Central Bank of Nigeria (CBN) Guidelines on Targeted Financial Sanctions on Proliferation Financing

The Central Bank of Nigeria Guidelines on Targeted Financial Sanctions (TFS) relating to Proliferation Financing (PF) were released in November, 2022 and were made pursuant to the United Nations Security Council Resolutions, the Financial Action Task Force (FATF) recommendations and the Terrorism Prevention & Prohibition Act 2022.

This article will be focused on dealing with topics of :-

1. The definition of Proliferation Financing.

2. The scope of the CBN Guidelines.

3. The objectives of the CBN Guidelines on Proliferation Financing.

4. The nature of TFS applicable to Proliferation Financing.

5. Obligations imposed under these guidelines.

6. Red flag indicators under the guidelines.

What is the scope of the CBN Guidelines on Proliferation Financing?

The Guidelines apply to all Financial Institutions in Nigeria licensed by the CBN.

What are the objectives of the CBN Guidelines?

The objectives of the Guidelines are :-

1. To assist FIs in complying with the requirements of extant laws and regulations relating to Proliferation Financing.

2. The provision of directions to FIs on implementation of Targeted Financial Sanctions (TFS) to prevent and suppress Proliferation Financing.

3. The provision of directions to FIs on implementation of TFS to prevent and suppress Proliferation Financing in accordance with the relevant United Nations Security Council Resolutions.

What exactly is Proliferation Financing as explained in the Guidelines?

An overview of Proliferation Financing involves the  act of raising funds, moving or making available funds, other assets or economic resources or financing in whole or part to persons or entities for the purposes of manufacturing, acquiring, possessing, stockpiling, storing, developing, transporting, selling, supplying, transferring, importing, selling, supplying, transferring, importing, exporting, shipping, trans-shipment, providing technical training, advice, service, brokerage or assistance related to or using in a non-legitimate capacity any of the following:-

1. Nuclear weapons

2. Chemical weapons

3. Biological weapons

4. Materials related to nuclear, chemical or biological weapons that are proscribed by the extant laws and regulations.

Proliferation Financing is usually carried out in 3 stages which are :-

– Fund raising.

– Disguising the funds raised.

– The procurement of materials and technology.

In what forms are Targeted Financial Sanctions (TFS) effected in cases of Proliferation Financing?

TFS under the CBN Guidelines typically involves the use of measures such as asset freezing, blocking & rejection of transactions by persons to prevent, suppress and disrupt the proliferation of Weapons of Mass Destruction (WMDs) and their financing in line with sanctions imposed by the UN Security Council through its resolutions.

TFS relating to PF are applicable to persons and/or entities designated by the UN Security Council or relevant committees set up by it. 

What are the criteria for qualifying as a “designated person” under the CBN Guidelines?

The criteria for qualifying as a designated person under the CBN Guidelines were actually set by the UN and includes :-

– Any individual, person or entity engaging in or providing support for proliferation-sensitive activities and programs.

– Any individual or entity owned or controlled by designated persons or entities.

– Persons or entities assisting designated persons or entities in evading sanctions.

What are the regulatory obligations imposed on FIs under the CBN Proliferation Financing Guidelines?

The obligations imposed on FIs are the same as contained in the relevant provisions on compliance obligations contained in the Terrorism Prevention & Prohibition Act (TPPA) 2022.

What categories of funds are subject to freezing obligations under the CBN PF Guidelines?

The following categories of funds are among those subject to freezing measures under the CBN Guidelines  on Proliferation Financing :-

1. Cash, cheques, or claims on money.

2. Debts and debt obligations, including trade debts.

3. Insurance and Reinsurance policies.

4. Letters of Credit.

What are FIs required to do under the CBN Guidelines regarding the receipt of additional funds into frozen accounts that usually constitute legitimate or running earnings?

Regarding the receipt of funds which would classify as :-

– Payments due under contracts, agreements or obligations;

– Interests or other earnings;

FIs are required to file a report of the receipt of such funds with the Nigerian Financial Intelligence Unit (NFIU) and where there is no existing account for the receipt of such additional funds the FIs are required to create an escrow account and inform the Attorney-General of The Federation for appropriate further steps to be taken.

What are some of the identifiers classified as “red flag indicators” under the CBN Guidelines on Proliferation Financing?

Red flag indicators under the Guidelines are categorized as red flag customers, red flag transactions and red flag jurisdictions with their descriptions as follows :-

Red Flag Customers

– Having ties to a foreign country of Proliferation concern or a neighbouring or sympathetic country.

– A military or intelligence body connected with a high risk jurisdiction of proliferation concern.

– Where the customer activity does not match his business profile.

Red Flag Transactions

– Involving an individual or entity in a foreign country of Proliferation concern.

Red Flag Jurisdictions

– Having a presence of an industry producing Proliferation-sensitive items or military goods.