The Central Bank of Nigeria (CBN) has taken immediate measures to protect the financial system from rising cases of money laundering through Other Financial Institutions (OFIS) .
The affected sectors include Microfinance Banks (MfBs), Discount Houses, Finance Companies, Bureaux De Change (BDCs, among others.
The apex bank has therefore developed guidance note on anti-money laundering/combating the financing of terrorism (AML/CFT) for other financial institutions (OFIs).
CBN Director, Financial Policy and Regulation Department, Chibuzo Efobi, said the Guidance Note would assist the sub-sector in the identification, assessment, as well as mitigation of money laundering and terrorist financing (ML/TF) risks in their operations.
He said that the level of sophistication of the internal controls should be commensurate with the size, structure, risks and complexity of the financial institution.
“The internal controls typically address risks and compliance requirements unique to a particular line of business or department and are part of a comprehensive AML/CFT compliance programme,” he stated.
According to Efobi, the OFIs are required to develop an AML/CFT programme, which at the minimum should contain the Board and Senior management oversight, risk management, policies and procedures, monitoring and suspicious transaction report, internal control, compliance function and training.
He added that the OFIS Board of Directors shall establishes an AML/CFT programme that is consistent with the AML/CFT legislations and regulations, approve written AML/CFT policies and procedures, designate any of its members to be responsible for AML/CFT issues or establish an AML/CFT Committee, receive reports on AML/CFT programme periodically and provides timely feedback/decisions on reports it receives.
Also, the OFIS Board of Directors are also expected to issue specific risk management policies and procedures with respect to ML/TF risks and formulate and communicates a code of conduct/ethics that include AML/CFT issues.
Moreover, the OFIS Senior Management is responsible and accountable for day-to-day implementation of the AML/CFT programme.
They should ensure that the programme is adequate to mitigate ML/TF risks and complies with the extant AML/CFT laws, regulations, guidelines and relevant circulars.
He said the determination of criminals and criminal organizations to use other financial institutions to launder funds and finance terrorist activities poses threats to the financial system globally.
According to him, the threat continues to be a source of concern to the CBN. “Over the years, there have been extensive efforts in many countries to come up with appropriate measures to combat money laundering and financing of terrorism.”
“One of the core mandates of the CBN is to promote the safety and soundness of the financial system and, by extension, formulating appropriate policies and procedures designed to mitigate AML/CFT risks to promote financial system stability,” he said.
He said the Guidance Note would identify relevant risk management procedures that would lessen the susceptibility of OFIs as a fertile ground for money laundering, terrorist financing and proliferation financing.
These risks may arise from customers, product and services, business practices or delivery methods and jurisdictions or geographical presence.
The CBN said in carrying out its supervisory activities, it observed that OFIs have uneven challenges in the implementation of effective risk-based approach to AML/CFT programme that meets the standard of regulatory requirements.
The application of the Guidance Note is expected to assist the institutions take appropriate measures to review, monitor and mitigate the identified risk. OFIs could use more stringent tools to identify and assess ML/TF risks in their institutions. However, irrespective of the method adopted, the risk assessment should be updated regularly, the CBN said.
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