The Nigerian Bar Association(NBA) may sue the government over a new requirement that lawyers should get registered to check those of them who aid money money laundering.

Its National Executive Committee (NEC) has mandated the body to take legal action against the the Economic and Financial Crimes Commission (EFCC) and the Ministry of Trade and Commerc.

It is over the recent directive of the Special Control Unit Against Money Laundering (SCUML), that lawyers must register with it before February 1 to ensure compliance with the Money Laundering Act (MLA) 201.

It is said to be part of the country’s Anti-Money Laundering and Combating of the Financing of Terrorism (AML/ CFT) regime

NBA President Okey Wali (SAN) had briefed the association after his interactions with officers of the Unit, who visited him at the NBA secretariat in Abuja to seek collaboration with the NBA on how to implement this law among lawyers.

Officers of the Unit were invited to explain their position to lawyers at the NEC meeting in Makurdi, Benue State.

At NEC, officers of the agencies made efforts to explain their position on the matter and concluded that the law as it were, was not properly drafted, because the Unit never expected lawyers to report every transaction above $1,00 as presently contained in the law.

Rather the law expects the lawyer to report suspicious transactions of that amount to the Unit.

A memonrandum by the Lagos branch of the NBA to the NEC on the same issue was circulated , read and discussed.

Following the deliberations, NEC decided to challenge the law’s validity in court.

NEC considered as unacceptable and a violation of the law on confidentiality, the direction of the EFCC that Legal Practitioners in Nigeria should report to it lodgments in the bank of money above $1,000 on behalf of their clients.

It authorised the leadership of the association to institute legal action challenging the law if the need arises.

The Lagos NBA memo reads in part: “The Lagos branch has noted with concern the recent directive of the special Control Unit Against Money Laundering (SCUML) that lawyers must register with the unit before February 1, 2013 in order to ensure compliance with the Money Laundering Act 2011(MLA) as part of the country’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. According to Section 5(6) of the legislation, there is a daily fine of N250,000 for failure of any DNFIs (Designated Non-Financial Institution) to comply with the law’s customer identification requirements and failure to submit transaction returns every 7 days.

“The Money Laundry Act, 2011 defines DNFIs as “dealers in jewellery, cars and luxury goods, chartered accounts(sic), audit firms, tax consultants, clearing and settlement companies, legal practitioners, hotels, casinos, supermarkets, or such other businesses as the Federal Ministry of Commerce may from time to time designate”. Legal practitioners are listed in the law as DNFIs.

“The dangers posed by the current AML/CFT regime on Legal Practitioners have been highlighted by the American Bar Association (ABA) in a statement which we quote below: “Lawyers should be extremely concerned because (US) Congress is considering legislation that would impose burdensome and intrusive gatekeeper regulations on lawyers, including measures that could subject the legal profession to key AML compliances of the BSA. Of enacted, this legislation would undermine the traditional role of state courts in regulating lawyers, erode the attorney-client privilege and interfere with the role confidential attorney-client relationship, impose excessive new federal regulations on lawyers engaged in the practice of law, and impinge on the delivery of legal services in general.’

“The requirement for lawyers registration and the rendering of periodic reports on his client’s financial activities are clearly in conflict with the express provisions of the Rules of Professional Conduct for Legal Practitioners in Nigeria (RPV) 2007, the Evidence Act 2011 and the common law rule against self incrimination.

“The rule which requires a report on every transaction of N150,000 and above(less than $1,000) without linking it to suspicion criminal activity impact upon and destroys the Attorney-Client confidentiality rule.

“The NBA must support the Federal Government in its efforts to combat money laundry and terrorist financing, these actions should be conducted in a manner that is consistent with the ethical rules and standards that regulate our profession, it said.

“NBA Lagos Branch wishes to draw the attention of the National Executive Committee to the status of SCUML.”

The legality of SCUML

According to NBA Lagos memo, the special Control Unit against Money Laundering (SCUML) was established as a specialised unit of the Federal Ministry of Commerce and Industry by the Federal Executive Council of Nigeria (Decision N0. EC (2005) 2861) in September 2005. SCUML was given the responsibility of carrying out the statutory role of the then Federal Ministry of Commerce and Industry (FMC & I) as spelt out in the Money Laundering (Prohibition) Act, ML(P)A 2004.

It said SCUML is not one of the agencies set out in either the MLPA 2011 or the MLPA 2004 to regulate DFNIs. Accordingly, the legality of SCUML is doubtful, more so as the Minister is not specifically empowered under the MPLA to set up any such unit and there is no saving provision in MLPA 2011.

Under section 5(4) of the Act, the Minister in the Federal Ministry of Commerce charged with responsibility for matters pertaining to commerce is empowered to make regulations guiding the operations of DBFIs. Section 5(5) enables the EFCC to “demand and receive reports directly from” DNFIs. Under section 5(6), DFNIs that failt to “comply with the requirements of customer identification and the submission of returns” are liable to a daily fine of N250,000 for the period of default. However, it should be noted that by section 5(1), the Minister’s power to make regulations is limited to DFNIs “whose business involves the use of cash transaction”.

It is, therefore, doubtful whether the Minister can make regulations relating to other aspects of the MLPA which also concerns DFNIs/Legal Practitioners as there is no omnibus clause empowering the Minister to make regulations for the enforcement of other sections of the Act. In addition the extent the SCUML’s mandate is limited by Section 51) to “occasional cash transactions” by DFNIs.

