Is The Money Laundering Act Valid?

By Abubakar D. Sani, Esq.

Introduction

The Money Laundering (Prohibition) Act, 2011 (MLA) is the pre-eminent legislation for combating money laundering in Nigeria. Apart from this statute (as amended in 2012) however, at least a couple of subsidiary legislations are also applicable. These are the Federal Ministry of Industry, Trade and Investment (Designation of Non-Financial Institutions and other Related Matters) Regulations of 2013 and 2016, respectively.

But, first, what is Money laundering? According to Wikipedia, “It is the conversion or transfer of property; the concealment or disguising of the nature of the proceeds; the acquisition, possession or use of property, knowing that these are derived from criminal activity; or participating in or assisting the movement of funds to make the proceeds appear legitimate. Money obtained from certain crimes, such as drug trafficking is “dirty” and needs to be “cleaned” to appear to have been derived from legal activities, so that banks and other financial institutions will deal with it without suspicion”.

Constitutional Over-view

Nigeria’s federal structure means that our Constitution has divided law-making powers between the National Assembly and State Houses of Assembly, in Section 4(2)-(3) & 4(6)-(7)(a) respectively. The implication of this was expounded in DOHERTY vs. BALEWA (1961)2 NSCC 248 @ 252 where the Supreme Court held that: “The Federal Parliament can legislate for the Federation only on those matters in respect of which it is specifically empowered to legislate under the Constitution”. This was amplified in TOGUN vs. OPUTA (2001)16 NWLR pt. 740 pg. 597 @ 644, where the Court of Appeal held that: “Nigeria is a Federal Republic with a Constitution in which the legislative powers of the National Assembly and the State Houses of Assembly are clearly defined. We have the Exclusive and the Concurrent Lists in which the National Assembly could legislate. This leaves the State Houses of Assembly to legislate exclusively on residual matters not included in either the Exclusive or Concurrent Lists”.

Status of the MLA

The MLA and its amendment were enacted by the National Assembly. The question is: where did the Assembly derive the powers to enact them? Is it contained in either the Exclusive Legislative List or the Concurrent Legislative List of the 1999 Constitution? The answer to this question necessitates a review of the aforesaid Legislative Lists contained in the Second Schedule to the Constitution – juxtaposing them with the provisions of the MLA. Starting with the latter, I believe that the following provisions thereof are problematic:-

• Section 1: which places a cap (of N5million and N10m) on cash payments to or from individuals or body corporates respectively – except through what the Act calls a financial institution as defined in Section 25 thereof;
• Section 3, in so far as it applies to some so-called DNFIs, such as dealers in cars, jewellery luxury goods, hotels, casinos and supermarkets, in respect of which the National Assembly lacks power to legislate;
• Section 4, which requires casinos to keep certain records of their customers;
• Section 5, which imposes additional obligations on the aforesaid DNFIs in terms of their registration with, and declaration of their activities to, the Ministry of Commerce (now Trade) and keeping records of transactions exceeding US$1,000 or its equivalent. It also empowers the relevant Minister to make Regulations guiding the operations of such DNFIs, as well as the EFCC to demand from such DNFIs reports of compliance with its provisions;
• Section 9, which obliges such DNFIs to, inter alia, establish internal audit units, designate compliance officers and undertake regular training of their staff – all for the purposes of the Act;
• Section 10(1), which obliges certain DNFIs – in respect of which the National Assembly lacks legislative power – to report to the EFCC with 7 days, any single transactions, transfer or lodgement of funds in excess of N5m or N10m, as the case may be;
• Section 15 of the Act, which formally prohibits money laundering in Nigeria and specifies the 4 different ways in which it can be committed in relation to any fund or property (which is) the proceeds of an ‘unlawful act’ as defined under the Act;
• Section 16(1)(f), in so far as it applied to Directors and employees of the aforesaid DNFIs;
• Section 25 which defines “Designated Non-Financial Institution” as, inter alia, “dealers in jewellery, cars, luxury goods, hotels, casinos and supermarkets.”

Who can regulate Money Laundering in Nigeria?

