Combating Money Laundering in Nigeria: An Appraisal of the Money Laundering Prohibition Act 2004

Combating Money Laundering in Nigeria: An Appraisal of the Money Laundering Prohibition Act 2004 1 Introduction One of the most pervasive economic crimes in Nigeria today is Money Laundering. Although relatively unknown in the country until the late 1980s, it is now a veritable companion of the corruption virus which has permeated every segment of the Nigerian society. By its very nature, money laundering is an offence that necessarily involves several persons and entities in its conception, planning, and execution.1 It has the capacity to distort and corrupt the economic system and inhibit the economic development efforts of states.2 It is in recognition of its adverse consequences on the national and international economy that a number of measures have been taken to combat the menace. At the international level, the OECD countries took the lead in engineering the establishment of Financial Action Task Force (FATF) which has been in the forefront of the measures against money laundering. The organization has not only succeeded in precipitating the taking of proactive measures to deal with this menace but also consistently made concrete suggestions on how national legislations dealing with this crime should be constructed. Indeed, it is in response to the prompting of such international institutions and agencies that several states have enacted laws specifically designed to deal with this offence. Nigeria first took positive action along this line in 1995 when she enacted the Money Laundering Act.3 However, it was soon realized that the decree had a number of loopholes and inadequacies which militated against its effectiveness. In the context of Nigeria, this is not surprising, because the usual pattern of legislation in the country hardly takes cognizance of all the circumstances before a law is passed. This problem was more apparent during the military regimes where decrees were rolled out after meetings of the military-dominated ruling councils without legislative debate.4 It was in recognition of these facts and the specific deficiencies identified that led to the enactment of the Money Laundering Prohibition Act 2004 by the present government. Although the Act makes a number of far-reaching provisions relating to money laundering in the country, it also raises a number of issues that require re-examination in the light of prevailing circumstances. It is intended in this paper to examine the provisions of this law to see how it has assisted in the fight against the menace in Nigeria. The inadequacies of the law will also be discussed and suggestions made in the concluding part of the paper on how to make the legislation more responsive to the quest for effective regulation of this crime. 2 Substantive Provisions of the Act The Act commences with the limitation of the amount of cash that private individuals and corporate entities can hold for the purpose of making any payments. It provides that in the case of the individual, the amount shall be five hundred thousand Naira (N500,000.00) while that of corporate entities shall be one million Naira (N1,000,000.00).5 Transactions involving sums of money above the stipulated maximum are required to be done through a financial institution. This is a very important provision as it is designed to minimize the undue reliance on a cash-based economy. It is common in Nigeria for a person buying land worth five million Naira (N5,000,000.00) to do so through cash payment. Indeed, the capacity to carry large sums of money and pay for transactions in cash is venerated in the country. Apart from the risk that the conveyance of such huge sum of money creates, it has very serious consequences on the ability of the regulatory agencies to formulate and implement forward-looking monetary and fiscal policies. In order to enhance the monitoring process and keep track of financial transactions, it is provided in section 2(1) of the Act that a transfer to or from a foreign country of funds or securities of a sum exceeding ten thousand dollars ($10,000) or its equivalent shall be reported to the Central Bank of Nigeria. It is also significant that a report made in pursuance of this provision is required to indicate the nature and amount of the transfer, the names and addresses of the sender, and receiver of the funds or securities.6 In the same vein, it is provided in section 5(1) of the Act that before opening an account for or issuing passbook or even entering into any business relationship with a potential customer, the financial institution shall verify the customer's identity and address. In the case of an individual, he is required to provide proof of his identity by presenting to the financial institution a valid original copy of an official document bearing his names and photograph; Secondly, he is to show proof of his address, by presenting to the financial institution the originals of receipts issued within the previous three months by public utilities.7 In the case of a body corporate, its proof of identity shall be provided by the presentation of its certificate of incorporation and other valid official documents attesting to the existence of the body coroporate.8 Where a manager, employee, or assignee is delegated by a body corporate to open or operate an account, such a person shall in addition to the requirements specified for private individuals also show proof of a power of attorney granted to him for that purpose.9It is also provided in section 5(6) of the Act that where a financial institution reasonably suspects that the amount involved in a transaction is the proceeds of the crime or an illegal Act, it shall require identification of the customer notwithstanding that the amount involved in the transaction is less than US $5,000 or its equivalent. Moreover, where it appears that a customer is not acting on his own account, the financial institution is required to ascertain by all reasonable means, information on the true identity of the principal.10 One important provision in the Act designed to facilitate the detection of money laundering activities is section 6(1). It provides as follows: When a financial institution is requested to carry out a transaction, whether or not it relates to the laundering of the proceeds of a crime or an act, the financial institution shall seek information from the customer as to the origin and the destination of the funds, the aim of the