FAFT AML Deficient
Higher Risk Areas
Compliance with FATF 40 + 9 Recommendations
US Dept of State Money Laundering assessment
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)
Medium Risk Areas
Weakness in Government Legislation to combat Money Laundering
Nigeria is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement - 18 October 2013
The FATF welcomes Nigeria’s significant progress in improving its AML/CFT regime and notes that Nigeria has established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in February 2010. Nigeria is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Nigeria will work with GIABA as it continues to address the full range of AML/CFT issues identified in its Mutual Evaluation Report.
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Nigeria was undertaken by the Financial Action Task Force (FATF) in 2007. According to that Evaluation, Nigeria was deemed Compliant for 2 and Largely Compliant for 7 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
Nigeria is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes
Nigeria is a major drug transshipment point and a significant center for financial crime. Corrupt officials and businessmen, criminal and terrorist organizations, and internet fraudsters take advantage of the country’s location, porous borders, weak laws, endemic corruption, inadequate enforcement, and poor socioeconomic conditions to launder the proceeds of crime. Criminal proceeds laundered in Nigeria derive partly from foreign drug trafficking and criminal activity including illegal oil bunkering, bribery and embezzlement, contraband smuggling, theft, and financial crimes. Public corruption is also a significant source of laundered criminal proceeds. International advance fee fraud, also known as “419 fraud” in reference to the fraud section in Nigeria’s criminal code, remains a lucrative financial crime.
Nigeria should pass and implement legislation that ensures the operational autonomy of the Nigeria Financial Intelligence Unit (NFIU), promotes the efficient recovery of criminal proceeds, and provides for mutual legal assistance in accordance with international standards. Nigeria should improve cooperation among various law enforcement agencies that investigate financial crimes. Nigeria also should review its safe harbor provisions to ensure they are in line with international standards and consider developing a cadre of trained judges with dedicated portfolios to process financial crimes cases effectively. Nigeria should strengthen its Federal Ministry of Justice Central Authority Unit, which handles international cooperation in the areas of extradition and mutual legal assistance.
VULNERABILITIES AND EXPECTED TYPOLOGIES
Nigerian financial institutions appear conscientious in submitting CTRs to the relevant authorities. The high volume of those reports and the cash-based nature of the Nigerian economy make it difficult for the government to detect suspicious activity. Nigeria’s oil industry, which generates up to 70 percent of government revenues, has long been mired in corruption and mismanagement under successive governments. In 2016, President Buhari implemented several transparency measures, such as requiring all government entities, including the Nigerian National Petroleum Corporation, to remit nearly all revenues to a Treasury Single Account (TSA). The recent implementation and enforcement of the TSA as well as the Government Integrated Financial Management Information System are intended to make government revenue collection and expenditures more streamlined and transparent.
The Economic and Financial Crimes Commission (EFCC) is the leading money laundering investigative entity in Nigeria. EFCC investigators usually conduct investigations with little prosecutor involvement and over-rely on investigation by confession. The challenge of collecting admissible evidence in money laundering cases often requires a combination of cooperation between U.S. and Nigerian law enforcement agencies and the use of formal mechanisms for mutual legal assistance. The United States and Nigeria are parties to various multilateral conventions that contain mutual legal assistance provisions, as well as a bilateral MLAT.
KEY AML LAWS AND REGULATIONS
In 2016, Nigeria made limited progress towards the passage of several pieces of legislation intended to address strategic deficiencies in the country’s AML regime. The Nigerian Financial Intelligence Centre (NFIC) Bill, which would make the NFIU a stand-alone agency, and the Proceeds of Crime (POC) Bill passed the National Assembly in 2014 and 2015, respectively, but have not yet been signed into law. There has also been little movement on a draft mutual legal assistance bill, pending in the National Assembly since 2015.
Nigeria has comprehensive KYC rules and STR regulations. In Nigeria, legal persons are covered criminally and civilly. Nigerian law also provides for enhanced due diligence for both foreign and domestic PEPs.
Nigeria is not currently subject to any U.S. or other international sanctions/penalties. Nigeria has yet to meet the requirements for the autonomy of the NFIU, and there are compliance issues among both financial and non-financial entities.
ENFORCEMENT/IMPLEMENTATION ISSUES AND COMMENTS
In 2016, the EFCC aggressively investigated high-profile money laundering cases. However, the EFCC’s conviction rates continue to be low due in part to gaps in the judicial system that cause cases to languish in the system for long periods of time without resolution. There are concerns about the Department of State Services’ capacity to investigate money laundering and that it does not share case information with other agencies that also conduct financial investigations.
There are no international sanctions currently in force against this country.
