High-Risk Customers Under Nigerian AML Law: What Compliance Teams Must Know

Introduction

Nigeria’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) framework is anchored in the risk-based approach. Institutions are expected to align their due diligence efforts with the risk posed by each customer, product, and transaction.

Yet the law does not leave everything to the discretion of compliance officers. Certain categories of individuals, entities, and transactions are explicitly designated as high risk. For these, financial institutions must apply Enhanced Due Diligence (EDD), regardless of how low-risk the client may appear at first glance.

Let’s explore these categories and why they matter.

Politically Exposed Persons (PEPs) and International Officials

The MLPPA 2022, supported by CBN and SEC AML Regulations, mandates that PEPs and individuals holding prominent functions in international organizations be treated as high risk.  PEPs sit at the heart of Nigeria’s AML framework because their access to power, contracts, and public funds makes them prime targets for corruption. The MLPPA and CBN regulations require financial institutions to apply Enhanced Due Diligence not just to the officeholder, but also to family members and close associates. Their proximity to power makes them more vulnerable to corruption and illicit enrichment.

Non-Resident Customers

Non-residents are automatically classified as high risk due to the difficulty of verifying their identity and source of funds across jurisdictions. For Nigerian banks and fintechs, this challenge is compounded by limited access to reliable foreign KYC databases and the risk of “regulatory arbitrage,” where criminals exploit gaps between Nigeria’s rules and foreign regimes. Every non-resident account is therefore a potential entry point for illicit cross-border flows.

Clients from High-Crime Locations

SEC Regulation 12(2)(b) flags customers linked to high-crime geographies as high risk. Geography unfortunately can be a proxy for systemic criminal exposure. Customers tied to regions with elevated rates of fraud, trafficking, or insurgency are tagged high risk. For example, accounts linked to areas with known cybercrime hubs or smuggling corridors demand closer scrutiny. Regulators expect compliance teams not only to check addresses but to apply geo-risk scoring and monitor transactional behavior tied to these locations.

Transactions from FATF-Identified Jurisdictions

Funds originating from FATF high-risk or non-cooperative jurisdictions are automatically red-flagged. These countries are under global scrutiny for AML/CFT deficiencies. Nigerian financial institutions must ensure such transactions are reviewed at the highest level, with documented EDD.

Private Banking Customers

Private banking remains synonymous with large-value, cross-border transactions and the use of complex investment vehicles. Nigerian regulators recognize that these services are disproportionately attractive to money launderers seeking to legitimize illicit wealth. As such, CBN Regulation 28(b) therefore treats all private banking customers as high risk, recognizing their attractiveness to criminals seeking to conceal or move illicit wealth.The expectation is that compliance teams look deeper into beneficial ownership, source of wealth, and the purpose of structures used to hold assets.

Trusts, Nominee Shareholders, and Bearer Shares

Ownership opacity is one of the oldest tricks in money laundering. Nigerian law mirrors global concern by classifying trusts used as holding vehicles, nominee shareholders, and bearer shares as high risk. Each of these masks beneficial ownership and complicates accountability.

Wire Transfers and Complex Legal Arrangements

Wire transfers, by their very nature, are susceptible to misuse in layering schemes, while overly complex legal arrangements are often engineered to confuse oversight. SEC Regulations require both categories to be treated as high risk.

Cross-Border Correspondent Banking

CBN Regulation 28(f) mandates enhanced due diligence for all cross-border correspondent banking and business relationships. While vital for commerce, they remain vulnerable to abuse, especially if counterparties are weakly regulated or operate as shell banks. That is why CBN Regulations mandates enhanced due diligence across all correspondent relationships, regardless of size or history.

High-Risk Jurisdictions (FATF Call for Action)

The Financial Action Task Force (FATF) regularly issues lists of jurisdictions with “strategic deficiencies” in their AML/CFT regimes. Any funds flowing from or to these countries are automatically high risk under Nigerian law. Both the CBN (Reg. 34) and SEC (Reg. 13(7)) direct institutions to apply enhanced due diligence when dealing with FATF-designated high-risk jurisdictions. 

Institutions must not only flag such transactions but document senior management approval and enhanced monitoring. Failure here attracts immediate regulatory attention because FATF compliance is tied to Nigeria’s standing in the global financial system.

Conclusion

By law, these categories cannot be overlooked. Failure to apply EDD exposes institutions to regulatory sanctions, fines, reputational damage, and personal liability for directors and compliance officers.

But beyond compliance, treating these categories seriously is a matter of global credibility. Nigerian institutions that align with FATF and international expectations demonstrate they are reliable partners in the fight against financial crime.

The complexity, however, is immense. PEP databases shift weekly, FATF advisories are updated regularly, ownership structures grow more opaque, and transaction volumes expand exponentially. Manual approaches are no longer sufficient. The challenge lies in staying ahead of shifting lists, opaque ownership structures, and rising transaction complexity.

This is where Regfyl comes in. Our platform is designed to help Nigerian financial institutions operationalize enhanced due diligence with precision and speed. From real-time PEP and sanctions screening to automated monitoring, ownership transparency checks, and FATF advisory updates, we make it possible for compliance teams to manage high-risk obligations without being overwhelmed.

By working with Regfyl, your institution gains a partner committed to helping you stay compliant, avoid penalties, and reinforce your standing as a trusted player in the financial system.

Book a 15-minute discovery call to see how Regfyl can strengthen your compliance posture and position your institution for long-term success.