Terrorism and money laundering are twin evils. But how can Nigeria, despite being delisted from countries identified as jurisdictions with significant deficiencies in Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) campaigns, tackle these problems? It is by building systems, says Head, Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA) office in Nigeria, Timothy Melaye. In this interview with COLLINS NWEZE, he insists that intelligent and influential people are behind money laundering.
One of the key issues your organisation addresses is terrorism financing.
Nigeria is faced with this problem believed to be funded externally. How relevant is your organisation in this matter?
Well, you see, who would have thought that terrorists would blow the World Trade Center in the United States of America (USA) or would have thought that the Kings Court Station in the United Kingdom (UK) would be blown up by terrorists. There were cameras; there were digital information; there were intelligent gathering and all of that. Recently, there was bombing in Boston.
So, the issue of terrorist activities is borne out of the fact that there is increase in evil people. Evil people plan evil every day. When out of 600 plans, that one that succeeded will make news more than those 599 that were averted. That is the case with terrorist activities. Of course, GIABA did not state in clear terms that it is fighting terrorism. No! Our work is issues of combating the financing, and in this case, certainly, there is funding.
If somebody drove a car, he did not bring the car from the road. Probably, he used money to buy the car. Even though cases have shown that some of them were snatched, or stolen, but either we like it or not, there are funds involved in terrorism. Some of them carry AK47 rifles, you can’t buy such from the street, it costs huge sums of money and with this of course, and there are issues of finance.
You cannot fight terrorism. It is just like if you want to kill a fish, just drain its water and leave the fish inside. In no time, the fish will not survive. So, what we are trying to do is to identify the means of draining the resources from those who finance terrorism.
If you really want to kill a fish without your bullet, obviously, you have to drain out the water from the pond. What we are doing is just working virtually and systematically with member-states to ensure that all of these are done, and those people doing this will no longer have a hiding place.
Nigeria was delisted from the list of non-coooperative countries. What does it mean to be non-cooperative; does it mean that it is cooperating or no money laundering is going on in the country?
Like you know, money laundering is a derivative crime. What do I mean by a derivative crime? It is not a crime you commit directly now. You must have committed criminal offence to get illicit wealth before you can lander it. So, it is a crime you are deriving from another crime that has existed before. So, you cannot stand here and nobody anywhere in the world can say there is no money laundering going on here or there. No! Every country is trying to ensure that it is minimised. The people who are involved in money laundering and other proceeds of crime are intelligent, articulate, have access to resources and sometimes, influential. So, if they say a country is complying, that means a country is meeting those recommendations; putting in place the structures that I have mentioned. That means, your jurisdiction has built the structure that will protect it from money laundering.
As I am talking to you, what if somebody is buying jewelry with stolen money? That means money laundering is taking place. He just goes into a jewelry shop and they tell him this gold will cost N20 million, and he says oh! No problem put it in my bag.
They tell him another one will cost N16 million and he says no problem, and picks it up. Because he knows that is the treasure he can hide his money, because jewelry, especially gold, anytime you want to sell it, you can just take it back to the market and resell your thing. He has cancelled the source of the money. He has made it to appear like clean money. That is what money laundering is all about.
And it will be reintegrated into the system. Now, we are saying that the jewelry seller should pay the money into his account. And when they see money in his account, he will say ‘ha you don’t know it was the jewelry that I sold?’ The origin has changed. So, what will they do? So that is what happens in many nations.
When we say that a country is complying, and it is enlisted on public statement, that means that the country is complying with the regulations, putting up necessary structures; the laws, awareness, and implementing them. Banks are following the Know Your Customer (KYC), due diligence and other things required from them by the regulators.
The awareness is created, and all the offences are criminalised in law. And money laundering itself is an offence in the law. So, when you have all those things in place, that means the country is cooperating. It is putting up structure so that its domains, its territories, are not a haven for those who launder money and finance terrorist activities.
The CBN took some key policy actions close to the time GIABA and FATF team came to Nigeria for on-sight inspection. There was a change from Wholesale Dutch Auction System to Retail Dutch Auction System and enforcement of other anti-money laundering rules to ensure that Nigeria was delisted from the list of non-cooperating countries. Why did the CBN go that far?
Well, I can not speak for Nigeria because I can’t say that I am directly working for GIABA or for the Economic Community of West African States (ECOWAS) and what we do here is to talk for the region. So, I cannot speak specifically for Nigeria, what they did and why they did it as at the time they did it.
But I know that in Nigeria, both the government and the operators have shown commitment towards ensuring that the country complies with those standards. So, of course, for you to comply, you have to put up what is required of you. The country did not just got into the list. The country was in the list before it came out in 2004. Of course, Nigeria Mutual Evaluation Report took place in 2007 and was adopted in 2008 after the adoption, the GIABA and FATF expected Nigeria to make some significant progress in case of follow up report on that mutual evaluation and the gaps required to fill.
