PROCEEDINGS OF THE 49TH ANNUAL CONFERENCE OF THE NIGERIAN ASSOCIATION OF LAW TEACHERS (NALT) Pages: 765-776.

FINANCIAL INSTITUTIONS AS WATCHDOG IN COMBATING THE CHALLENGES OF MONEY

LAUNDERING AND TERRORISM FINANCING UNDER THE LAW

DR. K. O. MRABURE Ph.D (I.U.O), LL.M (BENIN),LL.B (BENIN),BL

MEMBER NBA, NALT
FACULTY OF LAW (OLEH CAMPUS)
DELTA STATE UNIVERSITY
E-mail: kingomote@yahoo.com 07035420479

ABSTRACT

Most of the methods orchestrated by criminals to launder money or finance terrorism involve the use of the
financial system to transfer illicit funds. Financial institutions, in the context of this paper Banks, are most
susceptible to abuse for this purpose. In order to protect themselves, it is essential that financial institutions that
have adequate control and procedures in place that will enable them to report timeously any suspicious money
lodgement or transfer and to know the person with whom they are also dealing with in combating the
challenges of money laundering and terrorism financing.Therefore, there is need for a total compliance with
Financial Action Task Force recommendations, anti-money laundering and combating financing terrorism laws
coupled with the efforts of the Economic Financial Crimes Commission and other related bodies so that the act
of money laundering and the flow of terrorist funding be blocked. The onerous task is that the Bank must be the
watchdog in all these activities and must endeavour to do this proactively.

KEY WORDS: Anti Money Laundering, Combating Financing of Terrorism, Financial Action Task
Force, Watchdog, Financial Institution, Reporting

INTRODUCTION
No one can be really sure when money laundering first began. However, we can be confident that it has been
going on for several thousand years. In “Lords of the Rim” ,Sterling Seagrave1 explains how in China,
merchants some 2000 years before Christ would hide their wealth from rulers who would simply take it off
them and banish them.
In addition to hiding it, they would move it and invest it in businesses in remote provinces or even outside
China. In this way, the offshore industry was born and so was tax evasion.

1
Sterling Seagrave: Lord of the Rims in „Chibueze Ezewudu The Money Laundering and Terrorist Financing.An Insight
into the Money Laundering (Prohibition) Act of 2004, Laws of Nigeria‟ 11<sasspace.sas.ac.uk/4736/1/chibuezeezewuduLL
MCGFRELdissertation.pdf.assessed 9 January 2016.

1
The term money laundering is also traced2 from the famous mafia ownership of Laundromats in the United
States. As at that time, these gangsters profited massively from trafficking drugs, extortion, prostitution,
gambling etc. In showing the source of their money, they engaged in mixing money generated from
their rackets with the earnings gotten from seeming legitimate means. This they did by purchasing
businesses and in this case, a laundery business was acquired wherein profits gotten from their criminal
activities were passed, disguising the main origins of their activities.
The act of money laundering includes Placement, Layering and Integration. The first step involves the
introduction of illicitly acquired money into the financial system. This is usually completed through the
breaking down of such funds into smaller and less conspicuous bits that are then lodged into bank accounts or
by means of other instrument like cheques and money orders.
During the placement stage, the fund is intended to be disguised by moving the money now in the financial
system away from their sources and through various complex conversions and transfers. Such transfers or
conversions are often completed through wire transfers and purchase of assets. The second stage layering,3
involves concealing illegitimate money and placing it into circulation by disguising the source.The funds
may be wired across the world through various accounts held in different banks, possibly by several shell
companies4 operating under his control.
Upon the completion of the layering stage, the illicit funds are made to re‐enter the financial system as
“clean money”. This stage is known as the integration stage and the Launderer without inhibition, uses
the money to invest in various assets like real estates automobiles etc or enters a new business or worse
still, engages in the furtherance of their criminal activities. The launderer may also set up a web of front
companies with fictitious import or export businesses.

2
Arvind Giriraj and Prashant Mishra, Money Laundering: An Insight Into the Modus Operandi With Case Studies,
Skoch Development Foundation, India, Thinkers and Writers Forum 2009‐10. 7.
3
See Ezewudu supra n.1.
4
Below n.68.

2
On the otherhand, the term “terrorist financing” became a global concept5 after the September 9 2001 attack6.
Prior to this , the concept existed but only as a crime on its own and never found its way into any anti-money
laundering framework or recommendations7. According to Ezewudo , the 9/11 attack caused a new focus on the
involvement of financial institutions as vehicles for most serious crimes, a discovery which has brought
awareness to various financial regulatory authorities on the use of the banking system for this.
The meaning of terrorism is not universally accepted due to significant political, religious and national
implications that differ from country to country.
In 2011, the first ever Terrorism (Prevention) Act8 came into force with the aim of providing for measures for
the prevention, prohibition and combating of acts of terrorism, the financing of terrorism in Nigeria and for the
effective implementation of the Convention on the Prevention and Combating of Terrorism and Terrorism
Financing as well as prescribe penalties for violating any of its provisions.
This was a great step in the right direction geared towards amongst other things to greatly combat terrorism
financing as it had become scourge that must be disrupted.

THE LAW AND MONEY LAUNDERING

Article 3 (b) the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances9 states that money laundering includes the conversion or transfer of property, knowing that such
property is derived from any drug trafficking offence or offences or from an act of participation in such offence
or offences, for the purpose of concealing or disguising the illicit origin of the property or of assisting any
person who is involved in the commission of such an offence or offences to evade the legal consequences of his
actions; the concealment or disguise of the true nature, source, location, disposition, movement, rights with

