The Implementation of Targeted Financial Sanctions in Nigeria

By Kenechukwu C. Agagbo Esq. 

Introduction

The implementation of targeted financial sanctions concerning terrorism financing and proliferation financing is intricately intertwined with the broader Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) frameworks. These regulatory regimes necessitate the criminalization of terrorism, terrorism financing, and proliferation financing, alongside the establishment of expedited measures for freezing funds. Such measures aim to prevent individuals or entities from illicitly benefiting from assets or engaging in prohibited financial transactions.

The Financial Action Task Force (FATF), serving as a global standard-setting body, has delineated Recommendations 6 and 7 pertinent to targeted financial sanctions. Recommendation 6 underscores adherence to United Nations Security Council resolutions pertaining to the prevention and suppression of terrorism and terrorist financing. Conversely, Recommendation 7 underscores compliance with UN Security Council resolutions aimed at curbing the proliferation of weapons of mass destruction and associated financing.

Encouraging member states to adopt and integrate these recommendations into their domestic legal frameworks, FATF emphasizes their significance in bolstering international endeavours to combat terrorism and the proliferation of weapons of mass destruction. The paramount responsibility for upholding global peace and security, enshrined in Article 24 of the United Nations Charter, underscores the obligation of member states under Articles 25, 48, and 49 to enforce and implement UN Security Council resolutions.

In enforcing targeted financial sanctions related to terrorism financing and proliferation financing, the UN Security Council has instituted a designation process. This process entails the listing of terrorists, terrorism financiers, and proliferation financiers in the UN Consolidated List. Subsequently, punitive financial measures, such as freezing funds and other economic resources, are promptly imposed on designated individuals or entities in accordance with UNSCs Resolution 1267 and 1373, and their successor resolutions. This proactive approach aims to disrupt illicit financial activities and thwart efforts to support terrorism or facilitate the proliferation of weapons of mass destruction.

As a member state, Nigeria has ratified and incorporated Recommendations 6 and 7 into the Terrorism (Prevention & Prohibition) Act (TPPA) 2022. This legislative measure not only established the National Counter-terrorism Centre but also instituted the Nigeria Sanctions Committee (NSC). These organs of the government are instrumental in ensuring the effective implementation of international norms and standards set forth by FATF and the United Nations.

This paper shall elucidate the underlying aims and objectives of targeted financial sanctions, while concurrently spotlighting the consequential impact of the TPPA 2022 on the implementation of such sanctions within Nigeria’s regulatory landscape.

Aim and Purpose of Targeted Financial SanctionsTop of Form

The primary aim and purpose of targeted financial sanctions (TFS) are to exert diplomatic and economic pressure on individuals, entities, or countries in order to dissuade or halt activities deemed detrimental or violative of international norms, laws, or policies. These measures are typically initiated by governments, international organizations, or regulatory bodies to address a spectrum of concerns, including terrorism financing, proliferation of weapons of mass destruction, human rights abuses, money laundering, and other illicit activities.

Targeted financial sanctions encompass the freezing of assets and imposition of constraints on financial transactions associated with specific individuals, entities, or countries implicated in such activities. The overarching goal is to disrupt their access to and utilization of financial resources, thereby impeding their capacity to perpetrate undesirable actions or behaviours.

The specific objectives of targeted financial sanctions are multifaceted and contingent upon prevailing circumstances. However, they generally encompass the following:

1. Preventing the financing of terrorism: Targeted financial sanctions are deployed to dismantle the financial networks and funding channels of terrorist organizations, thereby impeding their operational capabilities.

2. Combating proliferation of weapons of mass destruction: Sanctions are employed to obstruct the flow of funds or resources that could facilitate the development or acquisition of nuclear, chemical, or biological weapons by designated countries or entities.

3. Addressing human rights abuses: Financial sanctions are applied against individuals or entities involved in grave human rights violations, such as torture, extrajudicial killings, or systemic repression, with the aim of holding perpetrators accountable and deterring future transgressions.

4. Deterring money laundering and illicit financial activities: Sanctions target individuals or entities engaged in money laundering, corruption, or other forms of financial malfeasance, with the intent of disrupting their operations and stemming the flow of illicit capital.

5. Promoting compliance with international norms: Targeted financial sanctions serve as a mechanism to incentivize adherence to international agreements, norms, or regulations pertaining to diverse issues, including nuclear non-proliferation, trade embargoes, or environmental conservation efforts.

It is imperative to underscore that the implementation of targeted financial sanctions necessitates meticulous evaluation and assessment to ensure their efficacy, proportionality, and avoidance of unintended repercussions. Sanctions regimes are subject to ongoing scrutiny and adjustments based on their impact and effectiveness in achieving their stated objectives.

