The Expanding Scope of Lawyers’ AML/CFT Obligations In Nigeria: Compliance Duties Under Scuml and the Money Laundering (Prevention And Prohibition) Act 2022

CONTRIBUTOR: IYANUOLUWA ANIMASAUN

Introduction

Nigeria’s anti-money laundering framework has evolved to classify lawyers and law firms as “gatekeepers” subject to regulatory oversight. The Money Laundering (Prevention and Prohibition) Act 2022 (MLPP Act 2022) repealed the 2011 regime and expressly empowers the Special Control Unit against Money Laundering (SCUML) of the Economic and Financial Crimes Commission to regulate designated non-financial businesses and professions (DNFBPs), including law firms. This development imposes clear AML/CFT obligations on Nigerian legal practitioners—particularly regarding customer due diligence (CDD), reporting, and record-keeping—thereby displacing the former assumption that legal practice fell outside the scope of financial regulation.

Legal Framework

The MLPP Act 2022 confers broad regulatory powers on SCUML to register, monitor and sanction DNFBPs. ^[1] Section 30 of the MLPP Act 2022 designates categories of DNFBPs, while implementing SCUML regulations expressly include “law firms, notaries, and other independent legal practitioners” within its scope. The MLPP Act 2022 required all existing law firms to register with SCUML within three months of its commencement.

SCUML’s mandate extends to ensuring compliance with AML/CFT obligations by regulated entities. Accordingly, lawyers must implement AML/CFT programmes, including risk-based policies and the appointment of compliance officers, in line with obligations imposed on other DNFBPs. ^[2] The MLPP Act 2022 also prescribes specific reporting thresholds and duties. For instance, section 11(1) of the MLPP Act 2022 requires DNFBPs, including lawyers acting in designated capacities, to report any cash transaction exceeding ₦5,000,000 for individuals or ₦10,000,000 for corporate entities to SCUML within seven days. In addition, lawyers must comply with applicable directives, including the Federal High Court’s 2024 Order, which reinforces due diligence and reporting obligations.

Compliance Obligations for Lawyers

The SCUML Regulations define the circumstances in which AML/CFT obligations apply to lawyers. These obligations arise only in connection with specified activities, not routine legal advice. The Regulations provide that the reporting and CDD obligations of law firms arise where they render services to, or carry out transactions for, clients in areas such as real estate transactions, the management of client money or securities, and the formation or management of companies or trusts.

In practical terms, where a lawyer assists a client in purchasing property or handles client funds (whether as legal fees or in escrow), the law requires full CDD. This includes verifying the client’s identity, source of funds, and beneficial ownership. Where these conditions apply, the lawyer must also comply with applicable reporting obligations. ^[3]Specifically:

• Registration with SCUML: All law firms must register as DNFBPs and renew such registration annually.
• Customer Due Diligence: Lawyers must identify and verify clients and beneficial owners in relation to specified transactions and retain records of client identification and transaction data in accordance with statutory requirements.
• Currency Transaction Reports (CTRs): Lawyers must report any single cash transaction (deposit, lodgement, or transfer) exceeding ₦5,000,000 for individuals or ₦10,000,000 for corporate entities within seven days of the transaction.
• Cash-Based Transaction Reports (CBTRs). Lawyers must report any single cash transaction exceeding US$1,000 (or its naira equivalent) within seven days.
• Suspicious Transaction Reports: Lawyers must submit Suspicious Transaction Reports (STRs) to the Nigerian Financial Intelligence Unit where they know, suspect, or have reasonable grounds to suspect that funds constitute the proceeds of crime, in accordance with sections 7–10 of the Money Laundering (Prevention and Prohibition) Act 2022. This obligation applies irrespective of whether any monetary threshold is met.^[4]

In sum, while routine legal services (such as court representation) do not constitute specified activities, lawyers engaged in transactional work must operate in a manner comparable to financial institutions. They must conduct CDD, monitor transactions, and ensure timely reporting of large or suspicious transactions. The MLPP Act 2022 and the SCUML Regulations also require law firms to implement effective compliance programmes, including risk assessments, staff training, and internal policies and controls.

Professional Privilege vs Statutory Duties

These obligations directly engage the lawyer’s duty of confidentiality. Nigerian law generally protects legal professional privilege and the solicitor’s duty of secrecy.^[5] However, the MLPP Act 2022 introduces a limited statutory exception. It provides that legal professional privilege and client confidentiality do not apply to specified activities under the MLPP Act 2022, such as the purchase or sale of property or businesses, the management of client funds or securities, the opening of bank accounts, and the creation or management of companies or trusts.

