By Oyetola Muyiwa Atoyebi, SAN

Money laundering is the process of concealing unlawfully obtained funds so that they appear to have been obtained legally. It has been laundered to give it a legitimate appearance. Criminals convert their illegal gotten money into an asset that appears genuine, such as an insurance policy, in order to avoid detection by the law. Insurance products, particularly life insurance, offer a straightforward and appealing way to launder money.

This article examines safeguards against money laundering in the insurance sector, and makes recommendations on ways to strengthen them.

INTRODUCTION

According to the Financial Action Task Force, money laundering is “the processing of …criminal proceeds to disguise their illegal origin.”[1] Article 3.1 of the United Nations 1988 Vienna Convention defines it as,  the conversion or transfer of property, knowing that such property is derived from any offense (s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense (s) to evade the legal consequences of his actions”. Put simply, money laundering occurs where illegally obtained money is cleaned or laundered in order to give it the appearance of propriety. It is estimated that about 2 – 5% of global GDP, or $800 billion – $2 trillion in current US dollars is laundered globally per year.[2]

Money laundering typically takes place in three stages, namely: Placement, Layering and Integration. Illegally obtained funds are secretly placed in a legitimate financial system (placement), concealed via a series of clever accounting tricks (layering), and then taken out for whatever purpose their owners need them for (integration).

It is important to note at this point, that funds that move through the money laundering stages are often used to finance terrorism.[3] Hence, anti-money laundering (AML) efforts are often undertaken with steps to Combat the Financing of Terrorism (CFT). [4]

Oftentimes, images of money laundering operations in popular culture involve casinos, gambling and cash smuggling. However, insurance products, (particularly life insurance) offer a very appealing and straightforward method of money laundering.

According to the PWC’s Economic Crime Survey 2018, in the past 24 months, 62 per cent of global insurance respondents stated their firms had been exposed to fraud or financial crime, compared to 37 per cent in 2016 and 35 per cent in 2014.[5]

In 2002, “Operation Capstone” uncovered a plan including the US, the Isle of Man, Panama and Colombia, in which there had been widespread usage of life insurance products for money laundering. It is estimated that up to $80 million has been laundered through this method.[6]

More examples of the scheme uncovered by Operation Capstone exist, but due to the clandestine nature of money laundering operations around the world, it is difficult to paint a clear picture.

What the context given above illustrates is the need for strong anti-money laundering compliance laws.

ANTI-MONEY LAUNDERING COMPLIANCE IN NIGERIA

Anti-money laundering (AML) refers to the web of laws, regulations, and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income.[7]

It was a response to the growth of the financial industry, the lifting of international capital controls and the growing ease of conducting complex chains of financial transactions.[8]

In Nigeria, certain institutions are mandated to abide by anti-money laundering requirements. These include: financial institutions, advisory firms, jewellers, chartered accountants, legal practitioners, hotels, casinos, supermarkets, tax consultants, car dealers, dealers in luxury goods, bureaux de change, insurance institutions, money brokerage firms, investment management firms, project consultancy firms and pension fund management firms.[9]

The applicable provisions on money laundering in Nigeria are:

  1. The National Drug Law Enforcement Agency Act, Cap N30 LFN 2004;
  2. The Money Laundering (Prevention and Prohibition) 2022;
  3. The Economic and Financial Crimes Commission (Establishment) Act, Cap E1, LFN 2004;
  4. The Independent Corrupt Practices (and other Related Offences) Commission Act, 2000;
  5. The Security Exchange Commission Rules and Regulations, 2013;
  6. The Banking and other Financial Institution Act 2020 No 5 of 2020; and
  7. The Central Bank of Nigeria (Anti-Money Laundering and Combating the Financing of Terrorism in Banks and other Financial Institutions in Nigeria) Regulations 2013.

The authority to prosecute money laundering crimes in Nigeria rests with the Economic and Financial Crimes Commission (EFCC). The Commission is empowered to investigate and prosecute financial crimes/money laundering related activities.[10]

The principal legislation overseeing Anti-Money Laundering compliance in Nigeria is the Money Laundering (Prevention and Prohibition) Act, 2022. Section 18 (2) of the Money Laundering (Prevention and Prohibition) Act, 2022 defines money laundering offences to include:

Any person or body corporate, in or outside Nigeria, who directly or indirectly— conceals or disguises the origin of, converts or transfers, removes from the jurisdiction, or acquires, uses, retains or takes possession or control of any fund or property, intentionally, knowingly or reasonably ought to have known that such fund or property is, or forms part of the proceeds of an unlawful act, commits an offence of money laundering under this Act.”

Subsections (3) and (4) go on to state the penalties for individuals and natural corporations:

A person who contravenes the provisions of subsection (2) is liable on conviction to imprisonment for a term of not less than four years but not more than fourteen years or a fine not less than five times the value of the proceeds of the crime or both.

A body corporate who contravenes the provisions of subsection (2) is liable on conviction to a fine of not less than five times the value of the funds or the properties acquired as a result of the offence committed.

