Introduction
Financial institutions play a crucial role in the fight against money laundering, terrorism financing, and the proliferation of weapons of mass destruction. One of the key mechanisms for ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations is the reporting of suspicious transactions to the Nigerian Financial Intelligence Unit (NFIU). A Suspicious Transaction Report (STR) is a critical document that alerts regulatory authorities to potential illicit financial activities.
This guide provides a step-by-step approach to identifying, documenting, and submitting an STR in compliance with the guidelines issued by the NFIU.
Step 1: Identifying a Suspicious Transaction
A transaction may be considered suspicious if it exhibits unusual patterns, lacks economic justification, or aligns with known red flags for money laundering or terrorism financing. Financial institutions must implement robust transaction monitoring systems (TMS) to flag transactions that may require further scrutiny.
Indicators of Suspicious Transactions
Some common red flags include:
Transactions involving large cash deposits or withdrawals inconsistent with customer profile
Multiple transactions just below the regulatory reporting threshold
Unusual or sudden activity on dormant accounts
Transactions with high-risk jurisdictions or entities linked to illicit activities
Rapid movement of funds through multiple accounts with no clear business purpose
Structuring of transactions to evade regulatory detection
Transactions involving entities or individuals flagged in watchlists
Financial institutions must conduct Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) to assess the legitimacy of transactions. If a transaction meets the criteria for suspicion, the compliance team should escalate it for further investigation.
Step 2: Conducting an Internal Review
Before filing an STR, financial institutions should conduct an internal review to determine if there are reasonable grounds for suspicion. This process includes:
Screening Transaction Alerts: Review flagged transactions to identify unusual activity.
Assessing Facts and Context: Establish whether the transaction is inconsistent with the customer’s profile.
Evaluating Red Flags: Link the transaction to known money laundering or terrorism financing indicators.
Documenting Findings: Compile supporting evidence, such as account activity, transaction history, and customer identification records.
Internal Approval: Obtain necessary approvals from the institution’s compliance or risk management team before filing the STR.
Step 3: Drafting the STR
A well-prepared STR must be detailed, factual, and concise. The report should include:
1. Customer Identification Details
Full name of the customer or entity
Account number(s) involved
Address and contact information
Identification documents (e.g., international passport, NIN, driver's license)
Business registration details (for corporate entities)
Details of beneficial owners (if applicable)
2. Transaction Details
Date and time of the suspicious transaction
Amount and currency involved
Account details (originating and receiving accounts)
Mode of transaction (e.g., cash, wire transfer, online payment)
Geographic location of the transaction
Linked transactions (if any)
3. Nature of Suspicion
Clear and concise explanation of why the transaction is suspicious
Specific predicate offences (e.g., fraud, corruption, terrorism financing)
Customer behavior or activity raising suspicion
Any prior STRs filed on the same customer
Any law enforcement agency (LEA) requests linked to the customer
4. Supporting Documentation
Copies of transaction slips or receipts
Account statements showing transaction patterns
Evidence of remittances or transfers
Communication records with the customer
Internal risk assessment reports
Step 4: Filing the STR with the NFIU
Timeline for Submission
According to the Money Laundering (Prevention and Prohibition) Act, 2022, and the Terrorism (Prevention and Prohibition) Act, 2022, financial institutions must file an STR with the NFIU within 24 hours of establishing suspicion.
The 24 hour period begins after the institution has established suspicion i.e. after a review has been completed. Institutions must complete this internal review within 72 hours of detecting a suspicious transaction to ensure compliance with regulatory timelines.
Therefore the timeline is 72 hours for investigation followed by 24 hours for submission.
Submission Method
STRs must be submitted electronically using the NFIU’s designated GoAML platform.
Reports should follow the prescribed format to ensure clarity and completeness.
Institutions must keep internal records of all STR filings for audit and compliance reviews.
Step 5: Compliance and Follow-Up Actions
After filing an STR, financial institutions should:
Monitor the Account: Continue monitoring the customer’s transactions for further suspicious activities.
Cooperate with Law Enforcement: Provide additional documentation if requested by the NFIU or relevant authorities.
Implement Risk Mitigation Measures: Depending on the severity of the suspicion, institutions may consider freezing the account or terminating the business relationship.
Review and Update Internal Procedures: Conduct periodic reviews of transaction monitoring systems to minimize false positives and enhance detection efficiency.
Sanctions and Penalties for Non-Compliance
Financial institutions and designated non-financial businesses face severe penalties for failing to report suspicious transactions (STRs) under Nigerian AML/CFT laws. Key penalties include:
Money Laundering (Prevention & Prohibition) Act, 2022
Failure to report an STR is an offence.
Lapses in internal controls may result in additional disciplinary measures.
Regulatory authorities can impose administrative sanctions for non-compliance, taking precedence over other penalties.
Criminal penalties: Employees or directors who warn a subject about an STR face a minimum 2-year jail term and a fine of at least ₦10 million.
Terrorism (Prevention & Prohibition) Act, 2022
STRs related to terrorism financing must be reported within 24 hours.
Non-compliance may result in fines, imprisonment, or withdrawal of operating licenses.
Nigerian Financial Intelligence Unit (NFIU) Act, 2018
Failure to comply with STR reporting requirements can attract NFIU-imposed penalties.
Fines must be paid within two working days, or a 10% daily interest will be charged for late payment.
Strict adherence to STR reporting guidelines is crucial to avoid financial penalties, legal consequences, and reputational damage.
Conclusion
The submission of Suspicious Transaction Reports (STRs) is a fundamental compliance requirement for financial institutions in Nigeria. A well-documented STR can help detect and prevent financial crimes while ensuring compliance with the regulatory framework. Institutions must establish robust monitoring mechanisms, train staff on AML/CFT best practices, and implement strict reporting protocols to effectively combat financial crimes.
By following these steps, financial institutions can contribute to the integrity of Nigeria’s financial system and safeguard against illicit financial flows. Proper adherence to STR guidelines not only ensures compliance but also reinforces the institution’s commitment to ethical financial practices.
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