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Nigeria, EU, money laundering and terror financing

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Naira notes

The recent blacklisting of Nigeria, alongside some other countries such as Saudi Arabia, Panama and other jurisdictions by the European Union (EU), for “strategic deficiencies in their anti-money laundering and countering terrorist financing regimes” has become worrisome to avid watchers of developments in the Nigerian economy.

Generally, the criteria used to blacklist countries have included weak sanctions against money laundering and terrorism financing, insufficient cooperation with the EU on the matter and lack of transparency about the beneficial owners of companies and trusts. This development is not good for Nigeria as this notorious status complicates the country’s financial relations with the EU such that unnecessary additional checks will be conducted on otherwise legitimate payments involving entities emanating from Nigeria.

Aside from money laundering and the financing of terrorism risks, the flow of illicit finance across the world has increasingly become worrisome in view of their negative impact on many economies, particularly on the poor nations. Illicit financial flows have been the channels through which trade mispricing by multinational corporations, tax havens and corruption have thrived. For most developing countries, the outflows of financing from corrupt practices have been the major cause of impoverishment of their economies that they perpetually depend on foreign aid for survival.

The reports of the African Union Commission and the African Development Bank in recent times on these illicit financial flows have clearly stated that the illicit outflows from the continent far outweigh the inflows such as aid, foreign direct investments and other foreign capital flows into the continent. On a global scale, many of these illicit flows, which invariably do not go through the formal financial systems, have become more destabilising to the world economy with increased incidences of money laundering and terrorist financing.

As far back as 1989, the G-7 Summit, in addressing the mounting concern over money laundering, and recognising the threat posed to the banking system and to financial institutions, had established the Financial Action Task Force on Money Laundering (FATF) with the responsibility of examining money laundering techniques and trends as well as reviewing the action which had already been taken at a national or international level in addition to setting out the measures that still needed to be taken to combat money laundering. Over the years, the FATF has spearheaded efforts to adopt and implement measures designed to counter the use of the financial system by criminals by establishing series of recommendations first in 1990 and subsequently to ensure their currency as well as relevance in view of the evolving threat of money laundering. These basic FATF frameworks for anti-money laundering efforts are intended to be of universal application.

In complying with this global trend, by virtue of one of the recommendations of the FATF and Article 14 of United Nations Convention Against Corruption, the Nigerian government had established the Nigerian Financial Intelligence Unit (NFIU), as the Nigerian arm of the global Financial Intelligence Units (FIUs) to comply with international standards on combating money laundering and financing of terrorism and its proliferation. Gladly, the NFIU has been admitted into the Egmont Group, the global body responsible for setting standards on best practices for FIUs made up of more than 131 FIUs from 131 jurisdictions, to foster international collaboration in the exchange of intelligence by member states.

The blacklisting of Nigeria by the EU is a subtle indictment of the NFIU, in ensuring that FATF recommendations are complied with. In this regard, one question that comes to mind is whether the NFIU as recently legalised in the country has been properly constituted to function optimally. Or is it that it is not receiving the appropriate cooperation with the collaborating agencies of government, as required in its operation? Statutorily the NFIU is required to collaborate with Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) stakeholders to fulfill its mission, some of which are law enforcement agencies such as the Department of State Security Service (DSS), Nigerian Police Force (NPF) and National Drug Law Enforcement Agency (NDLEA), among many others. It is also required to work closely with anti-corruption agencies such as the Economic and Financial Crimes Commission (EFCC), Independent Corrupt Practices and Other Related Offences Commission (ICPC) and the Code of Conduct Bureau (CCB).

The lacuna here is that there is a need to speed up the anti-money laundering bill in the national Assembly to combat frontally terrorism financing trails in the country. This will complement the NFIU whose director was confirmed early this year.

These various agencies need to work harmoniously to avoid a situation where Nigeria will be stigmatised in the international arena with payments emanating from these shores treated with unnecessary suspicion. Therefore, the National Assembly should ensure that the necessary legislations are in place to enhance the efficient operations of bureaucracy set up to combat money laundering and the financing of terrorism.

Overall, though it is proper for Nigeria to, as much as is necessary, comply with global best practices in the fight against financial crimes, it must be pointed out that the EU itself and other Western nations are not immune to financial crimes. It is not an African phenomenon as there have been instances of such misdemeanors in Western societies, which harbor the bulk of the global banking financial flows that one way or the other find their way into the financing of terrorism, as well as promote money laundering. Nigeria should nonetheless put its house in order to escape this blacklist as soon as is practicable, in the overall interest of the country and its citizens.


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