Hello and welcome to another edition of Governance and Compliance Digest.
Have you tried to open a corporate bank account and you were informed that a search (at the Corporate Registry) will be undertaken by the Bank? This search, amongst others, includes a review of your Memorandum and Articles (MEMART) of Association. Thereafter, the bank representative informs you that to proceed with opening of the corporate account, its Compliance department requires you to produce a SCUML certificate. More often, this would be your first encounter with the word “SCUML” or what it entails in general.
In today’s piece, we discuss the regulatory requirement for some Companies and Business Names commonly referred to as “Designated Non-Financial Institutions” (DNFIs) and the need for such entities to register with the Special Control Unit against Money Laundering (SCUML)”.
We will briefly examine the establishment and functions of the SCUML, conditions that necessitate registration with the SCUML, the documents required for registration, continuing obligations of the DNFIs and penalties for non-compliance.
What is the SCUML?
The Federal Ministry of Industry, Trade Investment (the Ministry), with the responsibility to monitor money-laundering activities, established the Special Control Unit on Money Laundering (SCUML) in 2005 under the Money Laundering (Prohibition) Act, 2004, which was subsequently repealed and amended to Money Laundering (Prohibition) Act 2011 (the Act).
The establishment of SCUML was a part of the Federal Government’s measures to implement the Financial Action Task Force (FATF) recommendations on Anti- Money Laundering/Combating the Financing of Terrorism (AML/CFT) in Nigeria.
SCUML was established to remedy identified inadequacies of legislation and institutional framework on Money Laundering. In addressing its responsibilities, SCUML collaborates with key stakeholders including the Corporate Affairs Commission (CAC), Economic and Financial Crimes Commission (EFCC) Self-Regulatory Organizations (SROs), Non-Profit Organizations (NPOs), Civil Society Organizations (CSOs), the National Planning Commission (NPC), and the Nigerian Financial Intelligence Unit (NFIU).
When is a Business Organization required to register and obtain the SCUML Certificate?
SCUML is charged with the responsibility of monitoring, supervising, and regulating the activities of DNFIs in line with the provisions of the Act.
Section 25 of the Act defines DNFIs as any business involved in the following areas:
- Jewelry.
- Cars and Luxury Goods.
- Precious Stones and Metals.
- Real Estate Development.
- Estate Surveyors and Valuers.
- Estate Agents.
- Chartered Accountants.
- Audit Firms.
- Tax Consultants.
- Clearing and Settlement Companies.
- Casinos and Lottery.
- Hotels and Hospitality Industry.
- Pool Betting.
- Supermarkets.
- Dealers in Mechanized Farming Equipment and Machinery.
- Practitioners of Mechanized Farming.
- Non-Governmental Organizations.
- Such other businesses as the Federal Ministry of Commerce or appropriate regulatory authorities may from time to time designate.
Where the object clause(s) of the Memorandum of Association or business registration form of a Company or Business Name or activities of a non-business organization (together “Organizations”) bears semblance to any of the above activities (a-r) such business organisation are required to register with SCUML and obtain the SCUML Certificate.
In addition, Companies with business objectives of mining, oil & gas, export, investment and pharmacy in their MEMART are required to obtain and attach the necessary approvals, authorization and/or licenses to their applications for the SCUML Certificate.
Documents Required for Registration.
The documents required for the registration of an applicant vary per the category of business organization (i.e. Limited Liability Company, Business Name or incorporated Trustees) a DNFI falls within or the nature of business carried on by the DNFI. The documents immediately listed below may be regarded as general documents.
Limited Liability Companies
- Certificate of Incorporation.
- Memorandum and Articles of Association.
- Status Report (or Form CAC 1.1 or CAC 2 and CAC 7, for Companies registered before 2021).
- Tax Identification Number (TIN).
- BVN, Bank Name and Account Number of the Company or one of its directors.
Business Name
- Certificate of Incorporation.
- Status Report (or Form BN-01 – Proprietor’s Particulars for Business Names registered before 2021).
- Tax Identification Number (TIN).
- BVN, Bank Name and Account Number of the Business or a Proprietor.
Non-Profit Organizations (NPOS)
NPOs include Charitable or Humanitarian Organizations (both international and local), Religious Organizations, Associations, Clubs or Societies. The documents required for their SCUML registration are listed below.
- Trusts/Charitable/Humanitarian Organizations:
- Certificate of Incorporation.
- Status Report (or Form CAC 1.1 or CAC 2 and CAC 7 or CAC/IT 1, for Companies or Incorporated Trustees registered before 2021).
- Trustees’ valid means of identification.
- Constitution or Memorandum & Articles of Association.
- Tax Identification Number (TIN) or Tax Exemption.
- Particulars of Settlors.
- Particulars of Protector (if any).
- Copy of cooperation Agreement (For international NGOs).
- Trust Deed Agreement.
- BVN, Bank Name and Account Number
- Religious Organizations:
- Certificate of Incorporation/Registration.
- Incorporation of Trustees.
- Trustees’ valid means of identification.
- Constitution of the Organization.
- Tax Identification Number (TIN) or Tax Exemption
- Letter of Authority from the General Overseer of the
- Details of other activities the Organization engages in (Charities/Humanitarian activities).
