POLICY ON ANTI MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM
Money Laundering has emerged as the foremost financial crime in the global economy; hence, the fight against it has become imperative for the global financial system. The continuing threat of Money Laundering through Financial Institutions and Designated Non- Financial Institutions is most effectively managed by understanding and addressing the potential Money Laundering risks associated with customers and transactions.
Money launderers go to great lengths to make their transactions indistinguishable from legitimate ones. Accordingly, it is difficult for an institution to distinguish between legal and illegal transactions, notwithstanding the development and implementation of a reasonably designed risk-based approach in an institution’s anti-money laundering programme. Equally significant and of concern is the increasing use of the financial system to fund and facilitate terrorism. The need to fight this menace has led to development of local and international frameworks to combat financing of terrorism.
Although different in scope and dimension, Anti-money Laundering and Combating Financing of Terrorism are often taken together (AML/CFT), a pattern that is adopted in this document.
1.1 It is against the above background that this AML/CFT Compliance Policy is developed for the guidance of the operations of INTERNATIONAL PACKAGING INDUSTRIES PLC
This Policy is made to:
(a) Provide protection against fraud, reputational and other financial risks.
(b) Minimize the risks faced by our business from the proceeds of Crime.
(c) Guide our staff in the implementation of Know Your Customer (KYC) and Customer Due Diligence (CDD) requirements.
(d) Protect the integrity of business against all forms of abuse, fraudulent and unfair trade practices.
These Regulations apply to the activities of Money Laundering and Financing of Terrorism in Nigeria.
1.2 Roles and Responsibilities
1.2.1 The Company
The Company by approving this Policy will ensure that AML/CFT measures adopted by the Company are sufficiently robust and adequate for the Company’s business. The Company will also bear the responsibility of ensuring that any staff involved in whistle blowing or making suspicious activity reports, are protected from any form of victimization.
1.2.2 Executive Management
The implementation and maintenance of an effective AML/CFT programme that meets the Company’s objectives will primarily be the responsibility of Executive Management led by the MD/CEO. Adequate resource will of course be made available for the implementation, review and control of the AML/CFT programme, including the appointment of a Compliance Officer with the relevant competence, authority and independence to undertake the Company’s AML/CFT Compliance programme.
1.2.3 Compliance Officer
In addition to other regulatory reporting duties, the Primary duty of the Company’s Compliance Officer among other things will include:
i. Developing the AML/CFT Compliance Programme.
ii. Providing Reports to the Board on issues relating to the AML/CFT Programme.
iii. Receiving and vetting suspicious transaction reports from staff.
iv. Filing suspicious transaction reports with the Nigerian Financial Intelligence Unit (NFIU)
v. Rendering “nil” reports with the NFIU where necessary to ensure compliance.
vi. Ensuring that the Company’s compliance programme is implemented.
vii. Co-ordinating and training staff in AML/CFT awareness, detection methods and
Viii. Serving both as Liaison Officer with the NFIU and a point of contact for
all employees on money laundering and financing terrorism issues.
1.3 AML and CFT Institutional Policy Framework
INTERNATIONAL PACKAGING INDUSTRIES PLC shall
(a) Adopt policies stating its commitment to comply with Anti –Money Laundering and Countering the Financing of Terrorism (AML/CFT) obligations under the law and regulatory directives to actively prevent any transaction that facilitates criminal activities;
(b) Formulate and implement internal controls and other procedures that will deter criminals from using its facilities for money laundering and Terrorist financing and to ensure that its obligations under subsisting laws and Regulations are met;
(c) Designate AML/CFT Compliance Officer at the management level, with the relevant competence, authority and independence to implement the institution’s AML/CFT compliance programme;
(d) Comply with the requirements of the Money Laundering (Prohibition) Act, 2011 (as amended), Terrorism (Prevention) Act, 2011 (as amended) and Terrorism Prevention (Freezing of International Terrorists Funds and other Related Measures) Regulations 2013,
1.4 What is money laundering?
Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the “clean” money to the launderer in an obscure and indirect way.
One problem of criminal activities is accounting for the proceeds without raising the suspicion of law enforcement agencies. Considerable time and effort may be put into strategies that enable the safe use of those proceeds without raising unwanted suspicion. Implementing such strategies is generally called money laundering. After money has been laundered, it can be used for legitimate purposes.
Money laundering involves three steps: the first involves introducing cash into the financial system by some means (“placement”); the second involves carrying out complex financial transactions to camouflage the illegal source of the cash (“layering”)’ and finally, acquiring wealth generated from the transactions of the illicit funds (“integration”). Some of these steps may be omitted, depending upon the circumstances. For example, non-cash proceeds that are already in the financial system would not need to be placed.
