How can cross border flow of corrupt and criminal assets be reduced? How do illicit financial flows (IFF) occur? What should be done to corrupt facilitators and intermediaries? What factors impede speedy recovery/return of stolen assets? How does IFF affect human rights? These and more were discussed at an international conference on IFF and assets recovery organised by the Federal Government and development partners in Abuja. JOSEPH JIBUEZE was there.
Africa reportedly loses between $50 billion and $80 billion yearly through illicit financial flows (IFF). These include funds looted by public officials and hidden abroad, those fraudulently taken away by multinational corporations through tax evasion, profit shifting and mis-invoicing; money laundering and trade mispricing, among others.
Globally, yearly cross-border flow of proceeds of criminal activities is estimated at between $1 trillion and $1.6 trillion, half of which comes from developing and transitional economies.
The effect is that African countries are deprived of the capacity to realise the United Nations (UN) Sustainable Development Goals (SDGs) of no poverty, zero hunger, good health and wellbeing, quality education, clean water and sanitation and affordable clean energy.
One of the ways through which these goals can be achieved is by strengthening asset recovery (AR) measures, and ensuring that assets recovered as proceeds of corruption are returned to victim countries and channeled towards meeting SDGs.
To make its voice heard within the international community on stemming IFF in its wide ramifications and enhancing AR, the Federal Government, through the Presidential Advisory Committee Against Corruption (PACAC) and the ministries of Foreign Affairs and Justice, hosted a three-day conference on Promoting international cooperation in combating illicit financial flows and enhancing asset recovery to foster sustainable development.
Tagged “Abuja IFF/AR”, which held at the State House Banquet Hall, it was organised in collaboration with some development partners, including the Government of the Kingdom of Norway, and the Ford Foundation.
There were over 40 speakers drawn from Africa and other parts of the world, as well as members of the diplomatic corps, regional bodies, intergovernmental organisations, United Nations agencies, among others.
The sessions had the sub-themes: Combating cross border flow of corrupt and criminal assets, understanding illicit flows in commercial transactions, holding IFF facilitators and intermediaries accountable, practical steps to stopping IFF, enhancing asset recovery and asset return, management and application of returned assets for SDG and human rights, and framework for international cooperation.
Acting President Yemi Osinbajo opened the conference; ministers of Finance and Foreign Affairs Mrs Kemi Adeosun and Geoffrey Onyeama, as well as the Attorney-General of the Federation Abubabar Malami (SAN) were among the speakers.
The conference focused on the policy measures, tools and strategies to effectively tackle IFF and strengthen AR, with emphasis on propelling the implementation of the recommendations of the African Union/UN Economic Commission for Africa High-Level Panel on IFF to foster the achievement of the SDGs.
Speakers emphasised the need to close knowledge gap on IFF, enhance asset return process, improve sanctions and enforcement, and build on international resolutions on IFF and asset return.
Hold facilitators accountable
Corruption has many facilitators, but only few of those complicit in the chain of organised criminality of IFF are ever punished.
Such intermediaries are real estate agents, brokers, trust experts, commercial actors, financial institutions, lawyers, bankers, auditors, accountants and others.
Speakers said these middlemen who help to move criminal assets and falsify records should be held accountable.
Osinbajo said financial institutions that aid the perpetration of corruption should be made to face the consequences.
“Banks and financial institutions that actually engage in this must be called out and made to face the consequences of engaging in criminal practices. If that is not done, we are not likely to go very far.
“In the agreement and conventions we will be signing, we must ensure that financial institutions are not given a free run and to hold them accountable,” he said.
PACAC Executive Secretary Prof Bolaji Owasanoye said the committee was pushing for the prosecution of “middlemen”, such as accountants, lawyers and customs officials who aid looting.
“When you pick up the politically-exposed person, you must also pick up the middleman – the accountant, the lawyer, the Customs official who looks the other way. Let them suffer the consequences together. That is what we are pushing for at PACAC,” he said.
Former Economic and Financial Crimes Commission (EFCC) chairman Mallam Nuhu Ribadu said IFF and money laundering could not take place without the connivance of banks.
There was, therefore, the need to hold culpable officials to account to serve as a deterrence, he said.
End financial secrecy,
build capacity
To successfully tackle IFF, there is the need to end secrecy in financial transactions, according to the keynote speaker and chairperson, International Anti-corruption Conference Council, Akere Muna.
He said capital flows had grown much faster than GDP and trade since 1980, yet the global financial system continue to look unprepared and, in some cases, reluctant to effectively regulate large volumes of cross-border flows.
“It is imperative that we make it a priority to double efforts to end the use of financial secrecy for corruption, drug smuggling, money laundering, terrorism, people trafficking and other illicit financial practices,” he said.
Muna, a member of the High-Level Panel on IFF from Africa, headed by Thabo Mbeki, referred to the panel’s findings, among which is that transparency was key across all aspects of IFF.
He said even as more effort was needed in asset recovery and repatriation, weak national and regional capacities impeded efforts to curb IFF.
“Financial secrecy jurisdictions must come under closer scrutiny,” he said.
