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					INTERNATIONAL LEGAL AND ADMINISTRATIVE REGIMES
     FOR COMBATING MONEY LAUNDERING AND
             TERRORIST FINANCING

                                 BY

   PROFESSOR MUHAMMED TAWFIQ LADAN (PhD)
                   PROFESSOR OF LAW
        DEPARTMENT OF PUBLIC LAW, FACULTY OF LAW,
             AHMADU BELLO UNIVERSITY, ZARIA,
                 KADUNA STATE, NIGERIA
    Email: - mtladan@ymail.com, mtladan@live.com, mtladan@gmail.com
                   Blogsite: - http://mtladan.blogspot.com/


                  A PAPER PRESENTED AT:
A – 2 DAY WORKSHOP ON MONEY LAUNDERING
          LAWS AND REGULATIONS


                        ORGANIZED BY:
   LINTOL RESOURCES BASE LTD, LAGOS.


                    VENUE: LAGOS
                DATE: - MARCH 1-2, 2010
     INTERNATIONAL LEGAL AND ADMINISTRATIVE REGIMES FOR
    COMBATING MONEY LAUNDERING AND TERRORIST FINANCING
                                       BY
                       Professor Muhammed Tawfiq Ladan (PhD)

INTRODUCTION

        In the recent past, more countries are becoming vulnerable to the risks of money
laundering and its contagious effects. According to the International Monetary Fund (IMF), the
scale of money laundering globally could be between 2% and 5% of World Gross Domestic
Product at the very lowest. This translates into a range of anything between USDollars 590
billion to USD 1.5 trillion of laundered money per year.1

        The African region and indeed most of the developing countries are vulnerable to
money laundering and terrorist financing particularly because of their cash-based and open
economies. In Africa, this is further aggravated by the porous and weak controls at the borders.
Combating money laundering and terrorist financing in these economies is further complicated
by weak or ineffective regulation of financial institutions, lack of comprehensive legal
framework, weak law enforcement agencies and poor coordination and collaboration between
law enforcement agencies and financial regulatory bodies.2

        Recent studies, including the ones carried out by the Inter-Governmental Action Group
Against Money Laundering in West Africa (GIABA) and the Financial Action Task Force (FATF),
suggest that advances in technology and the progressive tightening of Anti-Money Laundering
(AML) regulations are leading money launderers to make more complex arrangements outside
the formal financial services industry, such as the use of various professional services, and in
1
 See IMF Washington DC, USA Fact Sheet (2009): www.imf.org/external/np/exr/facts/aml.htm/septermber2009.
2
  See Ladan M.T., (2004): The Effectiveness of Legal and Enforcement Framework in Fighting Advance Fee Fraud
and Money Laundering Activities. Being a Paper presented at the 3rd National Seminar on Economic Crimes: On
the Theme: Combating Advance Fee Fraud and Money Laundering: - A Renewed Approach. Organized by the
Federal Government of Nigeria through the Central Bank of Nigeria, Securities and Exchange Commission etc.,
Abuja. Date: - 27 –29th June 2004. Venue:- Shehu Musa Yar’adua Centre, Abuja – Nigeria.
Also see Charles G., and Anneli B, (2004): - “African Commitments to Combating Crime and Terrorism: - A Review
of Eight NEPAD Countries”, in African Human Security Initiative, www.africanreview.org.AHS/Papaer3/July2004,
pp.1-10.

                                                                                                     Page | 2
particular the real estate business, legal practitioners, tax consultants, chartered accountants
and designated Non-Financial Institutions or sectors, such as the International football, casinos
and gaming, hotels, supermarkets, dealers in luxury goods, cars and jewelry. 3

        It is against this background that this paper seeks to realize the following objectives: -

    1. To examine why and how is combating money laundering and financing of terrorism a
        top priority for the international community;
    2. To discuss the international legal and administrative frameworks against money
        laundering and combating financing of terrorism (AML/CFT).
    3. To conclude with some recommendations.

1. WHY AND HOW COMBATING MONEY LAUNDERING AND TERRORIST FINANCING IS A TOP
    PRIORITY FOR THE INTERNATIONAL COMMUNITY?

        Money laundering is a process in which the illicit source of assets obtained or generated
by criminal activity is concealed to obscure the link between the funds and the original criminal
activity.4 Terrorist activities may also be financed with funds that represent the proceeds of
illegal activities.5 Perpetrators of these activities constantly seek new ways to launder the funds
in order to use them without drawing the attention of authorities to the source of the funds
and the links with the underlying crimes. Money laundering is inextricably linked to underlying
criminal activities that generate it and in the process undermines the criminal justice system.6




3
   See GIABA Dakar, Senegal (2009): - Final Report on Typologies of Money Laundering through the Real Estate
Sector in West Africa. Pp.1-40.
Also see FATF 2008-2009 Annual Report (2009) www.FATF-GAFI.org: - New Studies on Typologies, boxes 3 and 4 @
pp.18-19.
4
  Ladan M.T., ‘Prevention and Control of Money Laundering in Nigeria: - A critical analysis of the Money Laundering
Decree No.3 of 1995’ in Nigerian Current Law Review (1997): - Nigerian Institute of Advanced Legal Studies, Lagos,
Chapter 2 at pp.1-2.
5
  IMF Fact Sheet Supra note 1 at p.1
6
  Ladan M.T., (2010): - Enhancing Access to Justice in Criminal Matters: - Possible areas for Reform in Nigeria. A
Paper presented at a 3 day National Workshop on Law Development organized by the Nigerian Law Reform
Commission, Abuja, on 12-13 January 2010 at New Chelsea Hotel, Abuja at pp. 5-13.
     Also see Ladan M.T., Supra note 2.

