Nigeria has always occupied a top position on the unflattering list of corruption and money laundering. Last December, it was placed seventh in the list of the 20 biggest exporters of illicit financial flows over a decade, with cumulative figure of $129 billion and an average of $12.9 billion, by Global Financial Integrity (GFI), a Washington-based research and advocacy organisation.
For over two weeks now, 20 bank managers from 13 banks have been detained by the State Security Service (SSS) for alleged involvement in money laundering, a move that has created tension in the financial world as the affected banks have been threatening to down tools if their staff are not released.
The affected officials who are being detained without trial are being connected by the SSS to the money laundering allegations leveled against the sons of Jigawa State Governor, Sule Lamido, Aminu and Mustapha in a N10 billion scam.
The Lamidos who have since been released on bail from the coffers of the Economic and Financial Crimes Commission (EFCC) were arrested in a case of money laundering in which over N10 billion was said to have been transferred from Jigawa State government accounts into the accounts of companies in which the governor and his two sons have interest.
In all, 13 banks were affected by the arrests including Zenith Bank, Access Bank, Fidelity, Unity, First Bank, Skye, Sterling, Diamond, Ecobank amongst others. The SSS had subsequently swooped on the 13 banks in which the companies have accounts and even obtained a court order to freeze the accounts. Also, it had begun a systematic arrest and detention of senior officials of the banks in the last two weeks.
A source close to the bankers who confided in LEADERSHIP Sunday had said the detained bankers who are mostly managers comprise five managers from Fidelity Bank Plc, four from Unity Bank Plc, while the remaining are from other banks. “I can tell you authoritatively that 20 bankers are being detained by the SSS. Most of the detained bankers are managers and have been detained for about two weeks.
“I can also inform you that they are being detained without trial. Some of the detained managers include five from Fidelity Bank Plc, four from Unity Bank Plc and an average of two from each of the other banks.
“One of those arrested is a director. Some others are risk managers, fraud control and detection officers, zonal and regional coordinators and key IT experts. There are compliance managers among those arrested. There are also account officers, branch managers, chief inspectors and heads of treasury among those arrested. To continue to operate without these key personnel could expose depositors’ funds to serious danger. So, the bank CEOs are thinking it might be safer to close shop to secure depositors’ funds and reduce exposure to a possible collapse of the nation’s banking system,” the senior bank source said.
Apart from the risk of possible compromise of the system, the bank chiefs are also frowning at the propriety of the SSS’ action. They fear that, unlike the EFCC and the CBN, which have the wherewithal to investigate bank transactions and fraud, the SSS may not be treading on a familiar turf.
An executive of one of the affected banks also told LEADERSHIP Sunday that the banks were yet to conclude under which umbrella they would make the strike move, adding that there is the likelihood of the Bankers’ Committee, which is a body of all CEOs of banks in the country, intervening.
With the arrest by the SSS came queries as to the power of the security agency to arrest and detain the bankers, especially without trial. Legal practitioners had queried the propriety of the detention of the bankers by the SSS, saying that the service should explain to Nigerians under what laws the bankers are being detained.
Lawyers including Chief Mike Ahamba (SAN), Mr Tayo Oyetibo (SAN) and Chief Fred Agbaje had described the action is illegal and unconstitutional, saying what was required of the SSS is to charge the officials to court and not to usurp the function of the third arm of government, the judiciary.
According to Ahamba “The detention is as lawful as the people detained. If they are not comfortable with their detention, they would have taken appropriate steps to challenge their detention in court.”
Oyetibo on his own part stated that “There is no law that empowers the SSS to detain anyone for more than two days without trial. It is a violation of their right to freedom and they can go to court to enforce the right. If the bankers have breached any law, the SSS should hand them over to the appropriate authorities so that they can be arraigned in court. If it is true that the offence that the bankers are being detained for is money laundering, I don’t think the SSS has the responsibility to investigate such crimes, unless it has something to do with state security. It is the police, the EFCC, and the ICPC that that have the responsibility to investigate and prosecute offenders for such crime.”
Agbaje also stated that “this is the lawlessness that we have been campaigning against all these years. There is so much impunity in the country. Money laundering offences are not part of the constitutional responsibilities of the SSS; their duty is intelligence gathering. It is the constitutional duty of the police, the EFCC and the ICPC to investigate money laundering and economic crimes offences in the country.”
However the SSS maintained that it is acting within the law as its spokesperson, Marilyn Ogar held on to the SSS Instrument No 1 of 1999, which mandates the security agency to “uphold and enforce the criminal laws of Nigeria and provide leadership and criminal justice services to both state and federal law enforcement organs.”
“Who says that the SSS has no powers to investigate allegations of money laundering? Look at the law setting up the Service and you will see that it is part of our responsibility. Instrument 1 of May 1999 empowers the service to carry out the prevention, detection and investigation of threat of espionage, threat of subversion, threat of sabotage, economic crimes of national security dimension, terrorist activities, and separatist and inter-group conflicts and threat to law and order”, she insisted.
Following the continued detention of the bankers, various unions related to the financial world such as the National Union of Banks, Insurance and Financial Institutions Employees (NUBIFE) and the Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI) had commenced their own end of investigation, but had declined to comment further.
The Central Bank of Nigeria (CBN) on the other hand is not sitting without doing anything about the situation on ground as its spokesman, Director of Corporate Communications Ugo Okoroafor had told LEADERSHIP Sunday that the apex bank is concerned about the effect the arrest would have on the reputation of the banks involved and the financial industry at large. According to him, the CBN has already commenced investigations to ascertain the validity of the allegations.
