The journey towards a clean bill of health: recent developments in Nigeria’s anti-money laundering crusade.

Background

Efforts to combat money laundering in Nigeria began in 1995 with the first Anti-money laundering legislation. Since then, there have been enactments and amendments in 2004, 2011, and 2012. Nevertheless, Nigeria is yet to gain the much coveted status of a fully compliant country. Since 2010, the Government of Nigeria has expressed a strong political will to tackle the issue of money laundering in the country. As a result several measures have been put in place to step up the anti-money laundering crusade in the country. It is in line with this vision that the Money Laundering (Prohibition) Amendment Act of 2012 was passed to address the lapses in the Money Laundering (Prohibition) Act of 2011.

Highlights of amendments in the Money Laundering Prohibition (Amendment) Act, 2012

Generally, the amendments made by the 2012 Act border around stiffer sanctions for the offence of money laundering, expansion of the scope of money laundering offences, and enhancement of customer due diligence measures for financial and designated non-financial institutions. Significantly, the Act, for the first time since the enactment of anti-money laundering legislations, expressly prohibits the act of money laundering in Nigeria. The penalty for the offence of money laundering is a minimum of seven years imprisonment and maximum of fourteen years imprisonment, in the case of an individual which is more than the previous minimum of five and maximum of ten years. In the case of a body corporate, the Act stipulates a penalty of a fine of not less than 100% of the proceeds of the offence and withdrawal of licence. Persistence by a body corporate in the commission of the offence of money laundering could lead to a revocation of the licence of such body corporate.

The Act also expressly prohibits the operation of a shell bank in Nigeria and prohibits financial institutions from having any relationship with a shell bank within or outside Nigeria. A person who is guilty of the offence relating to shell banks is liable, in the case of an individual to a minimum of two years imprisonment and maximum of five years imprisonment. In the case of a body corporate, the penalty is a minimum of ten million naira and maximum of fifty million naira in addition to prosecution of its principal officers and winding up of the body corporate.

Another significant provision of the 2012 Act is the provision of a stiffer penalty for failure to declare sums or negotiable instruments in excess of ten thousand dollars (US$ 10,000) to the Nigerian Customs Service as required by the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act. An offender who is found guilty would forfeit the entire undeclared sum or negotiable instrument as against the original provision where the offender would be required to forfeit not less than 25% of the undeclared funds or negotiable instrument. A stiffer sanction is also provided for the offence of tipping off, destruction of records required to be kept under the Act, falsification of identity to carry out any money laundering act, failure to report suspicious transactions, or contravention of the provisions regarding cash payment limits.

The penalty for the stated offences by a director or employee of a financial institution or a designated non-financial institution would be a minimum of two years imprisonment or a fine of ten million naira in the case of tipping off offence or minimum of three years imprisonment or fine of ten million or both in the case of an individual who has committed any of the other offences listed above. In the case of a body corporate the penalty would be twenty-five million naira. This is an increase from the previous minimum of one million and three million naira in the case of an individual and corporate body respectively. The increase in the amount payable as fine no doubt is to serve as a deterrent and it is recommended that such provisions should be reviewed to reflect the economic realities per time. Some laws have become obsolete based on the amount of fines they carry as penalties for offences in such laws. If an offender stands to lose little or nothing for not complying with the provisions of the law, the essence of legislation is defeated. This is especially so where the enforcement mechanism is efficient. The 2012 Amendment Act provides for enhanced due diligence mechanisms and processes by outlining cases where further information about a customer should be obtained and enhanced measures for risk mitigation should be undertaken by financial and designated non-financial institutions.

Implementation and enforcement of the Anti-money laundering legislation

The Central Bank of Nigeria (CBN) has taken some productive steps to enforce the anti-money laundering provisions relating to cash transactions in order to ensure that funds go through financial institutions where they can be scrutinized. The cashless policy of the CBN in this regard is also worthy of mention as this has proved successful to a large extent in parts of the country where the policy is being implemented. It is hoped that with time and the necessary enlightenment about the policy, it would be embraced my majority of the citizenry. The CBN has also issued regulations and circulars and monitored financial institutions to ensure that qualified persons are appointed as compliance officers in all branches where such institutions are located.

For Designated Non-Financial Institutions (DNFI), the Special Control Unit on Money Laundering (SCUML) which is a unit of the Ministry of Trade and Investment has begun the mandatory registration of all businesses within its coverage with a deadline of December, 2013. The affected businesses are dealers in jewellery, cars and luxury goods, chartered accountants, audits firms, tax consultants, clearing and settlement companies, legal practitioners, hotels, casinos, and supermarkets. These are businesses which the regulatory agencies believe are target organisations for money laundering in the country. It is important to note that the Nigerian Bar Association (NBA), the umbrella body of legal practitioners in the country has dragged the SCUML to court over the requirement to report transactions over one thousand dollars (US$1000) to the unit as a way of curbing money laundering which includes legal practitioners. The NBA argues that is an infringement of the independence of the bar and breach of privacy/confidentiality required by the profession. However, this does not affect the other DNFIs which are considered high risk businesses and potential targets for money laundering.

On its part, the Economic & Financial Crimes Commission which was formed to combat money laundering in the country seems to get weaker and weaker with fewer convictions despite several cases that have been prosecuted by the Commission. Many high profile cases involving politically exposed persons and bank chiefs remain inconclusive with poor investigation and data analysis. The situation is compounded by weak and ill-equipped law enforcement agencies with weak or non-existent collaborations between themselves to combat the menace of money laundering and counter terrorism financing in the country. The criminal justice system in particular and judicial system in general in the country even worsen the situation further and encourage the prevalence of organised crime in the country. In cases where there is actually a conviction, the sentences are disproportionate with the offence and therefore not dissuasive. Rather they embolden criminals who are willing to give up some of the proceeds of their crime and continue in the illegal act. The case of James Ibori, former Governor of Delta state who was discharged and acquitted in Nigeria but found guilty and convicted on money laundering offences in the UK attest to the fact that there remains much to be desired in the manner financial crimes are being prosecuted in the country. It is suggested that a special tribunal be constituted which should be manned by a well-trained and qualified workforce with a high level of integrity and efficiency to ensure speedy prosecution of cases. This will go a long way to serve as a deterrent to those who capitalize on the inefficiency of the judicial system in the country.

Ready or Not…

Although Nigeria has taken laudable strides in the legislation against money laundering and terrorist financing, there is still a lot to be done in the area of implementation and enforcement of statutory provisions in the country. Predicate offences especially, card fraud, computer-aided scams, oil theft, drug trafficking, human trafficking, weapons trafficking, bribery and embezzlement in public and private sectors are on the increase. If the crime of money laundering is to be effectively addressed, the incidence of predicate offences must be reduced to a bare minimum. As Nigeria prepares to receive the team of supervisors from the Financial Action Task Force (FATF) in September, 2013, one question that easily comes to mind is whether in the present circumstance, Nigeria stands a chance of being de-listed from the grey list of the FATF. In my candid view, this is very unlikely. This is because very little improvement has been made in terms of enforcement and implementation of policies that would enhance the status of the country to that of a compliant member country of the FATF and the Inter-governmental Action Group against Money Laundering in West Africa (GIABA).

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