LAW 89
THE GUARDIAN, Tuesday, February 26, 2013
NBA and anti-money laundering/terrorism control: Matters arising HE National Executive Committee T (NEC) of the Nigerian Bar Association (NBA) has mandated the NBA to drag the Federal Government, the Economic and Financial Crimes Commission (EFCC), the Federal Ministry of Trade and Commerce to Court over the recent directive of the Special Control Unit Against Money Laundering (SCUML), that lawyers must register with the Unit before February 1, 2013 in order to ensure compliance with the Money Laundering Act 2011 (MLA) as part of the country’s Anti- Money Laundering and combating of the Financing of Terrorism (AML/ CFT) regime The association took this position after serious discussions on the issue, the NBA president, Okey Wali (SAN) had briefed the association on his interactions with officers of the Unit who visited him at the NBA secretariat in Abuja to seek collaboration with the NBA on how to implement this law with respect to Nigerian Lawyers. He promptly invited the officers of the Unit to come and explain their position to Nigerian lawyers at their NEC meeting in Makurdi, Benue State. At NEC, officers of the agencies involved made efforts to explain their position on the matter and concluded that the law as it were, was not properly drafted, because the Unit never expected lawyers to report every transaction above 1,000 Dollars to the unite as presently contained in the law, rather the law expects the lawyer to report suspicious transactions of that amount to the Unit. Thereafter, a memorandum by the Lagos branch of the NBA to the NEC on the same issue was circulated , read and the matter seriously discussed. Thereafter, NEC decided to go to Court to challenge the validity of the law. NEC considered as unacceptable and a violation of the law on confidentiality, the direction of the Economic and Financial Crimes Commission (EFCC) that Legal Practitioners in Nigeria should report to it lodgments in the bank of money above one thousand US Dollars on behalf of their clients and authorized the leadership of the Association to institute legal action in court challenging the law if the need arises. The Lagos NBA memo reads in part: “The Lagos branch has noted with concern the recent directive of the special Control Unit Against Money Laundering (SCUML) that lawyers must register with the unit before 1st February, 2013 in order to ensure compliance with the Money Laundering Act 2011(MLA) as part of the country’s Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. According to Section 5(6) of the legislation, there is a daily fine of
N250,000.00 for failure of any DNFIs (Designated Non-Financial Institution) to comply with the law’s customer identification requirements and failure to submit transaction returns every 7 days. “The Money Laundry Act, 2011 defines DNFIs as “dealers in jewellery, cars and luxury goods, chartered accounts(sic), audit firms, tax consultants, clearing and settlement companies, legal practitioners, hotels, casinos, supermarkets, or such other businesses as the Federal Ministry of Commerce may from time to time designate”. Legal practitioners are listed in the law as DNFIs. “The dangers posed by the current AML/CFT regime on Legal Practitioners have been highlighted by the American Bar Association (ABA) in a statement which we quote below: “Lawyers should be extremely concerned because (US) Congress is considering legislation that would impose burdensome and intrusive gatekeeper regulations on lawyers, including measures that could subject the legal profession to key AML compliances of the BSA. Of enacted, this legislation would undermine the traditional role of state courts in regulating lawyers, erode the attorney-client privilege and interfere with the role confidential attorneyclient relationship, impose excessive new federal regulations on lawyers engaged in the practice of law, and impinge on the delivery of legal services in general.” “The requirement for lawyers registration and the rendering of periodic reports on his client’s financial activities are clearly in conflict with the express provisions of the Rules of Professional Conduct for Legal Practitioners in Nigeria (RPV) 2007, the Evidence Act 2011 and the common law rule against self incrimination. The rule which requires a report on every transaction of N150,000.00 and above(less than $1,000) without linking it to suspicion criminal activity impact upon and destroys the Attorney-Client confidentiality rule. While the NBA must support the Federal Government in its efforts to take reasonable steps to combat money laundry and terrorist financing, these actions should be conducted in a manner that is consistent with the ethical rules and standards that regulate our profession. Accordingly, NBA Lagos Branch wishes to draw the attention of the National Executive Committee to the status of SCUML. The legality of SCUML “The special Control Unit against Money Laundering (SCUML) was established as a specialised unit of the Federal Ministry of Commerce
