EXAMINING THE VALIDITY OF THE CBN NEW CASH WITHDRAWAL POLICY VIS-À-VIS THE PROVISIONS OF THE MONEY LAUNDERING ACT, 2022

E.O., Johnson.

LL.B (LASU), B.L. (KANO).

G-mail: oluwadamipe7@gmail.com

E.O., Olojede.

LL.B (Bowen), B.L. (KANO), AICMC.

G-mail: elizabetholojede02@gmail.com

Sequel to the launch of the redesigned ‘200’, ‘500’ and ‘1000’ naira notes, aimed at checking inflation, counterfeiting and corruption, the Central Bank of Nigeria (hereinafter referred as “the CBN”) through a circular referenced BSD/DIR/PUB/LAB/015/069  issued on December 6, 2022 and signed by its Director of Banking Supervision, Haruna Mustafa, directed Deposit Money Banks (DMBs) and Other Financial Institutions to uphold the new cash withdrawal policy which places withdrawal limit for individuals at N20,000:00 (Twenty Thousand Naira Only) per day and N100,000:00 (One Thousand Naira Only) per day for corporate entities.

Scheduled to take effect from January 9, 2023, the CBN, amongst other reasons, cited the need to enhance digitalisation, prevent vote buying, discourage hoarding of local currency and improving the awareness and use of the E-Naira for the promulgation of the policy.

The proposed policy has not escaped public scathing ever since its communication. It has been brazenly described as an opaque policy, unreflective of the present day economic realities of the country and “designed to sentence poor citizens to more excruciating economic hardship”.[1]

While disconnecting from the fuss and socio-economic views expressed about the policy, this paper verifies the legality of the proposed regulation under the prism of the of ultra-vires doctrine.

Cash Withdrawal Threshold under the Money Laundering Act

Section 2(1) of the Money Laundering Act states thus:

“No person or body corporate shall, except in a transaction through financial institution, make or accept cash payment of a sum exceeding –

(a) N5,000,000:00 or its equivalent in the case of an individual; or

(b) N10,000,000:00 or its equivalent, in the case of a body corporate”.

The language and intention of the draftsmen is clear. A cash withdrawal policy of N5 million and N10 million for individuals and body corporate respectively is one that mirages the present day economic realities of the country. Until the provisions of Section 2(1)(a)-(b) of the Money Laundering Act, 2022 is amended, the limitation on cash withdrawal proposed to be set by the CBN is ultra-vires the powers of the CBN and hitherto null and void ab initio.

Powers of the CBN

The Central Bank of Nigeria is a creation of statute.[2] It is the apex bank in Nigeria with the responsibility to provide regulatory oversight on financial institutions while maintaining and promoting sound financial ecosystem in the country.[3]

As an agency of the Federal Government, part of its powers is to (only) administer Acts of the National Assembly touching on its core objects as set out under Section 2(d) of the CBN (Establishment) Act, 2007.[4] An extension of this power (as in the instant case) is a sheer abuse of power. The CBN cannot by its direction or policy override the provisions of an enactment of the National Assembly. Doing so is ultra-vires its powers; it is unconstitutional; it is null and void.

Some have argued for the validity of the policy  on the strength of Sections 56 and 53 of the Banks and Other Financial Institution Act, 2022 (BOFIA)[5] and Section 51 of the CBN Act. Contrary to the above, the provisions the BOFIA and CBN Act under which the CBN Governor purportedly acted, encapsulates only acts and actions covering its statutory obligations/objects under the CBN Act.

In Liberty Bank & Ors v. CBN & Ors[6] the Court of Appeal held thus:

“…even though Section 56 of BOFIA and 51 of CBN Act empower the 1st and 2nd Respondents to make rules and regulations for the operation and control of Banks in Nigeria, any such rules or regulations must be made towards achieving their statutory obligations under the Acts. The 1st and 2nd Respondents cannot, whimsically prompted by impulse make rules and regulations in an arbitrary and unreasonable manner. The exercise of discretion granted to the1st and 2nd Respondents must be within the framework of the endowing statutes”.

