THE CBN AML/CFT ADMINISTRATIVE SANCTIONS REGIME AND THE ROLE OF INTERNAL AUDIT 

The Central Bank of Nigeria in 2018 announced some sanctions in relation to Money Laundering and Combating the Financing of Terrorism. These sanctions which are administrative seek to fine banks and banks’ top officials, namely, Directors, Chief Compliance Officers and Internal Auditors, for 31 out of the 48 money laundering

intractions.

The new regime aims to eradicate the illegitimate use of Nigeria Financial sector and to effectively ensure stricter monitoring of money laundering and terrorist financing activities in the country.

According to the CB schedule of Administrative Sanctions and Penalties, the following shall apply:

Failure to establish written AML /CFT policies and procedures – a minimum penalty as follows: N20 million on the Deposit Money Bank (DMB)

b)

Failure to approve the AML/CFT policies and procedures – a minimum penalty as follows: N1million on each member of the board and N20 million on the Deposit Money Banks (DMB)

c)

Failure to review/update the AML/CFT policies and procedures at least every three (3) years, a minimum penalty as follows: N750,000 on the Executive Compliance Officer in the first instance and N750,000 for each year that the contravention continues. N500,000 on the Chief Compliance Officer in the first instance and N500,000 for each year that

the contravention continues. b milion on the bank in the first instance and N1 million for each year that the contravention continues

d)

Failure to communicate the AML/CFT program ot the organisation to the employees – a minimum penalty as follows: N750,000 on the Executive Compliance Officer, N500,000 on the Chief

Compliance Officer and N10 million on the DMB

e)

Failure of the board or its commitee to

supervise and ensure the effective implementation of the AMLUrT programme, a minimum penalty as follows: N500,000 on each member of the board and N10 million on the DMB.

f)

Failure of the officer to generate periodic reports on AML/CFT issues to the board or its relevant committee – a minimum penalty as follows: N750,000 the Executive Compliance Officer, N500,000 on the

Chief Compliance Officer and N5 million on the DMB.

railure to implement AML/CrI policies and

procedures in all branches (including foreign

branches and subsidiary – a minimum of N1,250,000

on the executive compliance Otticer a minimum

penalty of N20million on the DMB.

The role of interna audit in this new regime is to ensure implementation of the AML/CFT compliance.

In order to guarantee the regulation is compled with,

Banks and other rinancial institutions are required to

perform the following:

1) Implement Customer Due Diligence (CDD) and
Know Your customer KC princibles for
potential customers before the establishment
ofbusiness relationship.

2. Develop a risk-based approach for the dentification and management of their AML /CFT risks in accordance with the requirements of the regulation.
3.   Have an approved policies, controls and procedures by the board of directors which should assist to manage and reduce the risks that have been identified.
4.   Appoint an AML/CFT Chief Compliance Officer with relevant competence, authority and independence with the role of supervising the monitoring and reporting of suspicious transactions. Also, a professional AML /CFT training should be organized for the Chief Compliance Officer.
5.   An approved annual AML /CFT program by
   CB and Nigerian Financial Intelligence Unit
   (NFIU) should be maintained while ensuring attendance is compulsory for all categories of employees including Board and Management.
6.   Various categories of customers should be identified, whether permanent or occasional, natural or legal persons or legal arrangements and verify the customers identities using sourced documents that are reliable and independent.
7.   Thendentity and information of beneficial owners should be obtained and verified with respect to accounts with an authorized representative and to determine the capacity of such representative to operate the account.
8.   In addition to conducting Customer Due Diligence (CDD), appropriate risk management systems should be put in place to determine whether a prospective customer or existing customer or the beneficial owner is a PEP.
9.   An AML/CFT Program which outlines policies and procedures with respect to customer Due Diligence (CDD), record retention, detection of unusual and suspicious transactions should be developed and approved.
10.     Transaction records should be maintained for at least 5 years, for both domestic and international, subject to request of the CBN and NFIU. Ensure record system is easily retrievable and upholds confidentiality and non-disclosure of information to unauthorised parties.            

Conclusion

The Central Bank of Nigeria has been enabled by the Money Laundering (Prohibition) Act, 2011 (as amended), the Terrorism Prevention Act, 2011 (as amended and other relevant laws and regulations to diligently enforce AML /CFT measures and ensure effective compliance with stiffer sanctions for any infraction. Internal Audit should therefore ensure that AML /CFT compliance is implemented and adequate oversight functions are conducted.