This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
Page 2 of 13
money laundering that the proceeds are
sought to be disguised to enable the
perpetrators enjoy these profits without legal
jeopardy. These underlying offences are
known as predicate offences. According to
the United Nations Office on Drugs and
Crime, a predicate offence is “...the criminal
activity from which the proceeds of the
crime are derived, with money laundering
being the derivative crime.”7
Different countries take different approaches
when legislating on predicate offences. On
the one hand there are those that explicitly
list specific criminal activities as predicate
offences. One major defect with such
approach is that it limits the scope of illegal
activities that could precipitate money
laundering, thus creating an avoidable
loophole for accused persons to escape
justice.8 On the other hand, there are
countries that criminalise laundering of
proceeds obtained from any criminal act
whatsoever.9
2.1.1 Nigeria
The Nigerian AML Regime is largely
governed by three statutes namely; the
Money Laundering Prohibition
(Amendment) Act (hereafter MLPAA),10
the
Advanced Fee Fraud and Other Fraud
Related Offences Act11
and the 2004
Economic and Financial Crimes
7 UNODC, “Predicate Offence” in UNDOC, Money
Laundering Terms Dictionary (2005). Accessed on 30
September 2009, at http://www.babylon.com/definition/Predicate_offence/English 8 A. Adekunle, “Seizure of Proceeds of Criminal Activity:
Trends in Recent Financial Crimes Legislation in Nigeria”
in Modern Practice Journal of Finance and Investment
Law (1999) Vol. 3, No. 2, 250 at 262. 9 R. Ezeani, Impact of International and Domestic Laws on
Money Laundering Activities in the ECOWAS: A Legal
Perspective (2005) 3, accessed on 30 September 2009 at
www.aeandelegal.com/dynamicdata/flash/MONEY%20LA
UNDERING%20in%20Ecowas%20reviewed.pdf 10 Of March 2004 amending the Money Laundering
(Prohibition) Act No 7 of 2003 (hereinafter MLPA) 11 No 3 of 1995.
Commission (Establishment) Act (hereafter
2004 EFCCEA).12
Under this AML Regime,
predicate offences include any criminal
activity such as common theft.13
The author opines that this approach is good
for Nigeria as it keeps her in tandem with
international trends of widening the
definition and scope of money laundering.
Secondly, it a positive approach as it hits at
the laundering of the proceeds of any crime
so as to principally cripple its financing and
logistic support which is the main aim of
such international instruments as the United
Nations Convention on Transnational
Crimes and successful national legislation in
countries like the United Kingdom.14
2.1.2 India
India is a bit similar to Nigeria in that the
fundamental Act itself, 2002 Prevention of
Money Laundering Act (hereinafter 2002
PMLA)15
takes a general definition of “any
crime” and does not restrict itself to specific
predicate offences; yet, other statutes
supplement it by explicitly identifying
specific activities that constitute predicate
offences. They include terrorist activities as
per the 1967 Unlawful Activities
(Prevention) Act (hereafter UAPA),16
and
illicit traffic in drug and psychotropic
substances as per the 1985 Narcotic Drugs
and Psychotropic Substances Act
(hereinafter 1985 NDPSA).
This approach is commendable because it
casts the net wide enough to capture all
illicit activities, and at the same time
provides itself with checks and balances not
to lose focus. Such approach could have
been prone to the criticism for ambiguity
12 Repealing the December 2002 edition 13 R. Ezeani, op cit, 3. 14 Proceeds of Crimes Act No c. 29 of 2002. 15 (28 November 2002), Section 3 16 Section 21
Report” in Electronic File Structure, 2, available at
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
Page 5 of 13
Suspicious transactions entail any
transactions which a reasonable person
acting in good faith would conclude that
they; gives rise to a reasonable ground to
believe that they involve proceeds of crime;
or appear to be made in circumstances of
unusual or unjustified complexity; or appear
to have no economic rationale or bona fide
purpose.