A Mere Circular is not Law

In view of the penultimate paragraph of the said circular which threatens “severe sanctions” on any Deposit Money Banks (DMBs) and Other Financial Institutions who breach the direction, it is advised that they should dispense with the threats. It is long established that ‘you cannot place something upon nothing’. The policy in itself is null and void ab initio, so does the threat of sanctions – it cannot hold water (in law).

Relying on the tenor in the ruling in Governor of CBN v. Rise Vest Technologies Limited & 5 Ors:[7]

“The law is trite that any conduct that must be sanctioned must be expressly stated in a written law. Being unknown to law, circulars cannot create an offence because it was not shown to have been issued under an Order, Act, Law or Statute”.

Conclusion

Until the provisions of Section 2 of the Money Laundering Act are amended, ipso facto and ipso jure, the cash withdrawal limit remains N5 million and N10 million for individuals and body corporate respectively. The CBN being a statutory creature itself cannot by its policy abrogate the provisions of the Money Laundering Act, such attempt is ultra-vires its powers, it is unconstitutional, it is null and void. The power to do so is constitutionally within the exclusive confines of the National Assembly of the Federation.

[1] According to the Learned Silk, Femi Falana (SAN).

[2] See, Section 1(1) of the Central Bank of Nigeria (Establishment) Act, 2007.

[3] See, Section 2(d), Ibid.

[4] Hereinafter referred as “the CBN Act”.

[5] Seyi Bella, ‘Revised Cash Withdrawal Limits: Legal, Regulatory and Compliance Implications for Businesses’ (2022) < https://www.mondaq.com/nigeria/financial-services/1261950/revised-cash-withdrawal-limits-legal-regulatory-and-compliance-implications-for-businesses > accessed 19 December 2022.

[6] (2019) LPELR-50238(CA)

[7] FHC/ABJ/CS/822/2021 (Unreported)

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THE PROPRIETARY OF THE NEW MONEY LAUNDERING (PROHIBITION) ACT 2022 AS IT APPLIES OR RELATES TO LEGAL PRACTITIONERS IN NIGERIA.

Omotayo Johnson, Esq. & Eunice Oluwadamilare, Esq.

LL.B., B.L.

G-mail: oluwadamipe7@gmail.com

Introduction

The Money Laundering (Prohibition) Act (MLA) 2022 was promulgated after the decision of the Court of Appeal in the case of Central Bank of Nigeria v. Registered Trustees of the Nigerian Bar Association & Attorney General of the Federation,[1] that decided, while interpreting Sections 5 and 25 of the  Money Laundering (Prohibition) Act, 2011 on Special Control Unit against Money Laundering (SCUML), which is im pari  Sections 6 and 30 of the Money Laundering (Prohibition) Act 2022, amongst others that:

“Since the Legal Practitioners Act has already made adequate provisions to regulate the practice of law vis-à-vis the Legal Practitioners duty and obligations to their client, the money Laundering Act cannot place them under control or regulations made by the Central Bank of Nigeria and the Minister of Commerce in their purported administration of matters provide for in the Money laundering Act”.

The Court further held that there is no doubt that the Legal Practitioners Act and Money Laundering Act cannot operate side by side or at the same time insofar as it relates to Legal Practitioners. There are violent conflicts between the two legislations as they affect Lawyers and their clients and the legal practice in Nigeria.

Since the judgment, Legal Practitioners have been exempted from SCUML requirement and to that end there has been no appeal against the judgment by Central Bank of Nigeria up till date. However, considering that the MLA 2022 was promulgated to repeal the MLA 2011 after the cited Court of Appeal judgment (delivered in 2017), there have been concerns whether the MLA 2022 can overrule the Court of Appeal judgment or sit as an appeal against the  judgment.

