Rule 69 Rules of Professional Conduct for Legal Practitioners

Rule 69 of the Rules of Professional Conduct for Legal Practitioners (RPC) 2023 is about Client due diligence. It is under Part III (Risk Based Approach and Client Due Diligence) of Chapter 2 (Guidelines and Rules on Anti-money Laundering and Combating Financing of Terrorism for Legal Practitioners) of the Rules. It provides as follows:

(1) A law firm or legal practitioner shall put in place internal measures to establish with certainty the identity of each client, and such measures should include procedures to—
(a) identify and appropriately verify the identity of each client on a timely basis ;

(b) identify with reasonable measures the real identity of the beneficial owner on risk-sensitive basis such that the law firm or legal practitioner is reasonably satisfied that it knows who the beneficial! owner is, in order to ascertain those natural persons who exercise effective influence or control over a client, whether by means of ownership, voting rights or otherwise ;
(c) determine the extent to which they are required to verify the identity of beneficial owner, depending on the type of client, business relationship and transaction, for the purpose of helping legal practitioners avoid conflicts of interest with other clients ;

(d) obtain appropriate information to understand the client’s circumstances and business depending on the nature, scope and timing of the services to be provided, including, where necessary, the source of funds of the client, and this information may be obtained from clients during the normal course of their instructions to the law firm or legal practitioner :
(e) conduct ongoing CDD on the business relationship and scrutiny of transactions throughout the course of that relationship to ensure that the transactions being conducted are consistent with legal practitioner’s knowledge of the client, its business and risk profile, including where necessary, the source of funds ; and

(f) ongoing due diligence ensures that the documents, date, or information collected under the CDD process is kept up-to-date and relevant by undertaking reviews of existing records, particularly for higher-risk categories of clients.

(2) Law firms or legal practitioners shall develop procedures to determine how the immediate client can be identified, and how the identity provided by the client may be verified.

(3) For the purposes of paragraph (2) of this rule the following procedures may be adopted—
(a) meeting the client in person and verifying their identity through the
production of a valid identity card and documentation confirming his or her address ;
(b) based on documentation or information obtained from dependable, publicly available sources (which are independent of the client), where available ;

(c) for clients that are companies or organizations, reasonable steps shall be taken so that the law firm or legal practitioner is satisfied about the identity of the beneficial owner and takes reasonable measures to verify the beneficial owner’s identity, by understanding the ownership and control of the company or organization that is the client, either through public searches or by seeking information directly from the client :

(d) law firm or legal practitioner shall obtain the following information for a client that is a legal entity—
(i) the name of the company,
(ii) the company registration number,
(iii) the registered address and principal place of business (if different),
(iv) the identity of shareholders or trustees and their percentage ownership (Where applicable),
(v) names of the board of directors, or trustees or principal members
responsible for the company’s operations,
(vi) the law to which the company or organization is subject and its memorandum and articles of association and constitution, and
(vii) the objects, types of activities and transactions in which the company or organization engages ;

(e) Law firms or legal practitioners shall verify information, and may use
sources such as the following—
(i) constitutional documents (such as a certificate of incorporation, memorandum and articles of association, constitution),
(ii) details from company registers with the company or organization and Corporate Affairs Commission,
(iii) shareholder agreement or other agreements between shareholders concerning control of the legal person, and
(iv) filed audited accounts ;

(f) in identifying beneficial owners, law firms or legal practitioners may use a combination of public sources and seek further confirmation from the immediate client that information from public sources is correct and up-to-date or ask for additional documentation that confirms the beneficial ownership and company structure ;

(g) law firms or legal practitioners may assess the risks that each client may pose taking into consideration any appropriate risk variables and any mitigating factors before making a final decision to either accept the client,
reject the client, or request additional information ;

(h) risk assessments shall be documented and kept in the client’s file, and the file should be reviewed as necessary, especially in a situation where the client looks to engage in a one-off or where new red flags arise ; and
(i) law firms or legal practitioners shall determine the CDD requirements appropriate to each client, which may include—
(i) a standard level of CDD, generally to be applied to all clients to whom specified legal services are provided,
(ii) in appropriate cases, a simplified level of CDD, generally a reduction of the standard level after consideration of appropriate risk variables, and in recognized lower risk scenarios, and
(iii) whether an enhanced CDD would be required for clients that are reasonably expected by the law firm or legal practitioner to be of higher risk should be determined, and this may be the result of the client’s business
activity, ownership structure, particular service offered including work involving higher risk countries or defined by applicable law or regulation as posing higher risk.