The author submits, therefore, that with
respect the reporting of suspicious
transactions, India has the most effective
and comprehensive laws with very clear and
detailed broad categories of reasons for
suspicion.
2.2.3 Germany
The cornerstone of the German AML
Regime is the obligation on credit and
financial institutions (including 'bureaux de
change') to require identification of all their
customers when beginning a business
relationship (particularly the opening of an
account or offering safe-deposit facilities),
when a single transaction or linked
transactions exceed €15,000 or when they
suspect laundering.27
However, German
legislation does not establish a specific
sanction for the failure to report suspicions
of money laundering, though it provides
administrative sanctions (a fine up to
€50,000) for informing the customer or a
party other than a public authority of the
filing of a report and for other types of
administrative offences.
If the financial institution does not report
probable suspicions it becomes liable for an
offence of negligent money laundering for
which penalty is up to 2 years of
imprisonment or a fine, and an offence of
www.pfiuindia.gov.indownloadsSTRBank.pdf and accessed
on 3 October 2009 27 The European Commission, op cit.
obstruction of punishment, for which the
penalty is up to 5 years of imprisonment or a
fine.28
Though some authors have argued
that in practice, administrative sanctions are
available for serious cases of non-
reporting,29
the author contends that
Germany should consider amending its
legislation to specifically impose a sanction
for failure to report suspicious transactions.
2.3.0 Obligations on Non-Financial
Businesses and Professions Combating money laundering and indeed
any other white collar/organised crime
demands the crossing out of the financial
trading businesses to other businesses and
professions as evidenced in the United
Nations Convention against Transnational
Organized Crime which requires member
States to establish:
“...a comprehensive domestic
regulatory and supervisory regime for
banks and non-bank financial
institutions and, where appropriate,
other bodies particularly susceptible to
money-laundering, within its
competence, in order to deter and
detect all forms of money-
laundering....”30
Furthermore, FATF Recommendations
require member states to empower their
competent authorities to extend their
mandate to obtain financial intelligence
from non- financial institutions and other
professions.31
28 J. A. A. Méndez et al, Germany: Report on the
Observance of Standards and Codes- FATF
Recommendations for Anti-Money Laundering and
Combating the Financing of Terrorism (July 2004) IMF
Country Report No. 04/213, IMF Publication Services,
Washington DC, 4, para 18. 29 Ibid. 30 The Palermo Convention, 2000, Article 7. 31 Cf: L. Fernandez, “Investigating Money Laundering 2”
(September 2009) Lecture Materials: The Law Related to
Anti- Money Laundering and Organised Crime, Masters
Degree Program, South African- German Centre of
Excellence, UWC, 2.
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
Page 6 of 13
2.3.1 Nigeria
The 2007 US DoS Report32
notes that under
the MLPAA and the 1995 Foreign Exchange
(Monitoring and Miscellaneous Provisions)
Act, Nigeria’s AML Regime extends to non-
financial businesses and professions such as
hotels, legal practitioners, and other
businesses designated by the Federal
Ministry of Commerce. The laws also
require the designated non-financial
institutions to furnish the authorities with
details of their financial transactions,
especially STRs, and reports involving the
transfer of funds or securities exceeding
$10,000 to or from foreign countries. The
report, however, noted that the oversight of
compliance by the Ministry of Commerce
has not been rigorous or effective, hence,
recommended further strengthening of the
supervision of non- financial institutions by
removing the oversight function from the
Ministry of Commerce.33
The author is of the view that PLMAA
Section 16 impliedly imposes an obligation
on all persons (including non- financial
business entities) not to assist, condone, or
acquiesce the commission of money
laundering. If they do not do so, they risk
being held complicity to the offence with a
stiffer penalty than that for the launderer
himself.34
Perhaps the rationale for such
disparities is to deter non- financial
businesses and professions like lawyers
from rendering the much needed expertise to
the launderers for purposes of perpetrating
the crime as enunciated by the Germany
Federal Constitutional Court.35
Moreover, it
32 Cited in Financial Standards Foundation, Nigeria: Anti-
Money Laundering/Combating Terrorist Financing
Standard (2008) available at www.eStandardsForum.org
accessed on 3 October 2009, 1, para 3. 33 Ibid. 34 PLMAA, Section 14(1) 35 See A. Bussenius, “Money Laundering by Defence
Counsel: The Decision of the Federal Constitutional Court”
is equally an offence under for non-
financial institutions or professions to
conspire with, aid, abet or counsel any
person to launder money,36
punishable with
compulsory winding up in serious cases.37
The author opines that such provisions are
good deterrent measures in the fight against
financial crimes and conform to well-known
principles governing corporate criminal
liability.38
However, for developing
countries like Nigeria, such penalty is too
harsh as one of the social implications of
such a winding up would be unemployment.
