Compliance and Financial Regulation Flashcards

A comprehensive set of 100 vocabulary flashcards covering financial regulation, AML/CFT standards, legal frameworks, and compliance mechanisms based on lecture transcripts.

Primary Regulations

Standards of behavior established directly by the lawmaking arm of the state (such as Parliament) requiring parliamentary or head-of-state approval.

Negative Externality

Spillover cost suffered by an uninvolved third party as a result of an economic transaction between a producer and consumer.

Risk Management Era

Historical era of financial regulation that succeeded the Structural Control Era, focusing on government restrictions to reduce asymmetric information and prevent excess risk-taking.

Central Bank of Nigeria (CBN) Act of 1958

The act that originally signaled the true commencement of an indigenous banking regulatory regime in Nigeria.

Financial Services Regulation Coordinating Committee (FSRCC)

Committee formally renamed from the FSCC on May 27, 1994, and accorded legal status under the 1998 CBN Act amendment.

Pillars of Basel II

The framework comprising $3$ pillars: Minimum Capital Requirements, Supervisory Review, and Market Discipline.

Apex Regulatory Entity (Nigerian Financial Architecture)

Parliament / Government, which sits at the apex of the regulatory pyramid to enact laws and establish regulatory bodies.

Self-Regulation

A regulatory approach where industry formulates its own rules and codes of conduct with sole internal responsibility for enforcement.

Co-Regulation

A regulatory arrangement where industry develops rules but government provides legislative backing and underpinning to enforce them.

Chief Compliance Officer (CCO) Appointment Level

Mandated by Section 13 of the MLPPA 2022 to be established strictly at the management level.

Preventive Control

A primary compliance control activity designed to stop the crystallization of risk before it occurs.

Terrorism Prevention and Prohibition Act 2022

The primary legal instrument governing the fight against terrorism and terrorism financing in Nigeria.

Precise Insider Information

Non-public capital market information indicating circumstances or events that exist or may reasonably be expected to occur, specific enough to draw a conclusion on price effect.

Financial Action Task Force (FATF)

Intergovernmental body established in $1989$ by the G-7 with its Secretariat located at the OECD headquarters in Paris, France.

South Africa (FATF Membership)

Currently the sole full member country of the Financial Action Task Force (FATF) in Africa.

Largely Compliant (LC) Rating

FATF Technical Compliance Rating in Mutual Evaluations signifying that there are only minor shortcomings.

1988 Vienna Convention

UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, which was the first international legal instrument to criminalize money laundering.

The Wolfsberg Group

An association established in $2000$ in Switzerland comprising $13$ global financial institutions.

EU 4th AML Directive Threshold

Directive (2015) under which the cash payment reporting threshold for DNFBPs was lowered to $\text{€}10,000$.

GIABA Creation Date

Created on December 6, 2000 by the Authority of Heads of State and Government of ECOWAS as a specialized regional institution.

GIABA Headquarters

Located in Dakar, Senegal, with regional field offices in Lagos, Nigeria and Abidjan, Côte d'Ivoire.

Office of Foreign Assets Control (OFAC)

A unit of the US Department of the Treasury that administers and enforces economic and trade sanctions.

Person with Significant Control (PSC)

Defined under CAMA 2020 as an individual directly or indirectly holding at least $5TS_PERCENT$ of shares, voting rights, or interest in a company.

Minimum Share Capital for PLCs (CAMA 2020)

Specified under CAMA 2020 as $\text{₦}2,000,000$ for public limited companies (compared to $\text{₦}100,000$ for private companies).

Predicate Offences (FATF 40 Recommendations)

Refers to $21$ specific categories of predicate offenses explicitly designated as primary sources of proceeds for money laundering.

Stages of Money Laundering

The three recognized linear or concurrent stages: Placement, Layering, and Integration.

Source of Funds (ML vs. TF)

Money laundering proceeds derive strictly from criminal acts, whereas terrorist financing can utilize funds from both legitimate sources and illegal acts.

Operational Stages of Terrorist Financing

The four distinct operational stages: Collecting, Storing, Moving, and Using.

Smurfing

The practice of breaking down large cash deposits into smaller transactions executed by multiple individuals to avoid threshold reporting.