transaction and the identity of the beneficiary.In order to make this surveillance function more effective, financial institutions are required within seven days of the transaction to carry out the following actions:Significantly, any financial institution which fails to comply with the above provisions is guilty of an offence and liable upon conviction to a fine of N1,000,00 each day for as long as the offence continues.12 To emphasize the importance of the identification of records of transactions, it is provided that these records are to be kept and preserved for at least a period of 10 years, and that the records shall be communicated to the Central Bank, National Drug Law Enforcement Agency (NDLEA), judicial authorities, Customs Officers, and such other persons as the Central Bank may from time to time specify.13 (a) Draw up a written report containing all relevant information about the transaction as well as the identity of the principal and where applicable, those of the beneficiary. (b) Take appropriate action to prevent the laundering of the proceeds of a crime or an illegal Act. (c) Send a copy of the report and action taken to the Central Bank, the Commission, the Securities and Exchange Commission, or such other appropriate regulatory authority, as the case may be.11 One other mandatory disclosure requirement concerning financial transactions is contained in section 10 of the Act. It is to the effect that a financial institution or casino shall report to the Agency in writing, lodgement or transfer of funds in excess of N1,000,000 or its equivalent in the case of an individual and N5,000,000 or its equivalent in the case of a body corporate.14 This report is to be submitted within seven days of any single transaction.15 Moreover, a person other than a financial institution, may voluntarily give information on any transaction, lodgement, or transfer of funds involving the amounts set out above.16 This ensures that even when a financial institution fails to report as required, information about the transaction still gets to the Agency. The purpose of these provisions is to enable the Agency ascertain the origin of the funds and determine whether to direct a stoppage of the transaction or not. This it can do when acknowledging receipt of such disclosure, report or information received in furtherance of the provisions. If the Agency is unable to ascertain the origin of the funds within a period of 72 hours, it may make a request to the Federal High Court for an order that the funds, accounts, or securities referred to in the report be blocked, and an order made by the Court in pursuance of this provision shall be enforced forthwith.17 Moreover, when an account, telephone line, or computer system is used or reasonably suspected to have been used by any person suspected of taking part in a transaction involving the proceeds of a financial or other crime, the Agency can obtain an order from the Federal High Court authorizing it to place such bank account under surveillance, tap such telephone line, or place it under surveillance. It can also through such an order obtain access to any computer system and communication of any authentic instrument or private contract, together with all bank, financial, and commercial records.18 For the purpose of carrying out the aforementioned measures, it is specifically provided in section 12(2) that the rule relating to banking secrecy19 shall not be invoked as a ground for objecting to these measures. A number of comments may be made here. Although it is a well-intentioned provision, it is clear that it greatly infringes on the constitutional rights of citizens, namely right to privacy and communications. The saving grace, however, is that the order can only be made based on a sworn declaration by the Chairman of the Agency, and the Court must be satisfied on the necessity for the grant of the orders before doing so.20 This is consolatory since the courts normally lean in favour of maintaining the rights and liberties of citizens.21 The actual money laundering offences are provided for in sections 14–18 of the Act which also specify the penalties for such offences. Thus, section 14(1) provides as follows: Any person who (a) converts or transfers resources or property derived directly or indirectly from illicit traffic in narcotic drugs or psychotropic substances or any illegal act, with the aim of either concealing or disguising the illicit origin of the resources or property or aiding any person involved in the illicit traffic in narcotic drugs or psychotropic substances or any other crime or illegal act to evade the legal consequences of his action; or (b) collaborates in concealing or disguising the genuine nature, origin, location disposition, movement or ownership of the resources, property or rights thereto derived directly or indirectly from illicit traffic in narcotic drugs or psychotropic substances or any other crime or illegal act, commits an offence under this section and is liable on conviction to imprisonment for a term of not less than 2 years or more than 3 years.22Significantly, a person who commits an offence under this subsection shall also be subject to the same penalty notwithstanding the fact that the various acts constituting the offence were committed in different countries or places.23 It is not difficult to ascertain the rationale behind this provision since, very often, money laundering entails the perpetration of some of the acts in one country and the others in other countries. This brings to the fore the transnational nature of money laundering which has given rise to international concern for its regulation. It is against this background that reference must be made to the United Nations Convention Against Transnational Organised Crime24 which is designed to deal with crimes of this nature, and the recommendations of the FATF.25 It is not only an offence to actually convert or transfer resources either directly or indirectly but also an offence under the Act to retain the proceeds of criminal or illegal activities. Thus, section 16 of the Act provides that any person who: (a) whether by concealment, removal from jurisdiction, transfer to nominees or otherwise retains the proceeds of a crime or an illegal act on behalf of another person knowing or suspecting such other person to be engaged in a criminal conduct or has benefited from a criminal conduct; or (b) knowing that any property either in whole or in part directly or indirectly represents another