Politically Exposed Persons In Nigeria: Who Qualifies And What Companies Need To Know

INTRODUCTION

The term "Politically Exposed Person” (‘PEP’) was formally defined by the Financial Action Task Force ("FATF") in its Forty Recommendations issued in 2003 as individuals who are or have been entrusted with prominent public functions, initially covering only foreign PEPs.¹ The scope was subsequently broadened in 2012 to include domestic PEPs and international organisation PEPs, in alignment with the United Nations Convention Against Corruption (the Merida Convention, 2003).² The development of this framework was significantly influenced by high-profile cases of public officials who misappropriated state funds and laundered the proceeds through the international financial system.

This article examines who qualifies as a PEP under Nigerian law, the legal and regulatory framework governing PEPs across different sectors, and the specific compliance obligations and consequences of non-compliance that companies and regulated institutions need to understand.

QUALIFICATION AS A PEP IN NIGERIA

The Money Laundering (Prevention and Prohibition) Act 2022 (‘Money Laundering Act’)³ defines PEPs to include three categories of individuals as follows:

1. Foreign PEPs: Individuals who are or have been entrusted with prominent public functions by a foreign country, for example Heads of State or Government, senior politicians, senior government, judicial or military officials, senior executives of State-owned corporations, and important political party officials.⁴ The Special Control Unit Against Money Laundering ("SCUML") Guidance Note on Politically Exposed Person Due Diligence for Designated Non Financial Businesses and Professions (the "SCUML Guidance Note"), clarifies that persons who hold prominent public functions in countries other than Nigeria, or who represent foreign countries within Nigeria, are Foreign PEPs. Such persons include senior members of the diplomatic corps such as Ambassadors and Chargés d'affaires.⁵
2. Domestic PEPs: individuals entrusted domestically with prominent public functions falling within the same categories as the foreign PEPs.⁶ In determining the prominence of the public function which a PEP holds, the SCUML Guidance Note provides that Designated Non-Financial Businesses and Professions (‘DNFBPs’) should consider the political importance of the office, the importance of the public office to the Nigerian economy and the agencies with judicial or prosecutorial powers particularly senior judicial officials whose decisions are not subject to further appeal, and anti-corruption agencies.⁷ Junior and middle-level positions are not considered "prominent public functions", but officers in such positions acting on behalf of a PEP attract the same enhanced measures applicable to PEPs.
3. International Organisation PEPs: Persons entrusted with a prominent function by an international organisation, including directors, deputy directors, and members of the board or equivalent senior management, and their family members and close associates.⁸ Such organisations include, but are not limited to, the United Nations and its agencies; international and regional development finance institutions such as the World Bank, the International Monetary Fund, and the African Development Bank; development agencies of foreign governments such as United States Agency for International Development (‘USAID’) and Department for International Development (‘DFID’), and international humanitarian organisations with special status such as the International Committee of the Red Cross and the Red Crescent.⁹

The PEP framework has been extended to family members and close associates. Family members are individuals related to a PEP either directly or through marriage or similar civil forms of partnership, including adoption. Close associates are individuals closely connected to a PEP, either socially or professionally.¹⁰ A company that conducts rigorous due diligence on a PEP customer but fails to identify and extend the rigorous due diligence to the PEP’s spouse will have satisfied the letter, but not the spirit, of the applicable obligations.

It is pertinent to note that the Money Laundering Act does not provide for the automatic cessation of PEP status upon a person leaving public office. The designation persists for as long as the risks associated with the person's prior position remain relevant, consistent with the FATF risk-based approach that underpins Nigeria's AML/CFT framework. In practice, a retired governor, a former military general, or a former head of a government agency may continue to attract PEP-related obligations even after vacating their position. 

LEGAL AND REGULATORY FRAMEWORK GOVERNING PEP IN NIGERIA

Nigeria's PEP compliance framework is built on an interlocking set of primary legislation and sector specific regulations and supervisory guidance. Each law, regulation and guidance note identifies the supervisory body responsible, the entities it governs, and the specific obligations it imposes. The major laws and regulations are as follows:

1. The Money Laundering Act serves as the primary statute governing AML/CFT obligations in Nigeria and applies to all financial institutions and DNFBPs. It sets out the core PEP obligations, requiring financial institutions and DNFBPs to identify PEPs, obtain senior management approval before establishing or continuing PEP relationships, establish source of wealth and funds, and conduct enhanced ongoing monitoring¹¹.
2. The Special Control Unit Against Money Laundering ("SCUML"), established under the Money Laundering Act¹² is a department of the EFCC which is responsible for the administration of the Economic and Financial Crimes Commission (Anti-Money 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 (‘EFCC AML/CFT’). SCUML also administers the Guidance Note on Politically Exposed Person Due Diligence for DNFBPs, 2022, which provides direction to DNFBPs on PEP identification, risk assessment, and the appropriate level of customer due diligence applicable to each PEP category.
3. The Central Bank of Nigeria (‘CBN’) administers the CBN (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation of Weapons of Mass Destruction in Financial Institutions) Regulations, 2022 (‘CBN AML/CFT/CPF Regulations’) which governs banks and other financial institutions under CBN’s supervision.¹³
4. The Securities and Exchange Commission (‘SEC’) administers the SEC (Capital Market Operators Anti-Money Laundering, Combating Terrorism Financing and Proliferation Financing) Regulations, 2022 (‘SEC CMO AML Regulations’) which govern Capital Market Operators (‘CMOs’) including stockbrokers, issuing houses, fund managers, investment advisers, custodians, and registrars, licensed by the SEC.
5. The National Insurance Commission administers the National Insurance Commission (Anti-Money Laundering and Countering the Financing of Terrorism) Regulations, 2013, which applies to insurance institutions including their agents and insurance brokers and all insurance transactions.
6. The Corporate Affairs Commission ("CAC") administers the Companies and Allied Matters Act, 2020 ("CAMA") and the Persons with Significant Control Regulations, 2022 ("PSC Regulations"), made pursuant to the CAMA.¹⁴ The CAMA and PSC Regulations¹⁵ require all companies and limited liability partnerships to identify and disclose their Persons with Significant Control, being individuals who directly or indirectly hold at least 5% of shares or voting rights, or who otherwise exercise significant influence or control over a company or limited liability partnership, to the CAC. Part of the information required to be disclosed is whether the PSC is a PEP, directly linking the corporate transparency framework under CAMA to the AML/CFT obligations under the Money Laundering Act.

Footnotes

1. FATF, The Forty Recommendations, 2003, Recommendation 6

2. FATF, Guidance on Politically Exposed Persons (Recommendations 12 and 22), June 2013

3. Section 30 of the Money Laundering Act

4. Ibid

5. Sections 2.1 and 2.2(b), SCUML Guidance Note on Politically Exposed Person Due Diligence for Designated Non-Financial Businesses and Professions, 16th November 2022 ("SCUML Guidance Note").

6. Section 30 of the Money Laundering Act.

7. Section 2.3, SCUML Guidance Not

8. Section 30, Money Laundering Act

9. Section 2.2(a), SCUML Guidance Note

10. Section 2.2(b) and (c), SCUML Guidance Note.

11. Sections 4(7) to (9), Money Laundering Act

12. Section 17, Money Laundering Act 

13. Section 3, CBN AML/CFT/CPF Regulations.

14. Section 2, PSC Regulations, 2022

15. 119, Companies and Allied Matters Act, 2020 and Section 4, PSC Regulations, 2022.

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