Record-Keeping Standard (FATF Recommendation 11)

Requires financial institutions to maintain transaction and CDD records for a minimum period of $5\text{ years}$.

Primary Regulation Creation Entity

Standards put in place directly by the lawmaking arm of the state that require parliamentary or head-of-state approval.

External Cost

A negative externality suffered by an uninvolved third party due to economic transactions or unregulated actions.

Focus of Risk Management Era

Moderating operator behavior, reducing asymmetric information challenges, and preventing excess risk-taking.

Commencement of Indigenous Nigerian Banking Regulation

Signaled by the enactment of the Central Bank of Nigeria (CBN) Act of 1958.

FSRCC Renaming Date

May 27, 1994, when the Financial Services Coordinating Committee (FSCC) was renamed to Financial Services Regulation Coordinating Committee.

Basel II Framework Structure

Composed of $3$ Pillars: Minimum Capital Requirements, Supervisory Review, and Market Discipline.

Apex of Regulatory Architecture Pyramid

Parliament / Government, sitting at the top to enact laws and establish regulatory bodies.

Self-Regulation Characteristics

Industry-formulated rules and self-enforcement, suitable when public interest risks are low.

Distinguishing Feature of Co-Regulation

Government providing legislative backing and underpinning to enforce industry-formulated compliance arrangements.

MLPPA 2022 Section 13 Mandate

Dictates that the Chief Compliance Officer (CCO) must be appointed at the management level.

Compliance Preventive Control

Control activity aimed at stopping the crystallization of risk before it occurs.

Nigerian Counter-Terrorism Financing Law

The Terrorism Prevention and Prohibition Act 2022.

Precise Non-Public Information

Information indicating existing or reasonably expected circumstances/events specific enough to draw conclusions on price effects.

FATF Establishment and Location

Established in $1989$ by the G-7 with Secretariat housed at the OECD headquarters in Paris.

African Member of FATF

South Africa, currently the sole full member country of FATF in Africa.

Largely Compliant Rating

Rating signifying only minor shortcomings in meeting FATF technical legal compliance.

1988 Vienna Convention Significance

The first international legal instrument to criminalize money laundering.

Wolfsberg Group Composition

Founded in $2000$ in Switzerland as an association of $13$ global financial institutions.

EU 4th AML Directive DNFBP Limit

Lowered cash payment reporting threshold for Designated Non-Financial Businesses and Professions to $\text{€}10,000$.

GIABA Creation Details

Created on December 6, 2000 as an ECOWAS specialized institution.

GIABA Location

Headquarters in Dakar, Senegal, with field offices in Lagos and Abidjan.

US Sanctions Enforcer

The Office of Foreign Assets Control (OFAC) under the US Department of the Treasury.

PSC Percentage Threshold

Holding directly or indirectly at least $5TS_PERCENT$ of shares, voting rights, or interest under CAMA 2020.

Public Limited Company Minimum Capital

Set at $\text{₦}2,000,000$ minimum share capital under CAMA 2020.

FATF Predicate Categories

Refers to $21$ explicitly designated categories of predicate offenses.

Sequence of ML Stages

Placement, Layering, Integration.

Terrorist Financing Funds Origin

Can originate from legitimate donations as well as illegal acts.

Steps of Terrorist Financing

Collecting, Storing, Moving, Using.

Structuring by Multiple Individuals

Smurfing.

FATF Record Retention Standard

Requires maintaining records for a minimum period of $5\text{ years}$.

Primary Regulation

Standards of behavior established directly by the lawmaking arm of the state requiring parliamentary or head-of-state approval.

Objective of Financial Sector Regulation

To promote smooth, fair, and honest operations while protecting stakeholders across the financial system.

Negative Externalities Definition

Costs suffered by an uninvolved third party as a result of an economic transaction.

Structural Control Era Focus

Government rules specifically targeting entry requirements and state restrictions on financial market participants.

Section 38 CBN Act 1991 Amendment

Accorded legal status in 1998 to the Financial Services Regulation Coordinating Committee (FSRCC).

International Association of Insurance Supervisors (IAIS)

Established in 1994 to set global standard rules specifically for the insurance industry.

Sustainable Banking Guidelines Driver

Environmental factors and climate change debates influencing regulatory frameworks.