According to the Executive Secretary, African Capacity Building Foundation, Harare, Zimbabwe, Prof Emmanuel Nnadozie, poor governance, weak regulatory structures, tax incentives and existence of financial secrecy jurisdictions and tax havens are the main enablers of IFF.
African countries, he said, need to develop capacity to deter, track, stop and recover stolen assets.
They must strengthen the capacity to address the drivers and enablers of IFFs and implement the recommendations of the Mbeki Panel Report.
They also need the capacity to determine and verify the amount of natural resources being exported, as well as capacity for inter-institutional cooperation, coherence and coordination.
Nnadozie also spoke of the need to train and equip investigators in human trafficking, poaching and drugs, arms and minerals trade.
He urged governments to strengthen institutional capacity of national and regional regulatory agencies and institutions; develop and enforce legal frameworks for illicit assets tracking and recovery, develop and enforce regulations against trade and tax malpractices, and implement comprehensive and strategic policies and best practices for rapid tracking and recovery of IFFs.
The government, he said, should support the judiciary and legislative bodies, build transfer pricing capacity and harmonise tax systems.
The modalities, he said, include mapping of key regulatory agencies/institutions mandated to combat IFFs, designing appropriate programs to equip agencies with required skills and institutional capacity, and assessing existing legal and regulatory architecture and identifying regulatory capacity gaps related to IFF.
He called for the strengthening of institutional capacity to enable tax, Customs and revenue services to deal with issues related to IFF, such as mispricing, money laundering and tax evasion, among others.
There was also need to strengthen audit and procurement capacity to effectively deal with multinational companies, he said.
Effective tax regime is also a panacea to IFF in commercial transactions, according to Alicja Majdanska of Global Tax Policy Center, Vienna University of Economics and Business.
She said the ‘whole-of-government approach’ in building tax regime is needed. In terms of administration and enforcement, she called for the strengthening of independent institutions and agencies of government responsible for preventing IFF.
She advocated improvement of cooperation between revenue authorities, financial intelligence units and different law enforcement agencies at domestic and international level and establishment of multi-agency units within governments and networks for sharing of information.
Majdanska called for the establishment of transfer pricing units in revenue authorities and suggested the implementation of transfer pricing legislation.
She recommended the establishment of beneficial ownership registers that allow authorities to ‘follow the money’ in financial investigations involving suspect accounts/assets held by corporate vehicles.
She also called for implementation laws against mis-stating the price, quantity, quality or other aspect of trade in goods and services in order to move capital to another jurisdiction or avoid taxation.
According to her, there is also need make better use of technology and “big data” solutions to improve financial transparency, simplify record-keeping and audit procedures, reduce the time, cost, and risks of verifying and enforcing compliance, and detect and prevent fraud.
Ambassador of Ecuador to Nigeria, Leopoldo Rovayo, said it required political commitment to tackle corruption and IFF.
“If we don’t let them take the money, we won’t need to recover it,” he said.
He believes the people also have a role to play, by ensuring that honest people get into politics. “Bad politicians should not be in politics,” he said.
Council member, Association of Chartered Certified Accountants (ACCA) UK, John Cullen, urged professional accountants to help curb IFF.
“The professional accountant’s skepticism is the first line of defence against money laundering. You have to get them (accountants) on side,” he said.
President, Global Financial Integrity, Washington DC, Raymond Baker, suggested ways to stop illicit financial flows, including whole-of-government approach (in which all agencies collaborate and share information); indentifying beneficial ownership of stolen funds, effective use of legislation and developing better monitoring systems.
He said assets recovery should be a diplomatic issue to make countries realise that relations can be adversely affected due to refusal to return stolen funds.
Baker also recommended the use of global information exchange systems, among others.
Nigeria’s demands, by Onyeama
Onyeama said Nigeria’s commitment to curbing IFF was demonstrated at the 71st UN General Assembly where it co-sponsored two resolutions to refocus global attention on the menace of IFF and the need to strengthen mechanisms for AR.
“Concerted efforts must be directed at curbing IFF in order to generate the much-needed finance for Africa’s development. Nigeria believes that there is a need for the global community to urgently redouble efforts to substantially tackle IFF through strengthened national regulation and increased international cooperation.
“We urge that concerted efforts must be directed at the enhancement of disclosure practices and transparency in both source and destination countries, including by seeking to ensure transparency in all financial transactions between governments and companies to relevant tax authorities.
“We urge global institutions including the International Monetary Fund (IMF), the World Bank and the UN to assist both source and destination countries in the implementation of effective measures aimed at detecting, preventing and countering corruption.
“We urge the international community to strive to eliminate safe havens that create incentives for foreign transfer of stolen assets and IFF. We urge destination countries to remove bottlenecks and conditionalities hindering the recovery of illicitly acquired funds and assets.”
PACAC Chairman Prof Itse Sagay (SAN) urged the international community not hold any fears about returned assets being re-looted.
“The government in place is responsible and will account for whatever is received. Under the Buhari administration, there will be no re-looting of recovered funds. They will be used for development purposes,” he said.
