Stories by Omodele Adigun
“Every year, money laundering channels around $2 trillion worth of proceeds from various illicit activities”, says Imran Farooqi, the PricewaterhouseCoopers (PwC) partner on Anti-Money Laundering, in its Anti-money laundering Global Economic Crime Survey 2018.
According to him, the negative impact of money laundering on any economy is damning because money laundering destroys value.
“It facilitates economic crime and nefarious activities such as corruption, terrorism, tax evasion, and drug and human trafficking, by holding or transferring the funds necessary to commit these crimes,” he added.
To add to this, the International Monetary Fund (IMF), last May, urged concerted efforts against the twin evils of money laundering and terrorist financing, saying that action against the duo responds not only to a moral imperative but also to an economic need.
In its statement entitled ‘The IMF and the Fight Against Money Laundering and the Financing of Terrorism (Anti-Money Laundering/Combating the Financing of Terrorism)’, the BrettonWoods institution states:
“Money laundering and the financing of terrorism are financial crimes with economic effects. They can threaten the stability of a country’s financial sector or its external stability more generally. Effective regimes to combat these threats are essential to protect the integrity of markets and of the global financial framework as they help prevent financial abuses. Action against money laundering and terrorist financing thus responds not only to a moral imperative but also to an economic need.
”Money laundering is the processing of assets generated by criminal activity to obscure the link between the funds and their illegal origins. Terrorism financing raises money to support terrorist activities. While these two phenomena differ in many ways, they often exploit the same vulnerabilities in financial systems that allow for an inappropriate level of anonymity and opacity in carrying out transactions.”
All the above make it imperative for the Federal Government to sustain and ensure that its ongoing fight against money laundering is decisively won.
Recall that in December 2002, after its placement on the Non-Cooperative Countries and Territories (NCCT) list and under threat of a Financial Action Task Force (FATF) recommendation for countermeasures, Nigeria enacted three pieces of legislation: an amendment to the 1995 Money Laundering Act that extends the scope of the law to cover the proceeds of all crimes; an amendment to the 1991 Banking and Other Financial Institutions (BOFI) Act that expands coverage of the law to stock brokerage firms and foreign currency exchange facilities, gives the Central Bank of Nigeria (CBN) greater power to deny bank licences, and allows the CBN to freeze suspicious accounts; and the Economic and Financial Crimes Commission (Establishment) Act that establishes the EFCC, coordinates Anti Money Laundering (AML) investigations and information sharing. The Economic and Financial Crimes Commission Act also criminalizes the financing of terrorism and participation in terrorism. Violation of the Act carries a penalty of up to life imprisonment. Based on this legislation, FATF decided not to recommend countermeasures against Nigeria; however, Nigeria remains on the NCCT list.
The Money Laundering and Prohibition Act was enacted in 2004, but was repealed by the Money Laundering (Prohibition) Act 2011.
The principal objective of the Non-Cooperative Countries and Territories (NCCT) Initiative was to reduce the vulnerability of the financial system to money laundering by ensuring that all financial centres adopt and implement measures for the prevention, detection and punishment of money laundering according to internationally recognised standards. The Financial Action Task Force (on Money Laundering) (FATF) is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001 the purpose expanded to act on terrorism financing.
In an article published in Beijing Law Review online, Akin Oluwadayisi and Moruf Mimiko, both of Adekunle Ajasin University, Akungba-Akoko, Ondo State, examined the effects of money laundering on the Nigerian Economy and noted that ‘money laundering affects indigenous entrepreneurs because the illicit funds gotten from money laundering activities are used in bringing goods to the market and such goods are being sold at prices below the cost prices. This will undoubtedly affect the business of other entrepreneurs in the same business.’
They added: “Money laundering promotes none or low profit making enterprises which tend to discourage indigenous entrepreneurs who got their funds from legitimate sources. This eventually frustrates these indigenous entrepreneurs out of the system leaving the economy of the countries into the hands to launderer. The resultant effect of this is that the economy of the country depends on the unsteady operators of its economy-the launderers – who have no intention of making profit, thereby jeopardizing the economic stability of the country.
“Another effect of money laundering on the Nigeria economy is that it attacks the reliability of the people on financial institutions. It was observed that between the 80s and 90s the reputation of the financial institutions in Nigeria was very low because the financial institutions relied extensively on the illicit proceeds of economic and financial crimes. These financial institutions only enjoyed these funds for a very short period, before they became disintegrated and some liquidated because they could not stand the test of time.
“Foreign investors find it extremely difficult to invest in any venture in the country during these periods due to obvious reasons which are the effect of financial and economic crimes on the economy of the country. These also hindered the growth of the economy of the country.
“Money laundering could lead to increase in liability and heighten the risks for assets quality in the financial system. When this happens, it may create systemic risks
for the financial services industry and consequently lead to loss of confidence and credibility in the financial institution.
”Money launderers in Nigeria, in order to conceal the source of their ill-gotten wealth commonly engages in mass importation of all kinds of good such as drugs, automobiles,
automobiles spare parts baby wears etc. These goods imported into the country are usually sold out at very low prices to recoup the illicit funds now in the nature
of legitimate funds. The deliberate reduction of the prices of these imported good tends to affect the value of domestic products manufactured by indigenous industries. Hence, our local products will become more expensive compared to the imported ones, the
local manufactures will be confronted with the challenges of reducing the prices of their goods since the imported goods by the launderer are far cheaper than theirs.
”Money launders make use of enterprises and company to disguise their activities. The enterprises are being ventured into without adequate knowledge. This is because these
enterprises are not motivated to generate profits; hence launderers often invest in ventures that do not benefit the economy of the country.
“The experience in Nigeria in the recent past especially in the 80s and 90s which were the hey days of money laundering in Nigeria, revealed how local manufacturing industries
suffered serious price crash and massive loss of investments resulting from large stock of unsold goods and products for lack of patronage and clear consumers’ preference for
imported goods. Thus most local industries collapsed and thousands of workers were laid off or rendered redundant.”
To fight, money laundering in the country, the country also joined Egmont Group- a body of HYPERLINK “tel:154” 154 financial intelligence units (FIUs) across the world that provides a platform for the secure exchange of expertise and financial intelligence to combat money laundering and terrorist financing on an operational basis on January 1, HYPERLINK “tel:2005” 2005 and became a full member on June 1, HYPERLINK “tel:2007” 2007.
Currently, the nation is working round the clock to get it readmitted into the fold after its suspension last July. And if fails to comply with the group’s demands by January HYPERLINK “tel:2018” 2018, the country will be expelled.
This may lead to a number of unpleasant consequences:
First, Nigeria will no longer be able to benefit from financial intelligence shared by the other HYPERLINK “tel:153” 153 member countries, including the US and the UK, while the country’s ability to recover stolen funds abroad will also be hampered.The federal government is currently seeking to recover funds laundered globally by politically exposed persons and their associates.
Another major repercussion will be the blacklisting of Nigeria in international finance, and this could affect the issuance of Mastercard and Visa credit and debit cards by Nigerian banks.
It could also affect the international rating of Nigerian financial institutions, restricting their access to some big-ticket international transactions.
Nigeria’s admittance into the group in HYPERLINK “tel:2007” 2007 is considered to be one of the biggest achievements of Obasanjo administration.
The membership ensured the removal of Nigerian banks from the blacklist of international finance.
The blacklisting had prevented the banks from engaging in correspondent banking with foreign institutions and also denied Nigerians access to foreign credit cards.