Senate Passes New Bill Banning Transactions With Shell Banks

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The Senate has commenced moves to ban the establishment and operation of shell banks in Nigeria in order to combat money laundering.

It also seeks to prohibit banks and other financial institutions in the country from having business relationships with shell banks.

The Senate aims to achieve this by repealing the Money Laundering (Prohibition) Act 2011 and enacting the Money Laundering (Prevention and Prohibition) Act 2021.

A shell bank is a bank that has no physical presence in the country in which it is incorporated or licensed, and is not affiliated with a regulated financial group that is subject to effective consolidated supervision.

Shell banks operate by using a post office box address for mailing and other correspondence or by having a representative agent or person who accepts mail on their behalf.

The Central Bank of Nigeria (CBN) had, in 2018, called for the enactment of a law that would prohibit operations of shell banks in the country.

The CBN governor, Mr Godwin Emefiele, made the call at a public hearing organised by the House Committee on Banking and Currency on a bill to amend the Banking and Other Financial Institutions Act (BOFIA) and other bills.

He said shell banks, apart from being used for money laundering, distort the banking system and pose major problems to regulatory agencies.

The Senate, on September 15, 2021, said the new bill, sponsored by Senator Sadiq Umar (Kwara North), has scaled first reading in the Red Chamber.

The bill, according to the sponsor, seeks to provide for an effective and comprehensive legal and institutional framework for the prevention, prohibition, detection, prosecution, and punishment of money laundering and other related offences in Nigeria.

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The proposed legislation, a copy of which was obtained by our correspondent, aims to expand the scope of money laundering offences and provide appropriate penalties; provide protection for employees of various institutions, bodies and professions who may discover money laundering, and enhance customer due diligence.

Subsection 5 of the new bill states that any financial institution that knowingly enters into a relationship with a shell bank or fails to terminate the relationship after realizing that it has entered into a banking relationship with a shell bank commits an offence and is liable on conviction to a fine of N100 million and withdrawal of its license to operate.

The bill also says that an officer of a financial institution who facilitates a banking relationship with a shell bank risks a fine of N10 million or two years’ jail term or both.

Subsection 7 states that a fine of N10 million or two years’ imprisonment or both await a person who establishes or operates a shell bank in Nigeria.

The bill also seeks the establishment of a department under the Economic and Financial Crimes Commission (EFCC) to be known as the Special Control Unit against Money Laundering (SCUML).

Any bank that fails to comply with this provision is liable, on conviction, to a fine of N25 million or more.

About Author

Ife Ogunfuwa is an award-winning reporter who is versed in reporting business and economy, technology, gadgets reviews, telecoms, tax, and business policy review, among others. She loves telling stories behind the numbers. She has professional certifications in business and financial reporting. You can reach her via – [email protected]

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