Legal framework Top of Form

Nigeria has established a robust legislative framework to facilitate the implementation of targeted financial sanctions relating to terrorism financing and proliferation financing. They include:

• The Terrorism (Prevention and Prohibition) Act 2022:  being the key legislation for the implementation of targeted financial sanctions provides for a comprehensive legal, regulatory, and institutional infrastructure aimed at detecting, preventing, prosecuting, and punishing acts of terrorism, terrorism financing, and proliferation of weapons of mass destruction within Nigeria.

Under the provisions of this Act, specific offices, committees, and centres have been established to foster inter-agency collaboration in combating terrorism and proliferation financing activities while fortifying the national legal regime against terrorism and enhancing international cooperation in this regard, all while ensuring respect for human rights.

Key provisions of the Terrorism (Prevention and Prohibition) Act 2022 include:

1. Establishment of the National Counter-Terrorism Centre: Section 6 mandates the establishment of the National Counter-Terrorism Centre as the coordinating body for counter-terrorism and terrorism financing in Nigeria, entrusted with coordinating policies, strategies, and plans in this domain.
2. Establishment of the Nigeria Sanctions Committee: Section 9 provides for the establishment of the Nigeria Sanctions Committee (NSC), comprising 16 governmental agencies and departments, chaired by the Honourable Attorney General of the Federation, while the Nigerian Financial Intelligence Unit is the Secretariat. The NSC is tasked with formulating general policy guidelines on the designation of groups or individuals as terrorists, financiers, proliferators, and proliferation financiers, as well as ensuring effective implementation of United Nations Security Council Resolutions on targeted financial sanctions.
3. Prohibition of proliferation of weapons of mass destruction: Sections 58 and 59 address the prohibition of proliferation of weapons of mass destruction and proliferation financing, respectively, in accordance with Recommendation 7 of the FATF Recommendations.
4. Establishment of the Victims Trust Fund: Section 91 establishes a Victims Trust Fund within the Office of the Attorney General of the Federation to provide compensation, restitution, and damages to victims of terrorism, as well as funding for terrorism prevention programs.
5. Criminalization of the unauthorized use of radioactive or nuclear materials: Section 44 prohibits the unauthorized use of radioactive or nuclear materials, with stringent penalties for offenders.
6. Strengthening sentencing provisions for terrorism offenses: The Act has enhanced the sentencing threshold for terrorism offenses, imposing life imprisonment or a minimum of not less than 20 years, as delineated in various sections of the Act. These amendments serve to augment the deterrence and proportionality of sentencing provisions.

Overall, these legislative measures reflect Nigeria’s commitment to combatting terrorism financing and proliferation financing while upholding international standards and safeguarding national security interests.

• Nigerian Financial Intelligence Unit (NFIU) Act, 2018: The NFIU Act empowers NFIU to oversee compliance by reporting institutions, evaluate information, and provide guidance to combat financial crimes effectively.
• Regulation for the Implementation of Targeted Financial Sanctions on Terrorism, Terrorism Financing, and Related Measures, 2022: This regulation outlines procedures for freezing funds and assets of individuals or groups involved in terrorism or terrorism financing. It ensures compliance and communication within the financial sector, aiming to restrict support for terrorist activities.
• Regulation for the Implementation of Targeted Financial Sanctions on Proliferation Financing 2022: This regulation sets out procedures for freezing funds related to proliferation of weapons of mass destruction. It mandates compliance by financial entities and provides guidelines for notification and utilization of frozen funds.
• Central Bank of Nigeria (Anti-Money Laundering, Combating the financing of Terrorism and Countering Financing of Proliferation of Weapons of Mass Destructions in Financial Institutions) Regulation 2022: The CBN’s regulation mandates financial institutions to enforce measures against money laundering, terrorist financing, and proliferation of weapons of mass destruction. It emphasizes compliance with Know Your Customer practices and imposes sanctions for non-compliance.
• Securities and Exchange Commission (Capital Market Operators Anti-Money Laundering and Combating the Financing of Terrorism and Proliferation Financing) Regulation 2022: SEC’s regulation guides capital market operators in implementing anti-money laundering and counter-terrorism financing measures. It focuses on Know Your Customer and due diligence requirements to mitigate risks.
• Nigeria Financial Intelligence Unit (NFIU) Administrative Sanctions Regulation 2023: These Regulations establish committees to adjudicate infractions and appeals related to money laundering, terrorism financing, and proliferation financing.