person's proceeds of a criminal conduct, acquires or uses that property or has possession of it, commits an offence under this Act and is liable on conviction to imprisonment for a term of not less than 5 years or to a fine equivalent to 5 times the value of the proceeds of the criminal conduct or to both such imprisonment and fine.26It is difficult to fashion the rationale for this marked variation in the punishment specified under this section and that provided for in section 14 of the Act relating to the actual conversion or transfer of funds from such criminal or illegal activities which is stated to be not more than three years. Although it may be said that the opportunity created by a willing receptacle could have emboldened the suspect and thus facilitated the commission of the offence, it is nevertheless incongruous to have such marked disparity in the punishment for both kinds of offences, when the level of moral reprehensibility is more for the actual converter or transferor of such illegal funds than the receiver.27 One other innovative provision relating to punishment under the Act is contained in section 17 and it is to the effect that conspiracies and attempts to commit any of the offences under the Act carry the same penalty as those prescribed for the main offences. Again, the only explanation for this provision which appears to differ from the well-known rule of having lighter sentences for attempts and conspiracies in criminal punishments is that it will go a long way in discouraging people from involvement one way or the other in the commission of money laundering. This of course depends on the extent of validity and value assigned to deterrence as a principle of criminal punishment.28 For the effective enforcement of the provisions of the Act, section 21, makes it an offence for any person who wilfully obstructs the Agency or any authorized officer in the exercise of the powers conferred on the Agency under the Act. The prescribed punishment in the case of an individual is a term of imprisonment not less than two years and not exceeding three years, while in the case of a financial institution or other corporate entity the punishment is a fine of one million Naira. In recognition of the fact that preventive measures are often more effective in the regulation of economic crimes, the Act has made a number of provisions compelling financial institutions to play a leading role in this direction. Thus, section 9(1) of the Act provides that every financial institution shall develop programmes to combat the laundering of the proceeds of a crime or other illegal act. These shall include: (a) the designation of compliance officers at management level at its headquarters and at every branch and local office; (b) regular training programmes for its employees; (c) the centralization of the information collected; (d) the establishment of an internal audit unit to ensure compliance with and ensure the effectiveness of the measures taken to enforce the provisions of the Act29To enhance compliance with this provision, the Governor of the Central Bank of Nigeria is empowered to impose a penalty of not less than one million Naira on any financial institution which fails to comply with the above provisions.30 This is a very important provision since the threat of immediate sanction which could be suspension of the bank's operating license can engender compliance with the statutory provision. 3 Enforcement of Statutory Provisions There is no doubt that with the enactment of the Money Laundering Act 2004 the Nigerian Government has taken a bold step in its efforts to combat money laundering in the country. However, this bold initiative may not bear the required fruits if the well-known problems of enforcement of law in the country are not adequately addressed. In the first place, the Act makes a number of far-reaching provisions relating to the disclosure of information concerning financial transactions by financial institutions and provides appropriate penalties for breach of such provisions. To what extent can the regulatory institutions go in enforcing due compliance with these provisions? It is a common feature in Nigeria that individuals and institutions prefer to subvert laid down rules rather than comply with them. The assurance being that even when they fail to comply, officials from the regulatory institutions will always compromise their positions. This brings to the fore the pervasiveness of corruption in the country as such officers are often ‘settled’31 to overlook non-compliance with statutory provisions. In this scenario, there is usually an unholy alliance between officers of the defaulting banks and those from the regulatory institutions.32 The end result is inadequate or ineffective enforcement of the rules, to the detriment of the Nigerian society. There is also the problem of lack of regular monitoring of the activities of these financial institutions. Inspectorate and Compliance Officers are known to be lax in their monitoring of the operations of these institutions. Allied to this, is the problem of lack of adequate capability to effectively perform the assigned tasks. There is no doubt that the regulation of financial transactions is a highly technical assignment that requires competent and experienced professionals which are often lacking in Nigeria. This is moreso when money laundering with its own intricacies is involved. One sure way of ensuring adequate monitoring of these transactions therefore is to enhance the capability of those officers to enable them perform this assignment effectively. In this connection, the efforts of the United Nations Office on Drug Control in assisting to upgrade the capability of the Economic and Financial Crimes Commission in this regard is highly commendable and will have positive impact if properly co-ordinated.33 It may also be suggested that for the success of the anti-corruption crusade within the context of the ongoing economic reforms, it is necessary to establish a specialized court namely, the Economic Crimes Tribunal with responsibility for the determination of disputes and other complaints relating to the commission of economic crimes in the country. This is because at present, the Federal High Court is largely bogged down with an unduly expanded jurisdiction in respect of several offences and acts, thus resulting in unnecessary delay in the disposal of cases brought before it. This will also ultimately create a pool of competent and experienced