                                                                                                         Page | 3
In most African states with weak anti-money laundering systems, drug and human trafficking,
corruption, illegal arms dealings and tax evasion are common crimes.7

         The international community has made the fight against money laundering and terrorist
financing a priority8 due to the following reasons: -




    i.      Money Laundering Undermines the Integrity of National Financial Institutions and
            Economic Policies

                     The hallmark of any financial institution is its reputation for integrity. This
            reputation can be seriously undermined if funds from criminal activity can be easily
            processed through that particular institution thus creating a perception of active
            complicity in criminal networks.9

                     Evidence of such complicity will have a damaging effect on the attitudes of
            the financial intermediaries and of the regulatory authorities, as well as ordinary
            customers. In some African states there is evidence of financial institutions that have
            collapsed due to their involvement in money laundering and parallel banking
            activities.10

                     Other far reaching effects of money laundering on majority of developing
            economies and least developed economies in Africa include: - a) Distortion of
            market prices by fuelling inflationary tendencies in essential commodities and real
            estate market by increasing money supply that is not matched by production of
            goods and services; b) Eliciting unfair competition against genuine businesses thus

7
  See Ladan M.T., Crime Prevention and Control and Human Rights in Nigeria (1998) ECONET Publishing Co. Zaria,
Nigeria, at pp. 125-165.
8
  See FAFT (2009) supra note 3.
9
   See the rationale behind FATF Recommendations 4-25, Special Recommendations VII and the Interpretative
Notes to Recommendation 5, 12 and 16: - on Measures to be taken by financial institutions and non-financial
businesses and professions to prevent money laundering and terrorist financing.
   Also see FATF Reference Document (2009): - Methodology for Assessing Compliance with the FATF 40 + 9
Recommendations (updated February 2009) at pp. 15-33.
10
   See Charles and Anneli supra note 2.

                                                                                                     Page | 4
             killing entrepreneurship; c) Diverting capital away from meaningful national
             economic activities to activities that enhance individual gain at the expense of
             economic development; d) Oiling corruption particularly through the process of
             compromising the criminal justice system and the rule of law with the resultant
             consequence of increased criminality and ultimately depressing Foreign Direct
             Investments.11

     ii.     Money Laundering and Terrorist Financing threaten International Financial
             Stability and Vibrancy

                     The International The international community has made the fight against
             money laundering and terrorist financing a priority. The IMF is especially concerned
             about the possible consequences of money laundering and terrorist financing on its
             members’ economies and on international financial stability.
                     Money laundering and terrorist financing activities can undermine the
             integrity and stability of financial institutions and systems, discourage foreign
             investment, and distort international capital flows. In an increasingly interconnected
             world, the problems presented by these activities are global, as are the links
             between financial stability and financial integrity. Money launderers exploit
             differences between national anti-money laundering laws and systems, especially in
             jurisdictions with weak or ineffective controls where they can move their funds
             more easily. Moreover, problems in one country can quickly spread to other
             countries in the region or in other parts of the world.
                     Strong AML/CFT regimes enhance financial sector integrity and stability,
             which in turn facilitates countries’ integration into the global financial system. They
             also strengthen governance and fiscal administration. The integrity of national
             financial systems is essential to financial sector and macroeconomic stability both on
             a national and international level.12

11
   See Aremu J.A., Attracting and Negotiating Foreign Direct Investment with Transnational Corporations in Nigeria
(2005), Market Link Communications, Lagos, Nigeria, at pp. 167-201.
12
   See IMF Fact Sheet supra note 1.

                                                                                                         Page | 5
iii.   Strategic Objectives of the International Community’s response in Combating
       Money Laundering and Terrorist Financing

              For the international community, the objective in combating money-
       laundering 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 approach in which organized crime is attacked by combating dirty money
       has many advantages. Given the financial power of criminal organizations and the
       fact that they are not defeated by any one measure, cracking down on money-
       laundering is a way to weaken the organizations without confronting them physically
       at a time when traditional methods of fighting them have shown their limitations
       the “war on drugs” decreed by Ronald Reagan in the 1980s had limited effects.
       Combating the money from crime also means suppressing the ultimate purpose of
       criminal activities making profits. It is a way to suppress the means for doing harm
       and, finally, a way for law enforcement to penetrate organized crime.

              The task is theoretically made easier because criminal organizations cannot
       operate using their traditional methods of threats, blackmail, violence or
       racketeering in order to launder the proceeds from their crimes. To give their profits
       the appearance of being legal, they must necessarily go through legal channels (the
       financial system) and use legal methods (corporate law, banking law) a terrain
       where it is easier to combat them.