5
Financial intelligence played important role following the July 7 2005 attacks in London and the March 11 2005 attacks in
Madrid.The recent attacks in 2015 in Paris and Brussels by Al-Qaeda are worth mentioning. See Mohammed Ladan Recent
Trends in Regulating Money Laundering and Terrorism Financing in the Banking, Insurance and Capital Market Sectors of the
Financial Economy of Nigeria< http://ssrn.com/abstract=2363529>accessed 4 April 2016.
6
The most prominent and recently, the most feared of them is the Islamic Movement known by its Hausa name as the Boko Haram
meaning „western education is sinful‟ who fights to oppose all forms of western education and life style, opposing the government
and insisting on Islamizing the entire nation.Nigeria has had serious terrorist attacks of its own - on October 1, 2010 when she was
marking her 50th independence anniversary, the bombing of UN building in Abuja, Police Force Headquarters in Abuja, all in 2011
and also various bombing attacks by the Boko Haram group in some northern states of Nigeria. These attacks have increased
concerns over terrorism at the national and international levels.
7
Ezewudu supra n.1.
8
No. 10, 2011.
9
Vienna Convention 1988. It is the first convention to have laid the foundations of the new strategy to combat drug trafficking
organizations., It moved away from emphasizing direct repression of drug traffic toward attacking the goal of all organized crime,
and also its weakest point namely money itself.The Convention recognized that “illicit drug traffic generates large financial profits
and wealth enabling transnational criminal organizations to penetrate, contaminate and corrupt the structures of government,
legitimate commercial and financial business, and society at all its levels,” and became the first international instrument to make the
fight against the proceeds of crime an angle of attack in the fight against organized crime and drug trafficking.

3
respect to, or ownership of property, knowing that such property is derived from an offence or offences or from
an act of participation in such an offence or offences.
The Vienna Convention adds that money laundering also involves the acquisition, possession or use of property,
knowing at the time of receipt that such property was derived from an offence or offences … or from an act of
participation in such offence or offences.10
By its terms, the Vienna Convention limits predicate offences (which is to say, the criminal activity whose illicit
proceeds are laundered) to drug trafficking offences. As a consequence, crimes unrelated to drug trafficking,
such as tax evasion, fraud, kidnapping and theft, for example, are not defined as money laundering offences
under the Vienna Convention. Over the years, however, the international community has come to the view that
predicate offences for money laundering should go beyond drug trafficking. Thus, other international
instruments have expanded the Vienna Convention‟s definition of predicate offences to include other serious
crimes. For example, the United Nations Convention Against Transnational Organized Crime11 requires all
participant countries to apply that convention‟s money laundering offenses to “the widest range of predicate
offences.”
The Financial Action Task Force on Money Laundering (FATF), which is recognized as the international
standard setter for anti-money laundering (AML) efforts12 defines the term money laundering succinctly as “the
processing of…criminal proceeds to disguise their illegal origin” in order to legitimize the ill-gotten gains of
crime.13 However, in its 40 recommendations for fighting money laundering , FATF specifically incorporates
the Vienna Convention‟s technical and legal definition of money laundering14 and recommends expanding the
predicate offences of that definition to include all serious crimes.15
However, the phrase money-laundering was not in the Nigerian dictionary, until in the 1980‟s which was when
it was recognised and efforts were made to tackle the problem by the government. Therefore, decrees were
promulgated by the government prohibiting activities related to money-laundering (Exchange Control (Anti
Sabotage)16 and National Drug Law Enforcement Agency Decree No 4817.

10
Ibid. Article 3(c)(i).
11
Palermo Convention 2000. The United Nations Convention against Transnational Organized Crime 14 is the first instrument of
criminal law designed to combat the phenomenon of transnational organized crime. It is a multi-purpose instrument supplemented
by three additional protocols bearing respectively on the treatment of individuals, trafficking of migrants over land, air and sea
and the illegal manufacture and trafficking of firearms.
12
See Chapter III, B., FATF.
13
FATF „What is money laundering‟?, Basic Facts About Money Laundering< www.oecd.org/fatf> accessed 4 April 2016.
14
The Forty Recommendations, Rec. 1 <http://www1.oecd.org/fatf/40Recs_en.htm.> accessed 4 April 2016.The forty
Recommendations are reprinted in Annex IV of this Reference Guide.
15
Ibid. Recommendations. 4 and 10.
16
Decree No 7 of 1984.
17
1989 Cap No 29 Laws of the federation of Nigeria.

4
It was in recognition of the defect or inadequacy of the previous Decrees to cover all the aspects of money
laundering that gave birth to the enactment of the Money-Laundering (Prohibition) Act, 2003 which covers
everything relating to the offence. And after One year of its enactment it was amended through the Money
Laundering Prohibition (Amendment) Act 2004.
The first anti money laundering framework enacted in Nigeria was known as the Money laundering
Decree of 1995.18 This statute dealt with the major flaw contained in the Nigerian Drug Law
Enforcement Agency Act (NDLEA) Decree19 which restricted money‐laundering offences particularly to the
laundering of the proceeds of illicit drugs; thus limiting the scope of its framework. The lacuna
revealed that there existed many other financial and economic crimes apart from drug related offences
threatening national peace and security and contributing to the escalation of money laundering.
The Money Laundering Decree was repealed and the Money Laundering (Prohibition) Act20 enacted in its
place. This legislation however lasted for only 10 months before it was replaced with the Money
Laundering (Prohibition) Act of 2004.
The 2004 Nigeria anti money laundering framework21 on the face of it appears not to have much
dissimilarity with the repealed Act of 2003 as both are structured nearly in the same number of
sections.22 Nevertheless, a close appraisal reveals noteworthy differences present between both Acts.
These differences have been summarized hereunder. First and foremost, the 2004 Act established the
Economic and Financial Crimes Commission23 and invested in it powers to investigate money
laundering and all other financial crime, a power which was hitherto vested in the National Drug
Law and Enforcement Agencies.24
The provision of Money Laundering (Prohibition) Act 2011 made comprehensive provisions prohibiting
the crime of money laundering and laundering the proceeds of a crime .
By virtue of s.5(1)(b) of MLPA 2011, the amount was reduced to $ 1,000 (one thousand dollars). The
reduction of the sum is targeted at eliminating “smurfing,” i.e. breaking down of the laundered money into
smaller bits in such a way that they become lower than the threshold stipulated for reporting by the financial
institutions.

18
Ibid.
19
48 of 1989.
20
2003 Law.
21
The renowned case Federal Republic of Nigeria v James Ibori & others brought to fore the weakness inherent in the
Anti Money Laundering Provision of 2004.
22
2003 Act is one Section more than the 2004.
23
Economic and Financial Crimes Commission Act, Cap. E1, LFN 2004. S.6 (b) hereinafter “EFCC”.
24
Section 12 MLPA 2003.