Against the backdrop of facts summarizing the above subject matter, this work attempts to exploit the already settled principles of law and argue that the MLA 2022 cannot overrule or void the decision of the Court of Appeal in CBN v. NBA so as to make Legal Practitioners in Nigeria liable to SCUML requirements. To achieve this end, the following issues have been phased out to assist in arriving at a definite conclusion:

  • Whether a repeal enactment serves to amend, alter or void a valid act of court over a subject matter prior to its repeal?
  • What is the position of the law where there are two conflicting laws over the same subject matter?

Issue 1: Whether a repeal enactment serves to amend, alter or void a valid act of court over a subject matter prior to its repeal?

The MLA 2022 by its commencement section is an Act designed to repeal the MLA 2011. The MLA 2022 being a repeal enactment to the MLA 2011 does not out-and-out affect the entirety of the operation of the old law, especially where there are rights accruing from it or where the courts have left their marks on it prior to its being repealed.

Section 6(1) of the Interpretation Act[2] reads:

“(1) The repeal of an enactment shall not –

(a) revive anything not in force or existing at the time when the repeal takes effect;

(b) affect the previous operation of the enactment or anything duly done or suffered under the enactment;

(c) affect any right, privilege, obligation, or liability accrued or incurred under the enactment;

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under the enactment;

(e) affect any investigation, legal proceedings or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment;

and any such investigation, legal proceeding or remedy may be instituted, continued enforced, and such penalty, forfeiture or punishment may be imposed, as if the enactment had not been repealed”.

Emphasis is placed on paragraphs (b), (c), and (e).

PER Ogundare JSC (as he then was) in Oladoye and Ors v. The Administrator, Osun State & Ors,[3] further affirmed that:

“Where an enabling law is repealed or revoked any delegated legislation, instrument or order made pursuant thereof becomes of no legal binding effect, except for the right that has accrued prior to the repeal or revocation”.

The MLA 2011 prior to its repeal had through the instrumentality of the court birthed certain rights on legal practitioners.  By the combined effect of the Section 6(1) of the Interpretation Act and the decision in Oladoye (supra), it is my believe and submission that the right created by the Court of Appeal decision in Central Bank of Nigeria v. Registered Trustees of the Nigerian Bar Association & Attorney General of the Federation[4]survives the repeal of the MLA 2011. Until there is an appeal to the decision, legal practitioners are exempted from SCUML certification.

Issue 2: The Position of the Law where there are Two Conflicting Laws on the same Subject Matter:

The Court of Appeal in Central Bank of Nigeria v. Registered Trustees of the Nigerian Bar Association & Attorney General of the FederationAppeal[5] was quick to point out the fundamental legislative error made by the National Assembly in attempting to bring the legal profession under the regulatory purview of the CBN, where there is an extant enabling law (i.e. The Legal Practitioners Act, 2004) on it. The court lamenting on the situation stated inter alia, that:

“Since the Legal Practitioners Act has already made adequate provisions to regulate the practice of law vis-à-vis the Legal Practitioners duty and obligations to their client, the money Laundering Act cannot place them under control or regulations made by the Central Bank of Nigeria and the Minister of Commerce in their purported administration of matters provide for in the Money laundering Act…”

It is unfortunate that, Sections 5 and 25 of the MLA 2011, upon which the court had earlier interpreted in favour of legal practitioners, are im pari and exact reproduction in Sections 6 and 30 of the new law. This either symbolises the sheer lack of alertness of the legislators to judicial development or a deliberate affront on the powers of the court to make laws.

It is trite law that, where there are two conflicting law; and one of specific application, while the other is of general application, the one which is of specific application shall take precedence. The Court of Appeal on the overriding effect of specific provision over general provision, in Neco v. Tokode,[6] held that:

“…the law is that a specific provision in a statute prevails over a general provision in a statute”.

The Legal Practitioners’ Act, being a law that applies specifically to only a class of people i.e. legal practitioners as a matter of law takes precedence over the provisions in the MLA 2022 which is of general application.