              Therefore, combating money-laundering is an important means in the fight
       against organized crime, as was stated in the global action plan adopted at the




                                                                                     Page | 6
             World Ministerial Conference on Organized Transnational Crime,13 which called
             upon the States to “ensure that the fight against organized transnational crime is
             based on strategies aimed at defeating the economic power of criminal
             organizations.”14

             The means

                      The strategy implemented through a series of legislative measures taken by
             governments and revolving around three axes:

                 -    Prevention, the goal of which is to prevent the finance al system from being
                      used for purposes of money-laundering, particularly through a general
                      requirement to precisely identify originators, as well as placing and
                      limitations on certain transcatio0ns that serve as vehicles for money-
                      laundering;
                 -    Detection of money-laundering operations through legislative provisions
                      allowing for the centralization of information by authorities charged with
                      combating such operations (reporting suspicions) and implementation of
                      specialized investigative measures (access to computer systems and
                      commercial and banking information, etc);
                 -    Suppression of money-laundering activities and associated crimes, as well as
                      confiscation measures that are complements to enforcement, and preventive
                      measures such as freezing and seizing assets.

                      The arsenal of measures is as strong as its weakest link-criminal proceeds
             tend to move toward countries that have not put such measures into place. It is thus
             necessary to ensure that the implementation of these measures is as uniform and as
             widespread as possible. The efforts of the international community have sought to
             encourage countries to institute the necessary legislative framework through

13
   Held in Naples, November 21-23, 1994. See report to the United Nations General Assembly on the World
Ministerial Council on Organized Transnational Crime, A/49/748.
14
   Political Declaration and Global Action Plan against Organized Transnational Crime, report to the United Nations
General Assembly, op.cit., Para. 35.

                                                                                                         Page | 7
international legal instruments designed to harmonize standards or through
initiatives that seek to compel recalcitrant countries to adopt them. For example,
this is the goal of the efforts made by the Financial Action Task Force (FATF).

       It must be noted that this objective remains far from being reached. Many
countries have not yet developed the necessary legislation, and even where they
have done so, the implementation of the measures may depend on the extent to
which they receive support.

       Pierre Kopp (1995) explains that one of the problems in combating money-
laundering “comes from the information asymmetry in principal-agent relationships
between the State (the principal) charged with implementing the fight against
money-laundering, and the financial sector (the agent),” the only entity that has the
data on illegal transactions.

       The difficulty thus lies in the fact that the authorities charged with
implementing policies to combat money-laundering have the power to act but do
not have access to information that would allow them to act. It is the financial
institutions that have this information but they do not have power to act.

       Therefore, the detection of money-laundering operations necessarily
involves collaboration and information exchange between the financial sector and
the authorities responsible for legal procedures. Without this collaboration, there is
little chance that money-laundering operations could ever become known, as they
are by nature hidden. Given the confidentiality of the information held by banks, it
has been necessary to establish bridges between prosecution and enforcement
authorities and financial institutions in order to allow this information to circulate
while honoring confidentiality requirements. These bridges take the form of
Financial Intelligence Units (FIUs).

       Notwithstanding, law enforcement’s access to this information, officials
would not be in a position to identify, among the mass of information generated by

                                                                                  Page | 8
            the daily financial transactions of a financial sector institution, operations that are
            suspicious or that conceal money-laundering activities. This is all the more true
            because the suspicious nature of a transaction most often results not from the
            intrinsic characteristics of the transaction itself but rather from factors extraneous to
            the transaction.15

                     A reporting system has thus been introduced in most jurisdictions requiring
            professionals subject to this requirement to inform the legally designated authority
            of any transactions he believes could be linked to money-laundering operations. This
            is the system for reporting suspicions that has been progressively adopted by most
            States.16 It transforms the financial sector professional into a filter responsible for
            separating economically justified operations from operations linked to the activities
            of a criminal organization. Bankers, particularly due to their knowledge of their
            clients and of the economic and financial arena, have detection measures that go
            beyond the formal criteria that might characterize a suspicious transaction. This is all
            the more important because in most cases there is no difference in the manner in
            which money-laundering operations and legal operations are carried out.

                     It is in this spirit that the international community in the late 1980s instituted
            an international legal framework which is still in its developing, specifically to
            confront new threats, but also to remain informed of new money-laundering
            techniques.

2.      INTERNATIONAL LEGAL AND ADMINISTRATIVE FRAMEWORKS FOR COMBATING
        MONEY LAUNDERING AND TERRORIST FINANCING

        The international anti-money laundering strategy was first developed in the late 1980s
in response to the reality that the traditional means for combating organized crime had
reached the limits. The only existing weakness of criminal organizations was their need to

15
   For example, the absence of a connection between the transaction and the economic activity of the operator;
his nationality; numerous complex transactions within a short period of time.
16
   On this issue see, Thony J.F. (1997) Processing Financial Information in Money Laundering Matters: - The
Financial Information Units, European Journal of Crime, Criminal Law and Criminal Justice, 1996-3, p.257.

                                                                                                     Page | 9
utilize the legal channels of the banking and financial system to transfer funds and disguise the
origin of assets. The necessity to put these funds “on the market” made them extremely
vulnerable, and tracing the laundering process was a more cost effective and a less dangerous
means to achieve law enforcement objectives.17 Such a strategy had also the advantage of
targeting efforts on the richest and thus most dangerous criminal organizations.

