Nigeria: Tackling money laundering in cash driven economy

Nigeria's effort at tackling money laundering has received its reward with the removal of the country's name from FATF black list. NSE AKPAN looks at the hurdle of a cash based economy faced by the endeavor.

The Federal Government as well as the financial sector regulators is fighting money laundering on all fronts. One of the areas in which it has increased effort is the banking and financial industry where the Nigeria Financial Intelligence Unit (NFIU) has made it mandatory for banks to comply with its directive on reporting cash transactions beyond the specified limit set for both individuals and corporate organisations. To facilitate this, banks have also mandated to set up anti-money laundering software to ensure electronic transfers suspicious transaction reporting (STRs) and currency transaction reports (CTRs) to the NFIU.

CBN has also issued several directives to banks on the compliance with know your customers (KYC) provisions. Despite these strides, a major hurdle still remains the prevalent high dependence of cash in the economy.

The NFIU draws its powers from the Money Laundering (Prohibition) Act (MLPA) 2004 in the fight against the menace. The 2004 Act, is regarded as the turning point in Nigeria's legislation against money laundering. This is because it captures all the details of the menace, which previous laws failed to recognise.

One of the major provisions of the act is that no person or corporate organisation should make or accept cash payment up to N500, 000 or N2 million respectively except through a financial institution. This measure is to ensure that transactions involving such amounts are captured in the formal system and thus making the source of the funds traceable.

Unfortunately, the authorities are unable implement provision and so contain the activities of money laundering despite that penalty for non-compliance is a minimum of N250,000 fine or 15 years imprisonment, and maximum of N1 million or 25 years imprisonment. Statistics show that over $600 million (about N76.20 billion) is lost annually to money laundering and financing of terrorism in Nigeria.

Asishana Okauru, director, NFIU, observed that the major challenge in enforcement is the country's cash driven economy. According to the CBN's economic report for July 2007, total amount outside the banking system amounted to N714.3 billion. This shows N314.3 billion increase from the N400 billion in 2004. This figure is an indication that the economy is predominantly cash based. Despite the security risks many Nigerians still prefer to have receive cash payments for sales or services due to the poor confidence in the financial system occasioned by the high level of dud cheques.

The CBN has stressed the urgent need for banks transit to promote the use of cards, cheques as well as other means besides cash to make payments in order to improve the payment system due to its important implication for the conduct of monetary policy, the soundness of the financial system and efficient functioning of the economy as a whole. Also the Dud Cheque Act has to some extent curtailed issuance of dud cheques.

On the part of operators, banks have been investing heavily in information technology, which has seen to massive deployment of e-based banking application in the country. Also e-payment companies are cashing in on the increasing insecurity in the country resulting in incessant armed robbery attacks and the determination of government to check corruption amongst officials in high places to invest in further deployment of ATMs and other Point-of-Sale terminals to make electronic funds transfer across the country easier, faster and safer.

At the regional level, the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), the regional focal point for the fight against money laundering, terrorist financing and drug trafficking, says it has just completed its mutual evaluation to ascertain Nigeria's compliance with anti-money laundering and terrorist financing provisions. Though the report is yet to be discussed at its plenary meeting, Abdullahi Shehu, director general of GIABA has assured of very positive outcomes. This added to the removal of the country the FATF monitoring list in June and its admission into the Egmont Group in May, all indicate that the government is not relenting in its efforts in ensuring that the country maintains a clean slate in anti-money laundering activities. Though Nigeria was removed from the list of countries and territories that are non co-operative in the international community's efforts to fight money laundering in June 2006, it was still placed under strict monitoring by the FATF until one year later.

The removing the country from its monitoring list in June 2007 does not however spell the end of the road. Prior to the removal, FATF said Nigeria now has an operational financial intelligence unit and has taken steps at the highest levels to fight corruption. The responsibility now lies on the NFIU to sustain this status while and also up the scale on compliance.

http://businessdayonline.com/print/782.html