Furthermore, and as a policy matter (especially in the light of the CBN circular), the FATF have, since 2008, recognised that the 2003 recommendations – on which the MLPA 2011 is clearly based-required review. The guidelines for the legal profession suggest that AML CFT regulations adopt a risk based approach, as opposed to the “one size fits all” approach manifest in the MLPA 2004 and 2011.

The way forward

The NBA Lagos Branch said: “The requirement for registration should be opposed as being unnecessary and unduly burdensome. The obligation to report should be on the bank where the financial transactions are consummated and they have records of the account owners. Additional Know Your Customer (KYC) requirement should not be predicated on registration with SCUML. Any KYC requirement which imposes a duty to register with SCML should be opposed as indirect regulation of the legal profession. Banks can carry out their customer checks as much as they can in order to ascertain their customer’s identify and business. It remains the duty of banks to do a KYC of their customers. Other persons not regulated by CBN should not be compelled to be subject to its regulation or that of any other Government agency.

“Litigation against the government and its agencies to challenge the validity of the blanket provision requiring registration with SCUML and supervision of legal practitioners by MDAs outside the legal profession is the most viable option

“The legality of SCUML should be contested, given that there is seemingly no express provision establishing the unit under MLPA 2011, nor is the Minister empowered in that regard. Further, there is no saving provision that may have preserved such a unit under the new regime. Any action would need to be accompanied by an application to restrain the Ministry of Trade and Investment, the EFCC and any other federal agency charged with the enforcement of the legislation from seeking to enforce it during the pendency of the litigation.

“Litigation should be instituted that forcing lawyers to submit to AML/CFT laws aimed at tracking money laundering and the flow of cash to terrorists would override solicitor-client privilege and thus violate extant laws/regulations and the Constitution. The 10-year legal battle between Canadian legal practitioners and the government in the celebrated case of RE: Federation of Law Societies of Canada v. Canada (Attorney-General), 2011 BCSC 1270 (CanLII) is a veritable guide as the points of law to be canvassed. The matter was decided in favour of the legal practitioners. A full text of the judgment is available at http://www.canlii.ca/en/bc/bcsc/2011/2011bcscl270/2011bcscl270.pdf

“While litigation is ongoing, the NBA should engage with the government through SCUML, the Federal Ministry of Trade and Investment, the Attorney-General of the Federation and the Central Bank of Nigeria (as well as EFCC, SEC, NDLEA etc) to enable the legal profession to be self-regulating in accordance with the most recent FATF guidance. The following areas of engagement are relevant:

Persuade the Minister to delegate the AML/CFT responsibility for regulating the legal profession to the NBA or to the Legal Practitioners Disciplinary Committee.

“The NBA should investigate the composition of the National Advisory Council of Designated Non-Financial Institutions which is charge with the financial institution against money laundering and countering financial of terrorism in Nigeria. The committee is/was chaired by the representative of ICAN while the Secretariat is located in SCUML. The NBA is supposedly presented on this council.

Conclusion

“To be seen as a viable self regulatory organ, the NBA needs to prepare and adopt strong AML provisions for the provisions for the profession. In 2008 the FATF issued AML guidance to the legal profession, which proposed a risk based approach, and these documents are all a ready source upon which any Nigerian provisions may be based.

“The NBA should liase with the appropriate agencies and ministries, and state clearly in the AML Regulations (yet to be drawn) how the Association intends to take punitive measures against practitioners who aid Money Laundering and Terrorism Financing (assuming there are any) through their firms and expertise.

“In the interest of the profession, more emphasis should be laid on the need to ensure that control of the Money Laundering and Terrorism Financing with the aid/assistance of Legal Practitioners be addressed by a committee to be inaugurated by the Nigerian Bar Association for that purpose.”

President, Common Wealth Lawyers Association (CLA), Mrs Boma Ozobia told The Nation: “It is clear from the presentation of the officer to the NBA NEC that there is a fundamental misunderstanding of the role of lawyers and the level of involvement we have in our clients’ businesses. As legal advisers to clients on transactions ranging from conveyancing to acquisitions, we may find that we have to hold funds in escrow in a client account, this does not mean that we participate in business with our clients.

“More importantly, these regulations are intended to prevent money laundering, in line with the global standards imposed on the legal profession in England and Wales or the United States of America for instance.

“Lawyers should, therefore, not be subjected to more onerous reporting requirements than their colleagues in these jurisdictions. As a solicitor qualified to practice law in England and Wales, I can assure you that I do not have to report every transaction with a value of $1000, why should I have to do so as a Nigerian lawyer? The law and ensuing regulations as currently drafted places an unacceptable burden on the Nigerian legal practitioner and does not take into account our rules of professional conduct and the duty of confidentiality it imposes on us. It is clear to me that the NBA ought to challenge this law in Court, it cannot stand in its current form in relation to the legal profession.”

Former Vice-President of the NBA and a promonent member of Lagos branch, NBA, Chief Funke Adekoya (SAN), said: “I don’t think that the NBA is left with any other choice but, to challenge the law because we have tried to engage with the powers that be to explain to them that we do not think that the way the law is being implemented is the way it is supposed to be implemented. Unfortunately, even though it seems as if the Financial Intelligence Unit understands the position of the FATF and the guidelines, but it seems that SCUML did not understand.

“They are asking us to report all transactions on our accounts without any proof or feelings of any criminal activity. We believe that that breaches legal regulations under the Evidence Act. It breaches the right of privacy under the constitution and that is what we want to test. We hope that we will be able to reach an agreement with the government. We support the government in the effort to check money laundering and terrorist financing, but we don’t think that we should be breaching the law to do so”

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