Okay Wali NBA President and Industry by the Federal Executive Council of Nigeria (Decision N0. EC (2005) 2861) in September 2005. SCUML was given the responsibility of carrying out the statutory role of the then Federal Ministry of Commerce and Industry (FMC & I) as spelt out in the Money Laundering (Prohibition) Act, ML(P)A 2004. “SCUML is NOT one of the agencies set out in either the MLPA 2011 or the MLPA 2004 to regulate DFNIs. Accordingly, the legality of SCUML is doubtful, more so as the Minister is not specifically empowered under the MPLA to set up any such unit and there is no saving provision in MLPA 2011. “Under section 5(4) of the Act, the Minister in the Federal Ministry of Commerce charged with responsibility for matters pertaining to commerce is empowered to make regulations guiding the operations of DBFIs. Section 5(5) enables the EFCC to “demand and receive reports directly from” DNFIs. Under section 5(6), DFNIs that failt to “comply with the requirements of customer identification and the submission of returns” are liable to a daily fine of N250,000 for the period of default. However, it should be noted that by section 5(1), the Minister’s power to make regulations is limited to DFNIs “whose business involves the use of cash transaction”. “It is therefore doubtful whether the Minister can make regulations relating to other aspects of the MLPA which also concerns DFNIs/Legal Practitioners as there is no omnibus clause empowering the Minister to make regulations for the enforcement of other sections of the Act. In addition the extent the SCUML’s mandate is limited by Section 51) to
“occasional cash transactions” by DFNIs. “Furthermore, and as a policy matter (especially in the light of the CBN circular), the FATF have, since 2008, recognised that the 2003 recommendations – on which the MLPA 2011 is clearly based-required review. The current guidelines for the legal profession suggest that AML CFT regulations adopt a risk based approach, as opposed to the “one size fits all” approach manifest in the MLPA 2004 and 2011. The way forward The NBA Lagos Branch humbly submits that: “The requirement for registration should be opposed as being unnecessary and unduly burdensome. The obligation to report should be on the bank where the financial transactions are consummated and they have records of the account owners. Additional Know Your Customer (KYC) requirement should not be predicated on registration with SCUML. Any KYC requirement, which imposes a duty to register with SCML should be opposed as indirect regulation of the legal profession. Banks can carry out their customer checks as much as they can in order to ascertain their customer’s identify and business. It remains the duty of banks to do a KYC of their customers. Other persons not regulated by CBN should not be compelled to be subject to its regulation or that of any other Government agency. “Litigation against the government and its agencies to challenge the validity of the blanket provision requiring registration with SCUML and supervision of legal practitioners by MDAs outside the legal profession is the most viable option The legality of SCUML should be contested, given that there is seemingly no express provision establishing the unit under MLPA 2011, nor is the Minister expressly empowered in that regard. Further, there is no saving provision that may have preserved such a unit under the new regime. Any action would need to be accompanied by an application to restrain the Ministry of Trade and Investment, the EFCC and any other federal agency charged with the enforcement of the legislation from seeking to enforce it during the pendency of the litigation. “Litigation should be instituted that forcing lawyers to submit to AML/CFT laws aimed at tracking money laundering and the flow of cash to terrorists would override solicitor-client privilege and thus violate extant laws/regulations and the Constitution. The 10-year legal
battle between Canadian legal practitioners and the government in the celebrated case of RE: Federation of Law Societies of Canada v. Canada (Attorney General), 2011 BCSC 1270 (CanLII) is a veritable guide as the points of law to be canvassed. The matter was recently decided in favour of the legal practitioners. A full text of the judgment is available a t http://www.canlii.ca/en/bc/bcsc/2011 /2011bcscl270/2011bcscl270.pdf “While litigation is ongoing, the NBA should engage with the government through SCUML, the Federal Ministry of Trade and Investment, the Attorney General of the Federation and the Central Bank of Nigeria (as well as EFCC, SEC, NDLEA etc) to enable the legal profession to be self-regulating in accordance with the most recent FATF guidance. The following areas of engagement are relevant: Persuade the Minister to delegate the AML/CFT responsibility for regulating the legal profession to the NBA or to the Legal Practitioners Disciplinary Committee. “The NBA should investigate the composition of the National Advisory Council of Designated Non-Financial Institutions which is charge with the financial institution against money laundering and countering financial of terrorism in Nigeria. The committee is/was chaired by the representative of ICAN while the Secretariat is located in SCUML. The NBA is supposedly presented on this council. Conclusion “To be seen as a viable self regulatory organ, the NBA needs to prepare and adopt strong AML provisions for the provisions for the profession. In 2008 the FATF issued AML guidance to the legal profession, which proposed a risk based approach, and these documents are all a ready source upon which any Nigerian provisions may be based. “The NBA should liaise with the appropriate Agencies and Ministries, and state clearly in the AML Regulations (yet to be drawn) how the Association intends to take punitive measures against practitioners who aid Money Laundering and Terrorism Financing (assuming there are any) through their firms and expertise. “In the interest of the profession, more emphasis should be laid on the need to ensure that control of the Money Laundering and Terrorism Financing with the aid/assistance of Legal Practitioners be addressed by a committee to be inaugurated by the Nigerian Bar Association for that purpose.”
