Legislative Changes in African Countries Resulting from AML/CFT Laws

The importance of law as a bedrock of financial regulation can be exemplified with the significant changes recorded within countries resulting from AML/CFT legislations, particularly in ACs, as can be seen through the continent’s legislative and technical evolution post the colonial era.[1]

It is imperative to state that during the colonial period, the crime of ‘money laundering’ was nonexistent although certain predicate offences like bribery, corruption, extortion and other offences had been acknowledged to exist. Attesting to this, Rodney stated that ‘colonialism was not merely a system of exploitation, but one whose essential purpose was to repatriate the profits to the so-called motherland’. Rodney speaks of an era dominated by slave trade and a gradual move to a period characterised by the exploitation of labour and forced labour where ‘Africans in their country were forced to grow cash crops by gun and whip’. The gradual change evidences the tactical means employed by colonial masters to circumvent the 1833 Abolition of Slave Trade Act, which allowed the laundering of ill-gotten wealth to capitalist economies. Interestingly, during this dictatorial period, such ‘illicit’ transfers, exorbitant taxation and exclusive rights of exploitation granted to British and European firms over mineral and natural resources were legalised.

The prevalent exploitation that riddled the colonial era set the tone for the decolonisation struggle, given that the structures instituted by the colonial masters hindered the fight for independence in ACs. Colonial masters struggled to give up power, arguing instead that their colonies were politically corrupt and unable to handle independence. For instance, colonial masters contended that Nigeria was ridden with ‘corruption and briber}’’ and hence required ‘ceaseless vigilance of the British Staff to maintain a high standard of integrity and.. .prevent the oppression of peasantry’.[2] Tignor, however, argued that the colonial masters had expected their collaborators to behave this way. Hence, as the struggle for independence grew, colonial masters continually produced reports which indicted leaders of the movement as corrupt and unjustly enriched to the detriment of their people. Nevertheless, ACs began to gain their independence in the 1950s.

During the decolonisation period, the ruling class amassed ill-gotten wealth. They were made ministers or chairmen of parastatals, with power to issue licences, award contracts or scholarships, subject only to veto powers of colonial authority. They exploited these positions to gain ‘kickbacks’ which are illegal pre-payments of a percentage of the contract awarded to the official in power. This was predominant in Nigeria after it gained independence in 1960, a period marred by widespread corruption. To combat these illicit crimes, the disregard for rule of law and lack of accountability, military takeover commenced in 1966 and dominated for about 32 years. Over six successful military coups occurred aimed at curbing corruption. The regimes of Murtala Mohammed in 1975 and Mohammadu Buhari in 1983 made considerable progress. Murtala Mohammed was killed six months into his regime, whilst Mohammadu Buhari was deposed by another military coup in 1985. Sadly, the deplorable situation remained mainstream, most prominently during the Sani Abacha regime, which looted about £5 billion from Nigeria’s coffers and stashed in jurisdictions including the United Kingdom and Switzerland.

Whilst Nigerian governments continually addressed corruption, there was limited focus on money laundering until Nigeria’s accession to the 1988 Vienna Convention. This culminated in Nigeria’s first significant piece of legislation (by decree) - the Drug Law Enforcement Agency (NDI.EA) Act, imbuing the

NDLEA with enforcement powers against drug crime. Mirroring the Vienna Convention, the NDLEA decree focused on tackling money laundering through a fight on drugs alone. At that time, Nigeria had developed large-scale drug trafficking and was classed as second only to China in the trafficking of drugs to the United States.[3] The environment was facilitated by drug lords who operated from a relatively safe home-base given the absence of laws. The NDLEA cracked down on drug lords at the point of cultivation, processing, sale and trafficking. However, the NDLEA decree did not cover other crimes in Nigeria, such as corruption, bribery, etc. This led to the enactment of the Money Laundering Decree (MLD) 1995.

A perusal of the MLD reveals the recognition that the use of financial institutions as a conduit to launder funds could potentially trigger financial instability. In addressing these concerns, the decree pioneered the commencement of Customer Due Diligence (CDD) by financial institutions and individuals with regards to cash payment above a threshold, a process which kickstarts once a customer seeks to open an account. The decree mandated banks to comply with these requirements given the force of law and the regimented structure put in place to combat money laundering. Financial institutions were also mandated to disclose overseas transfers and ensure that all details are precise. It also required casinos and gambling houses to adhere to its CDD and record-keeping requirements. More importantly, this decree required a sustained relationship between financial institutions and the NDLEA, to continually combat drug trafficking.

