COMPARE AND CONTRAST LEGAL APPROACH ADOPTED TO COMBAT MONEY LAUNDERING IN TH UK

The United Nations Convention against Illicit Traffic in Narcotics Drugs and Psychotropic substances of 1988 followed suit after the DTOA of 1986 and required signatories to the convention to criminalise production and cultivation of drugs, to the organisation, management and financing of trafficking operations. Its Article 3 most especially urged signatories to criminalise conspiracy, aiding and abetting and facilitating the commission of drugs offences including money laundering.

Next in line was the European Council Directive on money laundering which imposed a duty on European member states to implement anti money laundering provisions in their respective jurisdictions.

The council directive was quite of significant importance on enactment as it advocated for sanctity in transactions involving financial institutions. It expressed the fears that confidence in financial institutions and market would be greatly prejudiced if the ill wind of money laundering and organised crime was to blow its way.

Like other preceding provisions, this directive had its shortcomings that included lack of provision as to the confiscation of proceeds of crime, lack of obligation on member states to criminalise drug money laundering and lack of any requirement on member states to prohibit the laundering of the proceeds of all criminal conduct and which remained one of the most fundamental criticism.

 Other legislations followed on from here as a result of meeting challenges in money laundering. The council directive was therefore important as it heralded a progression of supra national anti money legislations and confirmed financial intermediaries as targets of money laundering.

Its importance lies in the fact that it provided a well defined format for the anti money laundering provisions in that the directives provided three main categories of obligations for credit and financial institutions; identification of customers and beneficial owners, due diligence in relation to suspicious transactions, and obligations to cooperate with law enforcement agencies. 

The approach of the UK to money laundering is commendable, quite developed and worthy of emulation by other countries. It consists of measures ranging from provisions in the criminal law to punish money launderers, deprive them of their proceeds to the obligations highlighted above and which contribute to the general aim of combating crime and the abuse of the financial system.

UK legislation now covers laundering of proceeds of from drug trafficking, terrorism and general crime. Drug trafficking has had the greatest influence on the drafting of the offence into law.

Thus, the UK anti money provisions consists of a number of laws, rules, and legislations namely

1. The Proceeds of Crimes Act of 2002 (PCA )
2. The Money Laundering Regulations 2003 (M.L.R)
3. The Industry and Professional guidance and
4. The Financial Services Act (F.S.A) rules and regulations.

The developments into the law above evolved primarily from the DTOA 1986 which then saw the emergence of other legislations to combat money laundering. These include the Criminal Justice Act of 1993, the Drug Trafficking Act 1994, and the Proceeds of Crime Act 1995. The original Money laundering regulation 1993 into effect on 1 April 1994 as a consequence of the EC first Money laundering directive. The EC second Money-laundering directive led to the Money laundering regulation 2001 and which extended the scope of the 1993 regulations. The second directive thus made way for the Proceeds of Crime Act 2002 and the Money Laundering Regulation 2003.

Earlier money laundering legislations relating to drug offences and other criminality apart from terrorism have been repealed and replaced (subject to transitional provisions) by the PCA 2002 Part 7 which sets out new money laundering offences and expanding the scope of earlier money laundering statutes and also the money laundering regulations 2003 part I, II, IV.

The UK domestic anti-money laundering regime was also influenced by the Financial Action Task Force (FATF) 40s recommendation on combating money laundering and the 8 special recommendations on terrorist financing. The FATF is an international group and its recommendation while not legally binding, incorporates elements of some treaties and conventions that are legally binding. It was established as an intergovernmental body of the G.7 summit in Paris in July 1989 to examine measures to combat money laundering.

The Proceeds of Crime Act sets out in a single set, money-laundering offences applicable throughout the UK to the proceeds of all crimes, the scope of money laundering is also increased to connote possession by criminals of their own proceeds and the offence of handling stolen goods. The act imposes a direct obligation on the regulated sector to make a suspicious activity report if they know or suspect that money laundering has taken place.

There is also an obligation on the regulated sector to seek consent to undertake a future activity or transaction which may constitute a prohibited act. This happens more or less in a situation where a customer wishes to withdraw funds from an account that an institution suspects are the proceeds of crime.

Thus there are basically three categories of offences recognised and contained in S.S 327- 329 which basically covers money laundering and facilitating laundering.  Offences specified therein are punishable on conviction by a maximum sentence of 14 years imprisonment, or a fine or both.

Secondly, there are offences contained in S.S 330-332 that deals with failure to report a knowledge or suspicion of money laundering. This carries a maximum sentence of 5 years imprisonment or a fine or both.