- BVN, Bank Name and Account Number of the Organization’s representative.
- Association/Clubs/Societies
- Certificate of Incorporation.
- Copy of Constitution.
- Status Report (or CAC/IT 1).
- Valid means of Identification of at least two of the trustees.
- Tax Identification Number (TIN) or Tax Exemption.
- BVN, Bank Name and Account Number.
In addition, SCUML requires some specific documents to be attached by certain DNFIs, such as Law Firms, Consulting Companies, Construction Companies, etc., to the general documents required their business category (as described above). These are:
- Call to Bar certificate or Qualifying certificates for Law Firms.
- Dealers in precious stones and metals:
- Exploration License/permit (Ministry of Solid Minerals).
- License from a Certified Geologist.
- For Exporting: Nigerian Export Promotion Council (NEPC).
- For Importing: Nigerian Investment Promotion Commission (NIPC).
- Evidence of registration with Nigeria Ports Authority (NPA) for Clearing & Forwarding (Settlement) Companies.
- Relevant Consulting certificate for Consulting Companies.
- Council for the Regulation of Engineering in Nigeria (COREN) Membership Certificate or Nigerian Society of Engineers Membership Certificate for Construction Companies.
- Real Estate Developers Association Nigeria (REDAN) Certificate for Construction Companies and Real Estate Dealers.
- Nigerian Institution of Estate Surveyors and Valuers (NIESVs), or Nigeria Institute of Quantity Surveyors Certificate (NIQS) for Estate Surveyors and Valuers.
- Professional certificate with ICAN or ANAN or ACCA for Accounting Firms, Tax Consultants and Audit Firms.
- License from the National Lottery Commission for Casinos, Pool Betting & Lottery Businesses.
- Registration with Hotel Owners Forum Abuja (HOFA) or Nigeria Tourism Development Corporation (NTDC) for Hotels and Hospitality Business.
- Evidence of Registration with Association of Motor Dealers of Nigeria (AMDON) for Car Dealers.
- Evidence of Registration with Jewelry Marketers Association of Nigeria (JMAN) for Dealers in Jewelry.
Regulatory Obligations of the DNFIs.
The compliance requirement for DNFIs does not stop at registration: the Act stipulates a number of obligations and reports to be filed by the DNFIs which are tabled below:
S/No. Obligations Compliance Timeline Penalty for Non-Compliance 1. DNFIs whose businesses involve cash transactions are required to declare their business activities to the Federal Ministry of Industry, Trade & Investment (the Ministry) before commencement or within three (3) months of commencement, for existing businesses. Before commencement or within three (3) months of commencement of business. · N250,000.00 for each day during which the offence continues.
· Suspension, revocation or withdrawal of license by the appropriate licensing authority as the circumstances may require
2. DNFIs shall not make or accept cash payments of N5,000,000.00 or its equivalent, in the case of an individual, or N10,000,000.00 or its equivalent, in the case of a body corporate, except through a financial institution. No stipulated timeline. Three (3) years imprisonment or banning of such DNFI indefinitely or for five (5) years from practice, as prescribed by the Nigerian Financial Intelligence Unit (NFIU). 3. Report their international transactions in writing to the relevant bodies indicating the nature and amount of the transfer, the names and addresses of the sender and the receiver of the funds or securities to the Central Bank of Nigeria, Securities Exchange Commission or the Economic and Financial Crimes Commission (the Commission). Within 7 days from the date of the transaction. Liable on conviction to forfeiture of not less than 25% of the undeclared funds or negotiable instrument or to imprisonment of not less than 2 years or to both. 4. Report transactions in excess of USD$1,000 or its equivalent in cash to the Ministry, identify and update all relevant information on the customers by requiring such customer to fill a standard data form and present their international passport, driving license, national identity card or such other document bearing their photograph. No stipulated timeline. · Fine of N250,000.00 for each day during which the offence continues.
· Suspension, revocation or withdrawal of license by the appropriate licensing authority as the circumstances may require.
5. Develop regular training programs for employees to combat the laundering of the proceeds of a crime or other illegal acts, designate compliance officers at management level at headquarters and at every branch and local office. No stipulated timeline. The Central Bank of Nigeria may impose a Minimum penalty of N1 million or the suspension of any license issued. 6. DNFIs are to centralize the information gathered and the establish an internal audit unit to ensure compliance with and ensure the effectiveness of the measures taken to enforce the provision of the Act. No stipulated timeline. The Central Bank of Nigeria may impose a Minimum penalty of N1 million or the suspension of any license issued. 7. Report Suspicious Transactions to the Ministry. 7 days after the transaction. N1 million for each day during which the offence continues. 8. Report, in writing to the Commission, any single transaction, lodgment or transfer of funds in excess of N5 million or its equivalent, in the case of an individual; or N10 million or its equivalent in the case of a body corporate. 7 days and 30 days, respectively N250,000.00 and maximum of N1 million for each day the default continues. For further discussion and assistance with filing any of your organization’s returns, as well as providing you with Board Evaluation and Nominee services, please contact us at contact@firstfiduciary.ng or any member of our team below:
