ANTI-MONEY LAUNDERING 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 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 ensure 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 including the conduct of an internal risk assessment to address money laundering, terrorism financing and proliferation financing, 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. However, where a legal practitioner merely notarises or certifies a document utilised in a contractual or related transaction, having not prepared same, the obligations imposed under the Rules will not bind him. In addition, a legal practitioner is mandated to keep an accurate and current record of clients both domestic and international which can aid the easy identification of such clients and such records of both clients and transactions must be kept for a minimum period of five years.
Members of the legal profession also must 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. In any case of a positive match, legal practitioners are mandated by the Riles to immediately identify and freeze all the assets of such client in their possession and forward a report to the NBAAMLC for onward transmission to the Nigerian Sanctions Committee as well as a Suspicious Transactions Report to the NBAAMLC to be further transmitted to the Nigerian Financial Intelligence Unit for additional analysis on the financial activities of such entities.
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 same. Such procedures must reasonably identify their clients and the potential risks and complexities that may be associated with them and ensure that their firms’ standards and policies can address such intricacies as may be associated with them. It is expected that where a legal practitioner lacks the requisite expertise to carry out effective client due diligence and enhanced due diligence, such must seek expert assistance in order to comply effectively with the provisions of the Rules, or otherwise decline such client instructions without prejudice.
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 in the determination. Risk categories may therefore include geographic risk, client risk, transaction risk, etc. Geographic or country-based risk may be determined by taking cognisance of the peculiarities of such countries including a positive identification by credible sources as financiers of terrorism, corruption and other criminal activities or have terrorist organisations operating within their territories, or are subject to sanctions, embargoes or other restrictions by international organisations, or have weak regulatory frameworks for countering money laundering to terrorism financing. Client risks may be assessed by determining the nature of the client such as politically exposed person or persons or entities (natural or juristic) related to a politically exposed person; clients who conduct business or request legal services in unconventional circumstances, 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. Transaction risks may be determined from transactions making use of an unusual means of payment e.g. precious stones; services which provide or depend on client anonymity, payments from unknown third parties or unconventional cash payments, services improperly concealing the beneficial ownership, etc.
It is expedient to state that compliance with the due diligence requirement analysed 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.