JUNE 19, 2016 • THISDAY, THE SUNDAY NEWSPAPER
57
PERSPECTIVE
Money Laundering: Interrogating Current Framework to Regulate Legal, Accounting, Property,Trust and Company Sector Services Femi Falana
M
oney laundering is a global phenomenon. According to the International Monetary Fund, the scale of money laundering is between 2% and 5% of the global Gross Domestic Product i.e between USD590 billion and USD 1.5 trillion per annum. The Thabo Mbeki High Level Panel report on Illicit Financial Flows from Africa adopted on Sunday February 1, 2015 by African Union Heads of State and Government at their summit in Addis Ababa, Ethiopia said about $40.9billion (about N6.87trillion) of an estimated $60billion (about N10.08trillion) lost through such transfers from Africa in a decade (2001-2010) are traced to Nigeria. The funds are stolen through corruption, tax evasion and illegal transfer of profits by multinationals, the AU said. (Premium Times, February 2, 2015.) In the very many cases of politically exposed persons who have been charged with corruption, fraud and money laundering, a number of lawyers, accountants, bankers, estate agents have been indicted. Even though such professionals were not prosecuted in the past not a few have been charged to court for aiding and abetting the commission of money laundering offences in the renewed war against corruption and impunity under the current political dispensation in the country. While the other relevant professional bodies have seen the wisdom in sensitizing their members to fight the scourge of money laundering and terrorism financing the Nigerian Bar Association has continued to insist that lawyers are immune from the prosecution under the Money Laundering Act. National Campaign against Money Laundering Money laundering means exchanging money or assets which were obtained criminally for money or assets that are clean. The clean money or asset is then delinked from any criminal activity. Money laundering also includes money that is used to fund terrorism. There are various instances where money laundering can occur. The common feature is the transfer or conversion of funds either Malami, Attorney General of the Federation within or outside the country. To recover the bulk of the money lost Economic and Financial Crimes Commission (Establishment) Act, through money laundering and corruption, Nigeria requires the 2004, Advance Fee Fraud And Other Fraud Related Offences Act, collaboration of relevant professionals. That was not forthcoming in the past because of the lack of the commitment of the government in 2006, etc. While the Economic and Financial Crimes Commission combating money laundering. (EFCC) is the major coordinating body for the prevention and To combat the menace of money laundering and terrorism prosecution of money laundering offences in Nigeria, sister instifinancing majority of countries have enacted laws, formulated tutions and agencies such as: the Central Bank of Nigeria (CBN), policies and established various framework. Notwithstanding that the National Drug Law Enforcement Agency (NDLEA), and Nigeria enacted the first anti money laundering legislation in 1995 the Special Control Unit Against Money Laundering (SCUML), the menace of money laundering has deprived the nation of huge etc, also have important roles to play in the fight against money financial resources which would have been properly deployed to laundering. Regrettably, all attention has been concentrated on execute needed infrastructures for the benefit of the people. The the prosecution of politically exposed persons. Not much has Money Laundering Act has since been amended in 2003, 2004, 2011 been done in dealing with cases of money laundering through and 2012. The amendments were all designed to strengthen the drug abuse and human trafficking. capacity of the relevant agencies of the Government to deal with money laundering and terrorism in the country. Duties imposed on lawyers, accountants, financial instituIn spite of the existence of the anti money laundering laws it tions and companies e.t.c. is common knowledge that cases of money laundering are still The Money Laundering (Prohibition) Act 2011 as amended very prevalent due to a number of factors. Instead of addressing by Money Laundering Act, 2012 (subsequently referred to as the challenges encountered in dealing with the menace of money ‘the MLA’) has imposed certain obligations on “Designated laundering the federal government has submitted the Money Non-Financial Institutions”, and “Financial Institutions” in Laundering (Prevention and Prohibition) Bill, 2016. In view of the Nigeria. It is instructive to note that Section 25 of the MLA Act serious objections to certain provisions of the proposed Bill by the defines ‘Designated Non-Financial Institutions’ to include: legal EFCC the national assembly is urged to conduct a public hearing with a view to ensuring that the limited success recorded in the fight practitioners, chartered accountants, audit firms, tax consultants, against money laundering is not sacrificed on account of expediency. clearing and settlement companies, hotels, casinos, supermarkets, dealers in Jewellery, cars, luxury goods, or such other business The people involved in money laundering are notorious for the acquisition of assets in different places and countries with illicit funds as the Federal Ministry of Commerce or appropriate regulatory authorities may from time to time designate. either directly or by proxy - usually through the aid and assistance Similarly, ‘Financial Institution’ is defined by the same of professionals who may be lawyers, accountants and or companies whose objectives range from property transactions, financial transfers provision to include: banks, body, association or group of persons, whether corporate or incorporate which carries on the business of and even trust. Some of the illegal sources of laundered funds are: investment and securities, discount house, insurance institutions, debts factorization and conversion firms, bureau de change, etc. 1. Corruption; Lawyers, accountants and other persons or bodies that fall within 2. Drug trafficking; the above definition are required by the law, that is, the Money 3. Human trafficking; Laundering (Prohibition) Act) 2011, MPL, to comply with certain 4. Robbery; obligations which are specifically enshrined in the Act. I shall 5. Fraud; now examine some of these duties or obligations. 6. Smuggling; and 7. Tax evasion, etc. 1. Limitation to make or accept cash payments: By the provisions of Section 1 of the MLA, “No person or Money laundering can take place in various organizations body corporate shall, except in a transaction through a financial and professions including the following: institution, make or accept cash payment as a sum exceeding 1. Legal profession/law firms; (a) N5.000.000.00 or its equivalent, in the case of an individual; 2. Accounting firms; or 3. Banks; (b) N10.000.000.00 or its equivalent in the case of a body 4. Bureau De Change; corporate. 