In a country where the rate of
unemployment is already very high, such
measures are likely to aggravate socio-
economic problems instead of remedying
the same mischief.39
2.3.2 India
The 2002 PMLA makes it obligatory for
financial institutions and their intermediaries
(who may be non- financial businesses or
profession) to maintain a record of all
probable suspicious transactions or series of
transactions, the nature and value of which
is prescribed by the Central Government.40
It is also a mandatory requisite for these
institutions to validate and preserve the
records of identity of all its clients in the
prescribed manner for a period of five years
from the date of cessation of transactions
between them; and be ready to tender such
records within a prescribed time and manner
once called upon by the designated
authorities.41
in Germany Law Journal (1 September 2004) vol. 5, No. 9,
490. 36 PLMAA Section 17 (a) 37 Ibid, Section 18(1) (2) 38 L.C.B. Gower et al, Gower’s Principles of Modern
Company Law (1979), 4th ed., Stevens & Sons, London,
126 39 Cf: Okogbule, op cit, 454. 40 Section 11 41 See Dadoo, op cit for a lengthy discussion of section 11.
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
Page 7 of 13
Further, when read together, Sections 8A
and 38 of the 1985 NDPSA also criminalise
the concealing or disguising of the true
nature, source, location and disposition of
any property, not necessarily by financial
institutions alone, with the knowledge that
such property is derived from an offence.
These provisions actually apply the
international principle of dual criminality in
that it prohibits the aforementioned vices as
criminalised in India or “any corresponding
law of any other country.” The author
submits that this is a positive feature of the
Indian ant- money laundering regime as far
as non- financial businesses or professions
are concerned as the law essentially imposes
obligations on the non- financial institutions
even for breaches committed outside abroad.
The author is of the view that India’s AML
Regime on non- financial businesses and
professions is sufficient and favourable. For
example, on the footing of the 1967 UAPA’s
alone so many companies have been wound
up with their directors imprisoned in certain
cases for non-compliance with its Sections
21 and 24. These sections make a
punishable offence the holding of proceeds
derived from terrorist activities, and impose
a duty on Directors of financial and non-
financial companies compulsorily transfer
shares of all members suspected of terrorist
activities into the name of the government,
respectively.42
In fact, India is known for its record of
prosecuting directors of both financial and
non- financial businesses for economic
crimes as evidenced by a long list of cases
such as Standard Chartered Bank v.
Directorate of Enforcement;43
State of
Maharashtra v. Syndicate Transport Co. (P)
Ltd;44
M.C.D. v. J.B. Bottling Co. Pvt. Ltd;45
42 Cf: Muralidhar and Deva, op cit, 9. 43 (2005) 4 SCC 530 or AIR 2005 SC 2622 44 AIR 1964 Bom 195.
and Emperor v. Dhanraj Mills Ltd, inter
alia,46
where the obligations on non-
financial businesses have been re-echoed.