practitioners in the handling of matters relating to economic crimes in the country. Finally, particular attention must be paid to the enlightenment of the public about the dangers posed to the economic health of the nation by money laundering and related activities. Indeed, this is one way of ensuring that the commission of the offence is nipped from the bud. 4. Conclusion Money Laundering has become a critical problem affecting the socio-economic structure of the Nigerian society. This is particularly so when it is facilitated by official corruption which is now seen as the norm rather than the exception in the country. The present administration's efforts at combating this menace led to the enactment of the Money Laundering Act which contains very important provisions designed to curb these practices. Although the provisions of the Act are, to a large extent, forward looking, a number of provisions therein require amendment to make the fight against money laundering more meaningful. The provisions will no doubt have meaning if the attendant problems of enforcement highlighted in the preceding paragraphs are adequately tackled. This is because a good legislation can be meaningless if not properly enforced. This calls for sustenance of the current efforts at combating money laundering as the economic reforms are taking shape. It also requires sufficient collaboration with international agencies and organizations concerned with the regulation of such economic crimes. In this connection, it is noteworthy that concerted efforts of the government has led to the removal of the country from the list of non-conformist countries with respect to the fight against money laundering. There is therefore the need for further intensification of efforts by the Economic and Financial Crimes Commission, and the other Agencies involved in this fight to ensure that Nigeria takes its rightful place in the comity of nations with demonstrable commitment to the eradication of this economic menace. 1 These include bank officials, accountants, estate valuers, agents and even solicitors; see, H Ping, ‘Lawyers, Notaries, Accountants and Money Laundering’ (2006) 9 J Money Laundering Control, 1, 62. 2 See Y Osinbajo and O Ajayi ‘Money Laundering in Nigeria’ in AU Kalu and Y Osinbajo (eds) Perspectives on Corruption and Other Economic Crimes in Nigeria (Federal Ministry of Justice Lagos Nigerig 1991) 58 at 59. 3 No. 3 of 1995. 4 See A Ojo Constitutional Law and Military Rule in Nigeria (Evans Brothers Nigeria Publishers Limited Ibadan 1987) 32. 5 Section 1(I) of the Act. 6 Section 2(2). 7 Section 5(2). The present economic reforms in the country which has led to the consolidation of banks has made those non-compliant institutions to take seriously the need to comply with these requirements because of the fear of possible sanction for default. 8 Section 5(3). 9 Section 5(4). 10 Section 5(7). This is a very salutary provision as the concept of undisclosed principal could be a veritable escape route for the perpetration of fraudulent activities. 11 Section 6(2). 12 Section 6(3). A proper enforcement of this provision will go a long way in ensuring compliance by the financial institutions, as the bane of Nigerian Criminal process has been lack of adequate enforcement of statutory provisions; see KS Chukkol ‘The Role of Banks and Other Financial Institutions in the Fight Against Economic and Financial Crimes in Nigeria’ (2003–2004) 21–22 Ahmadu Bello U L J 25 at 31, 32. 13 Section 8. 14 Section 10(I). 15 Ibid. 16 Section 10(3) 17 Section 10(6). 18 Section 12(I). 19 It is a fundamental rule of banking law that transactions between banks and their customers are kept secret. See TourniervNational Provincial & Union Bank of England [1924] IKB 461; Habib (Nigeria) Bank Ltd. vKoya [1992] 7 NWLR 251, 43. 20 Section 12(I). 21 In line with the constitutional guarantees of fundamental rights, see ST Hon Constitutional Law and Jurisprudence in Nigeria (Pearl Publishers Port Harcourt 2004) 82. 22 Section 14(I). 23 Section 14(2). This emphasizes the transnational nature of the offence, and justifies the international concern for its regulation. 24 Adopted by the General Assembly of the United Nations in November 2000. The relevance of this Convention in regulating transnational organized crime can hardly be over emphasized since globalization has collapsed the world into a global village thus facilitating transnational crime. See N Usman ‘Protection and Preservation of Cultural and Religious Diversities in a Globalised World: Problems and Prospects’ in DA Guobadia and E Azinge (eds) Globalisation, National Development and the Law (NIALS Lagos Nigeria 2005) 228. 25 The Forty Recommendations of the FATF continues to serve as a fundamental touchstone for states in the enactment of legislations dealing with money laundering. 26 This is a novel provision in criminal jurisprudence in Nigeria and it is a recognition of the inadequacy of existing legal provisions. 27 On the relationship between criminal law and morality, see Lord Devlin The Enforcement of Morals (Oxford University Press 1959); contrast, HLA Hart Law, Liberty and Morality (Harry Camp Lectures 1963). 28 There has been a recurring controversy as to the efficacy of deterrence as a principle of criminal punishment. See, for example, AA Adeyemi ‘Sentencing of Imprisonment: Objectives, Trends and Efficacy’ The Penal System of Nigeria; NS Okogbule ‘Towards a Rational Theory of Criminal Punishment in Nigeria’ (1993) 2 J Jurisprudence Contemporary Issues 50. 29 This is a salutary provision which if implemented would go a long way in ensuring effective enforcement of the provisions of the law. 30 Section 9(2). 31 This emerging concept of ‘settlement’ as a subject of contemporary political discourse can be traced to the regime of General Ibrahim Babangida as Head of State, see MH Kukah Democracy and Civil Society in Nigeria (Spectrum Books Limited Ibadan 1999) 222. 32 This emphasizes the pervasiveness of corruption in the country. See NS Okogbule ‘An Appraisal of the Legal and Institutional Framework for Combating Corruption in Nigeria’ (2006) 13 J Financial Crime 1, 92. C Achebe The Trouble with Nigeria (Fourth Dimension Publishers Enugu Nigeria 1983) 46–55. 33 See The Guardian, Wednesday 6 September 2006 27–28. © The Author 2007. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Statute Law Review Oxford University Press

Combating Money Laundering in Nigeria: An Appraisal of the Money Laundering Prohibition Act 2004

