Treasury looting cannot take place in a vacuum. It is with the connivance of banks, which hide the loot and refuse to report shady transactions in defiance of the law. To address the problem, the Presidential Advisory Committee Against Corruption (PACAC), the Association of Chartered Certified Accountants (ACCA), the Convention on Business Integrity (CBi) and the Chartered Institute of Bankers of Nigeria (CIBN) have held a conference on improving financial integrity. JOSEPH JIBUEZE was there.
It is not in doubt that corruption cannot thrive without a middleman. But, most times, it is the culprits who are held to account, but those who facilitate the act, such as bankers, are rarely brought to book.
Stakeholders and experts believe that corruption cannot be tackled if the financial sector does not play its role in detecting and reporting suspicious transactions.
To them, those who aid looting and facilitate the movement of stolen funds should no longer get away with it.
As a way out, the Presidential Advisory Committee Against Corruption (PACAC) collaborated with the Association of Chartered Certified Accountants (ACCA), the Chartered Institute of Bankers of Nigeria (CIBN) and the Convention on Business Integrity (CBi) to find solutions.
At a conference on Financial System Integrity Improvement in Abuja, they addressed regulatory and institutional measures being taken by the financial services sector and regulators to minimise fraud and corruption in the sector, the effectiveness of such measures and steps needed to close existing gaps and sanction breaches by defaulters.
The collaborating parties believe that all stakeholders in the financial services sector share a common goal of enthroning systemic integrity and accountability in the light of existing self-regulating measures, even if inadequate.
Speakers identified preventive and practical measures for the players and regulators to tackle fraud, corruption and other forms of financial crimes.
The keynote speaker was Nick Leeson, whose dealings at Barings Bank led to the collapse in 1995 of one of Britain’s oldest financial organisations.
Others who spoke were PACAC Chairman Prof Itse Sagay (SAN), CIBN President/Chairman of Council Prof Segun Ajibola, CBi Chief Executive Officer Soji Apampa, ACCA Regional Head of Policy Jane Ohadike, Ambassador of Ecuador to Nigeria Leopoldo Verdesoto, former Accountant-General of the Federation Dr. J.K. Naiyeju and Access Bank Plc’s Mrs Mosun Belo-Olusoga.
Others were Head, Risk Management, Securities and Exchange Commission, Okey Umeano, Chairman, Board of Integrity Organisation, Opeyemi Agbaje, former Central Bank of Nigeria Governor Tunde Lemo and Chairman, Inter-Agency Asset Tracing Team, Bamgbola Sokoya.
The Director-General, West African Institute for Financial and Economic Management (WAIFEM), Prof Akpan Ekpo, Director-General, Nigerian Financial Intelligence Unit, Frank Usani, a consultant, Dr. Biodun Adedipe, and ACCA council member Taiwo Oyedele also spoke at the event.
The role of banks
PACAC Executive Secretary Prof Bolaji Owasanoye believes looting cannot succeed if financial institutions played their roles well as critical stakeholders.
He said: “Banks are critical stakeholders if we’re to prevent money laundering and financial crimes. It is impossible to successfully carry out any act of corruption without the middlemen. So banks, auditors, lawyers and real estate brokers are included.
“With regard to banks in particular, people cannot hide assets like funds if banks follow their KYC (Know Your Customers) principles, ethical standards and provisions and the extant laws of the land.
“It is the duty of banks to know their customers and when any transaction raises an eyebrow, they should not ignore it.”
Owasanoye, who spoke with newsmen on the sideline of the event, said rather than play their role in preventing corruption, banks have aided and abetted it.
For instance, he said the alleged bribing of Independent National Electoral Commission (INEC) officials by former Petroleum Minister Mrs Diezani Allison-Madueke with $114 million was facilitated by banks.
“Banks were actively involved not only in holding those funds in suspense accounts, but in helping to disburse them. Was that every anticipated? We were hoping that banks would act as gatekeepers, to help the system and the society diminish corruption, because ultimately corruption will destroy the banks too. The banks didn’t play that role and that’s a major cause for concern,” he said.
According to Owasanoye, while it is not all banks that engage in illicit activities in aid of corruption, the institutions ought to strengthen their processes while ensuring that the bad eggs are severely punished.
“Our argument is: if banks follow their own processes and procedure, it would not happen. If banks followed international best practices, it would not happen. If banks followed the laws of the land, it would not happen. So, in all three fronts, they’re violating the rules and helping money laundering to happen.
“Even though banks do not necessarily need to know the source of funds, when a customer fills an account opening form, the bank asks for what they do and house address and the customer provides a utility bill to back it up. If it is a company, they make you pay for a search at the Corporate Affairs Commission to be sure the company is real.
“So, when a company that has N10,000 shareholding and doesn’t file annual returns suddenly deposits N1billion into the account, the banks have a duty to report according to law. And there are situations thay can take pre-emptive measures. It is because of the refusal to follow these principles that we’re having these conversations.”
To Owasanoye, beside banks complying with the laws and banking regulations, there is the need to sanction offenders to serve as deterrent to others.
“We’ve said that erring bankers, like other professionals and role actors, must be sanctioned. Everyone who violates the rules and those who help them should be prosecuted.
“Auditors who look at the books of banks professionally, see anomalies and fail to report them, or regulators who are supposed to regulate the banks but collect gratification to look the other way or choose to look the other way because they were encouraged to do so, all them are culpable. So we need to enforce the laws as they are,” he said.
Sagay (SAN) decried fraud in the banking sector, saying the fight against corruption cannot be won without the collaboration of banks and financial institutions.
“Private sector fraud, particularly in the banking sector, is enormous,” he said, adding that the economy and banks are at risk if urgent steps are not taken to tackle corruption in the sector.