5. Securities firms/Insurance companies; and 6. Cash intensive business and transactions. Etc. 2. Duty to report international transfer of funds or securities: The current legal regime It is common knowledge that hundreds of millions of dollars Under the current legal regime in Nigeria, various laws and have been transferred from and to Nigeria. These transfers are framework have been put in place to regulate and effectively supervise the Legal, Accounting, Property, Trust and Company sector often shrouded in secrecy and perfected in a manner that makes traces by the EFCC and other relevant law enforcement agencies services in Nigeria in relation to money laundering. The principal difficult, if not impossible. Lawyers in particular have aided legislation on money laundering is the Money Laundering (Prohibition) Act 2011 as amended. Other relevant laws on the subject are the their clients in transferring money (whose sources they rarely
know) out of the country for various purposes and in different guises. Accountants, banks and financial institutions are equally culpable. To arrest these illicit capital flights, Section 2 of the MLA requires that a transfer to or from a foreign country of funds or securities of a sum exceeding $10,000 or its equivalent shall be reported to the Central Bank of Nigeria, the Securities and Exchange Commission or the Economic and Financial Crimes Commission in writing within 7 days of the transfer. It further states that the report shall indicate the nature and amount of the transfer, and the names and addresses of the sender and receiver of the funds or securities. 3. Identification of customers/clients: The law prohibits lawyers, accountants, banks, property and trust companies, etc, from having or engaging in any financial transaction with any customer (or client), except the identity and address of the customer has been established. Specifically, Section 3 of the MLA imposes a duty on a financial institution and a designated nonfinancial institution to verify its customer’s identity and address before opening an account for, issuing a passbook to, entering into a fiduciary transaction with, renting a safe deposit box to or establishing any business relationship with the customer. An individual shall be required to provide proof of his- (a) identity, by presenting a valid original copy of an official document bearing his names and photograph; (b) address, by presenting originals of receipts issued within the previous three months before the transaction while a corporate body is required to present its certificate of incorporation and other relevant documents. For example, legal practitioners must as a matter of course ascertain the identity and address of their client before accepting or depositing funds in the Client’s Account for the benefit of a client. 4. Preservation of Records: Accountants, lawyers, banks, trust and property companies have a duty to keep and preserve records of the identify and transactions with their customers. This is not only morally and logically imperative, but also legally necessary given the importance of such records to any criminal investigation involving the customer that may arise subsequent to any transaction. By the combined effect of Sections 7 and 8 of the MLA. Record reviewed by MTN of identification and transactions shall be preserved and kept and made available on demand to the authorities (which includes the EFCC, NDLEA, judicial persons, CBN, etc) for a period of at least 5 years after the closure of the accounts or 5 years after severance of relations with ‘the customer. 5. Prohibition of Numbered and Anonymous Accounts: By virtue of Section 11 of the MLA, the opening and operation of numbered and anonymous accounts by persons, financial institutions and corporate bodies are illegal. Where an individual is the culprit, the law prescribes a term imprisonment of not less than 2 years but not more than 5 years. In the case of a financial institution or corporate body, the law provides for a fine of not less than N10.000.000.00 but not more than N50.000.000.00 upon conviction. Failure or refusal to comply with any of the above anti-money laundering obligations and requirements is illegal. Any legal practitioner or other professional that is found culpable by the court is liable to be prosecuted and if convicted may be either be imprisoned or a ordered to pay fine as the case may be. While the EFCC has targeted politically exposed persons involved in money laundering offences the professionals who aid and encourage their clients to breach the law have been spared from prosecution. For instance, several properties worth billions of Naira which have been seized on the orders of courts have been traced to retired military officers and other public officers. But the real estate and law firms which facilitated the acquisition and preparation of the title deeds in respect of such properties have been spared from prosecution. It was the same attitude that was adopted by the federal government with respect to the loss of N2 trillion to fuel subsidy scam in 2011. Through the investigation conducted by the House, the EFCC and the committee set up by the Federal Ministry of Finance it was established that the auditors, Akintola Williams & Adekanola engaged by the government had aided the fuel importers to perpetrate fraud by verifying fake importation documents. While the fraudulent importers were charged to court for money laundering the appointment of the auditors was terminated without any sanction. Compliance and Challenges Any profession, trade or company that is susceptible to being used for money laundering by criminals should be strictly regulated to reduce or totally eradicate money laundering in Nigeria. However, professional bodies have demonstrated different dispositions to the fight against corruption and money laundering. This conflicting dispositions is exemplified by the positions taken by two notable professional bodies in the country. Namely; the Institute of Chartered Accountants of Nigeria (ICAN) and the Nigerian Bar Association (NBA). While the former has taken a bold and patriotic action towards ensuring that her members comply with the provisions of the Money Laundering Prohibition Act, the latter has strongly resisted the subjection of her members (lawyers) to the anti-money laundering framework enshrined in the MLA. –(Being the Text of a Paper Presented by Mr. Femi Falana (SAN) at a Workshop on the Roles of Professionals in the fight against Corruption organized by the Presidential Advisory Committee on Anti-Corruption last week) (See concluding part on www.thisdaylive.com)