Role of Supervisors and Examiners

Operating as quasi-regulators or arms of regulatory bodies that examine and monitor compliance.

First Option Regulatory Model (Low Risk)

Self-Regulation, recommended when there is low public interest concern and low risk that the market can fix.

Black Letter Law

Explicit government regulation comprising primary and subordinate statutory legislation.

Public Law

Legal framework governing the relationship between the state/government and entities enabling prosecution for financial crimes.

Attributes of a Good Compliance Officer

Proactivity, objectivity, high integrity, diligence, and strong communication skills.

The Joint Forum

Tripartite forum established in 1996 comprising BCBS, IOSCO, and IAIS to exchange cross-sector information.

Directive Control

Compliance control measures that establish standards, policies, and employee training programs.

Market Manipulation

Market abuse involving deliberate actions like placing fictitious orders to artificially fix or inflate asset prices.

FATF Secretariat Location

OECD Headquarters in Paris, France.

FATF Recommendation 1

Requires countries and institutions to assess risks and apply a risk-based approach.

Non-Compliant (NC) Rating

FATF Mutual Evaluation rating indicating major shortcomings in meeting requirements.

2000 Palermo Convention

UN convention expanding money laundering predicate offenses beyond narcotics to all serious transnational organized crimes.

UN Security Council Resolution 1373

Adopted in September 2001, requiring member states to criminalize terrorist financing and freeze assets.

BCBS ML/TF Guidance Document

Titled 'Sound management of risks related to Money Laundering and Financing of Terrorism', published in January 2014.

GIABA Status

ECOWAS specialized institution acting as the FATF-Style Regional Body (FSRB) for West Africa.

USA PATRIOT Act of 2001

US enactment following September 11 that expanded anti-terrorism legislation and amended the BSA and MLCA.

Foreign Corrupt Practices Act (FCPA)

US legislation primarily prohibiting companies with US connections from bribing foreign officials.

Specially Designated Nationals (SDN) List

US OFAC list under which listed assets are blocked and transactions by US persons are prohibited.

Interpol Red Notices

Examples of official law enforcement watch lists and wanted alert notifications.

Politically Exposed Person (PEP) Screening Lists

Intelligence screening and risk control lists requiring Enhanced Due Diligence (EDD) without presumption of criminality.

Market Discipline Principle

Principle requiring banks to disclose accurate operational information to foster public confidence.

National Insurance Commission (NAICOM)

Nigerian regulatory agency that supervises Insurance Companies, Re-insurance Companies, and Loss Adjusters.

Mandatory Cash Transaction Disclosure Window

Requires cash transaction reports to be filed with the NFIU within $7\text{ days}$ under Section 11 of MLPPA 2022.

Independent Corrupt Practices Commission (ICPC)

Nigerian agency targeting public sector corruption, including bribery, gratification, graft, and abuse of office.

FRC Act Financial Reporting Window

Requires public interest entities to submit financial statements within $60\text{ days}$ of board approval.

Consumer Protection Council (CPC)

Established in 1992 under Act No. 66 to protect consumer rights, eliminate hazardous products, and provide speedy redress.

Licensed Credit Bureaus in Nigeria

Refers to the $3$ credit bureaus currently licensed to operate by the Central Bank of Nigeria.

Association of Chief Compliance Officers of Banks in Nigeria (ACCOBIN)

The professional body formerly known as the Committee of Chief Compliance Officers of Banks in Nigeria (CCCOBIN).

Revenue Mobilisation Allocation and Fiscal Commission (RMAFC)

Nigerian body constitutionally empowered to monitor accruals into and disbursements from the Federation Account.

FMDQ OTC Securities Exchange

Nigeria's foremost debt capital, foreign exchange, and derivatives over-the-counter exchange operating as an SRO.

Company Limited by Guarantee

Non-profit company structure under CAMA 2020 formed primarily for charitable causes that does not distribute profits to members.

Egmont Group Admission of NFIU

Occurred in $2007$, admitting the Nigerian Financial Intelligence Unit into the global network of FIUs.

Federal Government Whistleblowing Portal Management

Managed by the Federal Ministry of Finance to check financial abuses, TSA violations, and procurement fraud.