           The tragic events of September 11 showed that the rationale of this strategy could be
applied mutatis mutandis to terrorist groups. It also demonstrated that all the efforts to
improve financial transparency in order to better track criminal money had achieved a limited
result. In many cases, criminal investigators were still unable to trace movements of suspects
funds and to identify, behind shell companies or offshore bank facades, the real ownership of
suspicious assets.18

2.1        International Treaties

           1998 marked the starting point for an international strategy with the signature of the
United Nations Convention against illicit Traffic in narcotic Drugs and Psychotropic Substances,
which provided the first legal definition of money laundering. In addition, the Basel Statement
of Principle adopted at the same period, involved the financial system in the fight against
proceeds of illegal or criminal origin and terrorism financing. Since then, a succession of
international legal instruments and international initiatives have established the framework in
which states operate and the standards on the subject.

           a) The 1988 UN Convention on Drug Trafficking
                    The 1988 Convention against Illicit Traffic in Narcotic Drugs and Psychotropic
               Substances, the fruit of the experience of nearly a century in drug control, 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 attacking the goals of all organized crime, and also its weakest point namely
               money itself.

17
     Ladan M.T., (2004) supra note 2.
18
     Thony (1997) supra note 16.

                                                                                              Page | 10
                    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.
                    The Convention provides a definition of money-laundering that has been taken
                up in many laws as well as in most international conventions on the subject. 19
                    The Convention instituted a complete mechanism for mutual international
                assistance in the area of confiscation that seeks to resolve the problems that result
                from the fact that the assets in which drug traffickers invest their profits are not
                always found in the country where the party involved carries out these activities,
                where he has his domicile or even where he is arrested. These provisions apply to
                proceeds drawn directly from drug traffics, as well as substances, materials and
                equipment used for drug trafficking. They also apply to drug trafficking proceeds
                that have been converted to other assets, proceeds mixed with legitimately acquired
                assets, income drawn from the proceeds of trafficking income drawn from assets
                into which proceeds have been converted as well as income drawn from assets in
                which these proceeds have been mixed.
                    It seeks to provide concrete solutions for recurring problems in international
                cooperation. By instituting procedures for direct transmission of requests for mutual
                judicial assistance, it attacks the slowness of these procedures. By making
                cooperation compulsory, except in cases stipulated in the convention, it limits bad
                faith refusals to cooperate. It expands the field of cooperation between
                governments and allows not only international confiscation of assets of criminal
                origin, but the freezing or provisional seizure of assets..
                    Signed on October 20, 1988, the Convention against Illicit Traffic in Narcotic
                Drugs and Psychotropic Substances took effect on November 11, 1990.

19
     Infra. Note 9 and surrounding text

                                                                                             Page | 11
        b) The Strasbourg Convention
                 The Council of Europe’s Convention on Laundering, Search Seizure and
            Confiscation of the Proceeds of Crime20 was opened for signature on November 8,
            1990. The Convention adopts the definition of money-laundering established by the
            Vienna Convention, as well as the provisions on international cooperation in the
            area of seizure, confiscation and mutual judicial assistance in investigations.
            However, it extends the field of its intervention to all the proceeds of crime, defining
            them more broadly as “any economic advantage from criminal offenses.” It also
            adopts the recommendations of the FATF21 with respect to the rules for preventing
            money-laundering in the banking and financial system.


        c) The International Convention for the Suppression of the Financing of Terrorism
                 Background: On 23 September 1998, at the UN General Assembly (UNGA),
            France proposed a convention for the suppression of terrorist financing in order to
            further fill in the gaps in the international law against terrorism.
                 On 8 December 1998, the UNGA, in its Resolution 53/108, empowered the Ad
            Hoc Committee to elaborate a draft International Convention for the Suppression of
            Terrorist Financing to supplement related existing international instruments.
                 The Convention was adopted by the UNGA in Resolution 54/109 of 9 December
            1999.
                 Opened for Signature 10 January 2000; entered into force 10 April 2002.
                 Obligations: The Convention prohibits any person(s) from directly or indirectly,
            unlawfully, and willfully providing or collecting funds with the intention that they
            should be used, or in the knowledge that they are to be used, to carry out an act
            that constitutes an offense under one of the nine treaties listed in the annex. 22 It

20
   Council of Europe, ETS 141
21
   See Organization for Economic Cooperation and development (OECD) DAFFE/IME/BR997)20
22
   (1) The treaties are the 1970 Convention for the Suppression of Unlawful Seizure of Aircraft; (2) The 1971
Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation; (3) The 1973 Convention on
the Prevention and Punishment of Crimes against Internationally Protected Persons; (4) The 1979 International