The last category is the offence of prejudicing an investigation by tipping off, or by concealing, destroying, disposing of or falsifying documents. The offences therein are set out in PCA 2002, S.S 333 and 342. They also carry a maximum sentence of 5 years imprisonment.

The Money Laundering Regulations of 2003 which follows as an offshoot of the second EC money laundering directive expands the scope of the regulated sector to include the categories of estate agents, casinos, accountants, lawyers and anyone conducting a business of dealing with goods and accepting cash of approximately £10 000 or more in a single transaction.

The 2003 regulations places a burden on firms in the regulated sector requiring them to set up appropriate procedures for identifying clients, training staff, internal reporting and record-keeping and to designate a partner or a member of staff as the “nominated officer”, usually referred to as the money laundering reporting officer (MLRO).

Industrial and Professional guidance includes Guidance Notes provided by the Joint Money Laundering Steering Group (JMLSG) for the UK financial sector on interpreting the regulations and the courts in deciding when an offence has been committed consider whether the defendant followed the relevant “guidance” as issued by an appropriate body and approved by HM Treasury.

The F.S.A. being a major regulatory controller, in its money laundering rules require relevant firms to have effective anti money laundering systems and controls in order to reduce the opportunities for money laundering and require that specified individuals exercise appropriate responsibilities in financial transactions.

The UK anti money laundering regime is made up of the following that is responsible for various legislations on money laundering.

The HM Treasury; responsible for policy and legislation on anti money laundering and counter- terrorist financing systems and controls for the regulated sector e.g. financial institutions, accountants, casinos, lawyers e.t.c. It issues the money laundering regulations and also approves, under the PCA 2002 and MLR guidance notes produced by industrial bodies.

The FSA devises and enforces the rule applicable to FSA regulated forms including specific money laundering rules. It also has power to bring criminal prosecutions for breaches of the MLR.

There is also the Home Office and is responsible for policy and legislation relating to the recovery of the proceeds of crime and also responsible for the UK primary legislation and international cooperation with regard to the criminal law on money laundering and terrorist financing.  

Thus and has been evidently adduced, the UK has one of the most extensive and independent legislations in combating money laundering. Its effect is seen in the periodic arrest of offenders after proper investigation. There is also proper administration as regards to its observance as there are several bodies established to monitor its compliance in the society.

Legal approach to Money Laundering in Nigeria.

Anti-money laundering in Nigeria rose with the international spotlight on the state of corruption in the country. Transparency International has consistently rated Nigeria as one of the top three most corrupt countries in the world. Nigeria is notorious for financial crimes and advance fee fraud (aka 419) has brought disrepute to Nigerians all over the world.

The preponderance of crime has discouraged numerous would be investors, and Nigerian banks continue to lose viable businesses. This economic instability continues to result in business failure, unemployment and loss of revenue.

The counter money-laundering regime embodied in the legal, supervisory and regulatory systems of Nigeria suffers systemic problems identified as follows.

Nigeria law fails to criminalise the laundering of illicit proceeds other than proceeds derived from narcotics trafficking. Nigerian banks are not required to report suspicious transactions; banks are exempt from making a suspicious transaction for any transaction, which they decline to conduct or which is discontinued prior to completion.

There is also no penalty under Nigerian laws for failing to comply with the suspicious transaction-reporting obligation.

These deficiencies, the report further goes to state, caused Nigeria to be identified in June 2001 by the Financial Action Task Force on money laundering as “non cooperative” in the fight against money laundering.

With the threat by the FATF to impose counter measures on Nigeria in 2001 if she did nothing to update her laws and take steps to check the perpetration of economic and financial crimes together with the international dimension the crime had assumed, the promulgation of a law became inevitable.

Though the report recognised the fact that Nigeria had begun to cooperate with the FATF’s directives and had pledged to take measures to address its criminal problems by bringing the Nigerian anti money laundering regime into compliance with international standards, it nonetheless stated that “Nigeria’s legal, supervisory and regulatory systems create significant opportunities and tools for money laundering and increase the possibility that transactions involving Nigerian entities an accounts will be used for illegal purposes.  

The Economic and Financial Crimes Commission was then established to fill the lacuna in the existing financial laws and charged with the responsibility to specifically enforce the provisions of other existing principal laws bordering on economic and financial crimes that include;

1. The Money Laundering Act 2004
2. The Advance Fee Fraud (And other Related Offences Act) 1995
3. The Failed Banks (Recovery of debts and financial malpractices in Banks) Act 1991 as amended.
4. The Banks and other Financial Institutions Act 1996
5. The Miscellaneous Offences Act 1985.

