Money Laundering: Interrogating Current Framework to Regulate Legal, Accounting, Property, Trust and Company Sector Services


Femi Falana

Money 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 within or outside the country. To recover the bulk of the money lost through money laundering and corruption, Nigeria requires the collaboration of relevant professionals. That was not forthcoming in the past because of the lack of the commitment of the government in combating money laundering.

To combat the menace of money laundering and terrorism financing majority of countries have enacted laws, formulated policies and established various framework. Notwithstanding that Nigeria enacted the first anti money laundering legislation in 1995 the menace of money laundering has deprived the nation of huge financial resources which would have been properly deployed to execute needed infrastructures for the benefit of the people. The Money Laundering Act has since been amended in 2003, 2004, 2011 and 2012. The amendments were all designed to strengthen the capacity of the relevant agencies of the Government to deal with money laundering and terrorism in the country.

In spite of the existence of the anti money laundering laws it is common knowledge that cases of money laundering are still very prevalent due to a number of factors. Instead of addressing the challenges encountered in dealing with the menace of money laundering the federal government has submitted the Money Laundering (Prevention and Prohibition) Bill, 2016. In view of the serious objections to certain provisions of the proposed Bill by the EFCC the national assembly is urged to conduct a public hearing with a view to ensuring that the limited success recorded in the fight against money laundering is not sacrificed on account of expediency.

The people involved in money laundering are notorious for the acquisition of assets in different places and countries with illicit funds either directly or by proxy – usually through the aid and assistance of professionals who may be lawyers, accountants and or companies whose objectives range from property transactions, financial transfers and even trust. Some of the illegal sources of laundered funds are:

1. Corruption;
2. Drug trafficking;
3. Human trafficking;
4. Robbery;
5. Fraud;
6. Smuggling; and
7. Tax evasion, etc.

Money laundering can take place in various organizations and professions including the following:

1. Legal profession/law firms;
2. Accounting firms;
3. Banks;
4. Bureau De Change;
5. Securities firms/Insurance companies; and
6. Cash intensive business and transactions. Etc.

The current legal regime
Under the current legal regime in Nigeria, various laws and framework have been put in place to regulate and effectively supervise the Legal, Accounting, Property, Trust and Company sector services in Nigeria in relation to money laundering. The principal legislation on money laundering is the Money Laundering (Prohibition) Act 2011 as amended. Other relevant laws on the subject are the Economic and Financial Crimes Commission (Establishment) Act, 2004, Advance Fee Fraud And Other Fraud Related Offences Act, 2006, etc.

While the Economic and Financial Crimes Commission (EFCC) is the major coordinating body for the prevention and prosecution of money laundering offences in Nigeria, sister institutions and agencies such as: the Central Bank of Nigeria (CBN), the National Drug Law Enforcement Agency (NDLEA), and the Special Control Unit Against Money Laundering (SCUML), etc, also have important roles to play in the fight against money laundering. Regrettably, all attention has been concentrated on the prosecution of politically exposed persons. Not much has been done in dealing with cases of money laundering through drug abuse and human trafficking.

Duties imposed on lawyers, accountants, financial institutions and companies e.t.c.
The Money Laundering (Prohibition) Act 2011 as amended by Money Laundering Act, 2012 (subsequently referred to as ‘the MLA’) has imposed certain obligations on “Designated Non-Financial Institutions”, and “Financial Institutions” in Nigeria. It is instructive to note that Section 25 of the MLA Act defines ‘Designated Non-Financial Institutions’ to include: legal practitioners, chartered accountants, audit firms, tax consultants, clearing and settlement companies, hotels, casinos, supermarkets, dealers in Jewellery, cars, luxury goods, or such other business as the Federal Ministry of Commerce or appropriate regulatory authorities may from time to time designate.

Similarly, ‘Financial Institution’ is defined by the same provision to include: banks, body, association or group of persons, whether corporate or incorporate which carries on the business of investment and securities, discount house, insurance institutions, debts factorization and conversion firms, bureau de change, etc. Lawyers, accountants and other persons or bodies that fall within the above definition are required by the law, that is, the Money Laundering (Prohibition) Act) 2011, MPL, to comply with certain obligations which are specifically enshrined in the Act. I shall now examine some of these duties or obligations.

1. Limitation to make or accept cash payments:
By the provisions of Section 1 of the MLA, “No person or body corporate shall, except in a transaction through a financial institution, make or accept cash payment as a sum exceeding –

(a) N5.000.000.00 or its equivalent, in the case of an individual; or
(b) N10.000.000.00 or its equivalent in the case of a body corporate.

2. Duty to report international transfer of funds or securities:
It is common knowledge that hundreds of millions of dollars have been transferred from and to Nigeria. These transfers are often shrouded in secrecy and perfected in a manner that makes traces by the EFCC and other relevant law enforcement agencies difficult, if not impossible. Lawyers in particular have aided 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 non-financial 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.

