Money Laundering, Terrorism Financing and The Legal Profession: An Examination of Chapter 2 of the Rules of Professional Conduct 2023.

By Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

The fight against money laundering, terrorism financing, and proliferation financing in Nigeria has intensified in the wake of new means of committing these illegal acts by criminal minds in the nation.[1] Thus, the Nigerian legal framework continues to witness an expansion to accommodate laws and rules to combat the same. 

The Rules of Professional Conduct for Legal Practitioners 2023 were made on June 6, 2023, to provide ethical standards for members of the legal profession in the nation, and Chapter Two of the new Rules made provisions to address money laundering, terrorism financing, and proliferation financing in lawyer-client relationships and the provision of legal services. The inclusion of these provisions is necessitated by the growing risks encountered in the financial sector and the prospect of using independent legal practitioners for the perpetuation of financial crimes, having regard to the fact that they often deal with client money. [2] Chapter Two of the RPC 2023 therefore provides a comprehensive guideline for legal practitioners to identify, determine, assess, and address money laundering and terrorism financing risks. The Rules also establish a Committee of the Nigerian Bar Association, saddled with the responsibility of monitoring compliance with the Rules as well as related functions. The 2023 Rules revoked the RPC 2007, and the revocation took effect on the 31^st of December 2023[3] while the new Rules became effective on the 1^st of January 2024.[4] This article will examine the salient provisions of the RPC 2023 on anti-money laundering and terrorism financing.

Anti-Money Laundering (AML), Combating Terrorism Financing (CTF), and Proliferation Financing (PF) Provisions in the Rules of Professional Conduct 2023.

The amendment of the RPC and the inclusion of rules on anti-money laundering and combatting of terrorism financing gave a new outlook to the Rules of Professional Conduct for Legal Practitioners. The objectives of Chapter Two of the Rules, as stated in Rule 55, include the promotion of compliance with the rule of law and with extant AML/CTF/PF legislations; for the internal self-regulation of members of the legal profession as well as the discipline of erring members in line with laid down procedures; the promotion and enhancement of the lawyer-client confidentiality privilege and ensuring that same is  implemented in a manner that complies with ethical practices and not for the promotion of money laundering or terrorism financing, and the adoption of a risk-based approach to enable legal practitioners identify money laundering and its related situations before their occurrence to foster the proper advice of clients and thus prevent their occurrence. Rule 56 makes the Chapter applicable to all legal practitioners enrolled in Nigeria and as outlined in Section 2 of the Act.

Furthermore, a legal practitioner, under the Rules, has a reporting and compliance obligation[5] including the conduct of an internal risk assessment to address money laundering, terrorism financing, and proliferation financing[6], which must be carried out in all legal arrangements with clients either directly or otherwise, and failure to do so will ground a liability for professional misconduct punishable in accordance with the LPA.[7]  However, where a legal practitioner merely notarizes or certifies a document utilised in a contractual or related transaction, having not prepared the same, the obligations imposed under this part will not bind him.[8] In addition, a legal practitioner is mandated to keep an accurate and current record of clients, both domestic and international, which can aid in the easy identification of such clients, and such records of both clients and transactions must be kept for a minimum period of five years.[9]

It is also the duty of members of the legal profession to set up mechanisms for the implementation of the United Nations’ Targeted Financial Sanction relating to Terrorism and Proliferation Financing, and such mechanisms must provide an adequate procedure for the screening of all their clients to be sure that they do not fall within or are related to entities on the UN Consolidated List or the Nigerian Sanction List.[10] In any case of a positive match, legal practitioners are mandated by the Rules to immediately identify and freeze all the assets of such clients in their possession and forward a report to the NBAAMLC for onward transmission to the Nigerian Sanctions Committee, as well as a suspicious transaction report to the NBAAMLC to be further transmitted to the Nigerian Financial Intelligence Unit for additional analysis on the financial activities of such entities.[11]