Ajibola regretted that the banking sector was not immune to “the rot and corruption in the entire economy and even across the globe.”
His words: “It is no gainsaying that several corrupt individuals in the society have used the channels of banking and finance services to perpetrate financial crimes and corruption on the nation’s collective financial resources, thereby impinging on the integrity and credibility of the system.”
As a way out, he said the institute ensures strict adherence to the Code of Conduct in the banking industry by all cadres of employees.
CIBN, he said, also acts as a financial ombudsman, being the secretariat of the Bankers Committee sub-committee on ethics and professionalism, with a mandate to adjudicate cases or petitions against banks on unethical practices or excess charges.
Ajibola said since inception in 2001, the sub-committee has received 1,889 petitions/cases with total claims of N320.4 billion and $415 million. No fewer than 1,766 cases have been refunded, with N22.98 billion and $16,9 million refunded to petitioners and bank customers, he said.
“In addition to this, banks or individuals who engage in any form of infraction and reported, are arraigned before the institute’s Investigation Panel and Disciplinary Tribunal and appropriate disciplinary sanctions meted out against such an organization or individual.
“We would like to further encourage the banking public to continue to report to the institute actions that are inimical to the promotion of high ethical conduct in the industry. We are ready to collaborate with government agencies and he private sector in our collective bid to further entrench financial system integrity in the economy,” Ajibola said.
Causes, solutions
Leeson said opportunities to commit fraud must be removed. He argued that corruption in the banking sector would be curtailed if culpable persons did not get away with it.
“If you catch someone doing something wrong, there has to be adequate punishment. But if you see people doing something wrong and getting away with it, you’re also likely to do it,” he said.
Leeson said banks needed to keep their rules updated. “If your rules are two years old, then know that someone is already circumventing them,” he warned.
Apampa said lip service was being paid to the behaviour of banks. To him, stricter regulation and sanctions for wrong behaviour is needed to stop what he called “tainted money” being hidden in banks.
“We turn a blind eye and allow certain practices to go on. We have reporting problems and transparency issues. We don’t sanction and reward appropriately. There’s a big gap that leaves us vulnerable. There is also a big gap in the area of self-regulation,” he said.
Verdesoto said Nigeria had not punished erring banks and middlemen adequately.
“If a corrupt banker is not in jail, then something is wrong. The society and his colleagues ought to punish offenders,” he said.
Belo-Olusoga said for any economy to be vibrant, the financial sector must be free of corruption.
To her, it behoves individual bankers to ensure that their colleagues do not get away with wrongdoing.
“You cannot legislate integrity. It is something you decide to do. But we must put in place a system that rewards good behavior and punishes bad behavior,” she said.
To her, asking people who engage in wrong acts to retire was not enough; harsher punishment is needed. “We should dismiss them,” she said.
The pressure banks put themselves in, she said, also leads to banking improprieties.
“Banks put too much pressure on themselves. If Bank A makes N100million profit, Bank B will want to exceed it. So, they take more risks. Let’s stop short term performance that should be based on an industry-wide agreement,” she said.
Agbaje believes poverty and inequality are among socio-economic factors are causes of corruption. He decried a situation where junior and middle-level staff are paid peanuts, saying that could be an incentive for fraud. “There must be fair remuneration,” he said.
He warned against allowing ethnic and nepotistic arguments to obscure the need to punish acts of corruption.
“Let them not say I am the one who destroyed his career,” he said as an example of why people fail to report and punish acts of fraud.
Agbaje said banks should also be compelled to show the strategies that underline the targets they set and how to achieve them without the undue pressure that leads to cutting corners.
Lemo, in the same vein, said the compensation structure of financial institutions needed to change. He said a situation where top staff earned bonuses that are twice their annual salaries to the detriment of other employees should be stop.
Oyedele said the practice of banks competing on the basis of profit must also stop.
“The regulator could recognise the best banks from a corporate governance point of view,” he said.
According to him, suspected kidnapper Evans could not have succeeded in his business if banks played their role well.
“It was easy for him to move money within the banking system. He could have been caught if banks had done the right thing,” he said.
Oyedele called for a specialised Financial Services Integrity Tribunal to which the regulators and the regulated will be subjected.
Prof Ekpo said corruption was a systemic problem, therefore, financial institutions were not immune to it.
He thinks existing laws have not been well enforced. “Several laws are already in place but are we acting on those laws? The monies being looted go through banks. People should be heavily punished and jailed. If the crime is so serious, I don’t mind them being executed,” he said.
Usani said a specialised criminal court with trained manpower was needed to adjudicate corruption cases so they do not drag in court or culprits get away with crime.
Adedipe said strong anti-corruption institutions were needed rather than strong individuals.
“We must build a strong monitoring system. We must create a system of incentives that demand and encourage good behavior. Regulation must also be strong,” he said.
Naiyeju called for better use of the tax system in detecting crime.
“Taxation has been used in other jurisdictions to catch people who engage in financial crimes. Let those supervising the financial system be alive to their responsibilities,” he said.
He also backed the death penalty for corruption.
But, Owasanoye does not think the death penalty will solve corruption. To him, strict enforcement of the law and compliance with rules and regulations will.
“I don’t support death penalty for anything. The reason is that the death penalty has not been proven to be deterrent to crime. There are many other factors involved. I appreciate that in some countries there is the death penalty, but the very fact that you still have criminals in those places where there is capital punishment justifies the fact that death penalty doesn’t solve crime.
“Using Nigeria as an example, when death penalty was introduced for armed robbery, it escalated. It didn’t go down. Armed robbers became more desperate. For me, death penalty is not the issue,” he said.