These decrees, which changed the landscape of AML regulation in Nigeria, had their limitations. For instance, the MLD which required CDD by financial institutions failed as it provided discretionary powers to financial institutions on whether to report suspicious transactions. Additionally, penalties were only targeted at staff of the financial institution and not the institutions themselves, a shortcoming that hindered compliance. Furthermore, the decree was unclear regarding its definition of money laundering. More so, Nigeria was still largely a cash-based economy where less than 37% of adults had access to financial services. Hence, like drugs, money was usually laundered physically - mainly through

Effective Regulation: Preconditions 71 airports or seaports, an area unaddressed by the MLD. These deficiencies proved the limitations of legislative capacity in terms of comprehension of the scale of the problems and how best to tackle it. It showed that Nigeria was ill prepared to tackle money laundering or its predicate offences. The decree focused mainly on criminalisation and enforcement (breeding a ‘don’t-be-caught’ mentality), not necessarily on prevention. These shortcomings led to the FATF blacklisting of Nigeria in 2001.

To get delisted, Nigeria enacted the Money Laundering (Amendment) Act 2002. This Act expanded the scope of predicate offences to other illegal acts. It also extended AML obligations to other non-financial institutions and required enhanced due diligence. The FATF however still faulted the Act, leading to the enactment of the Money Laundering (Prohibition) Act 2004 which repealed the 2002 Act. The 2004 Act was modelled to ensure the delisting of Nigeria from the FATF’s blacklist. Hence, it limited the amount of cash that private individuals and corporate entities could hold for making payments of five hundred thousand naira (N500,000) and one million naira (N1,000,000), respectively.[4] It also provided that transfers above the stipulated amount be done through a financial institution. Additionally, it limited international transfers to ten thousand dollars ($10,000), mandating a report to the Central Bank of Nigeria or the Securities and Exchange Commission when the mandated limit was exceeded. These requirements were to ensure a move away from a cash-based to a cashless economy, whilst ensuring that regulator}' agencies could formulate and implement practical futuristic policies. The Act achieved the aim of delisting Nigeria from the FATF’s blacklist.

Importantly, two other notable laws, the Corrupt Practices and Other Offences Act 2000 which sets up the Independent Corrupt Practices and Other Related Offences Commission (ICPC) and the Economic and Financial Crimes Commission (EFCC) Act 2002, also facilitated the delisting of Nigeria. The ICPC focuses squarely on fighting corruption through investigations, arrests, prosecutions, corrective, preventative and educational responsibilities. The EFCC has a broader agenda, focused on the investigation and prosecution of all financial crimes. The EFCC is also authorised to freeze bank accounts, seize assets or arrest suspects. The Nigerian Financial Intelligence Unit (NFIU) is now domiciled within the Central Bank of Nigeria and serves as the national centre for the collation and analysis of suspicious transaction reports and other relevant information to money laundering. The NFIU previously derived its power from the Money Laundering Prohibition Act 2011, as amended in 2012 and the EFCC Act. In 2018, the Financial Intelligence Unit (Establishment) Act (NFIU Act)[5] became its main source of power. It is also responsible for establishing and maintaining relationships with other Financial Intelligence Units (FIUs) within the Egmont Group.

Following these legislations, there is appreciable progress in the way ML/ TF is combatted in Nigeria through financial institutions. For instance, banks now implement the CDD requirements which ensure the creation and maintenance of paper trails. Suspicious transactions are highlighted to regulators and the management is held responsible for the acts and omissions in facilitating ML/TF.

Consequently, it is arguable that Nigerian and, indeed, African laws may be capable of curbing illicit crimes. EENA2 states that ‘it is not as dire as one might think in... African countries - in fact, the letter of the law is pretty good’. However, recently, the Egmont Group suspended Nigeria for failing to enact legislations to autotomise the country’s NFIU from the EFCC. Nigeria is yet to take positive steps to avert an impending expulsion. Chukwuma Utazi, the Chairman of the Nigerian Senate Committee on Anti-Corruption has stated that ‘they (Egmont) already said that if we did not comply, they would expel us, so there is no fresh news there...we are working towards it, nothing has been done’. This response illustrates a nonchalant approach to addressing an issue pending for over five years. In June 2018, Nigeria finally took swift steps to avoid impending expulsion by enacting the NFIU Act, consequently granting the NFIU independent and operational autonomy. Indeed, the government’s slack demonstrates legislators’ reactive approach to addressing pressing issues.

