Accept Or transaction through a financial Make Cash Payment institution, make or accept cash payment of a sum exceeding: v. N 5, 000 or its equivalent, in the case of an individual; or v. N 10, 000 or its equivalent in the case of a body corporate Ønot less than 3 years imprisonment or a fine of N 10, 000 or both , in the case of individual and N 25, 000 fine in the case of a body corporate. ØMay be banned indefinitely or for a period of 5 years from practicing. Section 2 Duty to Report International transfer of funds and Securities Ønot less than 3 years or a fine of N 10, 000 or to both , in the case of individual and N 25, 000 in the case of a body corporate. ØProfessionals involved may be banned indefinitely or for a period of 5 years from practicing the profession Transfers of funds or securities exceeding US$10, 000 must be reported to CBN /SEC/Commission within 7 days Transportation of cash or negotiable instruments in excess of $10, 000 shall be declared to Nigeria Customs Service.

OBLIGATIONS OF NPOs UNDER THE ML(P) ACT 2011 (as amended) SECTION OBLIGATION Section 3 DNFIs must verify/ conduct due diligence Ønot less than 3 years or a fine of Identification of on their clients/ customers and any N 10, 000 or to both , in the Customers (KYC/CDD) other person acting on their behalf case of individual and through any acceptable means of N 25, 000 in the case of a body identification such as National ID, corporate. International Passport, Driver’s License ØMay be banned indefinitely or for or Voters Card a period of 5 years from practicing. Section 4 Duties incumbent upon casinos Casinos must verify its customers by requesting for valid original document bearing name and address, record such information chronologically in a register and forward to SCUML Ønot less than 3 years or a fine of N 10, 000 or to both , in the case of individual and N 25, 000 in the case of a body corporate. ØMay be banned indefinitely or for a period of 5 years from practicing.

OBLIGATIONS OF NPOs UNDER THE ML(P) ACT 2011 (as amended) SECTION OBLIGATION Section 5 a)Registration with SCUML b)Rendition of Occasional Cash Base Transaction((CBTRs) -DNFIs must declare their business activities to SCUML Section 6 Suspicious Transaction Reporting Where a transaction— (a) involves a frequency which is unjustifiable or unreasonable ; (b) is surrounded by conditions of unusual or unjustified complexity ; (c) appears to have no economic justification or lawful objective; SANCTION FOR NON COMPLIANCE a. A fine of N 250, 000 for each day during which the offence continued. -Transaction involving US$1000 b. Suspension, Revocation or or its equivalent in cash must withdrawal of license by be reported to SCUML within 7 appropriate licensing days of its receipt authority. As the circumstance demand. liable on conviction to a fine of N 1, 000 for each day during which the offence continues.

OBLIGATIONS OF NPOs UNDER THE ML(P) ACT 2011 (as amended) SECTION OBLIGATION SANCTION FOR NON COMPLIANCE Section 7 Preservation of Records DNFIs have the responsibility to preserve records of their customers and all financial dealings above threshold for a period of not less than five (5) years from the time of severance of business relationship. not less than 3 years or a fine of N 10, 000 or to both , in the case of individual and N 25, 000 in the case of a body corporate Section 8 Communication of information To make records preserved under section 7 available on demand (a) in the case of an individual, to imprisonment for a term not less than 2 years and not exceeding 3 years; and (b) in the case of a financial institution or other body corporate, to a fine of N 10, 000

OBLIGATIONS OF NPOs UNDER THE ML(P) ACT 2011 (as amended) SECTION OBLIGATION Section 9 Arousing awareness among employees of Designated Non -Financial Institutions Section 10 Mandatory disclosure by Designated Non Financial Institutions SANCTION FOR NON COMPLIANCE Development of programs and Failure to comply attracts a fine of not less than N 1 million or the training for its employees. suspension of its license. Designation of compliance officers at management level. Internal anti ML/FT policies A DNFI shall report to the Commission in writing within 7 days any single transaction, lodgment or transfer of funds in excess of(a) N 5, 000 or its equivalent, for an individual; or(b) N 10, 000, 000 or its equivalent, for a body corporate. liable on conviction to a fine of not less N 250, 000 and not more than N 1 million for each day the contravention continues.

OBLIGATIONS OF DNFIs UNDER THE ML(P) ACT 2011 (as amended) SECTION OBLIGATION SANCTION FOR NON COMPLIANCE Section 21 Power to demand obtain records To provide the required information/records on demand (a) in the case of an individual, to imprisonment for a term not less than 2 years and not exceeding 3 years; and (b) in the case of a financial institution or other body corporate, to a fine of N 1, 000 : For the purpose of this Act, the Director of Investigation or an officer of the Ministry, Commission, or Agency duly authorized in that behalf may demand, obtain and inspect the books and records of the Designated Non-Financial Institution to confirm compliance with the provision of this Act.

OBLIGATIONS OF NPOs UNDER THE ML(P) ACT 2011 (as amended) SECTION OBLIGATION SANCTION FOR NON COMPLIANCE Section 22 Obstruction of the Commission or authorized officers To allow authorizes (a) A person who willfully obstructs the officers of the Ministry, the Commission /Ministry Commission, the Agency or any access to authorized officer in the exercise of information/records the powers conferred on the on demand Ministry, the Commission, or the Agency by this Act commits an offence and is liable on conviction (b) in the case of an individual, to imprisonment for a term not less than 2 years and not exceeding 3 years; and (c) in the case of a financial institution or other body corporate, to a fine of N 1, 000

Collaboration and Partnership q. Collaboration / partnership with NNNGOs is necessity for effective regulation of the DNFI Sectors. q. SCUML has a staff strength at the moment of about 70, the number of DNFI within the country is over 300, 000. Its very impossible to reach out to all the DNFIs on a one on one basis.

Conclusion • In finding solution to the problems associated with ML/TF there is need for collaboration between the anti-money laundering agencies and stakeholders, including individuals and organizations. • This is crucial if we are to make a difference in curbing the money laundering phenomenon. • Stakeholders engaged in fighting ML/TF need to share a common vision and forge partnership. • Need for enhanced collaboration among law enforcement, regulators and NNNGOs.