Crucial legal issues in aircraft lease negotiation By Prince Aderemi OW that there has been a tremendous increase in wet leasing in the aviation industry, the discussion of the legal aspect of aircraft leasing has assumed a significant dimension. For many airlines in Africa and majority in Nigeria, the only way of meeting their aircraft needs is through leasing. The solicitor to a party in an aircraft lease negotiation has certain general and specific duties to perform. It is important to state as a preliminary matter that the solicitor to a party in an aircraft lease negotiation has a general duty of protecting his client’s interest throughout the negotiation preliminaries, documentation and finalization processes. In this connection, he must familiarize himself thoroughly with all aspects of the facts of the transaction and sight all documents and correspondents impacting on or related thereto. He must interview his client thoroughly to find out his commercial desire in entering into the negotiation and, against the background of his legal knowledge, evaluate the reasonable foresee-ability of the fulfillment of such aspiration on the (legal) framework proposed by the other
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mortgage, second mortgage, party. He must as a matter sublease or sub-sub-lease. It of utmost importance is also desirable that the attend every “all parties” or Solicitor should give general other meetings called and legal advice both oral and assist his client with his written on identified or conlegal knowledge in all templated knotty problems deliberations. that may be encountered in This is to say that the solicdocumentation and proceitor should be able to produral matters such as vide sound legal advice that Licensing, registration, dewill assist his client to registration and notification understand the whole of specific interest in transaction and remove Aircrafts to the appropriate unreasonable obligations regulatory bodies. and duties on the part of his Before beginning negotiaclient. tions of an aircraft lease I sugSimilarly, he must be in gest that certain preparatory touch with all the Solicitors Mohammed Adoke, AGF connected with the negotiation and attend the work be undertaken. We have discussed below meetings of all Solicitors especially where the 12 important issues to consider. These may all lease or negotiation is of tripartite or multi-par- seem very basic to experienced attorneys but tite nature. For instance, in a situation where a sometimes a review is helpful. bank is giving an indemnity or guaranteeing Compliance statutory requirements the compliance of the Lessee to the terms of the As negotiation proceeds, the Solicitor involved lease or even in the somewhat complicated will be generally responsible for ensuring that cases of aircraft mortgage, Lease combined with statutory requirements are complied with. He
may have to determine from the Memorandum and Articles of Association of the Company whether the transaction is intra-vires or ultravires. He may be requested to issue a “letter of comfort” to the other party. These he may have to do after due enquiries and verification have been made. It is trite to say that negligent misstatement and willful or fraudulent misrepresentation are actionable against legal practitioners. Transaction to be structured as a teamwork. It is important that the Solicitor makes it clear to his client that the transaction should be a team work. The old adage about too many cooks is certainly applicable to aircraft lease negotiations, particularly, high visibility transactions. It is certain that numerous experts would crop up during and at such negotiations or any other major business transaction. Having a project team makes communication between the parties easier, provides for a division of responsibility and utilizes the appropriate expertise. One suggestion in this regard is to make the team a multi-disciplinary one consisting of lawyers, aircraft engineers, operations, finance and management.
TO BE CONTINUED