2.3.3 Germany
In Germany, the law concerning non-
financial institutions is entrenched in the
new requirements detailed in the
Geldwäschegesetz (hereinafter “GwG”)47
and in line with the second EC Money
Laundering Directive which obligate
additional professions outside financial
institutions (in particular, lawyers, estate
agents, notaries, tax consultants and
accountants) to the identification and
reporting requirements. In practice, the
provision is almost obsolete as almost
negligible reports are made annually; in
2002 only three such reports were made.48
The author opines that this may be
attributable to the fact that prosecuting legal
entities is problematic because traditionally
only natural persons are subject to
prosecution under German criminal law.
Therefore, officers of a company who are
responsible for acts done in the name of the
company are sought to be made personally
liable for acts which result in criminal action
being taken against the Company; and this
only happens in very special circumstances
which do not include money laundering so
far.49
With reference to professions like
lawyers, the situation is still problematic
because the threshold to impugn the blame
is too high. A lawyer is only under duty to
report if he actually knows, and not only
suspecting, that his/her client is involved in
money laundering that lawyer.50
45 1975 Cri LJ 1148 (Del) (FB) 46 AIR 1943 Bom 182. 47 Money Laundering Act as amended on 8 August 2002. 48 Méndez et al, op cit, 8, para 41 49 R. Klinger and A. Sebok, “Survey Response, Laws of
Germany” in Fafo, Commerce, Crime and Conflict: A
Survey of Sixteen Jurisdictions (2006) Fafo AIS, Germany,
8- 10. 50 Bussenius, op cit, 490
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
Page 8 of 13
2.4.0 Financial Intelligence Gathering
Financial intelligence gathering has been
defined as: “investigations in which – on
behalf of law enforcement- financial
expertise is used in order to gather, check,
refine, process and analyse (financial)
information.”51
Statements from informers,
as well as publicly accessible information
may be used by the Financial Intelligence
Units (hereinafter FIUs). The FATF
Recommendations which leave it up to the
individual countries decide the kind of FIUs
that they consider appropriate.52
As such
some countries allow their FIUs to accept
information obtained through under-cover
agents’ ‘sting’ operations53
while others do
not.
Ordinarily, FIUs are the central authorities
mandated with receiving of STRs and other
reports though it is acceptable in some
countries to have various government units,
permanent or temporary investigative
groups/wings helping the FIUs.54
2.4.1 Nigeria
Upon promulgation of the 1995 MLD,
Nigeria established a Money Laundering
Surveillance Unit in the Central Bank of
Nigeria55
which was later replaced with a
much more effective one called the
Economic and Financial Crimes
Commission in 2002 tasked with the
gathering of financial intelligence, inter
alia.56
The Commission has power to
conduct investigation as to whether any
person has committed an economic or
financial crime. It also has power to conduct
investigations into the properties of any
51 M. Pfeiffer “Financial Investigations and Criminal
Policy” (1988) 2 Journal of Money Laundering Control,
Washington D.C, 33 at 34 52 Cf: Fernandez, op cit, 3. 53 Ibid, 9 54
FATF, Recommendation 27. See also Fernandez, op cit, 2. 55 King’wai op cit, 255 56 Economic and Financial Crimes Enforcement
Commission Act of 2002, Preamble.
