CBN Guidance Note on Beneficial Ownership in Nigeria, Garnishee Suits in Nigeria

CBN Guidance Note on Beneficial Ownership in Nigeria

The Central Bank of Nigeria on January 12,2023 launched a guidance note prescribing several regulations on the issue of beneficial ownership pursuant to the existing new legal and regulatory framework on Money-laundering, Terrorism Financing and Proliferation Financing in Nigeria.

This article will be dealing with the following topics of :-

– The objectives of the CBN Regulatory Guidance note on beneficial ownership.

– The scope of this guidance note.

– Determining who beneficial owners are and what constitutes beneficial ownership. 

– Responsibilities of Financial Institutions by virtue of this guidance note.

What are the objectives of the CBN Guidance note on beneficial ownership in Nigeria?

The CBN guidance note was issued to assist Financial Institutions with yardsticks for identifying and verifying the beneficial owners of legal persons and legal arrangements in line with extant Anti-Money-laundering/ Combating the Financing of Terrorism/Combating Proliferation Financing (AML/CFT/CPF) laws and regulations in Nigeria.

What is the applicability scope of the CBN Guidance note?

The guidance note applies to all Financial Institutions (FIs) under the regulatory jurisdiction of the CBN.

Who is a beneficial owner by virtue of this guidance note?

The term “beneficial ownership”  refers to the natural persons who ultimately own or control a customer and/or the natural person on whose behalf a transaction is being conducted. This also applies to the persons who exercise ultimate effective control over a legal person or arrangement.

In line with the requirements of the Financial Action Task Force (FATF) a beneficial owner must not be the legal owner of a corporate vehicle, but a person who exerts effective control over the corporate vehicle or a person on whose behalf a transaction is being conducted.

How is beneficial ownership determined?

This is to be done by identifying the following people :-

– Individuals owning or holding at least 5% of the issued shares of a corporate vehicle directly or indirectly.

– Individuals controlling a corporate vehicle.

– Individuals exercising at least 5% of the voting rights in a legal person (corporate vehicle) directly or indirectly.

– Individuals having a right to directly or indirectly appoint or remove majority of the directors of the legal person (corporate vehicle).

What are the means prescribed by the CBN Guidance note for identifying beneficial ownership?

FIs under the CBN Guidance note are to look at certain determinants to find out beneficial ownership which include :-

1. Certificates of Incorporation.

2. Particulars of Shareholders.

3. A corporate vehicle’s memorandum/articles of association.

4. Partnership Agreement.

5. Resolutions.

6. Nominee Director agreements.

7. The Internet & Social media.

What are the responsibilities of Financial Institutions (FIs) under the CBN guidance note?

The responsibilities of FIs by virtue of the CBN guidance note are :-

1. To identify and manage Money-laundering/Terrorism Financing and Proliferation Financing risks posed by legal persons and legal arrangements.

2. To apply Enhanced Due Diligence (EDD) on complex corporate vehicle structures that pose higher Money-laundering/Terrorism Financing and Proliferation Financing risks.

3. To understand the nature of the customer’s business, its ownership structure, taking into cognizance the complex ownership structure where shareholders are multiple legal persons or complex arrangements in different nominee shareholders.

Garnishee Suits in Nigeria

The whole process of litigation and lawsuits for the purpose of securing remedies for perceived wrongs would be utterly useless without the means or ability to enforce judgments obtained in court. 

This is why Judgment Enforcement techniques have been a core specialization area for many legal counsel, with the most commonly used method of judgment enforcement being the Garnishee Suit.

This article will be looking at what garnishee suits are, the parties to a garnishee suit, the differences in commencing garnishee suits against certain persons, and the process of commencing a garnishee suit.

What exactly is a garnishee suit?

A garnishee suit is simply a lawsuit commenced by a judgment creditor (a party in whose favour a monetary court judgment was passed) for the purpose of securing a judgment enforcement order in the form of an attachment of monetary assets belonging to a judgment debtor (a party against whom a monetary court judgment was given) and in the custody of a 3rd party known as a Garnishee, typically a bank. 

What is the major legal framework governing garnishee suits in Nigeria?

Garnishee suits in Nigeria are governed by the Sheriffs and Civil Process Act of Nigeria (or the “SCPA”) .

How are garnishee suits commenced?

Garnishee suits are commenced usually by heading to the same court that granted the original monetary judgment through an application made ex-parte(without the need to put the judgment debtor on notice) which when granted will be served or brought to the notice of the garnishee who is then required to appear in court and give returns to the court on the statement of the judgment debtor’s account domiciled with them if any.

Can garnishee suits be commenced against any judgment debtor without notice?

No. For some debtors like government agencies, it is presumed rightly that the appropriate garnishee would be the Central Bank of Nigeria (CBN). To commence such a suit against such bodies the prior consent of the Attorney-General of the Federation (AGF) must be sought.

What happens when a garnishee appears in court and lies that an account belonging to the judgment debtor is either empty or not domiciled with them?

This would qualify as perjury that can lead to criminal prosecution.

What happens when the judgment debtors are the banks themselves?

In seeking to enforce a monetary judgment against a bank via a garnishee order, the appropriate garnishee would be the Central Bank of Nigeria.