The Commission considers based on its analysis that Nigeria has strategic deficiencies in its AML/CFT regime as defined under Article 9 of Directive (EU) 2015/849, taking into account the jurisdiction’s risk profile, the threat level and security situation in the country.
With regard to criminalization of money laundering and terrorist financing: in the absence of detailed, up-to-date, and reliable statistics on the number of investigations, prosecutions, and convictions it is difficult to assess the effectiveness of the system in place.
However, the available information indicates conviction rates in cases related to terrorist financing and money laundering are rather limited and not commensurate with the risk profile of the country, despite the fact that the country prioritizes the fight against terrorism as such. With regard to customer due diligence requirements (‘CDD’), record keeping and reporting of suspicious transactions in the financial sector and in the relevant non-financial sectors: it should be acknowledged that Nigeria has gone a long way in clarifying the requirements relating to customer due diligence in the financial sector and has put a lot of regulatory, clarification, and outreach efforts towards the DNF businesses and professions sector.
However, important requirements are missing from the regulatory framework, such as deficiencies with regard to politically exposed persons or with regard to identification of beneficial owners, and those deficiencies are material in light of the high corruption threat in the country.
Deficiencies persist also with regard to the timely reporting of suspicious transactions, in particular in relation to terrorism and terrorist financing, which is rather material given the risk profile of the country.
In addition, it has been reported that a sizeable informal sector was not covered under the reporting requirements and it remains unclear to what extent this has been effectively addressed. Despite the efforts of the authorities, the available information is not indicative of an effective system where DNF businesses and professions properly understand and fulfil their AML/CFT and, in particular, CDD and reporting obligations.
With regard to the existence of dissuasive, proportionate and effective sanctions in case of breaches: there seems to be a system of sanctions in place. However, there is insufficient data to assess the effective application of sanctions to date and it is not clear how the regime of administrative and criminal sanctions is articulated in practice.
With regard to the powers and procedures of competent authorities: in the absence of detailed, up-to-date, and reliable statistics it is difficult to assess the effectiveness of the AML/CFT system in place and, in particular, that of the supervisory and other competent authorities.
Due to the fact that the rule of law is not upheld on the whole territory, it remains unclear how the powers of competent authorities could be effectively applied throughout the country. In particular, it is difficult to suggest that competent authorities’ staff could perform their duties freely and securely (e.g., with regard to supervisory authorities’ inspections and the law enforcement authorities’ activities) in the recently recaptured territories, now under military control.
With regard to competent authorities’ practice in international cooperation: Nigeria does not seem to have a comprehensive legislation on international cooperation even though there are ongoing efforts of the authorities to address this. Mutual legal assistance related legislation has to be distilled from multiple legislation and various multilateral and bilateral agreements.
There is also no information and statistics on the effectiveness of the system to date. With regard to the availability and exchange of information on beneficial ownership of legal persons and legal arrangements: important shortcomings with regard to beneficial ownership transparency seem to remain as Nigeria does not seem to have a functioning system in place to ensure the timely access of competent authorities to accurate, complete, and up-to-date information on beneficial ownership of legal persons and legal arrangements.
With regard to implementation of targeted financial sanctions: while Nigeria appears to have a sound framework for applying those sanctions, it is not clear whether sanctions for non-compliance with UNSCR 1373 are effective, proportionate and dissuasive and no funds seem to have been frozen despite the fact that a number of persons or entities with links to Nigeria are currently designated under the relevant UN instruments.
While the Nigerian authorities continue making efforts towards improving the AML/CFT regime and bring it in line with international expectations, there is not enough evidence that the system is effective in practice. Generally, the effective application of AML/CFT is negatively impacted by the security situation in the country.
According to public sources of information and intelligence, while the authorities have recently recaptured large parts of the territory previously controlled by terrorist groups, in particular Boko Haram, the group has continued to launch deadly attacks and remained a significant threat, and the affected regions remain a patchwork of garrison cities with military escort needed for all movements. The situation is further exacerbated by a civil war-type of ethnic conflicts in the Middle Belt part of the country.
This casts significant doubt as to the possibility to have an effective AML/CFT system overall and is a material weakness considering the risk profile of the country. Given the significant risks of money laundering and terrorism financing which the country is faced with and which are not properly mitigated, and the difficult security situation still in progress, the Commission concluded that Nigeria has strategic deficiencies in its AML/CFT regime under Article 9 of Directive (EU) 2015/849.
It is noted that Nigeria had applied for direct membership to the FATF but the process was suspended further to the suspension of Nigeria from the Egmont Group of Financial Intelligence Units. Nigeria has enacted legislation in July 2018 to address the deficiencies identified by Egmont and expressed its high-level engagement in continuing the accession process with the FATF.
The conviction rates in cases related to terrorist financing and money laundering are rather limited and not commensurate with the risk profile of the country, despite the fact that the country prioritizes the fight against terrorism as such.
With regard to customer due diligence requirements (‘CDD’), record keeping and reporting of suspicious transactions in the financial sector and in the relevant non-financial sectors: it should be acknowledged that Nigeria has gone a long way in clarifying the requirements relating to customer due diligence in the financial sector and has put a lot of regulatory, clarification, and outreach efforts towards the DNF businesses and professions sector.
However, important requirements are missing from the regulatory framework, such as deficiencies with regard to politically exposed persons or with regard to identification of beneficial owners, and those deficiencies are material in light of the high corruption threat in the country.
Deficiencies persist also with regard to the timely reporting of suspicious transactions, in particular in relation to terrorism and terrorist financing, which is rather material given the risk profile of the country.
In addition, it has been reported that a sizeable informal sector was not covered under the reporting requirements and it remains unclear to what extent this has been effectively addressed. Despite the efforts of the authorities, the available information is not indicative of an effective system where DNF businesses and professions properly understand and fulfil their AML/CFT and, in particular, CDD and reporting obligations.
With regard to the existence of dissuasive, proportionate and effective sanctions in case of breaches: there seems to be a system of sanctions in place. However, there is insufficient data to assess the effective application of sanctions to date and it is not clear how the regime of administrative and criminal sanctions is articulated in practice.
With regard to the powers and procedures of competent authorities: in the absence of detailed, up-to-date, and reliable statistics it is difficult to assess the effectiveness of the AML/CFT system in place and, in particular, that of the supervisory and other competent authorities.
Due to the fact that the rule of law is not upheld on the whole territory, it remains unclear how the powers of competent authorities could be effectively applied throughout the country. In particular, it is difficult to suggest that competent authorities’ staff could perform their duties freely and securely (e.g., with regard to supervisory authorities’ inspections and the law enforcement authorities’ activities) in the recently recaptured territories, now under military control.
With regard to competent authorities’ practice in international cooperation: Nigeria does not seem to have a comprehensive legislation on international cooperation even though there are ongoing efforts of the authorities to address this.
Mutual legal assistance related legislation has to be distilled from multiple legislation and various multilateral and bilateral agreements. There is also no information and statistics on the effectiveness of the system to date. With regard to the availability and exchange of information on beneficial ownership of legal persons and legal arrangements: important shortcomings with regard to beneficial ownership transparency seem to remain as Nigeria does not seem to have a functioning system in place to ensure the timely access of competent authorities to accurate, complete, and up-to-date information on beneficial ownership of legal persons and legal arrangements.
With regard to implementation of targeted financial sanctions: while Nigeria appears to have a sound framework for applying those sanctions, it is not clear whether sanctions for non-compliance with UNSCR 1373 are effective, proportionate and dissuasive and no funds seem to have been frozen despite the fact that a number of persons or entities with links to Nigeria are currently designated under the relevant UN instruments.
While the Nigerian authorities continue making efforts towards improving the AML/CFT regime and bring it in line with international expectations, there is not enough evidence that the system is effective in practice. Generally, the effective application of AML/CFT is negatively impacted by the security situation in the country. According to public sources of information and intelligence, while the authorities have recently recaptured large parts of the territory previously controlled by terrorist groups, in particular Boko Haram, the group has continued to launch deadly attacks and remained a significant threat, and the affected regions remain a patchwork of garrison cities with military escort needed for all movements.
The situation is further exacerbated by a civil war-type of ethnic conflicts in the Middle Belt part of the country. This casts significant doubt as to the possibility to have an effective AML/CFT system overall and is a material weakness considering the risk profile of the country. Given the significant risks of money laundering and terrorism financing which the country is faced with and which are not properly mitigated, and the difficult security situation still in progress, the Commission concluded that Nigeria has strategic deficiencies in its AML/CFT regime under Article 9 of Directive (EU) 2015/849.
It is noted that Nigeria had applied for direct membership to the FATF but the process was suspended further to the suspension of Nigeria from the Egmont Group of Financial Intelligence Units. Nigeria has enacted legislation in July 2018 to address the deficiencies identified by Egmont and expressed its high-level engagement in continuing the accession process with the FATF. The
Commission will monitor closely further developments. The Commission welcomes efforts made by Nigeria in order to reinforce its AML/CFT regime.
As detailed in the supplementing Directive (EU) 2015/849 of the European Parliament and of the Council by identifying high-risk third countries with strategic deficiencies