Any other law or regulation relating to economic and financial crimes including the Penal Code and the Criminal Code. 

The Commission was established by the EFCC Act of 2002 but later re-enacted in 2004. It provided for the first time, as regards financial and economic crimes for laws to be vested in one body.

The Establishing Section states that the EFCC is the designated Financial Intelligence Unit in Nigeria that is charged with the responsibility of coordinating the various institutions involved in the fight against money laundering and enforcement of all laws dealing with economic and financial crimes. The Interpretation Section defines economic and financial crime as “the non violent criminal and illicit activity committed with the objectives of earning wealth illegally either individually or in a group or organised manner thereby violating existing legislation governing the economic activities of government and its administration”.

 This includes as it goes further to explain “any form of fraud, narcotic drug trafficking, money laundering, embezzlement, bribery looting and any form of corrupt malpractices, illegal arms deal, smuggling, human trafficking and child labour, oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currencies, theft of intellectual property and piracy, open market abuse, dumping of toxic waste and prohibited goods among others.

Relevant provisions of the act criminalising financial impropriety include S.14, which deals with offences relating to financial malpractices. The punishment for anyone found liable is a term of imprisonment for a term not exceeding 5 years or a fine of N 500, 000 00 (five hundred thousand naira) or both. S.15 provides for the offence of terrorism with a term of life imprisonment as punishment. The act imposes imprisonment for five years or a fine of five times the value of proceeds of crime or both for the commission of the offence of retention of the proceeds of crime.

The High courts of a State and the Federal courts are both given jurisdiction to try offenders as relates to the breach of any of the provisions of the act and also make orders as to the forfeiture of assets or property accordingly.

Thus the EFCC enjoys autonomy in its operation and it has been an effective watchdog in the prosecution of offences specified under it. It liaises with international authorities in its bid to effective prosecution of offences. In its short life, it has been responsible for the arrest, prosecution and imprisonment of highly placed individuals and government officials both within and outside the country.

Notable among these is the arrest and detention of a Nigerian state governor on the 15th of September 2005 at the Heathrow Airport London and was subsequently charged under S.327 (1) of the Proceeds of Crime Act and S.93 (1) of the Criminal Justice Act, with possession and laundering of various sums amounting to £1.8 million.

Another example is the prosecution of a former inspector general of police, sentenced to 6 months imprisonment on conviction of money laundering.

Another legislation worthy of consideration in Nigeria’s approach to combating money laundering is the Money Laundering Prohibition Act 2004 enacted to repeal the Money-Laundering (Prohibition) Act of 2003. The summary of the bill is basically

1. To provide for the repeal of the M.L.A of 2003,
2. Make comprehensive provisions to prohibit the laundering of the proceeds of a crime or an illegal act and
3. Provides appropriate penalties and expands the interpretation of financial institutions and scope of supervision of regulatory authorities on money laundering activities among other things.

The Act amplifies on limitation to make or accept cash payment; by putting restrictions on amount of money individual or corporations can transact in a single business, imposes duty on relevant authorities to report not only suspicious international transfer of funds and securities, but give account of all transactions.

The status of the customer is also dealt with as the act makes for his identity to be thoroughly verified.

For the first time also, casinos were given a legal obligation to verify the identity of customers carrying out financial transactions.

The list of duties and obligations on banks/directors, financial institutions is quite elaborate as the act seeks to ensure money laundering is effectively tackled.

Offences are provided for in Part II alongside a definition of money laundering.

The act specifies a punishment of not less than 2 years or more than 3 years for anyone found liable on conviction for any of the offences specified.

The act is similar to the EFCC act in other respects as regards retention of a proceeds of a criminal conduct and jurisdiction to try offenders.

Hence going by the separate legal approaches in combating money laundering in the UK and Nigeria, the following comparisons are observed

1. There exists a common knowledge of the menace of money laundering and specific laws that arose almost as a result of indirect pressure or foreign presence. The EC directive in the case of the UK and the FATF in the case of Nigeria.
2. Both countries have included in their respective anti money laundering regulations, specific processes for reporting suspected financial crimes.
3. Notably too, both countries repeal and re-enact their laws to meet the changing faces of money laundering. There was a significant growth in the UK from the Drugs Trafficking Act of 1986 to precise legislation as found in the Proceeds of Crime Act and the Money Laundering Regulations. Nigeria on the other hand, established the EFCC Act 2004 to provide for the inadequacies of its earlier provisions governing financial crimes.

