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Considering the pivotal role Financial Institutions (FIs) play in the financial system to prevent abuse of the system from laundering of the proceeds of crime and financing of terrorism, the Central Bank of Nigeria (CBN) has released a guideline that will help FIs in identifying the beneficial owners of legal persons and arrangements .
According to the apex bank, given the growing use of corporate vehicles such as companies, trusts, foundations and other types of legal persons and legal arrangements by criminals to cover up and convert the proceeds of crime, global standards (Financial Action Task Force demand that countries “ensure that adequate, accurate and timely information on” beneficial ownership is accessible to check corporate vehicles from being abused in the financial system.
Signed by Chibuzor Efobi, Director, Financial Policy and Regulation Department of the CBN, the guide states that legal persons and legal arrangements are susceptible to abuse for money laundering and terrorist financing, hence, the need to identify, verify and have credible and reliable information on the legal and beneficial owners of all corporate vehicles and entities to ensure that such information is available and easily accessible in a timely manner by competent authorities.
This guidance, which draws from global standards, is issued to financial institutions (FIs) under regulatory purview of the CBN as defined under the CBN Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions Regulations, 2022 (CBN AML/CFT/CPF Regulations).
It reiterated that the objective of this guidance is to assist FIs in identifying and verifying the beneficial owners of legal persons and legal arrangements in line with extant AML/CFT/CPF laws and regulations.
The guidance is not exhaustive but would be amended as necessary and therefore, should be read and applied in line with the relevant provisions of extant laws and regulations on AML/CFT and CPF.
FIs are to carry out necessary customer due diligence (CDD) when identifyingand verifying BO, particularly at the on-boarding stage, based on the risk-
assessment of the customer and its BO, and must take all reasonable measures in verifying the information on the BO, the apex bank noted.
In identifying and verifying legal persons, FIs are required to adopt a three-step
cascade approach in Regulation 21 of the CBN AML/CFT/CPF Regulations.
The steps are to identify and verify the natural persons, where they exist, that have ultimate controlling ownership interest in a legal person, taking into cognisance 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; in the event of doubt as to the persons with the controlling ownership interest as beneficial owners or where no natural person exerts control through ownership interests, identify and verify the natural persons, where they exist, exercising control of the legal person or arrangement through other means; 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.
Describing a beneficial owner (BO) the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted, the guidance noted that it also includes those persons who exercise ultimate effective control over a legal person or legal arrangement.
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