In practice, the three stages are intertwined and the benefit from many crimes including most financial crimes is not necessarily placed into the financial system.
Money laundering is a crime that is most often associated with banking and money remittance services.
Examples of money laundering
There are several common types of money laundering, including casino schemes, cash business scheme, smurfing schemes and foreign investment/round-tripping schemes. A complete money laundering operation will often involve several of them as the money is moved around to avoid detection.
How do you know if someone’s money is illegal?
One of the clearest signs is that the transaction(s) in question simply don’t make sense for the type of customer or client involved. If the business has unexplainable cash proceeds or irregular transactions that cannot readily be accounted for, then there may well be money laundering at play.
What is the most common way to launder money?
This is done in three main ways:
Moving funds within the financial system; moving funds into unregulated financial e-cash systems and some of the most common methods for this include the use of:
• Anonymous shell accounts;
• Money mules and
• Unregulated financial services
1.5 Terrorist Financing
Terrorism is one of the main contemporary threats to international peace and security. Perpetrators of terrorist acts undermine human rights, fundamental freedoms and the rule of law, which are the pillars of national and international stability.
In Nigeria, legal and regulatory efforts aimed at curbing terrorism and terrorist financing can be located within the Terrorism (Prevention) Act [TPA], 2011[as amended].
The TPA defines the act of financing of terrorism as a person who, directly or indirectly, provides or collects funds with the intention or knowledge that they will be used, in full or in part, in order to:
Commit an offence in breach of an enactment specified in the Schedule to this Act; or
Do any other act intended to cause death or serious bodily injury to a civilian or any other person not taking active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a group of people or to compel a government or an international organization to do or abstain from doing any act.
The key to the prevention of both money laundering and terrorist financing is the adoption of adequate Know Your Client (KYC) and Customer Due Diligence (CDD) measures by the Company both at the commencement of every relationship and an on-going basis thereafter.
2.0 Know Your Customer (KYC)
The purpose of KYC is to establish the identity of the prospective customer and to identify the source of funds. The Company shall put adequate Know Your Customer (KYC) framework in place to identify prospective Customers. The KYC framework shall be designed in such a way that it enables IPI employees to know about the customer in detail including:
b. Residential address;
c. Date of Incorporation/Registration details of Company
e. Employment details/business specialization;
h. Bank account details.
The KYC framework shall be flexible enough to accommodate amendment occasioned by changes in the AML/CFT environment.
2.1 Essential Elements of Know Your Customer (KYC) Standard
The four key elements in the design of a good Know Your Customer (KYC) framework are:
a. Customer Acceptance Policy (CAP)
b. Customer Identification Procedure (CIP)
c. On-going monitoring of all transactions
d. Risk Management.
3.0 Customer Due Diligence
The need for the Company to know their customers is essential to the prevention of money laundering and combating the financing of terrorism. Customer Due Diligence (CDD) is a key element of an internal AML/CFT system.
CDD measures that should be taken by the Company include:
- Identifying the client on the basis of documents, data or information obtained from a reliable and independent source;
- Identifying, where applicable, the beneficial owner and taking risk-based and adequate measures to understand the ownership and control structure of the client;
- Obtaining information on the purpose and intended nature of the business relationship;
- Conducting ongoing monitoring of the business relationship including ensuring that the transactions being conducted are consistent with the knowledge of the client, the business and risk profile, including, where necessary, the source of funds and ensuring that documents, data or information held are kept up to date.
IPI shall identify its customers (whether permanent or occasional; natural or legal persons; or legal arrangements) and verify the customers’ identities using reliable, independently sourced documents, data or information.
In some circumstances, The Company shall apply the Due Diligence measures on a risk-sensitive basis.
3.1 Components of Due Diligence
The components of Due Diligence covered by this manual include Reduced or Simplified Due Diligence, Enhanced Due Diligence (EDD) and Customer Due Diligence (CDD) which shall apply to customer on a case by case basis.
i. Reduced or Simplified Customer Due Diligence
Where there are low risks, IPI shall apply reduced or simplified measures. There are low risks in circumstances where the risk of money laundering or terrorism financing is lower, information on the identity of the client and the beneficial owner of a client is publicly available or where adequate checks and controls exist elsewhere in national systems, or where the volume transacted in is considered low.
The Simplified CDD measures shall not apply to a client whenever there is suspicion of money laundering or terrorist financing or specific higher risk scenarios. In such a circumstance, enhanced due diligence shall become mandatory.
ii. Enhanced Due Diligence (EDD)
Enhanced Due Diligence is a process that has mandated an increased level of monitoring for clients who are considered high-risk. It goes as far as identifying the beneficial owners of entities and understanding their line of business.