Rating (100-Good / 0-Bad)
Transparency International Corruption Index
World Governance Indicator – Control of Corruption
INVESTMENT CLIMATE - Executive Summary (US State Department)
Nigeria hosts Africa's largest economy, with 2013 Gross Domestic Product (GDP) estimated in the $500 billion range, as well as its largest population of over 170 million citizens. This substantial market size, combined with consistent and strong GDP growth over the past decade, has attracted considerable investor interest. The Government of Nigeria (GON) actively seeks foreign investment and in 2012 Nigeria was the largest recipient in Africa, with over $7 billion in foreign direct investment (FDI) recorded. While Nigeria offers abundant natural resources and a low-cost labor pool, much of Nigeria’s market potential remains unrealized because of significant impediments to investment that include an inadequate power supply, lack of transportation infrastructure, delays in the passage of announced legislative reforms, an inefficient property registration system, non-comprehensive intellectual property protections and enforcement, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption.
The Nigerian economy has continued to grow rapidly in recent years despite these persistent structural weaknesses, with growth concentrated primarily in trade, agriculture, and telecommunications. While the agriculture sector sustains over 80 percent of rural households, the Nigerian economy remains heavily dependent on its oil and gas sector which accounts for 14 percent of GDP, over 90 percent of export earnings, and over 70 percent of government revenues. Nigeria ranks as Africa’s largest oil producer and the thirteenth largest in the world, producing high-value, low-sulfur crude oil. However, Nigeria’s oil output has contracted in the past three years and regulatory constraints, other uncertainties, and security risks have limited new investment in this sector. A significant bottleneck to broad-based economic development remains Nigeria’s underdeveloped power sector, which currently supplies less than 5,000 megawatts of power. A comprehensive reform of Nigeria’s power sector is ongoing, although many challenges remain before Nigeria will see a significant, sustainable improvement in power delivery to industrial and consumer end-users.
Conservative macroeconomic management over the past three years has provided Nigeria a stable base for future growth and the overall macroeconomic outlook for Nigeria is strong in the medium term, assuming that oil output stabilizes and oil prices remain strong. The Central Bank of Nigeria (CBN) has pursued broad financial sector reforms and its monetary policy has been successful in cutting consumer price inflation to the 8 percent range in 2013 from double digit levels in recent years. The CBN has also successfully smoothed exchange rate volatility and maintained a high degree of exchange rate stability.
Nigeria’s trade regime remains highly-protectionist and distorting, with restrictive import tariffs and outright import prohibitions in place to spur domestic agricultural and manufacturing sector growth. Nigeria’s bilateral trade with the U.S. totalled $18.2 billion in 2013. U.S. exports to Nigeria are primarily refined petroleum products, vehicles, cereals, and machinery. Nigeria’s 2013 exports to the U.S. totalled $11.7 billion, down 38.3 percent from 2012. Crude oil and petroleum products accounted for over 99 percent of 2013 Nigerian exports to the U.S. Nigeria enjoys preferential access to the U.S market under the African Growth and Opportunity Act (AGOA). However, non-oil exports to the U.S. under AGOA remain at low levels.
Although the bulk of Nigeria’s FDI has historically been concentrated in its oil and gas sector, substantial new investment is flowing into Nigeria’s power, telecommunications, real estate (commercial and residential), and agricultural sectors. The stock of U.S. FDI in Nigeria stood at $5.2 billion in 2010, up 5.1 percent from 2009. U.S. direct investment in Nigeria remains concentrated in the oil and gas sectors.
April 2016 - Extract from 2016 Article IV Consultation
Using Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Framework to Combat Oil Theft and Corruption The AML/CFT framework can help detect financial flows from theft and corruption, and facilitate confiscation of proceeds from crime. Some key components of the framework and how they can help tackle the proceeds of theft and corruption in the oil sector are analyzed below.
National Risk Assessment (NRA) on Money Laundering and Financing of Terrorism (ML/FT) The NRA is a cornerstone of the revised international standard on AML/CFT, the Financial Action Task Force (FATF) Recommendation. The NRA aims to identify and assess the ML/FT risks faced by the country and inform national policy making in establishing priorities with a view to mitigating these risks. Coordinated by the Nigerian Financial Intelligence Unit (NFIU) at the operational level, Nigeria launched its first NRA in 2013 and expects to conclude this exercise prior to the mutual evaluation of its AML/CFT framework in the first half of 2017. Twenty-six institutions/agencies are involved in the exercise, including law enforcement agencies such as the Economic and Financial Crime Commission (EFCC), the Independent Corrupt Practices and Other Related Offense Commission (ICPC), and Nigeria Customs Service; supervisory bodies such as the CBN; and the private sector. According to authorities, both oil theft and corruption are covered in the analysis.
CBN’s AML/CFT supervision
The CBN oversees banks’ implementation of AML/CFT obligations using a risk-based approach. Commercial banks in Nigeria are required to assess ML/FT risks and apply risk-sensitive controls including due diligence on customers and beneficial owners, monitoring of domestic politically exposed persons (including senior executives of stated owned corporations) and reporting suspicious transactions. It seems that banks have considered corruption as the most significant proceeds generating crime in Nigeria and taken mitigating measures, but have paid less attention to oil theft. The CBN is also charged with supervising more than 2,800 bureau de changes (BDCs) including with respect to the implementation of AML/CFT measures. BDCs may be particularly vulnerable to money laundering schemes that involve moving the criminal proceeds abroad through massive cash smuggling (see below). In 2015, the CBN inspected 135 BDCs (or 5 percent) and found their compliance level to be generally poor. BDCs filed no suspicious transaction reports (STRs) in 2014 and 2015.