                                                                                                     Page | 12
             shall not be necessary that the funds were actually used to carry death or serious
             bodily injury to a civilian, or to any other person not actively involved in a situation
             of armed conflict, when the purpose of such act is to intimidate a population, or to
             compel a government or an international organization to either do, or to abstain
             from doing a specific act. Persons are prohibited from attempting participating in,
             organizing, contributing to, having knowledge of, or directing others to commit such
             offenses.23 Under no circumstances are the above offenses justifiable by
             considerations of a political, philosophical, ideological, racial, ethnic, religious, or
             other similar nature.
                 Compliance and Enforcement: The Convention obligates each State Party to
             establish the aforementioned offenses as criminal offenses under its domestic law,
             thus making them punishable by appropriate penalties, including prosecution or
             extradition. Each State Party shall take necessary measures to establish its
             jurisdiction over the offenses if such offenses are committed in the territory of that
             State, on board a vessel flying the flag of that State, an aircraft registered under the
             laws of that State or operated by the government of that State, by a national of that
             State, in the territory of or against a national of that State, against a government
             facility of that State aboard, in an attempt to compel that State to do or abstain from
             doing an act, by a stateless person who has his or her habitual residence in the
             territory of that state, or if an offender is within its territory and there are no other
             Parties whom have claimed jurisdiction.
                 The Parties commit to prohibiting illegal activities of persons and organizations
             that knowingly encourage, instigate, organize, or engage in the commission of such
             offences in their territories. The parties also commit to requiring financial

Convention against the Taking of Hostages; (5) The 1980 Convention on the Physical Protection of Nuclear
Material; (6) The 1988 Protocol for the Suppression of Unlawful Act of Violence at Airports Serving International
Civil Aviation; (7) The 1988 Convention for the Suppression of Unlawful Acts against the Safety of Maritime
Navigation; (8) The 1988 Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms
located on the Continental Shelf; and (9) The 1997 International Convention for the Suppression of Terrorist
Bombings.
23
   The Convention does not apply to offences that are committed within a single State, the alleged offender is a
national of that State, when the alleged offender is present in the territory of that State and no other State has
basis under certain provisions of the Convention to exercise jurisdiction.

                                                                                                       Page | 13
institutions and other professions involved in financial transactions to maintain, for
at least five years, all necessary records on transactions, both domestic and
international, utilizing the most efficient measures available for the identification
and verification of customers’ legal existence; reporting suspect or unusually large
transactions; prohibiting the opening of accounts of which the holders or
beneficiaries are unidentifiable; detecting and freezing, or seizing any funds used or
allocated for the purpose of committing such offenses, as well as proceeds and/or
forfeitures derived from such offenses. States agree to give consideration to
concluding agreements on the sharing funds with other State Parties, as well as
compensating the victims of offenses with funds derived from the forfeitures, and by
maintaining and facilitating communication between the appropriate agencies.
Parties also agree to supervise the licensing of all money-transmission agencies and
monitor the physical cross-border transportation of cash and bearer negotiable
instruments.
   States agree to take their measure as may be necessary under its domestic law
to investigate the facts regarding an offense, and must ensure that the person(s)
who committed the offense are taken into custody to be prosecuted or extradited.
In either case, the State shall notify the Secretary-General of the United Nations of
its intent. The Convention provides for the inclusion of such offenses as extradition
treaty between the Parties, entitles them to consider the Convention as a legal basis
for extradition with respect to the offenses. If a Party does not extradite the
person(s), it is obliged, without exception whatsoever, to prosecute him or her. The
Parties also commit to afford one another the greatest measure of assistance, and
not to refuse a request for extradition of for mutual legal assistance on the sole
ground that it concerns bank secrecy, a fiscal offense, or a political offense. The
Parties are entitled to refuse to extradite a person or afford legal assistance required
under the Convention if they have substantial grounds for believing that the request
for extradition has been made for the purpose of prosecuting or punishing a person
on the grounds of race, religion, nationality, ethnic origin, or political opinion.


                                                                                 Page | 14
                 The Convention provides for all disputes between Parties that cannot be settled
             through negotiation within a reasonable time to be submitted to arbitration, and, if
             needed, to the International Court of Justice.


        d) The Palermo Convention against Transnational Organized Crime
                 The United Nations Convention against Transnational Organized Crime24 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.
                 Under the Convention, four offenses considered to comprise the structural
             characteristics of organized crime are required to be addressed by the States in their
             domestic law: criminal association, money-laundering, corruption and obstruction of
             justice.
                 The definition of money-laundering is provided in Article 6 of the Convention,
             which in fact adopts the definition of the 1988 Convention against Illicit Traffic in
             Narcotic Drugs. Article 7 requires the institution of a supervisory and regulatory
             regime to deter and detect all forms of money-laundering in financial institutions
             and other particularly susceptible entities, including, in particular, rules for
             identifying clients and the reporting of suspicious operations. It calls upon the States
             to institute a financial information service and to supervise international capital
             transfers.


        e) The 1999 OAU Convention on the Prevention and Combating of Terrorism (The
             Algeria Convention)
                 The Algeria Convention defines a “terrorist act” as:


24
  Signed in Palermo (Italy) on December 15, 2000, G.A. res. 55/25, annex I, 55 U.N. GAOR Supp. (No. 49) at 44,
U.N. Doc. A/45/49 (vol. I)(2001).

                                                                                                        Page | 15
   a) any act which is a violation of the criminal laws of a State Party and which
         may endanger the life, physical integrity or freedom of, or cause serious
         injury or death to, any person, any number or group of persons or cases or
         may cause damage to public or private property, natural resources,
         environmental or cultural heritage and is calculated or intended to:
            i.       intimidate, put in fear, force, coerce or induce any government, body,
                     institution, the general public or any segment thereof, to do or
                     abstain from doing any act, or to adopt or abandon a particular
                     standpoint, or to act according to certain principles; or
           ii.       disrupt any public service, the delivery of any essential service to the
                     public or to create a public emergency; or
          iii.       create general insurrection in a State.
   b) any promotion, sponsoring, contribution to, command, aid, incitement,
         encouragement, attempt, threat, conspiracy, organizing, or procurement of
         any person, with the intent to commit any act referred to in paragraph (a)(i)
         to (iii).