As part of the Customer Due Diligence or Enhanced Due Diligence requirements of the Rules, legal practitioners are obligated to identify and assess the money laundering and terrorism financing risks associated with specific services rendered or to be rendered to clients and accordingly develop internal mechanisms, policies, procedures, etc. to control and mitigate the same. Such procedures must reasonably identify their clients and the potential risks and complexities that may be associated with them, and they must ensure that their firms’ standards and policies can address such intricacies as may be associated with them.[12] It is expected that where a legal practitioner lacks the requisite expertise to carry out effective client due diligence and enhanced due diligence, they must seek expert assistance in order to comply effectively with the provisions of the Rules or otherwise decline such client instructions without prejudice.[13]

In determining the categories of risks that may be associated with services rendered or to be rendered by a legal practitioner, the Rules alluded to the fact that while no universally accepted category or methodology exists for assessment, the provisions of the Rules can guide the determination[14]. Risk categories may therefore include geographic risk, client risk, transaction risk, etc. Geographic or country-based risk may be determined taking cognizance of the peculiarities of such countries, including a positive identification by credible sources as financiers of terrorism, corruption, and other criminal activities, terrorist organizations operating within their territories, sanctions, embargoes, or other restrictions by international organizations, or weak regulatory frameworks for countering money laundering or terrorism/proliferation financing.[15]

Client risks may be assessed by determining the nature of the client such as politically exposed persons or persons or entities (natural or juristic) related to a politically exposed person; clients who conduct business or request legal services in an unconventional manner, juristic clients having an unclear structure or whose beneficial ownership cannot be reasonably determined; clients with cash or cash equivalent intensive businesses, clients with subsidiaries in countries posing high geographic risks, businesses having substantial amounts of cash, clients acting on the instructions of an undisclosed principal, clients using financial intermediaries, clients with funds which are obviously disproportionate to their statuses with regards to age, income, occupation, etc., clients suspected to be involved in falsification activities, etc.[16]

Transaction risks may be determined from transactions making use of unusual means of payment, e.g. precious stones; services which request for or depend on client anonymity, payments from unknown third parties or unconventional cash payments, services improperly concealing their beneficial ownership, etc.[17]  It is expedient to state that compliance with the due diligence requirement analyzed above is to be evidenced by the production of a compliance document stating the legal practitioner’s view and understanding of the service sought, together with an affidavit from the client stating the genuineness of the transaction, the source of funds, and other essential information.[18]

Establishment of the Nigerian Bar Association Anti-Money Laundering Committee

Rule 73 mandates the NBA, being a self-regulatory body, to create an ad hoc committee, to be known as the Nigerian Bar Association Anti Money Laundering Committee (NBAAMLC), charged with the responsibility of advising the NBA with the implementation and monitoring of compliance of law firms and legal practitioners with the provisions of Chapter 2 of the Rules.[19] The composition of the NBAAMLC is to take cognizance of persons with adequate training and knowledge on anti-money laundering and terrorism financing, who are persons of repute in the legal profession and have not been found guilty of money laundering or related offences.[20]  The NBA is further obligated to ensure the training of the members of the Committee on the risks of money laundering and terrorism financing, as well as the adequacy, effectiveness, proportionality, and efficiency of the existing policies and measures of control for legal practitioners[21] and the Committee is saddled with the principal responsibility of identifying these risks as well as the adequacy of existing measures and publishing them occasionally. [22]

The Committee will also develop policies and strategies for the identification and review of the profiles of legal practitioners who are at risk of being used or implicated in money laundering or terrorism financing[23] as well as a supervisory framework for verifying the existing ownership information of legal persons and arrangements maintained by lawyers and law firms.[24] Such framework must take cognizance of, among others, the performance by lawyers of risk assessment at the client, firm, and transactional levels; the performance of risk-based customer due diligence; periodic continuing legal education in due diligence, anti-money laundering, and combating terrorism financing themes; procedures to ensure prompt investigation of a lawyer’s misappropriation of a client’s funds or involvement in money laundering and/or terrorism financing; and the prompt reporting of suspicious transactions in a manner that complies with the profession’s ethical duty of confidentiality, among others.[25]

