AML, Terrorism: CBN Directs Banks To Lift Veils Of Benficial Ownership Of Companies, Organisations

In line with its 2022 regulations on checking the incidences of Anti-Money Laundering and Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions, the Central Bank of Nigeria (CBN), has directed financial institutions in the country to henceforth unveil the beneficial owners of companies and trusts, and foundations, among others.

It is believed that such legal entities are used by criminals to cover up and convert the proceeds of crime, hence the global demand for adequate, accurate and timely information on ultimate owners (of up to 5% of the shares in issue directly or indirectly) to check their abuse in the financial system.

Consequently, the apex bank in a circular by Chibuzo A. Efobi, director, Financial Policy and Regulation Department, said it has developed a guidance on ultimate beneficial ownership of legal persons and legal arrangements to implement the measures.

To determine a beneficial owners, the CBN requires financial institutions under its regulatory watch to rely on such source documents as certificate of incorporation, particulars of shareholders, Memorandum and Articles of Association (MEMART), minutes of meetings, and resolutions. Others are partnership agreements, annual returns/financial statements, bye-laws, constitutions, charters, as well as trust deeds and trust registration documents.

The guidelines also require financial institutions to obtain beneficial ownership information from such public registers as the Corporate Affairs Commission and publicly available sources like the internet, print, electronic and social media.

Asides the beneficial ownership, financial institutions are also required to look into relevant relationships like senior management, authorized signatories, persons with voting rights, nominee directors, partners, office holders, settlors, trustees and beneficiaries, persons having power of attorney over the entity, among others.

Financial Institutions are expected to differentiate “between legal ownership and effective control, as the person who has legal ownership may not necessarily be the same person exercising control;” in addition to having a clear understanding of the customer’s governance and management structure will help FIs in identifying those individuals who have effective control over the customer, e.g. persons who dismiss or appoint those in senior management positions.

The guidelines also expect that financial institutions would distinguish between a person acting on behalf of a customer and where the person has control over the affairs of the customer, adding that a person may have authority to act on behalf of a customer, without necessarily translating to beneficial ownership of the customer, as in the case of authorized signatories to an account.

The CBN requires financial institutions “to adopt a three-step cascade approach in Regulation 21 of the CBN AML/CFT/CPF Regulations” of identifying and verifying the natural persons (where they exist) with ultimate controlling ownership interest in a legal person, taking into cognizance the fact that ownership interests can be so diversified that there may be no natural persons, whether acting alone or with others, exercising control of the legal person or arrangement through ownership.

However, “where a natural person is not identified, FIs shall identify and take reasonable measures to verify the identity of the relevant natural person who holds senior management position in the legal person.”

For legal arrangements, financial institutions must “identify and verify the identity of the settlor, the trustee, the protector where they exist, the beneficiaries or class of beneficiaries or persons in equivalent or similar positions, and any other natural person exercising ultimate or effective control over the legal arrangement including through a chain of control or ownership.”