   Article 3 of the Convention contains the controversial and seemingly
contradictory proviso that:

   i)         Notwithstanding the provisions of Article 1 (above-mentioned definition),
              the struggle waged by peoples in accordance with the principles of
              international law for their liberation or self-determination, including
              armed struggle against colonialism, occupation, aggression and
              domination by foreign forces shall not be considered a terrorist acts.
   ii)        Political, philosophical, ideological, racial, ethnic, religious or other
              notices shall not be a justifiable defence against a terrorist act.

   This provision clearly acknowledges the African historical context in which
liberation movements were labeled “terrorist organizations” by the colonial powers
or white minority regimes (for example, the African National Congress, current

                                                                                    Page | 16
         ruling party of South Africa). While this definition may conceivably present a
         “loophole” to justify inaction against human rights violations committed in the name
         of “liberation” or “self-determination”, it is unlikely to find application in Africa
         today. The focus of African leaders has instead been on developing the capacity to
         implement practical counter-terrorism measures, such as enhanced border control
         and surveillance, information-sharing and financial controls.

            African commitment to prevent and combat terrorism dates back to July 1992,
         when OAU heads of state and government adopted a Declaration against Extremism
         in Dakar. Despite visionary work done on the continent to prevent and combat
         terrorism, the OAU Convention on the Prevention and Combating of Terrorism, read
         with the “Plan of Action” of the African Union High-Level Intergovernmental
         Meeting on the Prevention and Combating of Terrorism in Africa is the latest and
         most comprehensive instrument in Africa addressing terrorism.

            However, commitments to detect, seize and confiscate the proceeds of
         corruption – in so far as this relates to money laundering – have been included. The
         commitments that have a bearing on organized crime can be found in the OAU
         Treaty Establishing the African Economic Community (1991), to a limited extent the
         AU Plan of Action for Drug Control in Africa 2002-2006 (2002), and the AU
         Convention on the Prevention and Combating of Corruption and Related Offences
         (2003).

2.2   Administrative Frameworks

         a) The FATF Standards (40 + 9 Recommendations)
                    The Financial Action Task Force (FATF) is an independent inter-
            governmental body that develops and promotes policies to protect the global
            financial   system    against   money    laundering    and   terrorist   financing.
            Recommendations issued by the FATF define criminal justice and regulatory
            measures that should be implemented to counter this problem. These
            Recommendations also include international co-operation and preventive
                                                                                      Page | 17
                 measures to be taken by financial institutions and others such as casinos, real
                 estate dealers, lawyers and accountants. The FATF Recommendations are
                 recognised as the global anti-money laundering (AML) and counter-terrorist
                 financing (CFT) standard.25
                         Since its creation in 1989, the Financial Action Task Force (FATF) has
                 worked to ensure that its 40+9 Recommendations are recognised globally as the
                 international standards for anti-money laundering and combating the financing
                 of terrorism (AML/CFT). The work of the FATF, covering more than 170
                 jurisdictions, has had a significant impact on the global detection and prevention
                 of money laundering and terrorist financing, and is critical to the implementation
                 of more robust AML/CFT regimes around the world.
                         The FATF, since its establishment, has focused its work on three main
                 activities: standard setting, ensuring effective compliance with the standards and
                 identifying money laundering and terrorist financing threats. These activities will
                 remain at the core of the FATF’s work for the remainder of this mandate. Going
                 forward, the FATF will build on this work and respond to new and emerging
                 threats, such as proliferation financing and vulnerabilities in new technologies
                 which could destabilise the international financial system.
                          A mid-term review was conducted in 2007 to ensure that the FATF is
                 equipped to respond flexibly to new challenges. The FATF mandate, revised
                 through this mid-term review process will expire in December 2012.
                         The core work of the FATF since its creation has been to combat money
                 laundering (40 Recommendations), and since 2001, terrorist financing (9
                 Recommendations). The FATF has taken concerted action to combat these
                 threats. The FATF continues to revise and clarify these standards, and will
                 continue to do so when necessary. This approach has so far provided the right
                 balance between giving the required stability to the FATF standards, whilst
                 allowing for the necessary flexibility to respond to the changing nature of the
25
  See Central Bank of Nigeria, Abuja (October 2009): - Anti-Money Laundering and Counter Terrorism Financing
(AML/CFT) Compliance Manual, 2009 for Banks and Other Financial Institutions.

                                                                                                     Page | 18
threats faced. Maintaining this balance between stability and flexibility allows for
more predictability, and consistent implementation globally.


The FATF 40 + 9 Recommendations
       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 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.




                                                                           Page | 19
         The FATF was later commissioned by the G7 to follow up the
implementation of its recommendations. 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 2012.
         The 40 recommendations of the FATF were revised in 1996. In addition,
following the attacks of September 11, 2001, nine 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 funds 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 organizations;
                 afford other countries the greatest possible assistance in connection
                  with criminal, civil or administrative inquiries, investigations or
                  proceedings in this area,


                                                                                 Page | 20
          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 provides a service for the transmission of money or
           value, including transmission through an informal money or value
           transfer system or network, particularly “Hawala” networks;
          require financial institutions, including money remitters, 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.