Contrasting circumstances are however observed in the adherence to the rules. There is a strict observance/adherence to the rules as observed in the UK as officers follow the due process of effective reporting and feedback on suspected transactions. Detailed reports are also submitted. In Nigeria however moneybags still transact their businesses especially as regards transactions exceeding the limit, which the law stipulates.

This moneybags go scot free with this as often times the management of the financial institutions will not report the matter for fear of losing a “big customer”.

Another difference in the legislation bothers on procedure as found in Nigeria. An erudite lawyer was observed, “One of the specific problems that have arisen from the use of electronic financial transaction is the manner and procedure for proving the forms of evidence generated by these means or simply proof of such transactions themselves”.

Nigerian procedural laws particularly the evidence act that was enacted in the light of an agrarian and pedestrian society have become grossly inadequately to cover the present advancement in technology with the concomitant sophistication employed in the commission of economic and financial crimes.

The lack of cyber laws is also identified as one of the differences in the legal approaches to combat money-laundering offences. This makes Nigeria vulnerable to Internet or cyber related offences.

 

Conclusion

The entire society is adversely affected by money laundering. Its consequences are bad for business, development and government. Money laundering if left unchecked would generate to accumulation of economic power to organised crime. Its social consequences therefore spell doom.

A responsibility therefore falls on both the government and society to tackle money laundering effectively.

Effective elements in the approach to money laundering will be

1. The co-ordinated and effective procedure of prosecuting offenders. Example abound on how top public officers or directors of banks face the full wrath of the law and are diligently prosecuted in law courts for flagrant abuse of the law.  
2. Existence and membership to regional or international anti money laundering groupings is also an effective approach to money laundering, as it contributes to the harmonisation of laws and standards.

Essential update/ review of existing laws/legislations is also an effective approach. Constantly reviewing applicable laws will make it possible to meet the changing tactics employed in money laundering. Other recommendations to ensure money laundering is adequately combated include;

1. Increase in human resources involved in the labour intensive and time consuming work of investigating suspected violations.
2. Increase in coordination between agencies (national and international) involved and to improve limited intelligence sharing.
3. Introduction of measures that make the movement of money more visible.
4. Encouragement of financial supervisors to apply bank-licensing procedures strictly, exchange information and train practitioners.
5. Proper mechanism for handling suspicious report.

 Money laundering legislation encourages banks to put in place effective procedures to ensure that all persons conducting business with them are properly identified and that transactions that do not appear to be legitimate are reported.

BIBLIOGRAPHY

T Sherman, “International efforts to combat Money laundering” In H.L.M MacQueen (ed) Money Laundering (Edingburgh University Press)  

Salva S (2001) “Money Laundering and Financial Intermediaries”; Studies in Comparative Corporate and Financial Law, Netherlands Kluwer Law International

Oxford English Dictionary (eds Simpson and Weiner) (Clarendon Press, Oxford, 1989) Vol VIII, p 702.

Bazley J et al (2004) “Money laundering for lawyers”; The new requirements and their practical implications. England Lexis Nexis UK p1

Journals and Articles

J. Drage (1992) Countering Money Laundering” Bank of England Quarterly Bulletin p 418 November

(2005) “Crime and Money laundering. The Challenges”; Address delivered at African Banking Congress, Johannesburg March

 (1985) Home Affairs Select Committee, Fifth report, Misuse of Hard Drugs; Interim report (HC 399) HMSO, London.

Kenneth Clarke Hansard, H.C Debates, 14 April 1993, Vol 222, Col 866

Council Directive (10617) of 10 June 1991 on Prevention of the use of the financial system for the purpose of money laundering.

Pg 23 in House of Lords Select Committee on the European Communities par 37, p 13

 (2002) Fincen Advisory Issue 32 April

Cases

R  v  Cuthbertson [1981] A.C 470

Statutes

Criminal Justice Act of 1993        

Drug Trafficking and other Offences Act 1986

Drug Trafficking Act 1994

EFCC Act of 2002

EFCC Act 2004

Misuse of Drugs Act 1971

Money-Laundering (Prohibition) Act of 2003

Proceeds of Crime Act 1995

Secychelles Economic Development Act 1995. S.S (7) (a)

The Advance Fee Fraud (And other Related Offences Act) 1995

The Banks and other Financial Institutions Act 1996

The Failed Banks (Recovery of debts and Financial Malpractices in Banks) Act 1991 as amended.

The Miscellaneous Offences Act 1985.

The Money Laundering Regulations 2003

The Money Laundering Act 2004

The Miscellaneous Offences Act 1985

United Nations Convention against Illicit Traffic in Narcotics Drugs and psychotropic substances 1988

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