As part of the insurance industry’s efforts to eliminate money laundering and counter terrorism financing, the National Insurance Commission (NAICOM) set up an AML and counter-terrorism (CTF) compliance unit to stamp out money laundering in the insurance industry.

This unit was set up with the mandate to ensure that the insurance industry’s operations were not misused for illegal purposes.

In line with this objective, the NAICOM also enacted the National Insurance Commission (Anti Money Laundering and Countering the Financing of Terrorism) Regulations 2013.

These regulations apply to all insurance institutions in Nigeria including their agents, insurance brokers and to all insurance transactions.[11]

Highlights of these regulations include:

  1. Setting up of Customer Due Diligence frameworks by insurance institutions in other to know the identities of the customers they are transacting with. [12]
  2. Identifying suspicious transactions as defined under the regulations.[13]
  • Establishing internal control measures to carry out an independent review of the insurance institutions’ AML/CFT framework.[14]

CONCLUSION

As cases of fraud continue to rise, the need for AML measures cannot be overemphasized. Insurance institutions and stakeholders may feel like they are another example of overreaching regulations. However, they serve an important purpose in keeping industry stakeholders accountable and on the straight and narrow. This further increases greater transparency in the industry and indeed, the wider economy.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN, FCIArb (UK).

Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm) where he also doubles as the Team Lead of the Firm’s Emerging Areas of Law Practice.

Mr Atoyebi’s vast knowledge and expertise in Corporate and Commercial Law has enabled him to advise and represent a vast clientele in a variety of high-level transactions involving Intellectual Property and Piracy. He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of a Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Nnamdi Okoronkwo.

Nnamdi is a member of the Corporate and Commercial Group at OMAPLEX Law Firm. He also holds commendable expertise in AML/CFT compliance and Insurance Law.

He can be reached at nnamdi.okoronkwo@omaplex.com.ng

[1] Fatf-gafi.org. n.d. [online] Available at: <https://www.fatf-gafi.org/faq/moneylaundering/> [Accessed 17 May 2022].

[2] United Nations: Office on Drugs and Crime. 2022. Money Laundering. [online] Available at: <https://www.unodc.org/unodc/en/money-laundering/overview.html> [Accessed 17 May 2022].

[3] Thony, J., 2000. MONEY LAUNDERING AND TERRORISM FINANCING: AN OVERVIEW. [ebook] Available at: <http://file:///C:/Users/Funmi/Downloads/MONEY%20LAUNDERING%20AND%20TERRORISM%20FINANCING.pdf> [Accessed 17 May 2022].

[4]A good example is the National Insurance Commission (Anti-Money Laundering and Countering the Financing of Terrorism) Regulations, 2013.

[5] 2018. Pulling fraud out of the shadows: Global Economic Crime and Fraud Report. [ebook] Available at: <https://www.aon.com/getmedia/952b6e59-0f6b-4970-aa6e-9f7809b28abe/PWC_global-economic-crime-and-fraud-survey-2018.aspx> [Accessed 17 May 2022].

[6] 2007. Anti-Money Laundering in the Financial Services Industry. [ebook] Toronto: Oliver’s Publishing. Available at: <http://oliverslearning.com/pdfs/monlaun/anti-money_laundering_in_the_financial_services_industry.pdf> [Accessed 17 May 2022].

[7] Keaton, W., 2022. Anti-Money Laundering (AML). [online] Investopedia. Available at: <https://www.investopedia.com/terms/a/aml.asp> [Accessed 17 May 2022].

[8] Ibid

[9] Federrick Ntido, “Anti Money Laundering Requirements for Financial Institutions and Other Designated Businesses,” (2022) Anti Money Laundering Laws and Regulations Nigeria.

[10] Section 6, EFCC (Establishment) Act, 2004.

[11] Reg. 2 NAICOM (Anti Money Laundering and Countering the Financing of Terrorism) Regulations 2013.

[12] Reg 6, ibid.

[13] Reg 17, ibid.

[14] Reg 21, ibid.

Book On The Dynamics of Mediation, Negotiation & Arbitration In A Globalized World [Order Your Copy]

Price: ₦15,000 or £20 per copy [Hard Back– 21 chaps/700 pages]: Contact: info@idrinstitute.com, info@adrinafrica.org WhatsApp only: 0803-703-5989 : Voice Call Mobile: 0817-630-8030, 0909-965-1401; 0705-767-0347; 0912-173-4691 : Landline: 09-2913581; 09-2913499

[Now On Sale] Book On “International Arbitration & ADR And The Rule Of Law”

Price: ₦15,000 or £20 per copy [Hard Back– 20 chaps/715 pages] Contact Information Email: info@idrinstitute.cominfo@adrinafrica.org WhatsApp only: 0803-703-5989 Voice Call – Mobile: 0817-630-8030,+234-805-2128-456, +234-909-9651-401 Landline: 09-2913581, +234-9-2913499, +234-9-2919209 Office Address: 50 Julius Nyerere Crescent, [Next To The World Bank], Asokoro, Abuja – Nigeria. Bank Account DetailsBank Name: UBA Plc.; Account Name: International Dispute Resolution Institute; Account Number: 1014072579