Why an organization needs an Anti- Money laundering Policy

The Central bank of Nigeria (CBN) in a bid to enhance the efforts of the Special Control unit against Money laundering (SCUML) of the Economic and financial crimes commission (EFCC), issued a directive on the 2^nd of August, 2016 which makes the registration with SCUML a key Know your Customer (KYC) requirement for opening accounts for Designated Non Financial Businesses and Profession (DNFBPs).

This implies that for you to conclude the bank account opening process for your business, you must first of all register and obtain a certificate from SCUML. This is one of the methods the apex financial regulatory institution has adopted to combat money laundering offences.

The phrase “Abacha loot” is not new to every literate Nigerian. The Switzerland government has returned a total of $723 million loot to the Nigerian government in the last ten years while more funds are still expected from other countries where these monies were illegally deposited. I’m sure these huge amounts weren’t ferried to those countries by boat or ship. This simply is an excellent result of a well calculated and coordinated money laundering master plan. The introduction of the Biometric Verification Number (BVN) registration system also forced money launderers to have a rethink before injecting their illicit funds into the Nigerian banking system.

Money laundering was not considered a crime until the 1980s, when the United States congress passed series of law to criminalise it. It is the process through which a criminal attempts to conceal the true origin and ownership of the proceeds of his criminal activities. These criminal activities include drug trafficking, terrorism, fraud, embezzlement, tax evasion and political theft. In simple English, it means changing “dirty money” to “clean money” and making it look as if it came from a legitimate source. The main objective of every launderer is to move, spend and invest monies from his criminal activities and also shield it from detection and taxation.

Money laundering can take several forms which includes smurfing, layering and integration. Smurfing is when a person goes to various banks and makes several deposits on the same day or consecutive days. Layering is the scheme of converting cash into monetary instruments such as stocks and bonds. It encompasses making wire transfers or purchasing expensive assets. Integration is the process of routing money into the banking system to make it appear that it comes from normal business earnings. Since money launderers need to provide an explanation for their wealth to be legitimate, they wire funds to foreign countries which are mostly tax havens. Tax havens are countries with either no or low taxes, which attract deposits and capital investment. They also have bank secrecy laws or customs.

Since the government is finding every possible means of curbing this crime, an organization must also put some internal control mechanism in place in order to shield itself from risks arising out of money laundering and terrorist financing since it is not totally immune as well, hence the need to have an anti money laundering policy in place. The policy if implemented will strongly uphold the organization’s position on money laundering and also provide guidance and information on how the organization deals with money laundering issues.

An organization must ensure it is not used as a conduit for money laundering or financing of other illicit businesses hence the need why the drafting an anti-money laundering policy manual is highly imperative. To drive this policy effectively, a chief compliance officer must be employed. All employees must be made to familiarize themselves with the working of the policy through training programmes to aid the quick understanding of the workings of the policy and how to apply them.

Accepting and managing funds from corrupt persons can severely damage to an organization’s reputation and can undermine public confidence in its ethical standards, since such cases usually receive extensive media attention and strong political reaction, especially if such an organization is publicly quoted.

An organization must be sceptical, alert and suspicious of illicit transactions.

Adeniyi Bamgboye is an advisor on accounting, audit, tax and business. He holds an MBA in financial management and a member of Association of Certified Chartered Accountant (ACCA-UK), Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria (CITN). He can be reached on 08060603156, bamgboyeadeniyi@yahoo.com.