On November 23, 2022, the Central Bank of Nigeria ("CBN") issued the Anti-Money Laundering, Combating the Financing of Terrorism, and Countering Proliferation Financing (AML/CFT/CPF) Guidelines for Licensing of Banks and Other Financial Institutions ("OFIs") (the "Guidelines").

The Guidelines were issued by the CBN in furtherance of its efforts towards promoting compliance with AML/CFT/CPF laws and regulations in Nigeria.

In this newsletter, we summarise the additional compliance requirements applicable to potential banks and OFIs1 in Nigeria.

What is the Scope/Applicability of the Guidelines?

The Guidelines highlight the minimum AML/CFT/CPF requirements in respect of license applications for banks and other financial institutions which are applicable in conjunction with other pre-existing AML/CFT/CPF regulations.

The Guidelines became effective on 23rd November 2022 and are applicable to both pending and new applications, including those awaiting the CBN's final approval.

What are the objectives of the Guidelines?

The Guidelines seek to;

  1. guide promoters in complying with AML/CFT/CPF requirements in license applications for banks and other financial institutions;
  2. ensure that proceeds of crimes are not used to establish financial institutions;
  3. ensure that criminals do not own or control financial institutions in Nigeria;
  4. identify and verify the Beneficial Owners2 of financial institutions; and
  5. ensure that promoters of financial institutions put in place appropriate and effective measures to mitigate risks of money laundering, terrorism financing, and proliferation of weapons of mass destruction (ML/TF/PF).

What are the requirements for the application of a CBN-issued license?

The promoters of financial institutions and OFIs are required to provide the following when making an application for a license:

  1. a completed and personally signed Beneficial Owners Declaration Form, which requires the inclusion of details and information concerning the beneficial owner;
  2. a notarised statement of net worth for all beneficial owners;
  3. a completed and personally signed Politically Exposed Persons (PEP) Declaration Form;
  4. an AML/CFT/CPF compliance policy;
  5. the shareholding structure of the institution for which licence is sought, and all relevant incorporation documents;
  6. where a shareholder or prospective shareholder is a legal person or legal arrangement, all relevant incorporation documents, detailing the current shareholding structure and directorship/trustee/fiduciary information; and
  7. the curriculum vitae of the beneficial owners.

The requirements above are not exhaustive, as the promoters are also expected to comply with licensing requirements specified in guidelines relevant to the institution to be set up.

What are the instances where the CBN may reject an application?

The CBN may reject an application for a license, in an instance where the promoters;

  1. fail to demonstrate understanding of the ML/TF/PF risks inherent in the business;
  2. are unable to address the AML/CFT/CPF licensing requirements satisfactorily;
  3. misrepresent facts and make false declarations; and
  4. application indicates a criminal record of conviction of any offence that constitutes a financial crime.

Conclusion

It appears the CBN has issued the Guidelines to prevent the ownership of financial institutions by financial criminals or potential launderers and therefore seeks to ensure that promoters of entities under its regulatory purview, i.e banks, and other financial institutions put in place measures to mitigate AML/CFT risks in such institutions before they are formed and issued a license to operate.

Whilst it is uncertain to what extent the information contained in applications would be verified, this compliance requirement as a condition precedent to being issued a license may alleviate the risks of money laundering and terrorism financing within the financial services sector.

Footnotes

1. OFI's include Deposit money banks, discount houses, primary mortgage institutions, finance companies, bureau-de-change, development finance institutions, micro finance banks, payment service providers, e.t.c

2. A beneficial owner includes the natural person(s) who ultimately owns or controls the customers/ corporate entity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.