5
Before the enactment of the MLPA 2011 executives could not proactively fight money laundering
without breaching any of their duties to their customers. An impressive provision of this act is the
granting of immunity to directors, officers and employees of financial institutions as well as the designated
non‐financial institutions from both civil and criminal liability in court actions brought against them by
their customers for failing to carry out their duties under the Act. The effect of this immunity is
easier compliance with the provisions of the law, having eliminated all bottle necks as the risk of liability.
The broad list of predicate offences under the MPLA 2011 under s.15 (1) provides that any person who:
(a) Converts or transfers resources or properties derived directly from:
(I) Illicit traffic in narcotic drugs and psychotropic substances; and
(II) Participation in an organised criminal group and racketeering, terrorism, terrorist financing, trafficking in
human beings and migrant smuggling, tax evasion, sexual exploitation, illicit trafficking in stolen and
other goods, bribery and corruption, counterfeiting currency, counterfeiting and piracy of products,
environmental crimes, murder, grievous bodily injury, kidnapping, illegal restraint and hostage taking,
extortion, forgery, piracy, insider trading and market manipulation and any other criminal act specified in this
Bill or any other legislation in Nigeria which is predicate to money laundering within the aim of either
concealing or disguising the illicit origin of the resources or property or aiding any person involved to
evade the illegal consequences of his action and
(b) Collaborates in concealing the genuine nature, origin, location, disposition, movement or ownership
of the resources, property or right thereto derived directly or indirectly from the acts specified .
The MPLA 2011 came with great innovation through the introduction of strict consumer due diligence
measures, through the identification both potential customers and existing customers, Know your
customer,reporting to the relevant authorities and keeping records of any suspicious transactions.

THE LAW AND TERRORIST FINANCING

The United Nations (UN) has made numerous efforts, largely in the form of international treaties, to fight
terrorism and the mechanisms use to finance it. Even before the September 11th attack25 on the United States,
The United Nations had in place the International Convention for the Suppression of the Financing of

25
The case of the 1993 attack on the World Trade Center provides evidence of both the both the importance of financing for terrorist
groups and the importance of following the financial trail in investigating incidents of terrorism. According to the testimony of the
then FBI Director Louis Freeh before Congress in 1999, the terrorists were unable to achieve the destruction they originally
intended because of shortage of funds. This limited their capacity to purchase explosive material sufficient to build a bomb of the
size they intended. It also forced them to implement the operation ahead of the original schedule. These facts were revealed by
Ramzi Yousef, who was captured and convicted as the mastermind behind the 1993 bombing.

6
Terrorism26 which provides that a person commits the crime of financing of terrorism "if that person by any
means, directly or indirectly, unlawfully and willfully, provides or collects funds with the intention that they
should be used or in the knowledge that they are to be used, in full or in part, in order to carry out" an offence
within the scope of the Convention.
Terrorism is defined as the calculated use of violence (or the threat of violence) against civilians or non-
combatants, in order to attain goals that are political or religious or ideological in nature, which is done through
intimidation of a population, a government or an international organisation or coercion or instilling fear to do or
abstain from doing any act.27
Under Nigerian Terrorism (Prevention) Amendment Act28 , s.19(f)29 defines a “terrorist” as any natural person
who commits any of the following acts: - (i) commission or attempting to commit, terrorist acts intentionally by
any means, either directly or indirectly, (ii) participation as an accomplice in terrorist acts, or (iii) organizing
terrorist acts or directing others to commit such acts, (iv) contributing to the commission of terrorist acts with a
group of persons acting with a common purpose where the contribution is made intentionally and with the aim
of furthering the terrorist act or with the knowledge of the intention of the group to commit a terrorist act.
Furthermore, s.25 of the Money Laundering (Prohibition)(Amendment) Act30, defines “Terrorism Financing”
as financial support, in any form, of terrorism or of those who encourage, plan, or engage in terrorism.
Under Regulation 132 of Central Bank of Nigeria (Anti-Money Laundering and Combating the Financing of
Terrorism in Banks in Nigeria31provides that “those who finance terrorism” include any person, group,
undertaking or other entity that provides or collects, by any means, directly or indirectly, funds or other assets
that may be used, in full or in part, to facilitate the commission of terrorist acts, or to any persons or entities
acting on behalf and those who provide of such persons, groups, undertakings or other entities and those who
provide or collect funds or other assets with the intention that they should be used or in the knowledge that they
are to be used, in full or in part, in order to carry out terrorist act.

26
1999
27
Muhammed Ladan Overview Of The Legal Foundation In Combating Financing of Terrorism (Cft) in Nigeria Being a A 5-Day
Seminar On Combating Financing Of Terrorism In Nigeria Organised By The Us Department Of State, Bureau Of International
Narcotics And Law Enforcement And The Us Department Of Justice, Office Of Overseas Prosecutorial Development, Assistance
And Training A 5-Day Seminar On Combating Financing Of Terrorism In Nigeria Organised By The Us Department Of State,
Bureau Of International Narcotics And Law Enforcement And The Us Department Of Justice, Office Of Overseas Prosecutorial
Development, Assistance And Training at EFCC Training Academy, Abuja, Nigeria http://ssrn.com/abstract=2391916accessed
on 6 April 2016.
28
2013
29
Ibid.
30
No 1, 2012
31
Regulations, 2013