The decision in FRN v. Osahon[7] on the correct approach to conflicting provisions of two acts of National Assembly. is also instructive in this instant case. The Supreme Court held that:

“Where two provision, one each of the National Assembly , conflicting in relating to the same subject matter, the conflict cannot be isolated in the two only in so far as there are constitutional provisions on the same matter. In such a situation, the provisions of the Constitution shall govern the interpretation”.

The regulatory and disciplinary framework for the legal profession derives its source from the Constitution. SCUML cannot override or take precedence over the statutory and Constitutional bodies including Supreme Court of Nigeria which are charged with the responsibility of regulating the legal Profession as well as disciplining of erring lawyers. The Legal Practitioners Act (LPA), 2004 remains the law that regulates the practice of law in Nigeria. The Act created and gave power to the ‘General Council of the Bar’ for the general maintenance of the legal profession, and includes making rules from time to time on professional conduct in the legal profession,[8] out of which the Rule of Professional Conduct for Legal Practitioners (RPC), 2007 a subsidiary legislation to the LPA was made. As a matter of fact, the RPC contain copious provisions that mandate legal practitioners to maintain and ensure client confidentiality, except in circumstances allowed by the Rules.[9][10] It is worthy of note that the foregoing formed part of the rationale in the Court Appeal decision.

Conclusion

In view of the forgoing analysis and arguments, it is my believe that, that the decision of the Court of Appeal in Central Bank of Nigeria v. Registered Trustees of the Nigerian Bar Association & Attorney General of the Federation[11] survives the MLA 2011 and therefore remains valid. The mere reproduction of Sections 5 and 25 of the MLA 2011 in Sections 6 and 30 of the MLA 2022 is of no moment. This is because, although, the MLA 2022 had repealed the MLA 2011, notwithstanding, the rights birthed by the old law through judicial pronouncement remains valid, and can only be voided where there is a subsequent pronouncement to that effect.

[1] Appeal No. CA/A/202/2015

[2] Cap. 123, LFN, 2004

[3] (1996) LPELR -2552 (SC)

[4] Op.cit

[5] Op.cit

[6] (2010) LPELR -9121 (CA)

[7] (2006) 4 M.J.S.C 1

[8] See, Section 12(4) Legal Practitioners Act, 2004

[9] See, Rule 19(1)-(2) Rules of Professional Conduct for Legal Practitioners, 2007

[10] See also, Section 192(1) Evidence Act, 2011

[11] Op.cit

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CASHLESS POLICY: ARE NIGERIAN BANKS IN BREACH OF THEIR BANKER-CUSTOMER RELATIONSHIP DUTIES?

Omotayo Johnson, Esq.

LL.B (LASU), B.L. (KANO).

G-mail: oluwadamipe7@gmail.com

Introduction

In what is perceived as an attempt to fast track the transitioning into a cashless economy, the Central Bank of Nigeria (CBN) by a statement posted on its website on Thursday, “directed Deposit Money Banks (DMBs) to commence the payment of the redesigned Naira notes over the counter, subject to a maximum daily payout limit of N20,000”. Even with daily payout benchmarked at N20,000, most banks have struggled to meet customers demand, in what have been epitomised by theatrical displays in banking halls and never ending long queues at ATM points, as Nigerians and banking customers struggle to grapple with the incumbent cashless regime.

Fundamental to the banker-customer relationship is the invariable duty of the bank to ‘honour and pay customer’s cheque standing to his credit in the bank’. Against the above backdrop, this paper juxtaposes the present realities in the Nigeria banking sector with the principles of law regulating banker-customer relationship, and purports to resolve questions on whether a bank have any ground to dishonour a customers’ demand for pay, and the possible remedies available to a customer whose demand for payment was ‘wrongly’ dishonoured.

Nature of Banker-Customer Relationship

The relationship that subsists between a bank or financial institution and its customer is essentially a contractual relationship[1] which is usually categorised as a debtor-creditor relationship.[2]

The Court of Appeal in UBA v. Yahuza[3] better described the relationship in these words:

“It is settled that in law and the practice of banking, the relationship between a bank and its customer is contractual. By the contract, the bank undertakes to receive money and collect bills for its customer and the proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them on demand by the customer”.

