FATF Grey List on High-risk Jurisdictions
The Financial Action Task Force (FATF) statement on high-risk jurisdictions was released on the 21st of October, 2022 in which it recently updated its list of jurisdictions under increased monitoring (otherwise known as “The Grey List”) regarding Proliferation Financing and Terrorism Financing and Money-laundering.
The contents of this statement and their legal effects on countries like Nigeria are as follows :-
– The FATF statement now brings the number of jurisdictions subject to increased monitoring to 23 with the inclusion of the Democratic Republic of Congo & the removal of Nicaragua and Pakistan.
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– The FATF in its statement also called for the application of risk-based approaches in dealing with countries on the list.
– In addition, Myanmar (Burma) has been added to the list of countries designated as “High Risk Jurisdictions” subject to the implementation of TFS-based counter measures.
– Consequently, FIs are required to adopt the recommended approach and measures in dealing with entities from jurisdictions in the updated FATF Grey List.
– The legal effect of this is that any supposed investment coming into Nigeria from any country on the FATF Grey List must be filed as a Suspicious Transaction Report (STR) by Financial Institutions and might be subject to Targeted Financial Sanctions (TFS) pursuant to the Money-laundering Prohibition Act 2022, The Terrorism Prevention & Prohibition Act (TPPA) 2022, and the Central Bank of Nigeria (CBN) Anti-Money-laundering Combating the Financing of Terrorism AML CFT Regulations as well as the CBN TFS Guidelines on Terrorism Financing and Proliferation Financing.
– The failure to bring transactions emanating from jurisdictions on the Grey List can also result in criminal liabilities for professionals involved in such transactions including FIs, Legal Practitioners, Accountants and Venture Capitalist Firms.
CBN Guidelines on Disposal of Non-Permissible Income
The Central Bank of Nigeria CBN Guidelines on the disposal of non-permissible income were released on the 13th of October,2021 and are aimed at standardizing the treatment and disposal of non-permissible income by Non-Interest Financial Institutions (NIFIs) in Nigeria.
This article will be looking at the scope of these Guidelines as well as their relevant provisions on the rules governing non-permissible income disposal and what actually qualifies as non-permissible income for NIFIs.
What is the Regulatory scope and reach of the CBN Non-permissible Income Guidelines?
The Guidelines apply to all NIFIs in Nigeria licensed by the CBN.
Which agency is charged by the CBN with the responsibility of non-permissible income disposal by NIFIs?
In line with CBN Guidelines, the Advisory Committees of Experts (ACEs) for institutions offering non-interest financial services have the responsibility of supervising and monitoring the disposal of non-permissible income by NIFIs.
What exactly is Non-Permissible Income (or NPI)?
NPI is any income that accrues to NIFIs in a Sharia non-compliant manner such as interest income, penalties for delayed payment of debt obligations or any income declared by the ACE of a NIFI as non-permissible according to Sharia.
What are the objectives of the Non-permissible income Guidelines?
The Guidelines were issued to guide the ACE of a NIFI or NIB(Non-Interest Bank) in supervising and monitoring the disposal of NPI by the NIFI.
What are the relevant provisions of the Guidelines on the disposal of NPI?
The Guidelines give the following provisions on non-permissible income :-
– NPI is not an object of ownership of the NIFI and does not confer any ownership rights on it.
– The NPI shall be put in a dedicated NPI account and shall not be co-mingled with the funds of the NIFI.
– The NIFI is under an obligation to dispose of any NPI that accrues to it.
– Disposing the NPI to a charitable cause is regarded as a proper disposal of the NPI on the following conditions :-
- The NIFI does not stand to benefit from the charitable cause in any way, even if by goodwill.
- The charitable cause does not give benefit to any shareholder, director, ACE member or management staff of the NIFI.
- The disposal to the charity shall not be constituted not included as part of the corporate social responsibility of the NIFI.
– The ACE is to ensure that the NIFI does not delay the disposal of the NPI without justifiable cause as any unjustifiable delay shall be tantamount to the NIFI deriving benefit from the NPI.
– The ACE shall submit a quarterly report to the CBN on the disposal of the NPI by the respective NIFI.
– The ACE shall include in its annual report on the financial statements of the respective NIFI, a report on the disposal of the NPI in the required format.