New rules for banks on money laundering

NEW rules have been set by the Central Bank of Nigeria (CBN) for banks planning to establish correspondent banking relationship with foreign lenders.

The apex bank, in the Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) Policy and Procedure Manual released yesterday insisted that it will guard against establishing correspondent banking relationships with high risk foreign banks such as shell banks, with correspondent banks that have historically allowed their institutions to be used for Money Laundering / Financing Terrorism (ML/FT).

The regulator said that all banking products that are used to convert cash to a monetary instrument and electronic products that permit rapid value movement such as electronic transfers, forex transactions followed by payment into an account in another jurisdiction can be abused by criminals.

The CBN said: “For trade transactions, Export Letters of Credit have been ranked as high risk because of the possibility of presentation of false shipping documents when no goods are actually shipped.

“Another factor in this ranking is the possibility of over-inflated invoicing for low value or worthless merchandise. All other trade products have been risk ranked either medium or low risk.”

The regulator said that transactions conducted through correspondent banking relationships shall be managed in accordance with a risk-based approach, and Know Your Correspondent (KYC) procedures shall be established to ascertain whether or not the correspondent bank or the counter party is itself regulated for money laundering prevention.

Also, where regulated, the correspondent shall verify the identity of its customers in accordance with Financial Action Task Force (FATF) standards, and where this is not the case, additional due diligence shall be required to ascertain and assess the correspondent’s internal policy on money laundering and KYC procedures.

The CBN said that care should be taken when doing business with third parties located in geographic locations with a history of supporting terrorism, bases for drug production/distribution, suffering from civil unrest/war.

“These include jurisdictions that have been identified as high risk countries by standard setting institutions such as FATF; countries on designated sanction lists such as the United Nations Consolidated list and US Office of Foreign Asset Control (OFAC) List,” the bank said.

The CBN said it shall accept customers after due verification of customers’ identities, address and/ or place of business, after ascertaining their source of income/funds and after considering the level of risks they pose to the bank, based on the kind of business under consideration (such as bureau de change operators).

The apex bank said care will be taken to apply appropriate level of due diligence, depending on customers’ risk profiles adding that no accounts shall be opened for anonymous of fictitious customers.

“The CBN should not enter into a relationship with a prospective customer until the person/entity has been duly identified and verified. The customer acceptance process also includes ensuring that the prospective customer is not on the ‘watch-list’ which includes names of sanctioned persons as well as known fraudsters.”