4.0 Politically Exposed Persons (PEPs)
When applying EDD measures, the category of PEPs comprises of high-ranking public officials, members of the Legislature and such persons immediate families and close associates. Prominent PEPs can pose a higher risk because their position may make them vulnerable to corruption. Relationships of this nature should obtain the approval of the Compliance Officer and MD/CEO before commencing business with them.
Where the Client is already a client of the firm and has an on-going relationship with us and is identified to be a PEP, approval must be obtained from the Compliance Officer and MD/CEO to continue the business relationship.
1.1 What is a PEP?
In INTERNATIONAL PACKAGING INDUSTRIES PLC, we consider the Risks associated with providing services to individuals or entities that are PEPs and for our purposes rely on the Financial Action Task Force (“FATF”) definition of PEP as follows:
Domestic PEP: Individuals who are or have been entrusted domestically with prominent public functions such as Heads of State or of Government, Governors, Local Government Chairmen, senior politicians, senior government officials, judicial or military officers, senior executives of State-owned corporations, important political party officials, family members and close associates and members of Royal Families and the related businesses of all these groups of persons outlined above.
Foreign PEPs: Individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or of Government, senior politicians, senior government, judicial or military officials, senior executives of State owned corporations and important political party officials and their related businesses.
International Organisation PEPs: Persons who have been entrusted with a prominent function by an international organization.
5.0 Internal Controls, Compliance and Handling of Suspicious Transactions
IPI shall have adequate processes in place to ensure strict compliance with all relevant Laws, Guidelines and Regulations.
All employees shall have adequate knowledge of Anti-Money Laundering and Financing of Terrorism processes as contained in this AML/CFT Compliance Manual.
Compliance Unit shall promptly download and/or obtain from the relevant Regulatory Authorities all new releases such as circulars, laws, guidelines and other regulations on AML/CFT and circularized same to all.
4.1 Reporting Suspicions to the Nigeria Financial Intelligence Unit
The employees of the company will discharge their legal obligation by disclosing their suspicions to the compliance officer in accordance with the company’s internal procedures.
Where the compliance officer validates an internal suspicious transaction report, he or she must report it and the circumstances surrounding it as soon as possible to NFIU in the prescribed format.
4.2 Recording Suspicious Transaction Report
The company must maintain a register of internal suspicious transactions reports received by the compliance officer and all reports made by the compliance officer to NFIU.
Where the compliance officer has not deemed it appropriate to report a transaction reported by an employee, he or she should document the reasons for not submitting it.
5.0 Some AML/CFT Red Flags
- Lack of customer’s concerns about risks, commissions charged or other transactions related costs.
- Customers who are unable to properly articulate the nature of their business or lack the general knowledge of what obtains in the industry.
- Purchase and sale of financial instruments without known business or investment purpose or purchased in an unusual manner.
- Missing information or delaying providing information for verification.
- Clients who are willing to deposit or invest at rates that are not advantageous to him/her, or competitive.
- Customers who attempt to use cash to complete a proposed transaction when the transaction would normally be handled by cheque or another method of payment.
5.1 Record Keeping
Record keeping is an important control mechanism. Where a company suspects an applicant or business or where there is an investigation into the conduct of an applicant or business. The records maintained by the company may prove to be valuable.
5.2 Compliance Monitoring
The compliance officer shall be responsible for implementing and monitoring the day to day operations in accordance with AML/CFT policy. The listed items should also be verified:
The compliance officer should ensure that all supply and purchase orders are received for verification and should have a full completed KYC documentation.
The Company’s clients are generally engaged in printing, design and other related activities.
While we at IPI must accept that the customer is always right, it will not be acceptable for any staff to circumvent procedures in the interest of undue speed, or convenience.
Staff will not be excused from their culpability by the Company and neither will other organizations excuse the culpability of the Company, if wrong procedures or inadequate behavior or negligent treatment of transactions should occur which end up causing a breach of standard rules and regulations, transactional losses/ financial impropriety.
Staff when confronted with a transaction dilemma should ensure the following:
That a full and proper KYC documentation is in place
Enhanced Due Diligence is conducted in the case of:
a. Transactions emanating or involving political persons.
b. Corporate bodies/corporations.
c. Any other accounts in which a fraud or unidentifiable beneficial owner is believed that the Compliance Desk should be informed of the transaction.
It is important to note that there are various agency bodies who should be partnered in order to eliminate the risks inherent in combating Money Laundering and Financing of Terrorism including the Economic & Financial Crimes Commission/NFIU etc.