7
The primary goal of individuals or entities involved in the financing of terrorism is therefore not necessarily to
conceal the sources of the money but to conceal both the financing and the nature of the financed activity.
Money laundering is the process of concealing the illicit origin of proceeds of crimes. Terrorist financing is the
collection or the provision of funds for terrorist purposes. In money laundering, the funds are always of illicit
origin, whereas in the case of terrorist financing, funds can stem from both legal and illicit sources. The primary
goal of individuals or entities involved in the financing of terrorism is therefore not necessarily to conceal the
sources of the money but to conceal both the funding activity and the nature of the funded activity.
The Terrorism (Prevention)(Amendment) Act, 2013 amends the 2011 Act and makes provision for extra-
territorial application of the Act and strengthens terrorist financing offences in the following ways: First, under
Nigerian Terrorism (Prevention) Amendment Act 2013, s.2(1) prohibits all acts of terrorism and financing of
terrorism. Section 2(2) of the same Amendment Act provides that: A person or body corporate who knowingly
in outside Nigeria directly or indirectly willingly: (a) does, attempts or threatens any act of terrorism, (b)
commits an act preparatory to or in furtherance of an act of terrorism, (c) omits to do anything that is reasonably
necessary to prevent an act of terrorism, (d) assists or facilitates the activities of persons engaged in an act of
terrorism or is an accessory to any offence under this Act,(e) participates as an accomplice in or contributes to
the commission of any act of terrorism or offences under this Act, (f) assists, facilitates, organizes or directs the
activities of persons or organizations engaged in any act of terrorism, (g) is an accessory to any act of terrorism,
or (h) incites, promises or induces any other person by any means whatsoever to commit any act of terrorism or
any of the offences referred to in this Act, commits an offence under this Act and is liable on conviction to
maximum of death sentence.
Second, s.13 of the 2013 Amendment Act substituting for s.26-29 of the 2011 Amended Principal Act,
prohibits financing of terrorism and provides for a liability regime with stiffer sanctioning strategy as follows:
13(1) Any person or entity who, in or outside Nigeria a) Solicits, acquires, provides, collects, receives,
possesses or makes available funds, property or other services by any means to (i) terrorists, or (ii) terrorist
groups, directly or indirectly with the intention or knowledge or having reasonable grounds to believe that such
funds or property will be used in full or in part in order to commit an offence under this Act or in breach of the
provisions of this Act, b) Possesses funds intending that it be used or knowing that it will be used, directly or
indirectly, in whole or in part, for the purpose of committing or facilitating the commission of a terrorist act by
terrorist or terrorist groups, commits an offence under this Act and is liable on conviction to imprisonment for
life imprisonment, (2) Any person who knowingly enters into, or becomes involved in an arrangement a) which
facilitates the acquisition, retention or control by or on behalf of another person of terrorist fund by

8
concealment, removal out of jurisdiction, transfer to a nominee or in any other way, or b) as a result of which
funds or other property are to be made available for the purposes of terrorism of for the benefit of a specified
entity or proscribed organization, commits an offence under this Act and is liable on conviction for life
imprisonment. (3) For an act constitute an offence under this section, it is not necessary that the funds or
property were actually used to commit any offence of terrorism.
In the exercise of the powers conferred on the Attorney-General of the Federation and Minister of Justice by s.
9(6) and 39 of the Terrorism (Prevention) Act 2011, as amended in 2013, the Regulations32 on the Freezing of
International Terrorists Funds and other Related Measures, 2013 were made in August 2013 with the aim of
prescribing the procedure for the freezing of funds, financial assets or other economic resources of any
suspected terrorist, international terrorist or an international terrorist group, the conditions and procedure for
utilization of frozen funds, or economic resources and constituted the Nigeria Sanctions Committee for the
purpose of Proposing and designating persons and entities as terrorists within the framework of the Nigerian
legal regime33.
Part 5 of the Regulation prohibits making funds, financial services or economic resources available to
designated persons and circumventing prohibitions34; Part 6 lays down the conditions and procedure for
utilisation of frozen funds35; Part 8 provides for information and reporting obligations36 and Part 9 on penalties
and sanctions provides for a maximum of 5 years of imprisonment for any individual or corporate or
institutional violator of the regulations37.
This penalty is not stiff enough as it will not deter people from assisting persons in the act of terrorism
financing.

IMPACT OF MONEY LAUNDERING AND TERRORISM FINANCING

With the liberalization of trade, the activities of money launderers affect the indigenous industry.
Growth of local industries could be stunted while being deprived of funds38. As is typical of laundering
activities, in order to legitimize their laundered money, the launderers use front line companies to offer

32
Cited as Terrorism Prevention (Freezing of International Terrorists Funds and other Related Measures) Regulations,
33
2013.
Ibid, Regulation 2.
34
Ibid, Regulations 12-13.See also Ladan n.27..
35
Ibid, Regulations 14-17.
36
Ibid, Regulations 18-19.
37
Ibid, Regulations 20-30.
38
Yusuf Arowosaiye and Ahmad Kulliyah, „The Devastating Impact of Money laundering and Other Economic and Financial
Crimes on the Economy of Developing Countries: Nigeria as a case Study‟<wwwunilorin.edu.ng/publication/arowosayeyi/ The
Devastating Impact of Money laundering and Other Economic and Financial Crimes on the Economy of Develop >accessed 6
April 2016.

9
products at prices less than the real cost at which a manufacturer can produce.
The laundered money is routed through mass imports of goods ranging from auto spare parts to
pharmaceutical products and are sold at very low prices. The reason for this is not distant, and that is that
Launderers only need to hide and transfer their proceeds of crime and have little or no intention to maximize
profit as the genuine Entrepreneur would do39.
It becomes both discouraging and a great challenge for the genuine Entrepreneur involved in legitimate business
transactions to compete equally in this situation giving the very high likelihood that buyers would be willing to
make purchases where the prices are inviting. In any event, the return on investment realised from
domestic production and legitimate business will deplete and fall much lower than returns of the
money launderers, thus distorting and affecting domestic production.
This led to many flourishing financial institutions such as commercial banks in Nigeria to collapse
midway, and be liquidated. Other institutions such as mortgage and finance institutions collapsed due to
sudden withdrawal of deposits with the origin of ill‐gotten wealth.
Nigeria is fraught with so many impediments stunting its democratic growth. The economic and political
consequences of criminal organisations and money laundering deteriorate the social culture, ethical values and
the democratic foundation of the people.
For a long time now, the country has been battling with building an image that has been grossly dented by
the activities of criminals involved in money laundering activities40. Nigerians were being treated with
contempt in most entry borders of the developed country for reason of the country‟s 41 involvement in
money laundering and other criminal activities even when a trivial number of persons are involved in these
activities.
In Nigeria currently the fear of Boko Haram is everywhere. Financial activities have been paralyzed as
everyone live in fear. People are now scared of gathering together. Business activities have also not been left
out in this game of fear as everyone is standing with one leg, calculating where the next target could be.
The major target of Boko Haram is to frustrate the western education which to them is a sin. Higher institutions
have become a dreadful area as the group‟s main target is western education.