And when those gaps were not filled up sufficiently, as at the time it was expected, that was why Nigeria went back to the public statement. So, what the country needed to do if it wanted to come out of the public statement, the gaps that have been identified had to be filled. If you see a lot of policies coming up, the policies are intended to fill those gaps and if they didn’t fill it, they will still be on a public statement.
By the time you finished filling these, it doesn’t matter whether you will fill all of them at once or five years or 10 years, the longer it takes, the more the country will degenerate from the green list to black list to all kinds of things like that.
So, the country therefore, would have done what it needed to do to get out of the list. Whatever it has done would have been as a response to the fact that the country is working hard to comply with all necessary regulations.
A lot of laws were passed, bills were sent to the National Assembly, those laws will enhance the policies of the banks, the policies of designated non financial sector, and all kinds of issues would be put in place. Now that the country feels that it has addressed those challenges that have been identified in the Mutual Evaluation report, then, it would be presented to the plenary session of the FATF.
Why doesn’t the acronym of GIABA match its full meaning? I ask this question because it means Group Inter-Governmental d’Action Centre le Blanchiment d’Argent en Afrique de l’Quest.
That is the English name but, the acronym actually, is a French acronym as the Intergovernmental Action Against Money Laundering in West Africa, does not synchronise with what we have on the acronym as a GIABA.
This is because GIABA is an organisation that is formed by the Economic Community of West African States (ECOWAS). And ECOWAS, of course, has membership across all West African countries, and there are 15 ECOWAS members that formed ECOWAS.
So, because it also has English speaking, French speaking and Portuguese speaking, since the name is always called in English, we prefer that the acronym be in French. It is a way of creating sense of ownership to all the member states. However, most documents of the organisation come in English, French and Portuguese to represent the combination of the whole components.
ECOWAS established GIABA in the year 2000 because of the need to see issues relating to money laundering and terrorist financing to be addressed within the region. After the establishment of GIABA in the year 2000, they were setting up process and all of that. The initial mandate of GIABA was to work assiduously in combating money laundering and terrorist financing within the region. They are to ensure that people do not have access to launder the proceeds of crime within the region. That was the core mandate of GIABA as it was given by it statutes.
In essence, all the work we do revolves around this mandate. Working with all the member states.
Two other countries, Sao Tome and Principe have also joined. Though Sao Tome and Principe is not member of ECOWAS but it is a member of GIABA, because GIABA has more opportunity to add more members that would address issues concerned. This country made GIABA members to be 16 instead of 15 ECOWAS countries.
What is the relationship between GIABA and Financial Action Task Force (FATF)?
The FATF is the global standard setting body for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) while GIABA, is an associate member of FATF.
This gives GIABA the opportunity to be part of every decision making at the FATF. In terms of relationship, GIABA is also what they call the FATF Style Regional Body. What they mean by FATF Style Regional Body (FSRB) is the body that covers this jurisdiction.
For instance, there are over 180 countries that have signed into the FATF, and Jurisdictions. FATF will not be able to cover all these countries effectively and so they have SRBs that manage the jurisdictions. For instance, GIABA is the FATF SRB in West Africa. So, the role of FATF is being played by GIABA within West Africa.
For instance, they conduct mutual evaluation which is the peer review mechanism to assess a county’s performance in terms of plans to fight money laundering and terrorist financing.
In conducting mutual evaluation, what are the issues always considered?
The mutual evaluation exercise is usually to check, in the whole form of it, a country’s compliance with the recommendations. FATF has what it calls “40 Recommendations” it used to be 40 plus nine, but after the revision, it was revised to have 40 recommendations that comprises money laundering, issues of terrorist financing, and proliferation of light weapons and weapons of mass destruction which they call proliferation financing.
Also, countering the finances of proliferation of weapons of mass destruction or light weapons. So, these are the key issues that are addressed in those 40 recommendations, and what countries needed to do to prove standards.
Mutual evaluation is to identify gaps that countries have based on these recommendations.
For instance, the recommendation is talking about the enactment of adequate legislation, laws that will combat terrorism. In a lawless society, it is criminal to be law abiding.
So, it is to make sure that all the member states have adequate legislation, laws that combat money laundering because criminals will be looking for countries where laws do not exist to go and operate, so even when you catch them, there is nothing you can use to prosecute them.
What we do for instance, is to ensure that all countries have adequate legislation. You remember that sometimes ago, in Nigeria they said had anti money laundering law but did it have law against terrorist financing?
So, we look at all the issues of legislation, we look at financial institutions. What role are they playing? Are their platforms available, readily confirmed? Do they prepare transaction report? Do they remit to transaction report, and were those reports well processed? What roles do they have to play, and their impact in terms of moving finances/ money from one country to another?
So, all are those areas that we are looking into. Customers due diligence, the customs, the immigration, movement of cash and goods and all the other areas, even the designated non-financial businesses and profession; could be somebody who deals with the issues like property. If someone wants to launder money through property and he decides not to take the money to a bank, he can approach a property firm and decide to buy 20 duplexes in choice areas. He is laundering the proceeds of crime. He is not taking the money to the bank, but he is making transactions and payments and the money is going into property.