NFIU’s strategic analysis
The NFIU has established a unit responsible for conducting thematic strategic analysis with a view to identifying ML and FT trends and typologies prevalent in the country. In this capacity, the NFIU relies mainly on the intelligence generated by itself and has not systemically benefited from other information in particular cases investigated by law enforcement agencies which were not triggered by NFIU. To date the NFIU has published one typology report on terrorist financing. It has however identified oil theft and corruption among priority topics for strategic analysis in 2016.
EFCC’s investigation and prosecution
Supported by intelligence generated by the NFIU, the EFCC investigates and prosecutes ML and predicate offences including oil theft, and assists the ICPC in investigating corruption cases. These activities are carried out at regional level. In oil producing regions, oil theft is considered a priority and constitutes the majority of investigations. While some investigations on oil theft resulted in successful convictions, majority of the proceeds generated are widely believed to have been moved abroad thus prove difficult to trace and recover.
Anti-corruption work of ICPC and Code of Conduct Bureau (CCB)
The ICPC is charged with investigating and prosecuting corruption related offences defined under the ICPC Act and other Acts. It is empowered to trace, seize, freeze, confiscate and forfeit all proceeds of corruption and related offences. The CCB is mandated by the third and fifth schedules of the Constitution to receive assets declarations by public officers; examine the declaration; retain custody of such declarations and make them available to Nigerian citizens.
Tackling cash smuggling
One potential means to move ill-gotten funds abroad is massive cash smuggling. A Joint Task Force comprising, among other, the Nigeria Customs Service (NCS) and the EFCC has been set up to tackle the issue. The NFIU also receives from the NCS information on declarations of cash transportation of a value over USD 10,000 or equivalent, but is not informed when custom officers take provisional measures (such as seizure).
The authorities’ efforts to tackle theft and corruption in the oil sector should be pursued further. Enhancing implementation of existing measures:
- Expedite the NRA process and ensure it provides a comprehensive assessment of risks posed by oil theft, corruption, tax evasion and related money laundering and informs the national policy on AML/CFT (short term);
- Conduct robust strategic analysis on macro-relevant crimes including oil theft, corruption and tax evasion supported by enhanced information sharing between the NFIU and law enforcement agencies, and publishing typology reports in a timely manner (short term);
- Strengthen AML/CFT supervision of banks focused on the risks of laundering of the proceeds of corruption and in particular oil theft (short term);
- Seek synergy between AML/CFT policy and national strategies on combating oil theft and anticorruption (medium term);
Reviewing the legal and regulatory framework to fully address risks associated with oil theft, corruption and the laundering of proceeds generated:
- Review the anti-corruption legal framework to ensure all corruption acts are criminalized in accordance with the United Nations Convention against Corruption and the offences are applicable to directors and senior executives of NNPC (short term);
- Review the AML/CFT regulatory framework of BDCs with a view to improving AML/CFT compliance (medium term).
Enhancing transparency of assets owned by senior officials. In this regard, measures can be built upon the existing constitutional requirement on public officers to declare assets:
- Require the publication of comprehensive asset declarations by senior officials, including directors and senior executives of NNPC and of the oil sector regulator. It should cover assets owned abroad and assets of which the official (or executive, director) is a beneficial owner (short term).
- Ensure non-declaration or false declaration are subject to dissuasive sanctions (short term).
17 May 2015 - Extract from IMF Country Report: Nigeria: 2014 Article IV Consultation-Staff Report
Since the 2012 FSAP update, the authorities have been active in strengthening the framework for Anti-Money Laundering (AML)/Countering the Financing of Terrorism (CFT). To support the broader financial inclusion agenda, tiered-Know Your Customer requirements have been introduced to facilitate account opening and operation (within limits) even with basic identification (e.g., a telephone number). In addition, several CBN circulars have been issued relating to different aspects of AML/CFT; the Financial Intelligence Unit (FIU) has issued a strategic analysis on terrorism financing, providing clear guidance on indicators of terrorism finance that can be monitored; and the authorities have provided training to the financial sector on various aspects. These efforts have led to Nigeria being removed from the Financial Action Task Force (FATF) list of jurisdictions with significant deficiencies in their AML/CFT regimes.
Nigeria is due to undergo a FATF mutual evaluation in 2016; in that context, the Presidential Committee on Financial Action Task Force is overseeing the preparation of a national risk assessment, which is anticipated to be completed in 2015. In addition, the FIU is planning additional strategic analyses covering fraud and oil & gas theft issues within the next year. With new channels of financial activity likely to emerge, especially within the context of financial inclusion, staff encouraged enhanced vigilance and broadened oversight to adequately capture these in the framework and ensure the continued integrity of the financial system.