39
Aniedi Ikpang, „A Critical Analysis of the Legal Mechanisms For Combating Money Laundering in Nigeria’, 2011,vol 1
AJLC .124.
40
Ibid.
41
The „Re‐branding Nigeria agenda of the Yar‟Adua administration led by Dora Akunyili, Nigeria‟s Erstwhile
Information Minister adopted to create the awareness of imbibing and taking conscious steps in the redefining the values of the
country. See also Ishaq, A, Rebranding Nigeria is a Good Idea. The Guardian, 27 March, 2009.

10
The typical social development programmes jeopardized by the activities of Boko Haram42 in the country
include the following: family welfare services, health, housing, community development, youth‟s services and
women development.
Internal conflicts have negatively hinders social development. The conflict has led to environmental
degradation, poverty and have also hindered rapid economic growth and development.
Money laundering can harm the soundness of a country‟s financial sector as well as the stability of individual
financial institutions in many ways. Sowe43 observes the effects to include reputation, operation, legal and
concentration risks resulting in the following: Loss of profitability business; Liquidity problems through
withdrawal of funds; Termination of corresponding business facilities, for example. banking, and re-insurance;
Investigation cost and fines;asset seizure; and decline in stock value.
Terrorist financing and money laundering also impact negatively on foreign investments and international
relations. Some of the consequences include loss of reputation as a money laundering haven alone could cause
significant adverse consequences for development in a country. Foreign Financial Institutions may decide to
limit their transactions with from money laundering havens. Any country known for lax enforcement of
AML/CFT is less likely to receive foreign private investment. For developing nations, eligibility for foreign
governmental assistance is also likely to be severely limited44.
We state pointedly that the catastrophic impact of money laundering and terrorism financing need not be over
emphasized.Banks can do more in averting these negative impact by nipping the bud earnestly through
reporting immediately any transfer or lodgement of money to the relevant authority which could not be
ascertained or verified.

42
Federal Government of Nigeria has secured 11 convictions in its prosecution of Boko Haram insurgents in the last one year 2012-
2013; while the prosecution of several suspects for terrorism crimes is ongoing. The Minister of Justice and Attorney-General of
the Federation, Mr. Mohammed Adoke (SAN), disclosed this at the 12 th Session of the Assembly of State Parties, World Forum
Theatre at The Hague.<http://www.punchng.com/news/bharam-fg-secures-11-convictions-say> accessed 5 April 2016). Further,
four men have been given life jail sentences following their conviction of terrorism charges yesterday for participating in bomb
attacks in Suleja, Niger State, and Dakna village of Abuja in 2011. Shuabu Abubakar, Salisu Ahmed, Umar Babagana and
Mohammed Ali were convicted by the Federal High Court in Abuja, the first Boko Haram conviction since a purported sect
spokesman Ali Konduga was sentenced in December 2011 to a three-year prison term. The court found the four men, who were
identified as members of the Boko Haram sect, guilty of terrorism.
43
O.A.Sowe „Overview of Money Laundering Situation in West Africa and the role of Insurance Company in
Combating these Phenomena‟ Gambia Paper presented in WAICA, Meeting and educational conference, (2009). Banjul.13
44
Ezewudo, supra 89.

11
THE ROLE OF INTERNATIONAL ORGANS

INTERNATIONAL MONETARY FUND (IMF)

For the international community, the objective in combating money-laundering45 is three-fold. It involves
simultaneously protecting the international financial system, preventing criminals from enjoying the proceeds of
their crimes, and preventing them from utilizing the formidable economic power they have amassed to
challenge the stability of governments.
The IMF is contributing46 to the international fight against money laundering and the financing of terrorism in
several important ways, consistent with its core areas of competence. As a collaborative institution with near
universal membership, the IMF is a natural forum for sharing information, developing common approaches to
issues, and promoting desirable policies and standards -- all of which are critical in the fight against money
laundering and the financing of terrorism. In addition, the IMF's broad experience in conducting financial sector
assessments, providing technical assistance (TA) in the financial and nonfinancial sectors, and exercising
surveillance over members economic systems is particularly helpful in evaluating country compliance with the
international AML/CFT standards and in developing and implementing programs to assist member countries in
addressing identified shortcomings47. Along with the World Bank, the IMF provides substantial technical
assistance to member countries on strengthening their legal, regulatory, institutional and financial supervisory
frameworks for AML/CFT; and IMF and World Bank staff have been active in researching and analyzing
international practices in implementing AML/CFT regimes as a basis for providing policy advice and technical
assistance.
We opine that this great role must be maintained and sustained in providing vital information to the Banks so
that it can maximally play its watchdog role appropriately and effective in the fight against money laundering
and terrorism financing.

45
The IMF and the Fight Against Money Laundering and the Financing of Terrorismwww.imf.org/external/np/exr/facts/aml.htm
accessed on 5 April 2016.
46
The IMF is especially concerned about the possible consequences of money laundering and the financing of terrorism on its
members' economies. These include risks to the soundness and stability of financial institutions and financial systems, increased
volatility of international capital flows, and a dampening effect on foreign direct investment. The problem is global; money
launderers and terrorist financiers exploit loopholes and differences among national AML/CFT systems and move their funds to or
through jurisdictions with weak or ineffective legal and institutional frameworks.
47
Supra n.44.

12
FINANCIAL ACTION TASK FORCE (FATF)
The international standard for the fight against money laundering and the financing of terrorism has been
established by the Financial Action Task Force (FATF)48.
The international legal framework has been largely shaped by the 40 recommendations of the Financial Action
Task Force (FATF) created by the 1989 G7 Summit. At the request of the seven most industrialized countries 49
meeting in Paris at the “Arch Summit,” the FATF submitted an extremely detailed report in 1990 on money-
laundering phenomenon, issuing 40 recommendations to strengthen the fight against the recycling of capital
derived from criminal activities. These recommendations seek to achieve three objectives:
Improve national systems to combat money-laundering, in consideration of and consistent with the Vienna
Convention, by criminalizing all aspects of money-laundering crimes, even for offenses not associated with
drugs, and by setting up an effective confiscation procedure; strengthen the role of the financial system, in the
broadest sense, i.e., banking institutions and non-banking financial institutions. These recommendations,
consistent with the Basel Statement of Principles, seek to make better provision within financial institutions for
the identification of clients, the detection of unjustified or suspicious transactions and the development of secure
and modern transaction techniques; strengthen international cooperation, at the administrative level through the
exchange of information on international foreign currency flows, and at the judicial level through the
development of mutual judicial assistance for purposes of investigation, seizure and confiscation of funds, and
extradition. 
The FATF was later commissioned by the G7 to follow up the implementation of its recommendations 50. To do
so, it conducts an analysis of world financial flows, banking and financial systems and money-laundering
methods. It proceeds with an evaluation of the mechanisms put in place by the States participating in the Task
Force, suggests improvements to combative measures already instituted, and develops dynamic actions directed
to non-member States to ensure the broadest possible implementation of its recommendations. Its mandate has
been extended to 2004.