Uncooperative and High-Risk jurisdictions
       The FATF remains vigilant on international co-operation issues and
responds, as necessary, to jurisdictions that pose a threat to the international
financial system and the international effort to combat money laundering and
terrorist financing. Previously, the FATF non-cooperative countries and
territories (NCCT) process, which began in 2000, identified 23 jurisdictions that
posed significant ML/TF risks to the international financial system. The process
was highly successful—all of the jurisdictions that had been identified as NCCTs
in 2000 and 2001 made significant progress and are no longer on the NCCT list.
       Throughout 2008-2009, the FATF has continued its International Co-
operation Review Group to analyse problematic and high-risk jurisdictions and
recommend specific action. In 2008, the FATF issued a series of statements
expressing concerns about the AML/CFT deficiencies in Iran, Uzbekistan,
Pakistan, Turkmenistan, São Tomé and Principe, and the northern part of Cyprus.
The statements called on FATF members and urged all jurisdictions to pay special


                                                                            Page | 21
attention to transactions dealing with Iran and Uzbekistan and to strengthen
preventive measures in response to the risks associated with these countries. All
FATF members and many other jurisdictions took action to advise their financial
institutions of these risks. In February 2009, the FATF called on its members and
other jurisdictions to apply counter-measures to protect their financial sectors
from money laundering and terrorist financing risks emanating from Iran. The
situation will continue to be monitored so that further action can be taken, as
necessary, to protect the international financial system.
       Most of these jurisdictions have taken at least some steps towards
implementing AML/CFT systems. In October 2008 the FATF publicly recognised
the progress made in the northern part of Cyprus.
       The FATF began strengthening its procedures to respond to high-risk
jurisdictions in 2008; this process was reinforced with the call on a number of
international bodies, including the FATF, for fortified action in response to the
global financial and economic crisis. In June 2009, the FATF adopted new
procedures for identifying non-cooperative and high-risk jurisdictions and has
begun the process of reviewing the AML/CFT regimes of a limited number of
jurisdictions. The process will include direct engagement with the jurisdictions
under review. After reviews are completed, jurisdictions found to be non-
cooperative or high-risk at that time will be publicly identified. This would be
accompanied by an FATF call on members and other jurisdictions to apply
enhanced scrutiny when dealing with transactions involving the identified
jurisdictions. In addition to enhanced scrutiny, the FATF will, if necessary,
ultimately call for the application of appropriate counter-measures in order to
protect the financial system.


Money Laundering and Terrorist Financing Threats
       The methods used for laundering money and the financing of terrorist are
in constant evolution. As the international financial sector increasingly complies


                                                                         Page | 22
                   with the FATF standards, criminals need to find alternative channels to launder
                   proceeds of criminal activities and finance their illicit activities. The FATF
                   continuously monitors and identifies new threats and methods. It describes and
                   explains the nature of money laundering and terrorist financing threats in a
                   series of typologies reports. These studies play a key role in ensuring the
                   effectiveness of the FATF standards as they are used by the FATF to support FATF
                   policy-making. The FATF’s typologies studies increase global awareness of new
                   threats and money laundering methods. This in turn allows for earlier detection
                   as to whether these methods are used. Typologies studies are also crucial to
                   further develop the FATF Standards so that they can effectively combat money
                   laundering and terrorist financing as it continues to evolve.26


               b) Policy Responses in Africa27
                            Specific actions and strategies that have been considered by member
                   states includes the formation of sub region anti-money laundering blocks. One
                   such initiative includes the establishment of the Dar-es-Salaam based Eastern
                   and Southern Africa Anti Money Laundering Group (ESAAMLG). The group
                   coordinates the development and promotion of policies and measures to
                   combat money laundering in the region. Its Strategic Plan focuses on realizing
                   ESAAMLG’s vision of developing a strong and dynamic institution that is
                   committed to the eradication of money laundering and terrorist financing in the
                   Eastern and Southern-African Sub Region.
                            To date, ESAAMLG has made notable progress in the establishment of
                   Anti Money Laundering regimes in the sub region. Through this initiative, the
                   member states have made high profile endeavours to recover the proceeds of
                   economic crime and corruption attributed to officials in government and public
                   corporations in their respective countries. Similarly, corruption has been
                   criminalized in most countries by the beginning of the 1990s.
26
     See GIABA and FATF (2009) supra note 3.
27
     See Charles and Anneli, supra note 2.