The CBN Governor, Mallam Sanusi Lamido Sanusi had earlier blamed the incessant reported cases of money laundering on the type of laws operated in the country. Sanusi while speaking recently on Zero Tolerance in the country said “some of the money laundering activities are being facilitated by the kind of laws we have.
“We have an Exchange Control Act today that says you can take out any amount of dollars from Nigeria as long as you declare at the ports. People walk out of airports with $3 million after declaring it. That is the law; it allows them as long as they declare it and we cannot stop them.”
Just a month ago, Nigeria had been removed from the list of countries identified as jurisdictions with significant deficiencies in their Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regimes.
According to the Financial Action Task Force (FATF) the outcome of the on-site visit of its International Cooperation Review Group (ICRG) the FATF to Nigeria in September this year revealed that Nigeria has substantially completed the technical items on her Action Plan and that there is political commitment and institutional capacity to continue to implement AML/CFT reforms.
This is due to the improved laws and regulations that have been put in place by the government and its various agencies to combat money laundering in the country. Although an Anti Money Laundering Law had been instituted in 2011, the law had been amended early this year to fit international standards and to make it more effective.
The CBN had issued directives to banks to comply with the amended anti-money laundering/combating the financing of terrorism regulation, 2009 so as to align with money laundering Act, 2011 and terrorism Act, 2011.
It said, “Financial institutions are required to investigate suspicious transactions and report their findings to the Nigerian Financial Intelligence Unit in the Economic and Financial Crimes Commission within seven days of the transaction, in compliance with section 6 (2) (c) of MLPA, 2011.
“Financial institutions are required to report in writing any single transaction, lodgment or transfer of funds in excess of N5,000,000 and N10,000,000 or their equivalent made by an individual and body corporate respectively to the NFIU in accordance with section 10 (1) of the MLPA, 2011.”
The amended AML/CFT Act compels bank to consistently report any suspicious transactions to the apex bank as well as the EFCC. Transactions whose frequency is “unjustifiable or unreasonable; is surrounded by conditions of unusual or unjustified complexity; appears to have no economic justification or lawful objective” according to the act is to be reported by bank officials.
Also financial institutions through their compliance officers are required by the AML/CFT law to “seek information from customers as to the origin and destination of the fund, the aim of the transaction and the identity of the beneficiary.”
The AML/CFT law also stipulates that banks, not later than 72 hours of the initiation of the transaction “draw up a written report containing all relevant information on the transaction together with the identity of the principal and of the beneficiaries; take appropriate action to prevent the laundering of the proceeds of a crime or an illegal act” and report the transactions and the actions taken to the Nigerian Financial Intelligence Unit (NFIU) of the EFCC.
The Chairman of the Committee of Chief Compliance Officers of Banks in Nigeria (CCCOBIN) Mr. Pattison Boleigha , had recently quoted a survey by KPMG showing that compliance with AML/CFT laws in the country is low with many not paying close attention to internal controls and checks.
Boleigha said the KPMG survey indicated that “senior management interest is decreasing and nearly one-fifth of financial institutions do not formally test and monitor the effectiveness of their existing AML systems and controls. This is worrisome.”
This fact was also corroborated by the Director General of Inter-Governmental Action Group Against Money Laundering In West Africa (GIABA), Dr. Shehu Abdullahi as well as the Economic and Financial Crimes Commission (EFCC) Director, Nigerian Financial Intelligence Unit (NFIU), Juliet Ibekaku.
According to Abdullahi, GIABA had concluded its first round of mutual evaluation of its member states, and “the outcome of the evaluation reveals an abysmal performance on the Recommendations relating to the financial sector in the adoption and implementation of the FATF standards, making the sector one of the vulnerable in our economies.”
He explained that critical issues relating to customer identification, AML/CFT supervision among others, are yet to be fully addressed, while “other new challenges have arisen as a result of the issuance of new standards by the FATF, which will require the continued implementation of, and, in some cases, further refinements to, the financial sector AML/CFT programme.”
On her own part, Ibekaku said NFIU had found reports from a good number of financial institutions “not impressive; and this calls for urgent improvement as the NFIU will not hesitate to recommend sanctions within the provisions of our extant laws. This is the only way to ensure deterrence and to protect our financial system.”
The banking industry is one that is based on trust and reputation. Issues of fraud, mismanagement and the likes if discovered could lead to a run on the institution or even the industry. It also puts the country’s financial sector in a bad light in the global scene.
However, the damage is not done to only the country, the banks involved too get burnt in all areas. As Boleigha puts it, “failure to comply with anti-money laundering or anti-terrorism laws or regulations can expose Financial Institutions to severe civil and criminal penalties, including loss of professional licensing and imprisonment of its principal officers.
“Additional risks include but are not limited to reputational harm and impairment; monetary losses resulting from asset forfeiture actions, fraud and charge offs; substantial legal fees; delay or denial by government of applications submitted for mergers or acquisitions and other needs; and Loss of Foreign Direct Investments and offshore facilities from foreign business partners.”
Boleigha explained that while in the past, the sanctions had been meted out against the financial institution and at minimal fine. Now, the action will be taken against both the organization and responsible officials in the institution.
Considering the protest of the banks and their threat to down tools, the impact is one that would not only cut down on the already weakening income of the banks but would affect the entire business community.