48
Its primary responsibility is developing a world-wide standard for anti-money laundering and combating the financing of terrorism.
The FATF was established by the G-7 Summit in Paris in 1989 and works in close cooperation with other key international
organizations, including the IMF, the World Bank, the United Nations, and FATF-style regional bodies.
49
29 States as well as the European Union and the Gulf Cooperation Council are currently members of the FATF:
Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, France, Finland, Germany, Greece, Hong Kong,
Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, New Zealand, Norway, the Netherlands, Portugal, Singapore,
Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.More States have become members including
Nigeria and others.
50
The Inter -Governmental Action Group against Money Laundering in West Africa (GIABA) commissioned five experts, one each
in Burkina Faso, Mali, Niger, Nigeria and Senegal, to carry out a background study on terrorism and terrorist financing in their
countries. These countries were selected based on the prevailing incidences of terrorism or its effects on them compared to other
GIABA member States.

13
The 40 recommendations of the FATF were revised in 1996, and are currently being revised again in order to
take into account new developments in combating money-laundering, and to draw on nearly 15 years of
experience in combating dirty money. In addition, following the attacks of September 11, 2001, eight new
recommendations were issued to more specifically combat the financing terrorism. These recommendations
specifically call on the States to:
Take immediate steps to ratify and fully implement the 1999 United Nations Convention for the Suppression of
the Financing of Terrorism, as well as United Nations resolutions relating to the prevention and suppression of
the financing of terrorist acts, particularly United Nations Security Council Resolution 1373;criminalize the
financing of terrorism, terrorist acts and terrorist organizations; freeze without delay funds51 or other assets of
terrorists and those who finance terrorism and terrorist organizations; require that financial institutions or other
entities subject to anti-money laundering obligations report their suspicions to the competent authorities, when
they suspect that funds may be linked, related to. or are to be used for financing terrorism, terrorist acts or
terrorist organizations52; afford other countries the greatest possible assistance in connection with criminal, civil
or administrative inquiries, investigations or proceedings in this area, ensure that they do not provide safe
havens for individuals being sought for financing terrorist, terrorist acts or terrorist organizations; institute
supervisory measures applicable to individuals or legal entities that provide a service for the transmission of
money or value,to include accurate and meaningful originator information (name, address and account number)
on fund transfers and related messages that are sent, and give particular attention to non-profit organizations,
such as charitable organizations, that can be used or exploited by terrorist organizations.
We submit that FATF has done tremendously well in releasing detailed and useful recommendations as guides
which have been useful in curtailing the menace of money laundering and terrorism financing.But a lot needs to
be done on the part of Banks in fully complying with FATF recommendations in the aspect of reporting if it
wants to play the active role of a watchdog.


ENFORCEMENT IN RELATION TO INSTITUTIONS IN NIGERIA

The relevant organs and institutions of State with the mandate for the enforcement of money laundering laws in
Nigeria are:
(i) The Attorney General of the Federation (AGF), (ii) The Nigerian Police and the (iii) Economic and

51
Joint UN/FATF Open Briefing on Depriving Terrorist Group of Sources of Funding<www.fatf.gafi.org >accessed on 5
April,2016.
52
National Money Laundering and Terrorist Financing Risk Assessment
www.fatf.gafi.org/documents/nationalmoneylaunderingandterroristfinancingriskassessment.html accessed on 5 April,2016.

14
Financial Crimes Commission (EFCC).
The Attorney General of the Federation
53
Section 174 (1) empowers the Attorney General of the Federation(AGF) to prosecute persons accused of
the offence of money laundering. The AG of a State has similar powers conferred on him by virtue of
s.211 of the Constitution although in the exercise of these powers, he is limited to offences that are created by
the State House of Assembly.54
Since the laws on money laundering in Nigeria were enacted by the National Assembly, no State AG is
competent to institute, take over or discontinue a money laundering trial although the power to institute may
be delegated by means of a fiat issued by the AGF to the State AG.
In recent times, there has been some constitutional debate about the whether these constitutional powers of the
AGF are wide enough to make the EFFC subject to his control in the determination of which cases are to be
prosecuted.

The Nigerian Police Force

By virtue of the Police Act, the Nigerian Police has wide investigatory and prosecutorial powers 55.Section 23
of the Act empowers the Police to institute a criminal proceeding against any person before any court in
Nigeria. This power, it would appear is subject only to the power of the Attorney General to institute and
undertake, takeover and continue or discontinue criminal proceedings against any person before any court of
law in Nigeria56. The power of the police to prosecute a matter in any court was reaffirmed in the case of
Olusemo v. Commissioner of Police57 in which the court stated that the police can try offences in the Federal
High Court (which currently enjoys exclusive jurisdiction with regards to money laundering trials).
Notwithstanding the wide and sweeping investigatory and prosecutorial powers of the Police, the EFFC Act
has greatly restricted investigatory and prosecutorial powers in relation to money laundering offences to the
Commission. Whether the powers vested in the Commission is, however, meant to be exclusive to it is one
that has not been subject of judicial clarification.58

53
1999 Constitution of the Federal Republic of Nigeria as amended hereinafter CFRN 1999. See Adegboyega
Ige, „A Review of The Legislative and Institutional Frameworks For Combating Money Laundering in
Nigeria‟ 102< www.nials‐nigeria.org/journals/Adegboyega%20A.%20Ige.pdf> assessed 9 January 2016.
54
This is however subject to the power of the AGF to grant a fiat to the State AG to prosecute federal offences on
his behalf.It is also subject to the rule of territoriality in determining jurisdictional issues.
55
Cap P19, LFN 2004).
56
See s.174 and 211 of the Constitution of the Federal Republic of Nigeria,1999 as amended.
57
(2006) FWLR (Pt. 3) 12.
58
A close study of the Money Laundering (Prohibition) Act reveals that the EFFC is solely conferred with the
responsibility for administering the law.