                                                                                          Page | 23
                              On it part, the Economic Community of West African States (ECOWAS) in
                    response to the international fight against money laundering has established the
                    Inter-Governmental Action Group against Money Laundering in West Africa
                    (GIABA) in 2000. The mandate of GIABA is the prevention and control of money
                    laundering and terrorism financing as well as predicate offences in the sub
                    region.


               c) The Nigeria Experience
                              Nigeria has criminalized money laundering under the Money Laundering
                    (Prohibitions) Act, 2004, the National Drugs Law (Enforcement) Act, 1989, and
                    the Economic and Financial Crimes, Act, 2004. Money laundering offences cover
                    the conversion, transfer, concealment, or disguise, possession and acquisition of
                    property in a manner that is largely consistent with the UN Convention against
                    Illicit Traffic in Narcotic Drugs and Psychotropic Substances (Vienna Convention)
                    the UN Convention against Transnational Organized Crime (Palermo Convention)
                    Nigeria has also ratified the UN Convention against Corruption.28

                              Nigeria adopted the all crimes approach in defining the scope of
                    predicate offences. There is a broad range of ancillary offences to the money
                    laundering offences. Money laundering applies to both natural and legal
                    persons, and proof of knowledge can be derived from objective factual
                    circumstances. Legal persons are liable to a maximum of Naira250,000, and
                    withdrawal of licenses, while natural persons are liable to a maximum of
                    Naira1,000,000 fine or 3 to five years imprisonment or both fine and
                    imprisonment and the possibility of suspension from professional activity for
                    5years. Directors and officers of financial institutions are also liable for
                    neglecting to carry out their obligations under the MLP Act. There is lack of
                    comprehensive statistics on money laundering investigations, prosecutions and
                    convictions due to lack of effective coordination mechanisms. It is therefore

28
     See Ladan M.T. supra note 2.

                                                                                            Page | 24
                 difficult to determine how many money laundering cases have been investigated
                 and prosecuted. Overall, the AML legislation is not effectively implemented.29
                          Nigeria has ratified the UN Convention for the Suppression of the
                 Financing of Terrorism 1999 on 28th April 2003 and 7 out of the 13 UN terrorism
                 conventions. Attempt has been made to criminalize the financing of terrorism
                 through Section 15 of the EFCC Act. Within the existing legal framework, there is
                 evidence that the authorities have taken steps to confront terrorist activities
                 whether the threat has an international nexus or it is purely domestic in nature
                 such as the Niger Delta situation or it is one with religious dimension as a few
                 cases in Northern Nigeria suggest. It has been established by the authorities that
                 there is a connection between the purchase of weapons and terrorist activities in
                 the vulnerable regions of the country. The DSS, which is responsible for
                 interdiction of terrorists also, asserted that between 1999 and 2007, it
                 investigated 29 cases involving money laundering and terrorist financing. The
                 details of these cases were not provided to the Assessors. The implementation of
                 the existing framework has revealed some practical challenges. The major one
                 being that EFCC Act does not provide a comprehensive framework for dealing
                 with the tripartite offences of terrorism, namely, financing of terrorism,
                 terrorists act and terrorist organizations, as envisaged by the FATF Special
                 Recommendations and the UN Financing of Terrorism Convention. A
                 comprehensive bill for the prevention of terrorism that will address the observed
                 shortcoming is currently before the National Assembly.30
                          Nigerian law provides for the confiscation of laundered properties which
                 represent proceeds from, instrumentalities used in and instrumentalities
                 intended to be used for the commission of money laundering, and other illegal
                 acts and property of corresponding value. At the moment, the types of
                 confiscation and recovery measures provided in the law are criminal conviction

29                                                                        th
   See GIABA, Senegal (2008): - Evaluation Report on Nigeria adopted as a 4 Mutual Evaluation by its Plenary on
  th
7 May 2008.
30
   Ibid at pp. 4 – 6.

                                                                                                       Page | 25
                based confiscation, seizure and forfeiture of cash and assets either through plea
                bargain or through a court order. No rules have been made by the
                Attorney‐General under section 31 (4) and 43 of the EFCC Act to guide the
                management and disposal of forfeited or confiscated properties. The current
                regime also does not set out modalities relating to freezing having regard to the
                rights   of   persons     who     have    grievances     in   conformity     with    FATF
                Recommendations. The absence of a comprehensive FT legislation implies that
                no statutory provisions is applicable to the confiscation of terrorist related
                properties and therefore the measures required under SR.III.1 is not effectively
                implemented.31
                         In March 2009, the CBN issued an all-encompassing Anti-Money
                Laundering/Counter Terrorism Financing (AML/CFT) Compliance Manual, with a
                view to harmonizing its existing Circulars on AML/CFT with the FATF
                Recommendations, the various AML/CFT legislation and guidance notes in
                Nigeria and international best practices.
                         However, following comments received by the CBN from various
                stakeholders in the fight against money laundering and terrorism financing in
                Nigeria on the Manual, the CBN has reviewed the existing AML/CFT Manual.32



CONCLUSIONS

        It is evident from the above analysis that global financial stability hinges on collective
action at the international level, but also on effective national systems. Robust anti-money
laundering and combating the financing of terrorism regimes are an important pillar of the
international regulatory and supervisory system and part and parcel of the current efforts to
strengthen the global financial framework.




31
  Ibid at pp. 7 – 8.
32
  Revised CBN Anti-Money Laundering/Counter Terrorism Financing (AML/CFT) Manual, 2009 (draft), October 29,
2009.

                                                                                                 Page | 26
        All   countries,   including   non-members,   should    implement    the   FATF    40+9
Recommendations effectively, to ensure a more effective global system for combating AML/CFL
risk.

        Finally, the FATF need to redouble its efforts to undertake appropriate follow-up action
from mutual evaluations to ensure that members correct, as quickly as possible, any
deficiencies that are identified through the mutual evaluation process.




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