It is gratifying that the Central Bank of Nigeria (CBN) has introduced new rules to check money laundering and financing of terrorism. The new rules aimed at curbing insider crimes in the banking sector, stipulate far-reaching penalties for banks, their directors and other staff for money laundering and terrorism.
The new policy was formulated by the CBN in collaboration with the Office of the Attorney General of the Federation (OAGF). Sections 6-14 of the Money Laundering (Prohibition) Act 2004 cover a broad spectrum of offences and penalties. Under the new rules, therefore, banks and board members, as well as chief compliance officers, risk severe financial penalties for, at least, 31 out of the 48 money laundering infractions listed in the new regime.
For each of the 31 infractions, the minimum penalty is a fine of between N500,000 and N1.2m on a board member. The same applies to chief compliance officer and internal auditor, while a fine of N20m awaits any bank found to have violated any of the new rules. In addition, the CBN has warned that failure of any bank to comply with the Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) rules will attract N20m while failure to review/update the regulations every three months will attract a minimum of N750,000 fine for bank chief executive in the first instance and N5m each year that the contravention lasts.
However, recent reports that the banking sector has become a source of money laundering for financing terrorism make the introduction of these fresh rules by the CBN more timely. In this era of globalisation, it is important that the banking industry be tightly regulated and rules strictly enforced.
A recent security assessment of banks in Nigeria found that the sector has become vulnerable to insider abuse by top management officials. It was also found that hackers have broken into the websites of some banks and extracted customers’ personal and financial data. An average of N3.2bn of customers’ money is reportedly lost annually through financial crimes.
No doubt, every measure to check money laundering, round tripping and financing of terrorism is a welcome development. With Boko Haram insurgency on the increase despite measures already in place to curb it, the banks may be part of the funding channels that the sponsors use to keep their nefarious activities going. Security reports also claim that Boko Haram received over $70m between 2006 and 2009 through corrupt transactions like oil bunkering and drug money.
The Money Laundering and Combating the Financing of Terrorism rules should be strengthened with stiffer penalties for erring banks. No doubt, tackling illicit financial transactions is a daunting task. Currently, emerging trends in global financial systems, particularly the management of deposit transactions and the use of technology have predisposed financial institutions to abuse. Unarguably, some banks have become conduits for illicit cash flows with dangerous consequences for the economies of many countries.
The new rules by the CBN will only succeed with greater vigilance and strict enforcement. A few years ago, the Washington-based Global Financial Integrity Group, ranked Nigeria on the list of the “10 largest countries for illicit financial flows in the world.” The report claimed that about U$15.7bn illicit funds pass through Nigerian banking system annually. These illicit cash flows were reportedly traceable to money laundering, terrorism financing, illicit drug trade and oil theft.
Statistics from the Global Financial Integrity Group revealed that Nigeria accounted for a hefty part of the cumulative $854bn illicit cash flows from Africa in 1971 and 2009. Between 2002 and 2011, Nigeria lost $140bn to illicit financial transactions. This is, by every measure, disturbing.
In all, the National Assembly should examine the Money Laundering (Prohibition) Act 2004 and the Terrorism Act, alongside the new CBN regulations and make them more effective in checking financial crimes. The banks should institute robust corporate governance structure with specific guidelines to check illicit movement of funds. This critical function should not be left to the anti-graft agencies alone.