15
Economic and Financial Crimes Commission
The more contemporary practice all over the world, especially in countries badly plagued by corruption is that
the fight against corruption as well as economic and financial crimes are not left to the police but special anti-
graft commissions with specific mandate are established. It is against this backdrop that Nigeria established
the Economic and Financial Crimes Commission in 2004 (EFCC) under the Economic and Financial Crimes
Commission (Establishment) Act59 . The functions of the Commission are stated in section 6 of the EFCC Act.
The Commission in its own Mission Statement states its mission as:
to curb the menace of corruption that constitutes a clog in the wheel of progress; protect national and foreign
investments in the country; imbue the spirit of hard work in the citizenry and discourage ill-gotten wealth60,
identify illegally acquired wealth and confiscate it, build an upright work force in both public and private
sectors of the economy and; contribute to the global war against financial crimes.
Section 6 of the Act makes the Commission responsible for the enforcement and due administration of the
provisions of the EFCC Act. It, therefore, has the task of undertaking investigation of all financial crimes
including advance fee fraud, money laundering, counterfeiting, illegal charge transfers, futures market fraud,
fraudulent encashment of negotiable instruments, computer credit card fraud, contract scam, etc.
From 2004 till date, a number of money laundering cases61 have been successfully prosecuted by the EFCC.
The EFCC has birthed two specialised institutions with the mandate to work to realise the reduction of money
laundering activities in Nigeria. These are the Nigerian Financial Intelligence Unit (NFIU) and the Special
Control Unit against Money Laundering (SCUML).

Nigerian Financial Intelligence Unit (NFIU)

As part of the efforts of the federal government in combating money laundering, and the financing of terrorist
activities in Nigeria, the NFIU was established in June 2004 to co-ordinate Nigeria‟s Anti Money Laundering
and Combating the Financing of Terrorism regime in Nigeria. 62 It is the central national agency in Nigeria
responsible for the receipt and analysis of the financial disclosure (Currency transaction reports and Suspicious

59
Of 2004.
60
The recent cases of Dasuki and other PDP Stalwarts accused of money laundering and other related offences are still on
going at the Nigerian Courts.
61
The EFCC has since its establishment secured a total of twenty-five (25) money laundering convictions based on the Money
Laundering Prohibition Act 2004. The convictions and other ongoing prosecutions. no less than fifteen former bank Chief
Executive Officers/Managing Directors and Executive Directors have recently been charged to court for corruption, money
laundering and allied offences under Section 15 of the EFCC Establishment Act, 2004. The National Drug Law Enforcement
Agency (NDLEA) investigated nineteen (19) cases. These cases relate to the arrest and seizure of large sums of money and assets
suspected to be drug related.
62
Nigerian Financial Intelligence Unit < www.nfiu.gov.ng > accessed 6 March,2016.

16
Transactions reports) and dissemination of intelligence generated from it to competent authorities.63 Although
domiciled in the EFCC, it services all stake holders including law enforcement and regulatory agencies. 64The
domiciliation of the NFIU within EFCC is strategic given the peculiarities of the Nigerian economy and polity.
The EFCC has delegated its power as the Financial Intelligence Unit in Nigeria to the NFIU; hence, the core
functions of the NFIU are receiving, analysing, financial disclosures, development and dissemination of
Financial Intelligence to end users. The central aim of the NFIU is to increase transparency of Nigerian
financial and designated non-financial system so that economic and financial crimes, particularly money
71
laundering and terrorist financing can be prevented or detected, investigated and successfully protected.

Special Control Unit against Money Laundering (SCUML)

When the concept of Designated Non-Financial Institutions was introduced through the 2004 Act, there was a
need to establish an institution to monitor them. In response to this need, the Special Control Unit against
Money Laundering (SCUML) was established as a specialized unit of the Federal Ministry.65 Hence, SCUML
has the mandate to monitor, supervise and regulate the activities of all Designated Non-Financial Institutions
(DNFIs) in Nigeria in consonance with the country‟s Anti Money Laundering and Combating of the
Financing of Terrorism (AML/CFT) regime. The SCUML has an obligation to combat money laundering
among Designated Non-Financial Institutions through their compliance with Anti-Money
Laundering/Combating of Terrorist Financing obligations. The specific obligations these institutions towards
SCMUL include registration of businesses with SCUML, limitation of cash transactions above N500,000 by an
individual or N2 million by a Corporate body, customer identification/verification (Customer Due
Diligence/Know Your Customer), maintenance of register of transactions, preservation of records of
transactions, Designation of Compliance officers, maintaining internal audit control,training of employees and
reporting of transactions above threshold of N1 million and N5 million by individuals and Corporate bodies
74
respectively to SCUML.

63
Ibid.
64
Ibid.
65
Commerce and Industry by the Federal Executive Council of Nigeria [Decision No. EC (2005) 286] in
72
September 2005. It has offices in Lagos, Kano and Port Harcourt. It has the responsibility to carry out the
statutory role of the Federal Ministry of Commerce and Industry (FMC & I) as spelt out in the Money
Laundering (Prohibition) Act,

17
BANKS AS WATCHDOGS
A well functioning financial system is an important contributor to economic development. The use of the
financial system to advance criminal purposes, such as money laundering and terrorist financing, undermines
the function and integrity of the financial system.Any suspicious monetary transaction must therefore be
reported66 to the supervisory authorities.
The application of strict Customer Due Diligence67 (CDD) by financial institutions and a high degree of
transparency is crucial to fight money laundering and the financing of terrorism effectively. CDD must be
applied upon establishment of a business relationship or in preparation of a specific cash transactions in excess
of a certain amount. CDD must also be applied whenever financial institutions suspect money laundering or
terrorist financing activities as Financial institution secrecy and confidentiality laws shall not in any way, be
used to inhibit the implementation of the requirements in this law68.
Potential Transactions Perceived Or Identified As Suspicious
Transitions involving high risk countries vulnerable to money laundering, subject to this being confirmed. 
Transactions involving shell companies69,Transactions with correspondents that have been identified as higher
risk. Large transaction activity involving monetary instruments such as travelers‟ cheques, bank drafts, money
order, particularly those that are serially numbered. Transaction activity involving amounts that are just below
the stipulated reporting threshold or controls. Significant increases in cash deposits of an individual or corporate
entity without apparent cause, particularly if such deposits are subsequently transferred within a short period of
the account to a destination not normally associated with the customer70.Unusually large cash deposits made by
an individual or a corporate entity whose normal business is transacted by cheques and other non-cash
instruments. Frequent exchange of cash into other currencies. Customers who deposit cash through many
deposits slips such that the amount of each deposit is relatively small; the overall total is quite significant.
Customers whose deposits contain forged currency notes or instruments. Customers making large and frequent