Statute Law Review, Volume 28 (2) – Jul 1, 2007

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Abstract

1 Introduction One of the most pervasive economic crimes in Nigeria today is Money Laundering. Although relatively unknown in the country until the late 1980s, it is now a veritable companion of the corruption virus which has permeated every segment of the Nigerian society. By its very nature, money laundering is an offence that necessarily involves several persons and entities in its conception, planning, and execution.1 It has the capacity to distort and corrupt the economic system and inhibit the economic development efforts of states.2 It is in recognition of its adverse consequences on the national and international economy that a number of measures have been taken to combat the menace. At the international level, the OECD countries took the lead in engineering the establishment of Financial Action Task Force (FATF) which has been in the forefront of the measures against money laundering. The organization has not only succeeded in precipitating the taking of proactive measures to deal with this menace but also consistently made concrete suggestions on how national legislations dealing with this crime should be constructed. Indeed, it is in response to the prompting of such international institutions and agencies that several states have enacted laws specifically designed to deal with this offence. Nigeria first took positive action along this line in 1995 when she enacted the Money Laundering Act.3 However, it was soon realized that the decree had a number of loopholes and inadequacies which militated against its effectiveness. In the context of Nigeria, this is not surprising, because the usual pattern of legislation in the country hardly takes cognizance of all the circumstances before a law is passed. This problem was more apparent during the military regimes where decrees were rolled out after meetings of the military-dominated ruling councils without legislative debate.4 It was in recognition of these facts and the specific deficiencies identified that led to the enactment of the Money Laundering Prohibition Act 2004 by the present government. Although the Act makes a number of far-reaching provisions relating to money laundering in the country, it also raises a number of issues that require re-examination in the light of prevailing circumstances. It is intended in this paper to examine the provisions of this law to see how it has assisted in the fight against the menace in Nigeria. The inadequacies of the law will also be discussed and suggestions made in the concluding part of the paper on how to make the legislation more responsive to the quest for effective regulation of this crime. 2 Substantive Provisions of the Act The Act commences with the limitation of the amount of cash that private individuals and corporate entities can hold for the purpose of making any payments. It provides that in the case of the individual, the amount shall be five hundred thousand Naira (N500,000.00) while that of corporate entities shall be one million Naira (N1,000,000.00).5 Transactions involving sums of money above the stipulated maximum are required to be done through a financial institution. This is a very important provision as it is designed to minimize the undue reliance on a cash-based economy. It is common in Nigeria for a person buying land worth five million Naira (N5,000,000.00) to do so through cash payment. Indeed, the capacity to carry large sums of money and pay for transactions in cash is venerated in the country. Apart from the risk that the conveyance of such huge sum of money creates, it has very serious consequences on the ability of the regulatory agencies to formulate and implement forward-looking monetary and fiscal policies. In order to enhance the monitoring process and keep track of financial transactions, it is provided in section 2(1) of the Act that a transfer to or from a foreign country of funds or securities of a sum exceeding ten thousand dollars ($10,000) or its equivalent shall be reported to the Central Bank of Nigeria. It is also significant that a report made in pursuance of this provision is required to indicate the nature and amount of the transfer, the names and addresses of the sender, and receiver of the funds or securities.6 In the same vein, it is provided in section 5(1) of the Act that before opening an account for or issuing passbook or even entering into any business relationship with a potential customer, the financial institution shall verify the customer's identity and address. In the case of an individual, he is required to provide proof of his identity by presenting to the financial institution a valid original copy of an official document bearing his names and photograph; Secondly, he is to show proof of his address, by presenting to the financial institution the originals of receipts issued within the previous three months by public utilities.7 In the case of a body corporate, its proof of identity shall be provided by the presentation of its certificate of incorporation and other valid official documents attesting to the existence of the body coroporate.8 Where a manager, employee, or assignee is delegated by a body corporate to open or operate an account, such a person shall in addition to the requirements specified for private individuals also show proof of a power of attorney granted to him for that purpose.9It is also provided in section 5(6) of the Act that where a financial institution reasonably suspects that the amount involved in a transaction is the proceeds of the crime or an illegal Act, it shall require identification of the customer notwithstanding that the amount involved in the transaction is less than US $5,000 or its equivalent. Moreover, where it appears that a customer is not acting on his own account, the financial institution is required to ascertain by all reasonable means, information on the true identity of the principal.10 One important provision in the Act designed to facilitate the detection of money laundering activities is section 6(1). It provides as follows: When a financial institution is requested to carry out a transaction, whether or not it relates to the laundering of the proceeds of a crime or an act, the financial institution shall seek information from the customer as to the origin and the destination of the funds, the aim of the transaction and the identity of the beneficiary.In order to make this surveillance