Investogist - Cash withdrawals from public Accounts to be treated as Money Laundering Offence

On Thursday, The Financial Nigerian Financial Intelligence Unit (NFIU) took steps to mitigate money laundering, terrorist financing, and proliferation of weapons amongst others.

Arise TV reported that new guidelines released by the NFIU on Thursday contained provisions of a framework that also prohibit cash withdrawal from public accounts and ban the payment of estacodes and overseas allowances to civil and public servants in cash. The guidelines were said to be in an apparent drive to complement the recent efforts by the Central Bank of Nigeria (CBN) to tackle terrorism-related financing as well as promote a cashless economy.

The Nigerian Financial Intelligence Unit (NFIU) is the central national agency responsible for the receipt of disclosures from reporting organisations, the analysis of these disclosures and the production of intelligence for dissemination to competent authorities. The NFIU is an autonomous unit, domiciled within the Central Bank of Nigeria and the central coordinating body for the country’s Anti-Money Laundering, Counter-Terrorist Financing and Counter-Proliferation Financing (AML/CFT/CPF) framework.

The Enforcement, Guidelines, and Policies for Mitigation of Money Laundering, Terrorist Financing, Proliferation of Weapons and Prevention of Predicate Crimes, was signed by the NFIU Director/Chief, Mr. Modibbo Hamman Tukur, and made available to the press.

Tukur said the Unit supports the CBN’s circular on cash withdrawal limit which is in harmony with the law, provided in Section 2 of the Money Laundering (Prevention and Prohibition) Act, 2022 (MLPPA, 2022), adding that the new guidelines will support the efforts of the apex bank.

The enforcement and/or implementation of the guideline by all public authorities, institutions, and organisations in the financial sector, financial institutions, and designated non-financial institutions will commence on March 1, 2023.

Speaking further, Mr. Hamman Tukkur said that the discontinuation of cash withdrawal in naira and foreign denominations from public accounts at federal, state, and local government levels were in compliance with its statutory responsibility under Section 3(1) a – s and Section 23 (2) a of the NFIU Act, 2018, and other provisions under the MLPPA, 2022.

He further explained that the new guidelines released by his agency became necessary after the provisions and enforcement requirements of the law, particularly Sections 2 and 13 of the MLPPA, 2022, Section 26 of the Proceeds of Crime (Recovery and Management) Act, (POCA) 2022, and the CBN circular on the revised cash withdrawal limits, issued pursuant to its powers under the CBN Act, 2007, and Banks and Other Financial Institutions Act, 2020 was put into consideration.

The NFIU Chief noted that the Unit had in the process of its financial transactions analysis observed that civil servants were, “becoming more and more vulnerable to money laundering and its predicate offences due to their exposure to cash withdrawals from public accounts.”

According to him, the NFIU analysis spanning 2015 to 2022, showed that the federal government, states, and local governments withdrew N225.72 billion, N701.54 billion, and N156.76 billion respectively – all in cash.

The NFIU chief executive explained: “The cash withdrawals directly contravene the provisions of the MLPPA, 2022 and the Proceeds of Crime (Recovery and Management) Act, 2022 (POCA, 2022) which provide the legal framework setting limitations on cash transactions and sanctions for infringement of the provisions.

“Section 2 of the MLPPA, 2022 restricts cash payments of a sum exceeding N5 million (or its equivalent) for individuals, and N10 million or its equivalent for a body corporate. Section 19 of the MLPPA, 2022 imposes a fine of at least N10 million or imprisonment for a term of at least three years (or both), in the case of individuals; and a fine of N25 million in the case of a body corporate. Section 26 of POCA, 2022 makes provision for the seizure and detention of cash over the prescribed amount under the law.”

Tukur explained that most cash withdrawals from public accounts were in excess of N5 million and N10 million respectively which was prohibited and liable to imprisonment upon conviction.

He stated that, “The breach of this particular provision became so rampant because there are heavy withdrawals of cash from public accounts necessitated by inflation and changes in the economy, and also due to payment for overseas travels in terms of estacode and other overseas allowances.”

He stressed that by the principles of Section 2 (Cash Transaction Outside Financial Institutions Limit), and Section 13 (Use Of New Products, Business Practices and New Technologies) of the MLPPA, 2022, cash withdrawals must be prohibited in order to mitigate the risk of exposure of public servants to these crimes and protect the financial system from continuous abuse.

However, he noted that, “In the meantime, this is not only indicting chief accounting officers of Ministries Departments and Agencies (MDAs) but in the context of Nigeria’s democracy, it gives room for adversaries, political opponents and antagonists to exploit the law against their competitors, or to their individual political advantage.”

The NFIU director further maintained that, “Considering the provisions of Section 13 of the MLPPA, 2022, which depicts that in the light of the vulnerability stated above and risk, there must be a redesign of products and technologies to respond to new circumstances and developments which directly applies in this particular case, for the protection of the innocent public servants against terms of imprisonment.”

He said, “Sections 3(1)(e),(n), and (l) as well as 23(2)(a) of the NFIU Act empower the Unit to respond in line with our primary duty and issue guidelines, advise, monitor and report compliance on this to law enforcement and prosecutorial authorities.

He said going forward, any individual or corporate body who violates the provisions of these guidelines is in direct contravention of provisions of Section 2 of MLPPA, 2022, Section 13 of MLPPA, 2022, NFIU Act, 2018 and Section 26 of POCA, 2022.

According to him, such violations would be liable to necessary prosecution and penalties from the effective said date, adding that cash withdrawals from public accounts would be treated as a money laundering offence.

Tukur added that although the guideline is meant to enforce the provisions of Sections 2 and 13 of MLPPA, 2022, to discontinue cash withdrawal from public accounts and establish a clear audit trail, and mitigate corruption and other vices in public expenditure – it is also aimed at supporting law enforcement and the entire criminal justice system by strengthening transparency in the investigation.

He said, “By these guidelines, the local government N500,000 cash withdrawal limit with regards to public accounts and instituted funds are hereby discontinued. These guidelines supersede and repeal the N500,000 cash withdrawal limit of local government funds and also, since it is for a criminal purpose, supersedes the CBN’s regulation on cash withdrawal limit with regards to public accounts and instituted funds.

“There is nothing in these guidelines to suggest or indicate there is reason to compel or warrant a public official at federal, state, and local government to go to a financial institution to withdraw cash. In the unlikely event that a public official feels he may need cash withdrawal, he may apply for approval for a waiver from the Presidency which may be granted on a case-by-case basis.

“Under no circumstance, shall any category of public officers be given a standing or continuous waiver to withdraw cash from any public account in any financial institution or designated non-financial institution.”

He said, “The application of these guidelines includes all foreign missions operating in Nigeria, accounts of all development partner institutions, and the accounts of all instituted funds in form of independent funds to be operated as mutual funds such as insurance funds, cooperative funds, brokerages funds, political party funds or pressure group/union funds, once the funds are designated to exist as funds or to operate independently for management and/or investment.”