66
Participation in an organized criminal group and racketeering; Terrorism, including terrorist financing Trafficking in human beings
and migrant smuggling; Sexual exploitation, including sexual exploitation of children; Illicit trafficking in narcotic drugs and
psychotropic substances; Illicit arms trafficking; Illicit trafficking in stolen and other goods; Corruption and bribery; Fraud;
Counterfeiting currency; Counterfeiting and piracy of products; Kidnapping, illegal restraint and hostage-taking; Robbery or theft;
Extortion,Forgery; etc
67
Text of the Recommendation and Interpretative Noteswww.un.org/en/sc/ctc/docs/bestpractices/fatf/40recs-
moneylaundering/fatf-reco5.pdf accessed 7 April 2016.
68
Those secrecy and confidentiality laws are s.38 of EFCC Act, 2004; 12 of MPL Act, 2004 and 33 of the CBN
Act, 2007.
69
Offshore finance can be defined as the provision of financial services by banks and other agents to non-residents, including the
bank intermediation role of taking deposits from non-residents and lending to non-residents. Other services provided include fund
management, insurance, trust business, asset protection, corporate planning and tax planning.
70
Money Laundering Warning Signs<www.lawsociety.org.uk/support-services/advice/practice-notes/aml/moneylaundering-
warningsigns/ >accessed 8 April 2016.

18
cash deposits but with cheques always drawn in favour of persons not usually associated with their type of
business. Customers who request to exchange large quantities of low denomination banknotes for those of
higher denominations. Customers transferring large sums of money to or from overseas locations with
instructions for payment in cash. Financial transaction by a nonprofit or charitable organization, for which there
appears to be no logical economic purpose or for which there appears to be no link between the stated activity
of the organization and other parties in the transaction. Large number of incoming or outgoing funds transfers
takes place through a business account71, and there appears to be on logical business or other economic purpose
for the transfers, particularly when this activity involves designated high-risk locations72. The stated occupation
of the customer is inconsistent with the type and level of account activity. Funds transfer does not include
information on the originator, or the person on whose behalf the transaction is conducted, the inclusion of which
should ordinarily be expected. Multiple personal and business accounts or the accounts of nonprofit
organizations or charities are used to collect and funnel funds to small number of foreign beneficiaries.
Withdrawals of large amounts from an account previously dormant or inactive, or from an account that has just
been credited with a large amount unexpectedly from abroad Customers maintaining accounts with several
financial institutions in the same city or town, especially the accounts regularly consolidated prior to a request
for a transfer of the funds ,Frequent sending and receiving of wire transfers, especially to or from73 ,countries
considered high risks for money laundering (such as major drug producing and drug transit countries), or with
strict banking secrecy laws.
Other unusual or suspicious activities includeEmployee exhibits a lavish lifestyle that cannot be justified by
his or her salary Employee fails to comply with approved operating guidelines, particularly in private banking.
Customer uses a personal account for business purposes. 
Financial institutions and staff must provide information to the authorities and file suspicious activity reports to
supervisory authorities should be provided legal protection against criminal, civil, and administrative liability
when they act in accordance with the law and in good faith.

71
Ibid.
72
This is connected to the operational bases of members of Al Qaeda in the Islamic Maghreb (AQIM), through the Sahel towards
Mali, Mauritania, and Niger. Indeed, there are indications that AQIM has operational bases in some West African countries and
has forged tactical alliances with terrorist groups such as Boko Haram in Nigeria, the Movement for Oneness and Jihad in West
Africa (MUJAO), the National Movement for the Liberation of Azawad (MNLA), and Ansar Eddine in Mali and Niger. These
alliances have taken the form of AQIM‟s provision of training and logistical support to Boko Haram and other terrorist operatives.
In addition, there is suspicion that Boko Haram has developed ties with the Somali militant group Al Shabaab and even ISIS.
73
In the AML/CFT context, the term “typologies” refers to the various techniques used to launder money or finance terrorism.
Criminals are very creative in developing methods to launder money and finance terrorism. Money laundering and terrorism
financing typologies in any given location are heavily influenced by the economy, financial markets, and anti-money
laundering/counter financing of terrorism regimes. Consequently, methods vary from place to place and over time.

19
Financial institutions should verify a new customer‟s identity by requesting official documents issued by
appropriate authorities (passport, driver's license, personal identification, or tax identification document).
Accounts in anonymous or fictitious names must not be allowed.
Identification and verification of any beneficial owner, including reasonable measures to understand the
ownership and control structure of legal persons and arrangements where a customer is representing a third
party or beneciary.
Financial institutions should continuously be involve in the training of their staffs on actions to take when
confronted with transactions bordering on money laundering and terrorism financing. Employment of staffs of
financial institutions should be carried out meticulously taking into consideration the total profile of the staff
especially pertaining to his background and character.

CONCLUSION
Efforts by International Monetary Fund, Financial Action Task Force, other related bodies, anti money
laundering and combating financing terrorism f laws ,international conventions are plausible and
commendable towards the war on money laundering and terrorism financing.
However, the major task rests on financial institutions that is banks to report again and again74 any form of
suspicious monetary transfers or lodgments. Failure on their part to report such will lead to dormancy,
passiveness and inactivity on the part of the organs empowered to combat allege crimes of money laundering
and terrorism financing. Any form of concealment of such on the part of financial institutions should attract
instant revocation in serious cases or suspension in mild cases of their licences by the supervisory authorities
especially in instances where it is established that there was deliberate, flagrant or total disregard to the
reporting of such suspicious monetary transactions. Financial institutions as the watch dogs have a major role to
play in combating the challenges of money laundering and terrorism financing by reporting again and again.

74
Repeated for emphasis to buttress its importance.

20