person if it appears to it that the extent of the
properties and life style of the person are not
justified by his official income. In the
exercise of these powers the Commission is
under the control of the Attorney General of
the Federation who may from time to time
give directions to the Commission. The law
makes it mandatory for any officer of a bank
or other financial institution to take
reasonable care to comply with the
Commission57
as failure to do so is an
offence punishable by imprisonment.58
2.4.2 India
The Government of India set up Financial
Intelligence Unit (hereinafter referred to as
“FIU-IND”) on 18 November 2004 as an
independent body to report directly to the
Economic Intelligence Council (EIC)
headed by the Finance Minister.59
The FIU-
IND operates as a repository for (STRs)
which are then forwarded to a department
within the Ministry of Finance
investigations and decision on whether to
prosecute or not.60
This is a unique feature
about India’s AML in this context as it
delegates powers to “subjective” agencies to
use their discretion whether or not to
prosecute. In fact there are a number of
other national agencies responsible for
overseeing specific pieces of legislation
governing economic crimes with too wide
latitudes of discretion; such as the
Commissioner of Customs, and the
Narcotics Control Bureau, inter alia. The
flaw is that such wings not under obligation
57 Ibid. 58 Ezeani, op cit, 8- 9 59 FIU-IND, op cit 60 ASIA/PACIFIC GROUP ON MONEY LAUNDERING
(APG), “India: Anti- Money Laundering and Combating
the Financing of Terrorism” in 1st
APG Mutual Evaluation
against the FATF 40 Recommendations and 9 Special
Recommendations (13 July 2005), para 10,
www.apgml.orgdocumentsdocs8India%20Mutual%20Evalu
ation%20Executive%20Summary.pdf accessed on 3
October 2009. See also T. Jyoti, Crime and Money
Laundering- The Indian Perspective (2004) Oxford
University Press, London, 9.
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
Page 9 of 13
to report suspicious transactions to other
relevant authorities for effective gathering of
financial intelligence.61
2.4.3 Germany
The German FIU was only established on 15
August 2002 and joined the Egmont Group
in June 2003. It was formed as a distinct
entity within the BKA which provides for a
specific “police character” of the FIU. To
ensure a full range of expertise, the FIU has
opted for a multi-disciplinary approach and
has recruited consultants from the banking
sector and a firm of auditors. The FIU is
required to (1) collect and analyse STRs
filed, in particular checking against data
stored by other offices, and (2) report to the
federal and Land prosecuting authorities
without delay information that concerns
them as well as any connections between
criminal acts ascertained. Apart from these
“standard tasks”, within the FIU there are
specialisations in the areas of data
processing, operational/strategic analysis
and policy-making. The FIU does have
access to numerous sources of information,
whether financial, administrative, or law
enforcement to enable it to adequately
undertake its responsibilities.62
For purposes of financial intelligence
gathering, a search and seizure warrant may
be issued authorizing an appropriate person
(a) to enter and search premises specified in
the application for the warrant; and (b) to
seize and retain any material found there
which is likely to be of substantial value
61 I. Dettmann-Busch (Moderator) et al, Capacity Building
for FIUs: A Regional Exchange for Practitioners on
Financial Analysis Techniques and Global AML/CFT
standards (4 - 8 August 2008), FIU (Financial Intelligence
Units) Workshop on Financial Analysis Techniques,
organized by InWEnt and Capacity Building International
(Germany) in collaboration with the Asia/Pacific Group on
Money Laundering (APG) and the Office of Technical
Assistance (OTA) of the U.S. Department of the Treasury,
New Delhi, 2. 62 Dettmann-Busch (Moderator), op cit
(whether or not by itself) to the investigation
for the purposes of which the application is
made.63
Searches and seizures are, however,
subject to the constitutional safeguard of the
right to privacy which may limit, time,
space, and nature of article to be seized
(scope).64
The prosecutors are allowed to take drastic
measures against a lawyer who is suspected
of having committed money laundering by
accepting dirty money from a client. In this
situation the StPO (Criminal Procedure
Code) can justify not only searches and
seizures but also the surveillance of (taping
into) telecommunication lines in counsel´s
office.65
The author submits that such
unique empowerment on the part of
prosecutors has contributed to the strength
and effectiveness of the German FIU.
The major weakness that critics have
highlighted about Germany’s financial
intelligence gathering is that for instance,
there is no general provision in Germany in
relation to feedback, especially between the
FIU and the institutions filing the STRs
contrary to the FATF 40 Recommendations66
3.0 Conclusions
3.1 Nigeria
From the foregoing and indeed on a plethora
of literature, it is clear that though a
developing country, Nigeria has enacted
adequate and sufficient legislation to deal
with money laundering. This, coupled with
the apparent political will from the current
government has greatly enhanced the anti-
money laundering regime in Nigeria.