function more effective, financial institutions are required within seven days of the transaction to carry out the following actions:Significantly, any financial institution which fails to comply with the above provisions is guilty of an offence and liable upon conviction to a fine of N1,000,00 each day for as long as the offence continues.12 To emphasize the importance of the identification of records of transactions, it is provided that these records are to be kept and preserved for at least a period of 10 years, and that the records shall be communicated to the Central Bank, National Drug Law Enforcement Agency (NDLEA), judicial authorities, Customs Officers, and such other persons as the Central Bank may from time to time specify.13 (a) Draw up a written report containing all relevant information about the transaction as well as the identity of the principal and where applicable, those of the beneficiary. (b) Take appropriate action to prevent the laundering of the proceeds of a crime or an illegal Act. (c) Send a copy of the report and action taken to the Central Bank, the Commission, the Securities and Exchange Commission, or such other appropriate regulatory authority, as the case may be.11 One other mandatory disclosure requirement concerning financial transactions is contained in section 10 of the Act. It is to the effect that a financial institution or casino shall report to the Agency in writing, lodgement or transfer of funds in excess of N1,000,000 or its equivalent in the case of an individual and N5,000,000 or its equivalent in the case of a body corporate.14 This report is to be submitted within seven days of any single transaction.15 Moreover, a person other than a financial institution, may voluntarily give information on any transaction, lodgement, or transfer of funds involving the amounts set out above.16 This ensures that even when a financial institution fails to report as required, information about the transaction still gets to the Agency. The purpose of these provisions is to enable the Agency ascertain the origin of the funds and determine whether to direct a stoppage of the transaction or not. This it can do when acknowledging receipt of such disclosure, report or information received in furtherance of the provisions. If the Agency is unable to ascertain the origin of the funds within a period of 72 hours, it may make a request to the Federal High Court for an order that the funds, accounts, or securities referred to in the report be blocked, and an order made by the Court in pursuance of this provision shall be enforced forthwith.17 Moreover, when an account, telephone line, or computer system is used or reasonably suspected to have been used by any person suspected of taking part in a transaction involving the proceeds of a financial or other crime, the Agency can obtain an order from the Federal High Court authorizing it to place such bank account under surveillance, tap such telephone line, or place it under surveillance. It can also through such an order obtain access to any computer system and communication of any authentic instrument or private contract, together with all bank, financial, and commercial records.18 For the purpose of carrying out the aforementioned measures, it is specifically provided in section 12(2) that the rule relating to banking secrecy19 shall not be invoked as a ground for objecting to these measures. A number of comments may be made here. Although it is a well-intentioned provision, it is clear that it greatly infringes on the constitutional rights of citizens, namely right to privacy and communications. The saving grace, however, is that the order can only be made based on a sworn declaration by the Chairman of the Agency, and the Court must be satisfied on the necessity for the grant of the orders before doing so.20 This is consolatory since the courts normally lean in favour of maintaining the rights and liberties of citizens.21 The actual money laundering offences are provided for in sections 14–18 of the Act which also specify the penalties for such offences. Thus, section 14(1) provides as follows: Any person who (a) converts or transfers resources or property derived directly or indirectly from illicit traffic in narcotic drugs or psychotropic substances or any illegal act, with the aim of either concealing or disguising the illicit origin of the resources or property or aiding any person involved in the illicit traffic in narcotic drugs or psychotropic substances or any other crime or illegal act to evade the legal consequences of his action; or (b) collaborates in concealing or disguising the genuine nature, origin, location disposition, movement or ownership of the resources, property or rights thereto derived directly or indirectly from illicit traffic in narcotic drugs or psychotropic substances or any other crime or illegal act, commits an offence under this section and is liable on conviction to imprisonment for a term of not less than 2 years or more than 3 years.22Significantly, a person who commits an offence under this subsection shall also be subject to the same penalty notwithstanding the fact that the various acts constituting the offence were committed in different countries or places.23 It is not difficult to ascertain the rationale behind this provision since, very often, money laundering entails the perpetration of some of the acts in one country and the others in other countries. This brings to the fore the transnational nature of money laundering which has given rise to international concern for its regulation. It is against this background that reference must be made to the United Nations Convention Against Transnational Organised Crime24 which is designed to deal with crimes of this nature, and the recommendations of the FATF.25 It is not only an offence to actually convert or transfer resources either directly or indirectly but also an offence under the Act to retain the proceeds of criminal or illegal activities. Thus, section 16 of the Act provides that any person who: (a) whether by concealment, removal from jurisdiction, transfer to nominees or otherwise retains the proceeds of a crime or an illegal act on behalf of another person knowing or suspecting such other person to be engaged in a criminal conduct or has benefited from a criminal conduct; or (b) knowing that any property either in whole or in part directly or indirectly represents another person's proceeds of a criminal conduct, acquires or uses that property or