Later, when you ask him where he got the money he would say, you don’t know that I am into property business? I have been buying property bit by bit and now I even have over 40 properties. I have 200 houses, and I am into estate. And he has successfully hidden the source of his estate wealth. So, we will be looking at designated non-financial businesses and professions.
That could be the hardest part of your job?
Yes! And that is because we have a very large informal sector. Informal sectors where things are not going through formal processes. For instance in Nigeria, they have what we call Special Control Unit Against Money Laundering (SCUML). For you to operate in any business, you have to register with them now as a regulation body.
May be Bureau de Change, may be estate agents, may be law firm, may be accounting firm, and all of those things, because if you want to buy a property now, you will need a lawyer who will do the agreement. You need an estate manager who will make all the perfections and check the papers. All of them now are compelled to register with SCUML If you register with SCUML, any transaction you do within certain threshold will be reported as suspicious transaction. For instance, if I come to you and I work as a civil servant, and I say, I want to buy 200 houses, it is a suspicious transaction.
My salary as a civil servant may be at that time, just N200,000 and I want to buy a property of about N250 million. It is a suspicious transaction. You will go ahead to do your transaction but, you report it to the financial intelligent unit. It is their work to investigate, to identify, and to know if it is something to be looked into or not so that no stone is left unturned, no loophole is created in the system.
If it is jewelry or you sell cars, all manner of things, same procedure will be followed. And if you are caught not reporting when you should, then you know that you are aiding and abetting. The law covers not only the perpetrators of the crime but also the people who knew but conspired not to report it.
When the SCUML policy was introduced, many non-governmental organisations (NGOs) kicked against it. Is the policy still being implemented?
Yes, it is being implemented. A lot of organisations subscribe to it including non-governmental organisations and faith-based organisations. You may have your grudges but you have to subscribe to it.
If you say you don’t like traffic lights, that will not make you not to obey traffic lights. If you break the rules, there are sanctions. Fine, it has been spelt out that this is the process to go. Fine, some people may not like it and would prefer to hide their identities, maybe they don’t want to be part of it, but the day they are caught by law, they will pay for it. Recently the SCUML implementation deadline was extended to allow more people to take part.
People are already keying into the SCUML policy because it will get to a point that you would want to do your business as an agency and they will ask you to produce your SCUML registration certificate.
Banks will begin to demand that for you to open an account, you must provide SCUML registration certificate. By the time you want to open an account and your account officer says that you must produce your SCUML registration for that to happen, then you will know that it is very important. And overtime, they will find out that there are no options and they will have no other choice but to go and register.
So, these are the kind of processes that are being put in place and this is what will help. And you know also that there have been reductions on the volume of cash people can carry. So everybody is compelled one way or the other, through processes and systems, to go into the banking system.
You want to just carry your money around, to go and pay N5 million and withdraw it when you need it, the bank will demand that you explain why. There is a limit to what you can take now. If you are taking outside of it, it is something that can be reported. If you are taking more than the threshold, they will charge you and also report it. A follow up is going to be made on that personality, to find out if there are any issues of money laundering or any form of terrorist financing going on there. So, these are some of the issues.
It is not about the noise, it is not about the media, it is not about the type of things people want or people don’t want. It is about putting structures and systems that will make it work.
For instance, if I drive a Range Rover and the traffic light stops me but nobody sees me, if I beat the traffic light, I will just go away, as far as, there is no police in the front that is going to stop me. I have beaten the traffic and I have escaped it. But, if I beat the traffic in London, I am not supposed to see the policeman there, I will just beat the traffic and go, so, in the evening, they will just bring the fine bill to my house if I am a first offender but if I am a second or third offender, sometimes, it is even possible for me to go through legal processes.
So, these are the systems that we must put in place. Systems that will not allow you to see the police but will chase you when you beat the traffic as it is done in London or in New York city. The systems are what we are trying to build because, every cars that is driven in UK is registered with the owner’s phone address, emails with residential address of the person who registered the car. Whoever is driving the car, the camera is there to pick its number plate and the owner will be identified. If you are not the one that drove the car when it contravened the law, you will provide the person that drove it because records are there. So, it is not because people want to obey laws but because there are systems to check people’s excesses.
Every country, every nation has excesses. There are criminals everywhere. What we are trying to do is to put the systems that will work and will not allow criminals to go undetected. If the criminals know that they no longer have a hiding place because they will be detected, that will reduce the number of people that may wish to go into criminal activities.
So, if I know that it doesn’t matter whether everybody is seeing me or not, as far as I passed it at the wrong time, the camera will see me, all I need to do is just to be there, and once the light passes me, I will move. When the system is there, you will know that when you break the law, there is something that will find you and bring you out to face justice.
What we are trying to do now and I think the Nigerian government particularly, is making effort to help us. The CBN and other financial regulators are working on those systems, and as soon as they are in place, you will find out that the proper structure to combat money laundering and terrorist financing in this country and this region will b e minimised.