(4) Legal practitioners or law firms in conducting CDD may also look out for the following —
(a) where the transaction is unusual, for example if the type of document being notarized is clearly inconsistent with the size, age, or activity of the legal entity or natural person acting ;
(b) where the transactions are unusual because of their size, nature, frequency, or manner of execution ;

(c) where there are remarkable and highly significant differences between the declared price and the approximate actual values in accordance with any reference which could give an approximate idea of this value or in the
judgement of the legal practitioner ;
(d) where a non-profit organisation requests services for purposes or transactions not compatible with those declared or not typical for that body ;
(e) where the transaction involves a disproportional amount of private funding, bearer cheques or cash, especially if it is inconsistent with the socioeconomic profile of the individual or the company’s economic profile ;
(f) where the customer or third party is contributing a significant sum in cash as collateral provided by the borrower or debtor rather than simply using those funds directly, without logical explanation ;

(g) the source of funds is unusual ;
(h) the transaction is third-party funded either for the transaction or for fees or taxes involved with no apparent connection to the client nor legitimate explanation ;
(i) the funds received from or sent to a foreign country when there is no apparent connection between the country and the client ;
(j) funds are received from or sent to high-risk countries ;

(k) the client is using multiple bank accounts or foreign accounts without good reason ;
(J) the private expenditure is funded by a company, business, or government ,
(m) selecting the method of payment has been deferred to a date very close to the time of notarization, in a jurisdiction where the method of payment is usually included in the contract, particularly if no guarantee is available to secure the payment is established, without a logical explanation.
(n) an unusually short repayment period has been set without logical explanation ;

(o) mortgages are repeatedly repaid significantly prior to the initially agreed maturity date, with no logical explanation ;
(p) the asset is purchased with cash and then rapidly used as collateral for a loan:
(q) there is a request to change the payment procedures previously agreed upon without logical explanation, especially when payment instruments are suggested that are not appropriate for the common practice used for the ordered transaction ;

(r) finance is provided by a lender, either a natural or legal person, other than a credit institution, with no logical explanation or economic justification ;
(s) the collateral being provided for the transaction is currently located in a high-risk country ;
(t) there has been a significant increase in capital for a recently incorporated company or successive contributions over a short period of time to the same company, with no logical explanation ;

(u) there has been an increase in capital from a foreign country, which either has no relationship to the company or is high risk ;
(v) the company receives an injection of capital or assets in kind that is excessively high in comparison with the business, size or market value of the company performing, with no logical explanation ;

(w) there is an excessively high or low price attached to the securities transferred, with regard to any circumstance indicating the excess (such as volume of revenue, trade or business, premises, size, knowledge of declaration of systematic losses or gains) or with regard to the sum declared in another operation ; and
(x) large financial transactions, especially if requested by recently created companies, where these transactions are not justified by the corporate purpose, the activity of the customer or the possible group of companies to which it belongs or other justifiable reasons.

(5) A Legal practitioner shall be deemed to have satisfied the obligation to assess this risk if he shows by any compliance document, his or her review and understanding of such risk in the engagement with the client and provides an affidavit on oath from the client covering the field of review and attesting to the genuineness of the transaction, and other relevant information to the risk assessment outcomes.

(6) Where the law firm or legal practitioner is unable to comply with the applicable CDD requirements, or the clients did not pass the CDD, it should not carry out the transaction nor commence business relations, or it should terminate the business relationship and consider filing a suspicious transaction report (STR) in relation to the client to the Nigerian Bar Association Anti-Money Laundering Committee NBAAMLC.