has possession of it, commits an offence under this Act and is liable on conviction to imprisonment for a term of not less than 5 years or to a fine equivalent to 5 times the value of the proceeds of the criminal conduct or to both such imprisonment and fine.26It is difficult to fashion the rationale for this marked variation in the punishment specified under this section and that provided for in section 14 of the Act relating to the actual conversion or transfer of funds from such criminal or illegal activities which is stated to be not more than three years. Although it may be said that the opportunity created by a willing receptacle could have emboldened the suspect and thus facilitated the commission of the offence, it is nevertheless incongruous to have such marked disparity in the punishment for both kinds of offences, when the level of moral reprehensibility is more for the actual converter or transferor of such illegal funds than the receiver.27 One other innovative provision relating to punishment under the Act is contained in section 17 and it is to the effect that conspiracies and attempts to commit any of the offences under the Act carry the same penalty as those prescribed for the main offences. Again, the only explanation for this provision which appears to differ from the well-known rule of having lighter sentences for attempts and conspiracies in criminal punishments is that it will go a long way in discouraging people from involvement one way or the other in the commission of money laundering. This of course depends on the extent of validity and value assigned to deterrence as a principle of criminal punishment.28 For the effective enforcement of the provisions of the Act, section 21, makes it an offence for any person who wilfully obstructs the Agency or any authorized officer in the exercise of the powers conferred on the Agency under the Act. The prescribed punishment in the case of an individual is a term of imprisonment not less than two years and not exceeding three years, while in the case of a financial institution or other corporate entity the punishment is a fine of one million Naira. In recognition of the fact that preventive measures are often more effective in the regulation of economic crimes, the Act has made a number of provisions compelling financial institutions to play a leading role in this direction. Thus, section 9(1) of the Act provides that every financial institution shall develop programmes to combat the laundering of the proceeds of a crime or other illegal act. These shall include: (a) the designation of compliance officers at management level at its headquarters and at every branch and local office; (b) regular training programmes for its employees; (c) the centralization of the information collected; (d) the establishment of an internal audit unit to ensure compliance with and ensure the effectiveness of the measures taken to enforce the provisions of the Act29To enhance compliance with this provision, the Governor of the Central Bank of Nigeria is empowered to impose a penalty of not less than one million Naira on any financial institution which fails to comply with the above provisions.30 This is a very important provision since the threat of immediate sanction which could be suspension of the bank's operating license can engender compliance with the statutory provision. 3 Enforcement of Statutory Provisions There is no doubt that with the enactment of the Money Laundering Act 2004 the Nigerian Government has taken a bold step in its efforts to combat money laundering in the country. However, this bold initiative may not bear the required fruits if the well-known problems of enforcement of law in the country are not adequately addressed. In the first place, the Act makes a number of far-reaching provisions relating to the disclosure of information concerning financial transactions by financial institutions and provides appropriate penalties for breach of such provisions. To what extent can the regulatory institutions go in enforcing due compliance with these provisions? It is a common feature in Nigeria that individuals and institutions prefer to subvert laid down rules rather than comply with them. The assurance being that even when they fail to comply, officials from the regulatory institutions will always compromise their positions. This brings to the fore the pervasiveness of corruption in the country as such officers are often ‘settled’31 to overlook non-compliance with statutory provisions. In this scenario, there is usually an unholy alliance between officers of the defaulting banks and those from the regulatory institutions.32 The end result is inadequate or ineffective enforcement of the rules, to the detriment of the Nigerian society. There is also the problem of lack of regular monitoring of the activities of these financial institutions. Inspectorate and Compliance Officers are known to be lax in their monitoring of the operations of these institutions. Allied to this, is the problem of lack of adequate capability to effectively perform the assigned tasks. There is no doubt that the regulation of financial transactions is a highly technical assignment that requires competent and experienced professionals which are often lacking in Nigeria. This is moreso when money laundering with its own intricacies is involved. One sure way of ensuring adequate monitoring of these transactions therefore is to enhance the capability of those officers to enable them perform this assignment effectively. In this connection, the efforts of the United Nations Office on Drug Control in assisting to upgrade the capability of the Economic and Financial Crimes Commission in this regard is highly commendable and will have positive impact if properly co-ordinated.33 It may also be suggested that for the success of the anti-corruption crusade within the context of the ongoing economic reforms, it is necessary to establish a specialized court namely, the Economic Crimes Tribunal with responsibility for the determination of disputes and other complaints relating to the commission of economic crimes in the country. This is because at present, the Federal High Court is largely bogged down with an unduly expanded jurisdiction in respect of several offences and acts, thus resulting in unnecessary delay in the disposal of cases brought before it. This will also ultimately create a pool of competent and experienced practitioners in the handling of matters relating to economic crimes in the