The Current state

The Nigerian Financial Intelligence Unit, under the leadership of Director CEO Modibbo Hamman Tukur, has demonstrated strong commitment to enforcing the implementation of targeted financial sanctions (TFS) in Nigeria. Acting as the secretariat of the Nigeria Sanctions Committee (NSC), the NFIU convened the committee’s inaugural meeting on July 5, 2022, chaired by then Attorney General of the Federation, Abubakar Malami SAN. During this meeting, the 16 committee members were inaugurated and tasked with implementing TFS. The NSC manual, guidelines, and procedures were presented for committee approval.

On July 5, 2022, the Committee designated six terrorist groups under the Nigeria Sanctions List, including Yan Bindiga, Yan Taada, Indigenous People of Biafra (IPOB), Islamic State of West Africa Province (ISWAP), Ansarul Muslimina Fi Biladis Sudan (ANSARU), and Jama’atu Ahlis Sunna Lidda’awati Wal-jihad. These designations were sequel to an order of the court which proscribed the organization and declared it a terrorist group, necessarily requiring that it be designated, all these marked the initial steps in addressing the activities of these terrorist groups.

Subsequently, the committee convenes quarterly to deliberate on proposals presented by competent authorities regarding designations. Utilizing intelligence and law enforcement sources, the Secretariat profiles subjects linked to terrorism financing and proliferation financing, presenting its findings to the Committee. On November 8, 2022, the Committee designated 11 subjects, both individuals and entities, under the Nigeria Sanctions List.

Furthermore, the NSC inaugurated the Analytical Support Working Group (ASWG) on April 20, 2023, serving as the analytical arm of the Committee. Comprising personnel from NSC members, the ASWG identifies persons and entities for designation under the Nigeria Sanctions List, prepares narrative summaries for designations, and recommends proposed designees to the Committee through the Secretariat.

Designations of terrorist financiers and proliferation financiers adhere to NSC guidelines, aligning with FATF standards. Upon designation, the Secretariat updates the Nigeria Sanctions List on the NSC’s official website; www.nigsac.gov.ng, disseminating designation information to financial institutions and DNFBPs. These reporting entities are mandated to freeze assets of positive matches without delay. The Secretariat is also charged with maintaining and updating reports on frozen assets. The last report presented to the NSC on the 20^th April 2023 showed assets frozen to the tune of N38,248,922.38 ($86,536.02).

In addition to enforcement efforts, the NFIU conducts sensitization awareness programs and workshops to increase awareness of financial institutions and DNFBPs on their reporting obligations. Collaborating with many local and international partners like the Global Center on Cooperative Security, the NFIU has held series of sensitization programs to ensure awareness of the AML/CFT environment is up to date and comprehensive.

Benefits of Implementing Targeted financial sanctions in Nigeria

Nigeria faces severe challenges from terrorism, banditry, and kidnapping, threatening lives, property, and the economy. Despite military efforts, tackling the financial roots of these issues is crucial. Implementing targeted financial sanctions can disrupt the funding that sustains these activities, complementing existing security measures and bolstering international cooperation. This comprehensive approach is essential for effectively combating insecurity and safeguarding Nigeria’s future.Top of Form

According to the Global Terrorism Index (GTI), Boko Haram and Fulani ethnic militias are considered two of the five deadliest terrorist groups in the world. Nigeria ranked as the 3rd worst country in terms of insecurity in 2020, behind Afghanistan and Iraq. However, Nigeria dropped to the 8th most impacted country by terrorism in the 2022 Global Terrorism Index, which reflects ongoing efforts by the Nigerian government to combat terrorism. Implementing measures such as targeted financial sanctions can further aid in tracing and restricting the financiers of terrorism and proliferation, contributing to ongoing efforts to address security concerns.

In 2021, Nigeria underwent a Mutual Evaluation Report which identified deficiencies in complying with FATF Recommendations 6 and 7, as well as Immediate Outcomes 4 and 10. A total of 84 recommended actions were proposed to address these deficiencies.

To remedy the shortcomings in Recommendations 6 and 7, Nigeria took significant steps. This included repealing of the 2011 Act and a reenactment of a more comprehensive Law to combat terrorism; the Terrorism (Prevention and Prohibition) Act in 2022 and issuing regulations pertaining to terrorism financing and proliferation financing. Initially rated as Partly Compliant and Non-Compliant, these efforts resulted in a notable improvement in compliance. In the recent 2023 Follow-Up Report, Nigeria’s compliance with Recommendations 6 and 7 is now rated as Largely Compliant and Compliant, respectively.

The deficiencies highlighted in the Mutual Evaluation Report were also reflected in the Nigeria ICRG (International Cooperation Review Group) action plan. Specifically, the action plan derived from Immediate Outcome 4 underscores the need to enhance the effective implementation of targeted financial sanctions related to terrorism financing and proliferation financing promptly and efficiently.

