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A Critical Assessment of the Enforcement Regime for Combatting Money Laundering in Nigeria

Document Cited authorities 1 Cited in Related
Vincent
Published date01 February 2020
DOI10.3366/ajicl.2020.0303
Date01 February 2020
Pages85-105
INTRODUCTION

The menace of corruption, money laundering and other financial crimes, especially in public sector governance, has remained almost an intractable challenge in Nigeria.1 There is consensus in the literature that this problem has eaten deep into the fabric of the country's society.2 Money laundering is the process by which illegitimately acquired funds are legitimised through a complex web of transactions designed to hide the trail of the funds and the identity of the persons involved in the transaction.3 Thus the process conceals the nature, source, location, destination and ownership of illegally acquired assets, which might have been gotten through corruption, trafficking in narcotic drugs and psychotropic substances, human trafficking, bribery, embezzlement, illicit arms trafficking, currency counterfeiting, theft, advance fee fraud,4 kidnapping, hostage taking, terrorism financing, environmental crimes and other related financial crimes.5 That way, otherwise ‘unclean’ money that was acquired through criminal means is converted through legitimate channels, such as banks, other financial institutions and other businesses to good or clean money.6 Perpetrators of financial crimes readily see banks as attractive tools for completing the act because of the funds transfer channels offered by these institutions.7 Through the banking transactional facilities, otherwise tainted funds that are proceeds of corruption and other financial crimes are laundered and thereafter become ‘clean money’.8

Following the reintroduction of civilian democratic rule in Nigeria in 1999, the new government identified the imperative of combatting money laundering and related financial crimes, which are factors that could impair effective governance and, by implication, slow down socio-economic development.9 This period was contemporaneous with the new international order that emphasised renewed cooperation among states to stamp out the menace of money laundering and related cross-border financial crimes.10 Nigeria and other emerging economies benefited from the new international order. They simply applied the template in use in advanced economies and instruments offered by the United Nations Office on Drugs and Crimes (UNODC) as ready models for enacting municipal statutes for checking the menace of money laundering and other financial crimes.11 However, as was to be realised, models do not always exactly fit into all jurisdictions. The existing models already operational in the economies of the Western Hemisphere readily became misfits for the peculiar circumstances of the local environment, coupled with the fact that most emerging economies had challenges in updating their municipal laws, for example in the area admissibility of electronic evidence.12 Such was the initial teething challenge of the regime on combatting money laundering and other financial crimes, which resulted in the floundering of the novel statute on the subject upon takeoff in Nigeria.13 Nevertheless, steps were taken to address identified lacunae in the existing administrative and enforcement mechanisms on the subject. This has engendered accountability and transparency not only in public governance but also in the operations of the country's financial system.14 How far these objectives are realisable or have been realised are issues that require the critical examination of the several factors that could affect the matter, including the statutory, administrative and cultural implications.15

This article assesses the effectiveness of the pertinent statutory instruments engaged in curbing money laundering and related financial crimes and institutionalising transparency in Nigeria. The article identifies that the regime of regulation is rich in statutory provisions but the problem might be more attributable to an ineffective enforcement and punishment regime, challenges that need to be addressed in order to attain the desired objectives of effective prevention or containment of money laundering and other financial crimes.

 LEGAL AND INSTITUTIONAL FRAMEWORKS ON COMBATTING MONEY LAUNDERING IN NIGERIA

The Money Laundering (Prohibition) Act (hereinafter ‘the MLA’) was first enacted in 1995 and amended in 2002.16 That statute was repealed and replaced with the MLA 2003 in order to cure the lacunae observed in the 1995 Act (as amended). The 2003 Act was later repealed and replaced with the MLA 2004. The new statute addressed quite a number of burning issues relating to financial crimes, including widening the scope of transactions that may be considered to be money laundering and proceeds of illicit drugs trade as well as terrorism financing.17 Seven years on, the 2004 Act was again repealed and replaced with the MLA 2011, which came into force on 3 June 2011. This remains the extant statute on the subject.

The Economic and Financial Crimes Commission (EFCC) and the Central Bank of Nigeria (CBN) are the principal state agencies fixed with the responsibility of enforcing the anti-money laundering provisions of the MLA 2011, with the support of the National Drug Law Enforcement Agency (NDLEA).18 Under such arrangement, the importance of synergy among the various agencies cannot be overemphasised. However, the MLA 2011 makes the CBN and the EFCC the arrowheads of the regulatory and enforcement framework for combatting the menace.19

The inability of the regulatory agencies to enforce the anti-money laundering provisions of the Act effectively and the growing number of cases of collusion between money launderers and bank officials could be symptomatic of the high level of corruption in the private and public sectors. The attendant laxity in banks and other financial institutions facilitates a situation where money launderers would perfect their nefarious acts.20 The MLA is an important statutory instrument for the attainment of the objective of effectively combatting money laundering and related financial crimes, if conscientiously enforced. The Act is a veritable tool for the regulation of banks and other financial institutions in Nigeria, especially in checking their cash-based transactions. This is because cash exchange is an attractive means of perpetrating fraud and money laundering.21 Thus section 1 of the MLA 2011 provides:

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

₦5,000,000.00 or its equivalent in the case of an individual; or

₦10,000,000.00 or its equivalent in the case of a body corporate.22

 As regards offshore transfer of funds, the Act also provides under section 2

A transfer to or from a foreign country of funds or securities by a person or body corporate including a Money Service Business of a sum exceeding US$10,000 or its equivalent shall be reported to the Central Bank of Nigeria, Securities and Exchange Commission or the Commission in writing within 7 days from the date of the transaction;

A report made under subsection (1) of this section shall indicate the nature and amount of the transfer, the names and addresses of the sender and the receiver of the funds or securities;

Transportation of cash or negotiable instruments in excess of US$10,000 or its equivalent by individuals in or out of the country shall be declared to the Nigerian Customs Service;

The Nigerian Customs Service shall report any declaration made pursuant to subsection (3) of this section to the Central Bank and the Commission.23

 The essence of these chains of obligations on the declaration of cash is to ensure that the ultimate regulation of the financial sector is effective through adequate monitoring of monetary transactions.24 In a developing economy like Nigeria's where many transactions are cash-based and the larger chunk of financial dealings that are carried out to evade ease of tracing are carried out by cash, the importance of the above provisions cannot be overemphasised.25 If effectively implemented, it would mean that, apart from giving greater effect to the emerging cashless society policy of the CBN, all transactions that usually would have been carried out underhand must be declared to either the CBN, the EFCC or the NDLEA as the case may be.26

Moreover, banks and other financial institutions as well as non-financial institutions that conduct regular and one-off cash-based transactions for their customers are obligated to obtain adequate identification of such customers before opening accounts for them.27 They must also scrutinise all ongoing transactions undertaken throughout the duration of their relationship in order to...

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