  • [1] Focus will be on Nigeria, a prism through which other African countries can be viewed. 2 Walter Rodney, How Europe Underdeveloped Africa (Bogle L’Ouverture Publications Ltd, London 1988). 3 Ibid. 4 Austine Ejovi, Mgbonyebi Charles and Akpokighe Okiemute Raymond, 'Corruption in Nigeria: A Historical Perspective’ [2013] 3 (16) Research Humanities and Social Sciences Journal 1, 19. 5 Robert Tignor, ‘Political Corruption in Nigeria before Independence’ [1993] 31 (2) Journal of Modern African Studies 175, 178.
  • [2] Lord Lugard, The Dual Mandate in Tropical Africa (6th edn, Routledge 1922) 198; Colonial Office, Report of the Commission of Enquiry into the Disorders of the Eastern Province of Nigeria, November, 1949 (London, 1950) 12 and 30. 2 Tignor (n 40). 3 Ibid. 175,201. 4 BJ. Dudley, Instability and Political Order: Politics and Crisis in Nigeria (Ibadan, Ibadan University Press, 1973). 5 Ajayi Isaac, ‘Military Regimes and Nation Building in Nigeria, 1966-1999’ [2013] 5 (7) African Journal of History and Culture 138, 141. 6 Ibid. 138, 140. It should be noted that a period of civilian rule existed between 1979 and December 1983 under President Shehu Shagari. 7 Ibid. 8 Ogbewcre Ijewereme, ‘Anatomy of Corruption in the Nigeria Public Sector: Theoretical Perspectives and some Empirical Explanations’ [2015] Sage Open 1, 7. 9 Ibid. 1,4. 10 The Associated Press, ‘Late Nigerian Dictator Looted Nearly $500 Million, Swiss Say’ (New York Times, 19 August 2004) m/20()4/08/19/vorld/late-nigerian-dictator-looted-neaiiy-500-million-swiss-say.html> accessed 29 September 2017; Michael Ogbedi, ‘Political Leadership and Corruption in Nigeria Since 1960: A Socio-Economic Analysis’ [2012] 1 (2) Journal of Nigeria Studies 1, 9.
  • [3] Chibuike Uche, ‘The Adoption of a Money Laundering Regime in Nigeria’ [1988] 1 (3) JMLC 220, 220. 2 National Drug Law Enforcement Agency Act 1989. 3 Adegboyega Ige, ‘A Review of the Legislative and Institutional Frameworks for Combating Money Laundering in Nigeria’ [2011] 1 NIALS; Nlerum Okogbule, ‘Combating Money Laundering in Nigeria: An Appraisal of the Money Laundering Act 2004’ [2007] 28 (2) Statute Law Review 156, 157. 4 Money Laundering Decree 1995. 5 Ibid. S 1 (a)(b),S 10(2). 6 Ibid. 7 Ibid. 8 Ibid S 4(1) (a); S 4(1) (b). 9
  • [4] Money Laundering Act 2004, S1 ( 1 ). 2 Ibid. S 2(1); S2 (2). 3 The Corrupt Practices and other Related Offences Act 2000 No.5 Laws of the Federation of Nigeria; the Economic and Financial Crimes Commission (Establishment) Act 2002. 4 Nuhn Ribadu, Show Me the Money - Leveraging Anti-Money Laundering Tools to Fight Corruption in Nigeria: An InsiderStory (Centre for Global Development 2010) 16. 5 Economic and Financial Crimes Commission (Establishment) Act 2004, Section 7(1) (a).
  • [5] See NFIU Act, 2018. 2 EENA2, Senior Counsel, Financial Integrity Unit, IMF, Interview with EENA2, ‘Telephone Call’ (2017). 3 Damilola Oyedcle, ‘Egmont: Senate, House Disagree on NFIA as Threat of Nigeria’s Expulsion Looms’ (Thisday, 6 February 2018) accessed 11 February 2018. 4 Ibid. 5 See, s. 2(2), NFIU Act 2018. 6 Sterling Seagrave, Lord of the Rim (Bantam Press, London 1997).
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