Nigeria has continued to constantly review
and her legislation in line with the trends in
63 Durchsungsbefehl, vide Paras 104 ff German Code of
Criminal Procedure. 64 Fernandez, op cit, 8- 9 65 StPO, Sections 97, 100a, and 102. See also Bussenia, op
cit, 2. 66 Méndez et al, op cit, 10, table 2.
ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany
Page 10 of 13
money laundering activities. More
importantly, Nigeria has significantly
improved her laws in the area of compliance
and prevention resulting in the FATF
removing her from the non-cooperative
countries and territories (NCCT) list in May
2006 after having placed her on that list for
5 years.67
These are very positive features
about Nigeria’s AML Regime. Unlike
Germany which does not explicitly stipulate
specific sanctions for non- reporting of
suspicious transactions68
, Nigeria has clear
laws on sanctions for not reporting
suspicious transactions. For instance, in the
early 2000 banks like Devcom, Manny Bank
& Trust Bank have been charged for non-
compliance with money laundering
provisions; and some car dealers such as
Carlink and Alpha Motors, inter alia, have
been shut down.69
3.2 India
India has adopted the most comprehensive
and elaborative laws in terms of substance,
content and procedure but relatively weak in
terms of enforcement. For instance, though
the anti- money laundering Act was only
enacted in 2002, as early as 1985 India had
already criminalised the concealing or
disguising of the true nature, source,
location and disposition of any property
derived from illicit activities70
which in
essence is money laundering. Secondly,
India has a very robust (quick action)
responsive approach to legislating on money
laundering so as to be in tandem with
international trends and keeping abreast new
techniques being devised and employed by
67 Financial Standards Foundation, op cit, 1. 68 Méndez et al, op cit, 10, para 40. 69 See back page of The Guardian Newspaper of Friday 30
June 2003 quoted in R. Ezeani, Impact of International and
Domestic Laws on Money Laundering Activities in the
ECOWAS: A Legal Perspective (2005) available at
www.aeandelegal.com/dynamicdata/flash/MONEY%20LA
UNDERING%20in%20Ecowas%20reviewed.pdf accessed
on 30 September 2009. 70 1985 NDPSA, Section 8A
launderers. For instance, the UAPA which
was enacted in 1967 initially intended to
punish unlawful activities of individuals and
associations, has since September 21, 2004,
been extensively amended include terrorist
activities as predicate offences of money
laundering, yet there has not been tangible
enforcement of the same.71
3.3 Germany
The German AML Regime is the most
successful of the three in terms of repressive
measures as it has proven to be effective and
efficiently implemented as evidenced in
successful prosecutions.72
Germany has
adopted a very comprehensive set of
repressive measures with regard to money
laundering. 73
However, there are a few
deficiencies that must be addressed in order
for Germany to comply with some of the
FATF standards; such as the absence of
specific sanctions for not reporting
suspicious transactions. A specific sanctions
regime for non- compliance with the
identification requirements in case of
suspicious transaction should be
incorporated within the legal framework.74
REFERENCES
(A) PRIMARY SOURCES
Table of Cases Cited
1. Emperor v. Dhanraj Mills Ltd, AIR
1943 Bom 182.
2. M.C.D. v. J.B. Bottling Co. Pvt. Ltd,
1975 Cri LJ 1148 (Del) (FB)
3. Standard Chartered Bank v.
Directorate of Enforcement, (2005) 4
SCC 530 or AIR 2005 SC 2622.
71 Cf: Judge Dr. S.Muralidhar and S. Deva, “Survey
Response, Laws of India” in Fafo, Commerce, Crime and
Conflict: A Survey of Sixteen Jurisdictions (2006) AIS,
New Delhi, 9. 72 Méndez, op cit, 9, para 44 73 Ibid, 1-2. 74 Ibid, 10, table 2.