Accordingly, lawyers cannot rely on privilege to refuse to disclose or report such transactions. This statutory limitation has generated significant concern, as it compels lawyers to disclose client information in circumstances that would ordinarily be protected by confidentiality. It also raises potential conflicts with professional ethical obligations, including Rule 19(1) of the Rules of Professional Conduct for Legal Practitioners, and constitutional protections, particularly the right to privacy under section 37 of the Constitution of the Federal Republic of Nigeria 1999 (as amended), as argued in ongoing litigation.^[6]

JUDICIAL AND REGULATORY DEVELOPMENTS

Lawyers have actively challenged these obligations. Under the earlier Money Laundering (Prohibition) Act 2011 regime, the Nigerian Bar Association (NBA) obtained court orders in 2014 and 2017 that invalidated the SCUML certification and DNFBP registration requirements for legal practitioners on constitutional grounds. In subsequent litigation, including FRN v Ozekhome (2021), the Court of Appeal held that a lawyer had no duty to investigate the source of a client’s fees, thereby relieving legal practitioners of any obligation to determine whether such funds constituted proceeds of crime.^[7]

More recently, the courts have revisited these issues under the MLPP Act 2022. In July 2024, the Federal High Court, Abuja, declared unconstitutional the provisions of the MLPP Act 2022 imposing reporting and regulatory obligations on lawyers. The Court, per Egwuatu J, held that sections 6, 7, 8, 9, 11, and 30 of the MLPP Act 2022, as applied to legal practitioners, contravened constitutional guarantees and established rules of professional conduct. The Court granted the reliefs sought by the NBA, thereby nullifying the requirement for lawyers to disclose client transactions and to register with SCUML to operate bank accounts. This decision reflects judicial recognition of the primacy of legal professional privilege, although its ultimate effect remains subject to appellate review.

Notwithstanding these decisions, lawyers cannot assume blanket immunity from AML/CFT obligations. Judicial intervention has primarily curtailed the imposition of DNFBP-style regulatory burdens on legal practitioners; it has not displaced the application of general anti-money laundering laws or professional responsibilities.^[8] Accordingly, where a lawyer deliberately ignores clear indicators of money laundering—for example, the receipt of unusually large fees from manifestly illicit sources—the lawyer may still incur criminal liability or professional sanctions. The evolving jurisprudence therefore preserves confidentiality in principle, while requiring lawyers to exercise vigilance to avoid facilitating illicit financial activity.

INTERNATIONAL STANDARDS

Nigeria’s evolving framework aligns substantially with international anti-money laundering standards. The Financial Action Task Force (FATF), in Recommendation 22, requires jurisdictions to regulate lawyers only when they engage in specified non-legal or transactional activities, similar to those recognised under Nigerian law. FATF guidance further clarifies that where a lawyer’s services fall outside these defined activities, formal AML/CFT obligations do not arise.

Notwithstanding this limitation, the FATF emphasises a risk-based approach to legal practice. Even where reporting obligations do not strictly apply, lawyers should take reasonable steps to prevent the misuse of legal services for money laundering. This may include client screening, heightened scrutiny in high-risk transactions, and limited inquiries into suspicious circumstances. ^[9] Comparative practice reflects a similar approach. For example, the United Kingdom exempts pure legal advice from customer due diligence requirements. Still, it retains an obligation to file suspicious transaction reports where necessary, while several European jurisdictions restrict reliance on legal professional privilege when the lawyer actively facilitates a transaction.

Overall, international best practices underscore the importance of internal compliance mechanisms, including staff training, risk assessments, and robust control systems, particularly for law firms engaged in corporate or financial transactions.

Challenges and Ethical Implications

The intersection of AML/CFT obligations with legal ethics creates practical and interpretive difficulties. Lawyers express concern that strict reporting duties may erode client trust and expose confidential information unnecessarily. Uncertainty also persists as to the boundary between privileged legal advice and reportable transactional activity. Critics contend that the breadth of section 11(4) of the MLPP Act 2022 risks capturing aspects of routine legal work traditionally protected by confidentiality. In the absence of clear regulatory guidance, many law firms struggle to determine when a transaction falls within the scope of regulated activities. In addition, the framework relies heavily on self-reporting, which raises enforcement concerns, particularly given the SCUML’s limited supervisory reach over legal practitioners compared to financial institutions.

From an ethical standpoint, lawyers must balance competing obligations. Failure to report a known or suspected money laundering transaction may attract criminal liability or professional sanctions under the MLPP Act 2022. Conversely, disclosing client information without a clear statutory basis may breach confidentiality and infringe client rights. Commentators, therefore, caution that a lawyer who disregards obvious indicators of illicit activity may still incur serious legal and professional consequences. This tension remains unsettled, pending appellate clarification and possible legislative reform. In the interim, many practitioners adopt precautionary measures, including enhanced due diligence in high-risk transactions, particularly those involving corporate or trust structures, and seeking guidance from SCUML or independent legal advisers where uncertainty arises.^[10]

RECOMMENDATIONS AND SAFEGUARDS

Given the current legal landscape, lawyers and regulators should adopt a balanced and principled approach:

• Clarify statutory scope: The National Assembly or the SCUML should refine the language of the MLPP Act 2022 and its implementing regulations to ensure that pure legal advice and advocacy remain exempt, in line with legal professional privilege. Any reporting obligation should be expressly tied to clearly defined activities, for example, those enumerated in the SCUML Regulations. Regulatory guidance should also confirm that privilege subsists in non-commercial legal engagements.
• Implement risk-based policies: Law firms should establish AML/CFT compliance programmes in accordance with section 10 of the MLPP Act 2022 and applicable SCUML requirements. These measures should include the appointment of compliance officers, periodic risk assessments, staff training on identifying suspicious indicators, and the implementation of CDD procedures for relevant transactions. Smaller firms may adopt simplified tools, such as checklists or templates, to screen clients engaged in commercial transactions.
• Maintain records carefully: Lawyers should retain records of reportable transactions and CDD information, as required by law, in secure and confidential systems. Where appropriate, lawyers may seek client consent to disclose to regulatory authorities, provided that such steps comply with professional ethical standards. Any disclosure should be strictly limited to required information, such as transaction details and client identity, and must not extend to privileged legal communications.
• Professional guidance and education: The NBA should issue comprehensive guidelines on AML/CFT obligations for legal practitioners, with particular emphasis on the interface between regulatory compliance and legal professional privilege. Continuing Legal Education programmes should reinforce these obligations and promote best practices. Collaboration between SCUML and the NBA may facilitate the development of sector-specific “know your client” standards that reflect both legal and ethical considerations.
• Judicial clarification: In light of ongoing litigation, legal practitioners should remain apprised of judicial developments. Appellate courts, and ultimately the Supreme Court, are best positioned to provide definitive guidance on reconciling AML/CFT obligations with constitutional rights and professional duties. Pending such clarification, lawyers may seek judicial direction in appropriate cases to safeguard client confidentiality.

Conclusion

Lawyers in Nigeria can no longer treat AML/CFT compliance as optional. The MLPP Act 2022 and the SCUML Regulations have formally brought legal practitioners within the regulatory framework, particularly where they engage in transactional or financial activities on behalf of clients. Although recent judicial decisions have curtailed aspects of overbroad enforcement, the statutory regime remains operative and imposes substantive compliance obligations. Accordingly, lawyers must implement appropriate safeguards, including effective due diligence, client screening, and internal control systems, to meet these requirements without unduly compromising legal professional privilege. Achieving this balance will require clear regulatory guidance and a measured approach; however, the era of discretionary compliance has definitively ended.

Reference:

1. Part II Rule 5 Economic And Financial Crimes Commission (Antimoney Laundering, Combating The Financing Of Terrorism And Countering Proliferation Financing Of Weapons Of Mass Destruction For Designated Non-Financial Businesses And Professions, And Other Related Matters) Regulations, 2024 ↑
2. Part II Rule 9 Economic and Financial Crimes Commission (Antimoney Laundering, Combating The Financing Of Terrorism And Countering Proliferation Financing Of Weapons Of Mass Destruction For Designated Non-Financial Businesses And Professions, And Other Related Matters) Regulations, 2024 ↑
3. Check https://www.scuml.org/wp-content/uploads/2019/08/AML-CFT-COMPLIANCE-GUIDELINES-FORDNFIS1.pdf#:~:text=%EF%82%B7%20To%20make%20Currency%20Transactions,the%20date%20of%20transaction%20via accessed on 24th April 2026. ↑
4. Check https://www.scuml.org/wp-content/uploads/2019/08/AML-CFT-COMPLIANCE-GUIDELINES-FORDNFIS1.pdf#:~:text=%EF%82%B7%20To%20make%20Suspicious%20Transaction,Regulations%202013%20for%20more%20details accessed on 24th April 2026. ↑
5. Evidence Act 2011, section 195 ↑
6. Check https://www.thecable.ng/court-expunges-sections-of-law-compelling-lawyers-to-reveal-clients-financialtransactions/#:~:text=A%20federal%20high%20court%20in,financial%20transactions%20of%20their%20clients accessed on 24^th April 2026. ↑
7. Checkhttps://www.scirp.org/journal/paperinformation?paperid=94423#:~:text=In%20a%20considered%20judgment%20delivered,decision%20of%20the%20Federal%20High accessed on 24th April 2026. ↑
8. Check https://www.lexology.com/library/detail.aspx?g=b0937ab6-bd18-4db9-a0d9-bdcdf0bf6662#:~:text=against%20Money%20Laundering,KYC%20or%20CDD%20on%20clients accessed on 24th April 2026. ↑
9. Check https://www.lexology.com/library/detail.aspx?g=b0937ab6-bd18-4db9-a0d9-bdcdf0bf6662#:~:text=The%20removal%20of%20legal%20practitioners,their%20dealings%20with%20clients%20and accessed on 25^th April 2026. ↑
10. Check https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/Risk-Based-Approach-Legal-Professionals.pdf.coredownload.inline.pdf#:~:text=22,Accordingly%2C%20legal accesed on 25^th April 2026. ↑