country. Finally, particular attention must be paid to the enlightenment of the public about the dangers posed to the economic health of the nation by money laundering and related activities. Indeed, this is one way of ensuring that the commission of the offence is nipped from the bud. 4. Conclusion Money Laundering has become a critical problem affecting the socio-economic structure of the Nigerian society. This is particularly so when it is facilitated by official corruption which is now seen as the norm rather than the exception in the country. The present administration's efforts at combating this menace led to the enactment of the Money Laundering Act which contains very important provisions designed to curb these practices. Although the provisions of the Act are, to a large extent, forward looking, a number of provisions therein require amendment to make the fight against money laundering more meaningful. The provisions will no doubt have meaning if the attendant problems of enforcement highlighted in the preceding paragraphs are adequately tackled. This is because a good legislation can be meaningless if not properly enforced. This calls for sustenance of the current efforts at combating money laundering as the economic reforms are taking shape. It also requires sufficient collaboration with international agencies and organizations concerned with the regulation of such economic crimes. In this connection, it is noteworthy that concerted efforts of the government has led to the removal of the country from the list of non-conformist countries with respect to the fight against money laundering. There is therefore the need for further intensification of efforts by the Economic and Financial Crimes Commission, and the other Agencies involved in this fight to ensure that Nigeria takes its rightful place in the comity of nations with demonstrable commitment to the eradication of this economic menace. 1 These include bank officials, accountants, estate valuers, agents and even solicitors; see, H Ping, ‘Lawyers, Notaries, Accountants and Money Laundering’ (2006) 9 J Money Laundering Control, 1, 62. 2 See Y Osinbajo and O Ajayi ‘Money Laundering in Nigeria’ in AU Kalu and Y Osinbajo (eds) Perspectives on Corruption and Other Economic Crimes in Nigeria (Federal Ministry of Justice Lagos Nigerig 1991) 58 at 59. 3 No. 3 of 1995. 4 See A Ojo Constitutional Law and Military Rule in Nigeria (Evans Brothers Nigeria Publishers Limited Ibadan 1987) 32. 5 Section 1(I) of the Act. 6 Section 2(2). 7 Section 5(2). The present economic reforms in the country which has led to the consolidation of banks has made those non-compliant institutions to take seriously the need to comply with these requirements because of the fear of possible sanction for default. 8 Section 5(3). 9 Section 5(4). 10 Section 5(7). This is a very salutary provision as the concept of undisclosed principal could be a veritable escape route for the perpetration of fraudulent activities. 11 Section 6(2). 12 Section 6(3). A proper enforcement of this provision will go a long way in ensuring compliance by the financial institutions, as the bane of Nigerian Criminal process has been lack of adequate enforcement of statutory provisions; see KS Chukkol ‘The Role of Banks and Other Financial Institutions in the Fight Against Economic and Financial Crimes in Nigeria’ (2003–2004) 21–22 Ahmadu Bello U L J 25 at 31, 32. 13 Section 8. 14 Section 10(I). 15 Ibid. 16 Section 10(3) 17 Section 10(6). 18 Section 12(I). 19 It is a fundamental rule of banking law that transactions between banks and their customers are kept secret. See TourniervNational Provincial & Union Bank of England [1924] IKB 461; Habib (Nigeria) Bank Ltd. vKoya [1992] 7 NWLR 251, 43. 20 Section 12(I). 21 In line with the constitutional guarantees of fundamental rights, see ST Hon Constitutional Law and Jurisprudence in Nigeria (Pearl Publishers Port Harcourt 2004) 82. 22 Section 14(I). 23 Section 14(2). This emphasizes the transnational nature of the offence, and justifies the international concern for its regulation. 24 Adopted by the General Assembly of the United Nations in November 2000. The relevance of this Convention in regulating transnational organized crime can hardly be over emphasized since globalization has collapsed the world into a global village thus facilitating transnational crime. See N Usman ‘Protection and Preservation of Cultural and Religious Diversities in a Globalised World: Problems and Prospects’ in DA Guobadia and E Azinge (eds) Globalisation, National Development and the Law (NIALS Lagos Nigeria 2005) 228. 25 The Forty Recommendations of the FATF continues to serve as a fundamental touchstone for states in the enactment of legislations dealing with money laundering. 26 This is a novel provision in criminal jurisprudence in Nigeria and it is a recognition of the inadequacy of existing legal provisions. 27 On the relationship between criminal law and morality, see Lord Devlin The Enforcement of Morals (Oxford University Press 1959); contrast, HLA Hart Law, Liberty and Morality (Harry Camp Lectures 1963). 28 There has been a recurring controversy as to the efficacy of deterrence as a principle of criminal punishment. See, for example, AA Adeyemi ‘Sentencing of Imprisonment: Objectives, Trends and Efficacy’ The Penal System of Nigeria; NS Okogbule ‘Towards a Rational Theory of Criminal Punishment in Nigeria’ (1993) 2 J Jurisprudence Contemporary Issues 50. 29 This is a salutary provision which if implemented would go a long way in ensuring effective enforcement of the provisions of the law. 30 Section 9(2). 31 This emerging concept of ‘settlement’ as a subject of contemporary political discourse can be traced to the regime of General Ibrahim Babangida as Head of State, see MH Kukah Democracy and Civil Society in Nigeria (Spectrum Books Limited Ibadan 1999) 222. 32 This emphasizes the pervasiveness of corruption in the country. See NS Okogbule ‘An Appraisal of the Legal and Institutional Framework for Combating Corruption in Nigeria’ (2006) 13 J Financial Crime 1, 92. C Achebe The Trouble with Nigeria (Fourth Dimension Publishers Enugu Nigeria 1983) 46–55. 33 See The Guardian, Wednesday 6 September 2006 27–28. © The Author 2007. Published by Oxford University Press. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

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Statute Law ReviewOxford University Press

Published: Jul 1, 2007

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