Duty of Banks to Honour and Pay Customers’ Cheques

The duty of the bank to honour and pay customers’ cheque is very fulcrum that pivots the banker-customer relationship. Provided there is sufficient fund standing to the credit of the customer in the bank, the bank is obliged to honour and pay cheques duly drawn by the customer. In Muomah v.Enterprise Bank Ltd,[4] the court summarised in succinct that:

“When a customer whose account has money makes a demand on the bank, it must comply because it is a debtor”.

The position is the same where a customer is granted an overdraft facility. In Issa v. Union Bank,[5] the court held that, a customer who has been granted an overdraft facility is entitled to damages from the bank if cheques drawn to utilize the facility are dishonoured by the bank.

The cheque (or withdrawal slip) is seen as an order from the customer to the bank to withdraw the amount stated in the cheque from the amount standing to his credit in his account with the bank or an agreed overdraft to the bearer’s credit, provided that there is no legal barrier making such funds though sufficient but, unavailable for that purpose.

Do the Banks have any Defence to this Duty?

There are no exceptions to this duty, rather, it is conditional on the fact that:

  1. The state of the account of the customer is in credit, or there has been an overdraft facility granted to warrant so (the credit);
  2. There is no legal reason or excuse why the cheque should not be honoured.[6]

Perhaps the banks may use the executive directive of the CBN to pay maximum of N20,000 per day as an excuse for the non-payment of customers’ money in their custody. Contrary to this view, it is arguable that, the directive of the CBN as the apex regulatory bank, was only intended to limit the amount of money a customer may demand per day, it does not in any way discharge the banks of their duty to pay customers’ their money upon demand. There have been several cases where the banks, in sheer breach of their duty, have refused to pay at all or to the tune of N20,000 when such demand was made by their customers.

Remedies Available to the Customer against the Bank

Where a cheque has been drawn by a customer and the bank wrongly dishonoured it, the customer can maintain an action against the bank for breach of contract and be entitled to substantial damage (if he is a person in business). In UBA Plc v. Chimaeze,[7] the Supreme Court held that:

“A bank is bound to honour cheque issued by its customer if the customer has enough funds to satisfy the amount payable on the cheque in respect of the relevant account and that refusal to honour the cheque will amount to a breach of contract which would render the banker liable in damages”.

A customer may also sue the bank in tort for defamation.[8] 

Conclusion

The relationship between a banker and customer is one of a contract between a debtor and a creditor with the additional feature that the banker is only liable to repay the customer on payment being demanded. There is no obligation on the part of the banker or debtor to seek out his creditor, the customer and pay him: obligation is only to pay the customer or some person nominated by the customer, when the customer makes a demand or gives a direction for payment. Thus, to refer a cheque back to its drawer when the customer has money in his account constitutes negligence and is wrongful.[9]

[1] See, FGN v. Insterstella   Comms Ltd. (2015) 9 NWLR (Pt.1463) pg. 1 at 37

[2] See, Ecobank (Nig.) Ltd v. Anchorage Leisures Ltd & Ors (2016) LPELR-40220(CA)

[3] (2014) LPELR-23976(CA)

[4] (2015) LPELR-24832(CA)

[5] [5](1993) NWLR (PT 288) P. 502.

[6] One of the circumstances that can make a customer’s fund to be sufficient but unavailable for the purpose of withdrawn by cheque is when there is a garnishee order being placed on the customer’s account with the bank.

[7] (2014) LPELR-22699(SC)

[8] Emmanuel Omotayo Johnson; “Law of Banking BUL 402: Law of Banking II (Santa’s Note)”, S.A.R.I. 2019, pg.8

[9] See, STB Ltd. v. Anumnu (2008)  14 NWLR (Pt. 1106) 125 at 151

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