The NBAAMLC may also solely undertake compliance examinations of law firms on a risk-based approach and report the same to the Special Control Unit against Money Laundering (SCUML).[26] The examination template is to be prepared by the committee. [27]

Finally, the Committee is empowered to recommend disciplinary proceedings to the LPDC or take appropriate legal measures against any legal practitioner for the violation of the provisions of Chapter 2 of the Rules. The NBAAMLC is thus the principal arm of the NBA in addressing money laundering and terrorism financing issues.

Conclusion

Chapter Two of the Rules of Professional Conduct 2023 provides a comprehensive framework for addressing money laundering, terrorism financing, and proliferation financing in the legal profession. With emphasis on due diligence in the delivery of legal services, it is expected that a proper implementation of the provisions of Chapter Two will go a long way in aiding the nation’s stance against money laundering, terrorism financing, and proliferation financing.

Keywords: money laundering, terrorism financing, anti-money laundering, proliferation financing, rules of professional conduct for legal practitioners, the Legal Practitioners Act.

Snippet

The Rules of Professional Conduct for Legal Practitioners 2023 were made on June ^6, 2023, to provide ethical standards for members of the legal profession in the nation, and Chapter Two of the new Rules made provisions to address money laundering, terrorism financing, and proliferation financing in lawyer-client relationships and the provision of legal services. The inclusion of these provisions is necessitated by the growing risks encountered in the financial sector and the prospect of using independent legal practitioners for the perpetuation of financial crimes, having regard to the fact that they often deal with client money.

This Article Was Written By: Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

Mr. Oyetola Muyiwa Atoyebi, SAN, is the managing partner of O. M. Atoyebi, S.A.N. & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of litigation practice, and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng  

Contributor: Betseabasi Asuquo

Betseabasi is a member of the Dispute Resolution Team at OMAPLEX Law Firm. She also has commendable legal expertise in litigation practice.

She can be reached at betseabasi.eyo@omaplex.com.ng

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[1] Opudu O.D. and Ogoun S., ‘Money Laundering Conviction Rate and Capital Formation in Nigeria’ Accounting 9 (2023), 121–130. available at https://www.researchgate.net/publication/368226283_Money_laundering_conviction_rate_and_capital_formation_in_Nigeria/citations accessed on January 20, 2024.

[2] Ahiauzu N. and Inko-Tariah T., ‘Applicability of Anti-Money Laundering Laws to Legal Practitioners in Nigeria, NBA V. FGN & CBN’  Journal of Money Laundering Control (2016), available at https://www.researchgate.net/publication/310756672_Applicability_of_anti-money_laundering_laws_to_legal_practitioners_in_Nigeria_NBA_v_FGN_CBN accessed on the 20th of January 2024.

[3] Rule 75 RPC 2023.

[4] Ibid. Rule 76.

[5] Rule 57 (1)

[6] Rule 57 (5)

[7] Rule 57 (2) and (3)

[8] Ibid. Sub-Rule (4)

[9] Rule 58.

[10] Rule 60 of the RPC 2023.

[11] Rule 60 (4).

[12] Rule 61.

[13] Rule 61 (4) (c).

[14] Rule 62.

[15] Rule 63.

[16] See generally Rule 64.

[17] See generally Rule 65.

[18] See Rules 63 (4), 64 (4) and 65 (3) of the RPC 2023

[19] Ibid. 73(1)

[20] 73(2).

[21] 73(3)

[22] 73(4)

[23] 73 (5) and (6)

[24] 73(7)

[25] See Rule 73(8)

[26] Rule 59 (1)

[27] Ibid. Sub-Rule (2)