In a way to mitigate the risks of money laundering, financing terrorism, and financing proliferation of weapons of mass destruction, the central bank of Nigeria has set guidance on the ultimate beneficial ownership of legal persons and agreements to assist financial institutions to mitigate financial crimes.
This was disclosed in a circular issued by the central bank of Nigeria to all banks and other financial institutions in the federation on 12 January 2023.
The CBN stated in the circular, which was sent to all deposit money banks (DMBs) and other financial institutions (OFIs), that the Anti-Money Laundering, Combating the Financing of Terrorism, and Counter proliferation Financing of Weapons of Mass Destruction in Financial Institutions Regulations for 2022 mandate that financial institutions comprehend the structure of legal persons and contractual arrangements and implement customer due diligence measures to mitigate risk. It noted that consequently, financial institutions are required to unveil the beneficial owners of legal persons and legal arrangements in line with provisions of extant AML/CFT laws and regulations.
This Act was called into consideration due to the growing use of corporate vehicles such as companies, trusts, foundations, and other types of legal persons and legal agreements as the main avenue for financial crimes. The Financial action task force (FATF) has demanded that the country should ensure that adequate, accurate, and timely information on” beneficial ownership is accessible to check corporate vehicles from being abused in the financial system. They also noted that Legal persons and legal arrangements are susceptible to abuse for money laundering and terrorist financing. Hence, the need to identify, verify and have credible and reliable information on the legal and beneficial owners of all corporate vehicles and entities; to ensure that such information is available and easily accessible in a timely manner by competent authorities.
The objective of the guidance is to assist financial institutions in identifying and verifying the beneficial owners of legal persons and legal arrangements in line with Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions regulation 2022.
The main resolution of the guidance is that financial institutions are required to carry out necessary customer due diligence (CDD) when identifying and verifying the beneficial owner by using a three-step cascade approach in Regulation 21 of the CBN AML/CFT/CPF Regulations, to apply enhanced due diligence (EDD) on complex corporate vehicle structures that pose higher ML/TF/PF risks, to ensure records of all pertinent documents used in determining the BO for legal purposes, and to ensure that relevant authorities have timely access to beneficial ownership information.