There were also suggestions on what should be done with the recovered assets. Special Assistant to the President on Social Protection, Mrs Maryam Uwais, said recovered funds should be channeled towards realising the SDGs.
“So many of the SDGs will improve if we manage our resources well,” she said.
Special Adviser to the President on Economic Matters, Ambassador Yemi Dipeolu, said recovered assets should be used on health, real sector, and agricultural investment and strengthening of institutions.
National Association of Small and Medium Enterprises President, Prince Degun Agboade, said one of the ways SDGs could be realised was by micro, medium and small scale enterprises.
“We need to encourage manufacturing companies to employ more people,” he said, adding that some of the recovered assets could be channelled towards providing credit, among others.
Resolutions
The conference ended with a resolution called the Abuja Declaration on promoting international cooperation to combat IFF and enhancing asset recovery (AR) to foster sustainable development.
Stakeholders urged countries to remove barriers to asset recovery, including by simplifying their legal procedures and preventing abuse of those procedures.
They urged states to limit, where appropriate, domestic legal immunities, in accordance with their legal systems and constitutional principles.
It was agreed that stolen assets, when tracked, should not remain in the custody of enabling financial institutions but should be transferred into an escrow account, preferably in development banks, pending return to countries of origin.
The declaration underscored the fact that global standards in anti-corruption and anti-money laundering require financial institutions to subject accounts held by certain persons to greater scrutiny and monitoring, including senior government officials, leaders of political parties, executives at state-owned enterprises and others with access to large amount of state assets and the power to direct them.
On the management and application of returned assets, the declaration reiterated the need for countries to ensure that there were adequate mechanisms in place to manage and preserve the value and condition of assets pending the conclusion of confiscation proceedings.
It was recommended that where appropriate, non-conviction-based proceedings should be deployed to recover identified proceeds of crime, and to deploy the use of such recovered assets in a manner that enhances sustainable development.
Participants reiterated the principles behind the slogan adopted by the Mbeki Panel: track it, stop it and get it, and emphasised that facilitators and enablers of IFF should not benefit from the transaction.
On framework for international cooperation and financing for development, the declaration states: “Increased financial and commercial transparency could help to reduce illicit flows, by reducing the scope for transfer mispricing, corrupt payment and the illegal exploitation of natural resources.”
There was also a call for “enhanced inter-agency cooperation at national, regional and global levels to trace and recover illicit funds and assets and return of same to countries of origin.”
Participants urged source and destination countries to dialogue with a view to facilitating removal of conditionalities imposed on illicit funds and assets.
The declaration urged countries to ensure that “procedures for international cooperation allow for the seizure and/or restraint of assets for a time period sufficient to preserve those assets in full, pending confiscation proceedings in another State, to ensure that there are adequate mechanisms in place to manage and preserve the value and condition of assets pending the conclusion of confiscation proceedings in another State, and to allow or expand cooperation in the enforcement of foreign seizure and restraint orders and confiscation judgments, including through awareness-raising for judicial authorities.”
Among the recommendations is that the Government of the Kingdom of Norway should host a follow-up meeting by September.
Way forward
Eminent professor of International Law and Jurisprudence, Akin Oyebode, who chaired the session on framework for international cooperation, said with time, Nigerians would fall in line in the anti-graft battle, especially with President Muhammadu Buhari being an “epitome of accountability, transparency, and integrity”.
He said the team of Buhari and Osinbajo, who, he said, led an anti-corruption NGO called ‘Integrity’ before his appointment, offers hope for Nigeria.
“If we succeed in stemming the tide of financial haemorrhage from Nigeria, then the bulk of the struggle against corruption would have been won.
“Nigerian ruling class has had its hands soiled because of unconscionable practice, and if this conference recommendations are carried out, then I can express confidence and hope better days are yet to come,” Oyebode said.
Owasanonye said going forward, the government should take measures to block IFF, strengthen the legal framework, implement international commitments and set up a coordinating committee on IFF.
His words: “The conference was meant to call attention to the scourge of illicit financial flows, which is not very well known to many people. The second thing is to begin to take measures to block IFF and criminalise it.
“Some laws already forbid the falsification of trade records, but we need to look at the weaknesses of such regulations and legislations and then, in any area where legal reform required, to push for it.
“More importantly, we need to get our tax authorities and the customs to be a bit more vigilant with regards to records submitted by big businesses on imports and exports.
“Nigeria will need to quickly implement some of our commitments with regards to open government partnership and the beneficial ownership disclosures, because part of the problem is that companies move profits in-between subsidiaries to the detriment of the nation.’’
He continued: “We need to look at the practice of profit-shifting – moving profit that has been earned in Nigeria to a tax heaven. That’s the next major measure.
“The government needs to push for information sharing with other countries that we do business with and which multinational companies claim to be their countries of origin.
“The last point which is the most critical is that government will need to set up some kind of coordinating committee made up of the key agencies that are critical to stopping IFF.
“We’ve mentioned the middlemen. We have pushed successfully that government should penalise very severely and criminalise totally the actions of middlemen – banks, auditors, accountants, lawyers – all those people who facilitate IFF contrary to existing regulations. They will no longer have it easy.”