In specific terms, ICAN had commendably issued a compliance document called the ‘ICAN Members Guidance on Money Laundering’ which further explains the provisions of the MLA as it affects Chartered Accountants, the necessity for complying with same and the consequences of non-compliance. On its part, the NBA has insisted that lawyers cannot be subjected to certain anti-money laundering provisions and requirements under the MLA. The NBA’s contention is that legal practitioners have certain duties to their clients which are imposed on them by the Legal Practitioners Act 1975, the Evidence 2011 and the Rules of Professional Conduct for Legal Practitioners 2009.

The NBA through its Registered Trustees had filed an originating summons dated March 15, 2013 at the Federal High Court, Abuja challenging the constitutionality and applicability of Section 5 of the MLA to legal practitioners and the inclusion of legal practitioners in the definition of Designated Non-Financial Institution in Section 25 of the MLA. In his judgment delivered in December 2014, the presiding Judge, Justice Gabriel Kolawole, restrained the Federal Government, the Central Bank of Nigeria (CBN) and the Special Control Unit against Money Laundering (SCUML) from enforcing the provisions of the Money Laundering (Prohibition) Act 2011 (MLA) against legal practitioners. The court gave an order of perpetual injunction restraining the Federal Government, the CBN and the SCUML from seeking to enforce Section 5 of the MLA against legal practitioners. He made no order as to costs.

Section 5 of the MLA 2011 which was invalidated in relation to legal practitioners provides that Designated Non-Financial Institutions whose business involves the one of cash transaction shall prior to any transaction involving a sum exceeding US$1000.00 or its equivalent require the customer to identify himself by filling a standard data form and present his international passport, driving license, national identity card or such other document bearing his photograph as may be prescribed.

The Section further requires a chronological record of all such transactions indicating each customer’s surname, forename and address in a register which shall be submitted to the Ministry of Commerce. The Ministry shall forward same to the EFCC within 7 days of its receipt. The EFCC is however empowered to demand such records directly from any Designated Non-Financial Institution (which included lawyers prior to the judgment by Justice Kolawole). Failure to submit such records is punishable upon conviction, by a fine of N250,000 for each day during which the offence continues; and suspension, revocation or withdrawal of license by the appropriate licensing authority.

The question is: Is the judgment of Justice Gabriel Kolawole an immunity that allows legal practitioners to launder money for their clients? It is humbly submitted that the judgment cannot operate an as immunity to exempt any lawyer or law firm found to have engaged in money laundering for a client from criminal investigation or prosecution. Rule 19 of the Rules of Professional Conduct for Legal Practitioners which demands confidentiality of communication with clients and Section 192 of the Evidence Act 2011 which allows for privilege communication between a lawyer and a client, ought not to take precedence over the overall interest of the country to prevent and reduce money laundering, corrupt practices, drug trafficking, tax evasion and other illegitimate and unlawful activities. Any customer or client whose source of money is legitimate should not be reluctant or unwilling to disclose same to the authorities.

Owing to the BVN policy introduced to enable the banks to keep records of all depositors some people who had engaged in money laundering with the aid of the banks abandon billions of Naira as they could not account for the deposits in their accounts. Others resorted to buying millions of dollars which were kept in soak away as they could not take such money to the bank for fear of arrest and possible prosecution. The EFCC recently recovered $1 million from a soak away in Badagry, Lagos state in the home of a retired service chief. Another retired military officer has disowned millions of dollars recovered by the anti graft agency in one of his seized houses in the federal capital territory.

Many public officers have laundered stolen money by investing in real estates in major cities especially in Lagos and Abuja. On account of such investments by corrupt public officers the prices of properties have hit the roof in the country. Corrupt Nigerian officials have also bought properties in many cities in western countries and the United Arab Emirates. A few years ago, two former governors who were accused of money laundering in the United Kingdom jumped bail and rushed back to the country to resume duties. One was removed from office, tried and convicted. The trial court ordered the confiscation of his properties in Abuja, London, Johannesburg and Maryland in the United States. The trial of the other fugitive from the law is in progress in Nigeria.

Another governor who was charged in Nigeria with fraud and money laundering was given a clean bill of health by the federal high court. Without any trial whatsoever, the 107-count charge filed against him was dismissed. But when he was charged with similar offences in the United Kingdom he pleaded guilty in a plea bargain arrangement. He was convicted and sentenced to a 13-year jail term for fraud and money laundering. Apart for his wife, sister and friend who were also jailed for aiding and abetting him one of his lawyers and bankers were tried and convicted.

The lawyer, Bhadresh Gohil, who had represented his client was found guilty for his role in a scheme to sell $37 million in shares of Nigerian telecom company V-Mobile (now Airtel), the profits of which were then laundered. He later pleaded guilty to other charges lodged against him and was sentenced to seven years in jail for charges including money laundering. The presiding judge described Gohil as the “architect” of the scheme, and that “it’s said the real villains are in Nigeria, but this fraud required special expertise and you lent yourself to it.”