Nigeria faced repercussions for its failure to fulfill all expected recommended actions and was downgraded to the grey list in February 2023. Failure to address these deficiencies may lead to further consequences, potentially pushing the country into the blacklist. Being placed on the blacklist entails severe financial restrictions that could significantly damage the economy.

To avoid such detrimental consequences, it is imperative for Nigeria to prioritize and swiftly implement the recommended actions outlined by international financial standard setters. This includes addressing deficiencies related to anti-money laundering and counter-terrorism financing measures, as well as improving overall compliance with international standards.

Challenges

The targeted financial sanctions regime in Nigeria has encountered notable challenges despite its overall success.

1. Designation Process Delay: The requirement for the Nigeria Sanctions Committee (NSC) to seek the president’s approval for each designation before uploading to the Nigeria Sanctions List could indeed slow down the process. This bureaucratic hurdle may hinder timely responses to emerging threats such as terrorism financing and proliferation financing. Adopting a standing approval or fiat could help expedite the designation process without compromising national security concerns.
2. Change in Administration: The reshuffling of the cabinet and delays in appointing key officials, such as the Attorney General of the Federation, can disrupt the functioning of regulatory bodies like the NSC. This underscores the importance of ensuring continuity and institutional resilience in handling national security matters, possibly through interim measures or clear protocols for transitional periods.
3. Lack of Knowledge Among Financial Institutions: The low rate of reporting on Suspicious Transaction Reports (STRs) related to terrorism financing and proliferation financing suggests a need for enhanced awareness and training programs for financial institutions, particularly Designated Non-Financial Businesses and Professions (DNFBPs). Strengthening compliance frameworks and providing adequate resources for capacity building can help address this knowledge gap and improve reporting efficiency.

Addressing these challenges requires a concerted effort from government authorities, regulatory bodies, and financial institutions to streamline processes, enhance institutional capacity, and foster a culture of compliance. By addressing these setbacks, Nigeria can strengthen its targeted financial sanctions regime and better combat threats posed by terrorism financing and proliferation financing.

RecommendationTop of Form

To ensure the effectiveness of targeted financial sanctions (TFS) in Nigeria, several key strategies should be implemented:

1. Nationwide-Spread Sensitization: Given the country’s large population and high volume of financial transactions, extensive awareness campaigns are necessary. Efforts should be made to reach all areas, particularly rural regions often exploited by terrorists. Education programs should emphasize the importance of TFS and how individuals and businesses can contribute to combating terrorism financing.

2. Deployment of Advanced Technologies: The government should invest in advanced technologies to improve the detection of designated persons and entities. Utilizing data analytics and artificial intelligence can enhance screening processes and identify suspicious activities more efficiently. Financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) should be encouraged to adopt new technologies to enhance their screening capabilities and freeze assets linked to designated persons promptly.

3. Enforcement and Compliance: Strong enforcement mechanisms should be in place to ensure compliance with TFS regulations. Regular monitoring and audits of reporting entities are necessary to verify adherence to reporting obligations and screening procedures. Sanctions should be imposed on entities found to be non-compliant to serve as a deterrent to others.

4. Enhancing Stakeholder Partnerships: Collaboration among stakeholders is essential for the success of the TFS regime. Government agencies, financial institutions, DNFBPs, law enforcement, and international partners should work together to share information and coordinate efforts. Stakeholder-driven initiatives can lead to better intelligence sharing, more effective implementation of TFS measures, and improved outcomes in combating terrorism financing.

By implementing these strategies, Nigeria can strengthen its TFS regime, improve compliance with international standards, and enhance its capacity to combat terrorism financing effectively. 

Conclusion

In conclusion, Nigeria has shown steadfast dedication to combating terrorism and proliferation financing through the establishment of various legal frameworks. Despite proactive measures, challenges persist in effectively implementing these frameworks due to the complex nature of the threat. Collaboration among stakeholders is crucial to address these challenges and ensure the objectives set by Nigeria’s security council and international bodies are met.

While Nigeria’s commitment to fighting terrorism is commendable, efforts must continue to strengthen and refine legal frameworks, integrate them into the financial system, and promote vigilance against terrorism. Capacity building, information sharing, and technological advancements are essential to overcoming weaknesses in the financial system and enhancing counterterrorism efforts.

By bolstering implementation of targeted financial sanctions, fostering collaboration, and prioritizing continuous improvement, Nigeria can make significant strides in combating terrorism and proliferation financing, contributing to regional and global security while protecting its national interests.