I believe the answer to this question will depend on, at least, the meaning of “currency and legal tender” as used in Item 15 of the Exclusive Legislative List of the Constitution. To arrive at a definitive answer, however, we have to juxtapose that provision with those of Item 62 of the Exclusive Legislative List of the Constitution, which empowers the Assembly to regulate “trade and commerce, and, in particular –

• Trade and commerce between Nigeria and other countries, including import of commodities into and export of commodities from Nigeria, and trade and commerce between the states;
• establishment of a purchasing authority with power to acquire for export or sale in world markets such agricultural produce as may be designed by the National Assembly;
• inspection of produce to be exported from Nigeria and the enforcement of grades and standards of quality in respect of produce so inspected;
• establishment of a body to enforce standard of goods and commodities offered for sale;
• control of the prices of goods and commodities designated by the National Assembly as essential goods or commodities; and
• registration of business names”

Identical provisions in Item 61 of the Exclusive Legislative List of the 1979 Constitution were construed by the Supreme Court in ATTORNEY-GENERAL OF OGUN STATE vs. ABERUAGBA (1985)1 NWLR pt. 3 pg. 395, where the court held that the trade and commerce power of the National Assembly is limited to sub-items (a) to (f) of that Item. In other words, that while international trade and commerce, as well as inter-state trade and commerce, inter alia, were exclusively reserved for the National Assembly (including criminal offences arising therefrom – vide Item 68 of Part 1 and Item 2(a) of Part III of the 2^nd Schedule of the Constitution), trade and commerce within a State (as well as crimes arising therefrom) are Residual matters, reserved for State Houses of Assembly.

I believe the implication of this decision – in so far as the provisions of the MLA can be construed as regulating trade and commerce – is that they (or, at least parts thereof) might be ultra vires the National Assembly, vide DOHERTY vs. BALEWA, supra. However, as previously stated, this depends on the proper construction of Item 15 of the Exclusive Legislative List of the Constitution, specifically the words “currency and legal tender” used therein. Is regulating the amounts of cash which can be paid pursuant to a transaction outside a FI or DNFI, incidental or supplemental to the power of the National Assembly to regulate “currency and legal tender” within the contemplation of Item 68 of the Exclusive Legislative List of the Constitution? That is the question.

Assuming, without conceding, that Item 15 of the Exclusive Legislative List of the Constitution empowers the National Assembly to control the value of cash paid in transactions outside so-called FIs and DNFIs, it is surely arguable that, to the extent that those provisions are general, whilst those of Item 62 of that List are special, the latter prevail, on the principle that special things derogate from general things: see ATT-GEN OF THE FED. vs. ABUBAKAR (2007) All FWLR pt. 375 pg. 405 @ 472E and 524, S.C.

I believe the referenced suspect clauses in the MLA (i.e., Sections 1, 3, 4, 5, 9, 10(1), 15, 16(1)(f) and the inclusion of dealers in cars, jewellery, luxury goods, hotels, casinos and supermarkets within the definition of DNFIs in Section 25) mean that, at the very least, the blue-pencil rule ought to be applied to them, removing them from the Act; thereafter, if whatever remains can stand, then they will survive. However, if they cannot stand on their own, the entire MLA ought to be invalidated: see ATT-GEN OF ABIA STATE vs. ATT-GEN OF THE FED. (2002) 5 S.C.M. 1.

I submit that the foregoing is also applicable to Section 15(6) of the Act: its purported categorization of “any criminal act specified in (the) Act or any other law in Nigeria” as the predicate offences (or “unlawful act” to use the language of the Act) in relation to which one can be accused of money laundering under the Act, is obviously too sweeping, as some of those offences are clearly ultra vires the National Assembly.

Examples in this regard include murder, grievous bodily injury, theft, forgery, etc. None of these is a federal offence; I believe that for them to now acquire that character merely because a person is allegedly connected with “any fund or property” which constitutes the proceeds of those crimes is simply far-fetched. Can they be justified even under Item 15 of the Exclusive Legislative List? I doubt it.

Conclusion

I submit that (with limited exceptions) the true intent and purpose of the MLA is to regulate the entire gamut of trade and commerce – both retail and wholesale, domestic and import/export. I believe the provisions of Sections 5(4) and 25 of the MLA put this beyond doubt: they empower the Minister and the Ministry of Commerce (now Industry Trade and Investment), respectively, to regulate the operations of DNFIs and to designate them as such. See the Federal Ministry of Industry, Trade and Investment (Designation of Non-Financial Institutions and other Related Matters) Regulations of 2013 and 2016 referred to above. Arguably, had the National Assembly intended otherwise, it would have domiciled those powers elsewhere other than this particular Ministry.

For the foregoing reasons, I believe that the Act – in it’s entirety – is only applicable to Abuja, by virtue of the fact that the National Assembly legislates for the FCT – vide Section 299 of the Constitution. In the 36 States, the aforesaid problematic provisions of the Act (i.e., Sections 1, 3, 4, 5, 9, 10(1), 15, 16(1)(f) and parts of Section 25) are inapplicable and, it is up to their respective Houses of Assembly to enact their own versions of those provisions – if they so wish – in much the same way that the Administration of Criminal Justice Act and the Child Rights Act are restricted to Abuja, but can be domesticated through separate municipal legislations enacted by the States.

Abubakar D. Sani, Esq.

31^st October, 2020