In the same vein, Mr. Elias Preko, a former Goldman Sachs banker was sentenced to 4-1/2 years in prison by a London court for laundering $5 million on behalf of James Ibori, In sentencing Preko the judge said, “You are a man of considerable ability and intelligence, highly educated, capable of making lots of money perfectly legitimately. You had the ability to walk away (from Ibori). You chose to involve yourself with him as a professional man, against the code of upstanding conduct for men in your position.”

Recently, Mossack Fonseca, a law firm based in Panama founded in 1977 came to global limelight following the leak of 11.5million documents in what has been termed the “Panama Papers” by the International Consortium of Investigative Journalists. The notorious law firm registered over 300,000 offshore companies, “shell companies” and helped politicians, celebrities, business tycoons and influential figures across the globe to launder funds to secured tax havens. In the case of Nigeria, the public officers exposed in the Panama papers including the fellow who had millions of pounds in his account over 20 years ago has not been interrogated by the Code of Conduct Bureau or any of the other anti graft agencies. Unlike Nigeria, the revelations in the Panama Papers have sparked outrage and even led to the ouster of the Iceland Prime Minister, Sigmundur Gunnlaugsson following a popular mass action in Iceland.

At this juncture, we need to ask ourselves a simple question: How many Mossack Fonsecas do we have in Nigeria? How many law firms in this country are aiding and abetting their clients to evade and launder funds? With diligent enforcement of Section 5 of the MLA, it would have been difficult if not impossible for any legal practitioner or law firm to act as a clearing House for money laundering for the benefit of corrupt Nigerians. Although no lawyer has been prosecuted for money laundering in Nigeria it is no longer business as usual as many have recently been charged to court for providing criminal legal services.

However, some accountants, bankers and estate agents have been convicted for money laundering. An ex-MD of a bank was convicted and ordered to pay money and properties worth N191 billion. Some other former chief executives of other banks are facing trial for fraud and money laundering running to about N500 billion. Through interlocutory appeals the cases involving the other CEOs of the banks have been put on hold. In recent time, money laundering has increased in the banks due to the introduction of private banking. The fraudulent banking system was recently exposed when the EFCC discovered that the alleged stolen sum of over $250 million traced to a particular bank was not recorded in the books of the financial institution.

What the investigations have revealed is that former top officials of the federal government were neck deep in the laundering of public funds with the aid of bank executives. In order to allow politicians to move funds outside designated financial institutions the Money Laundering Act permits individuals to take out any amount of money from Nigeria once it is declared at the ports or borders. On a daily basis, millions of dollars are taken out of the country without any proper documentation or record. It is difficult to check money laundering in cash based economies. In an atmosphere of unprecedented impunity which prevailed in the country under the Jonathan administration, the federal government was once indicted in the smuggling of $15 million to South Africa when three private businessmen were arrested for money laundering.

The explanation by the Office of the National Security Adviser that the $15 million was meant to procure armament was rejected by the Asset Forfeiture Unit in the office of the National Prosecuting Authority (NPA) in South Africa. The official explanation of the federal government collapsed when it was revealed that the South African company involved in the deal was not a licensed arms dealer and that the jet used to ferry the money belongs to Pastor Ayo Oritsejafor, the then President of the Christian Association of Nigeria (CAN). When the CAN defended the use of the plane on the ground that it was leased for business transaction I pointed out that the leasing was illegal as the jet was registered in Nigeria to spread the gospel of Christ.

In spite of money laundering laws and regulations, law enforcement agencies and financial institution remain in the race to keep ahead of criminals. As law enforcement agencies and financial institutions are acquiring new technologies to curb the activities of criminals. Like many other criminal activities money laundering is undergoing what has been described as a revolution.

Criminals are taking advantage of technology to perpetrate money laundering. The government ought to ensure that the anti graft agencies acquire proper training and equipment to combat money laundering and terrorism financing. The federal government should ensure that the sharp disagreements between the office of the Attorney-General of the Federation and the EFCC over the proposed amendment of the Money Laundering Act pending before the national assembly are resolved without any further delay.

Finally, the country is in a pitiable economic state today largely because funds which were appropriated for infrastructures, social programmes and projects were mindlessly laundered by those entrusted with public offices. This crime against the Nigerian people would not have been achieved easily if lawyers, accountants and other professionals had acted strictly in conformity with the law and within the anti-money laundering framework of the Federal Government.

Henceforth, professionals who offer their expertise and render services to aid the commission of money laundering offences should be made to face the full wrath of the law. The federal government is urged to continue in the recovery of the commonwealth looted through corruption and money laundering by some unpatriotic public officers. The anti graft agencies should continue to prosecute the recovery agenda without fear or favour. There has to be deterrence.
–(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)