combating monel laundering

The Quest for Excellence

COMBATING MONEY LAUNDERING: MOVING BEYOUND THE FINANCIAL INSTITUTIONS

Presentation At The Stakeholders Seminar On Strategic Partnership With Stakeholders For Effective Implementation Of AML/CFT Regime In Nigeria Holding At Hotel Presidential Port Harcourt

Pattison Boleigha December 15, 2008

2The Quest for Excellence

Slide 2

• Introduction • Definition• Stages of Money Laundering• Effects of Money Laundering• Institutional Framework• Legal framework• Benefits of AML/CFT Regime• …Beyond FI’s • Best Practice in AML/CFT• ML in DNFI• KYC & CDD• Challenges of Implementing ML in DNFI• Suggested Solutions• Conclusion• Recommendations

Outline


Slide 3

• The battle against money laundering (AML) and terrorist financing (CFT) is an on-going and continuous process.

• Since criminals require financial service in order to launder the proceeds of their criminal activities, Financial Institutions must be able to identify and understand the potential risks of money laundering and terrorist financing within the institution and implement appropriate administrative processes, to prevent or at least minimize, such risks.

• Proper Know-Your-Customer (KYC) practices are central to the fight to against money laundering & terrorist financing.

• Money laundering and terrorism not only harm the public as a whole but can also damage the stability and reputation of the financial sectors and governments.

• It is in the financial industry’s and society’s best interests that financial institutions take all reasonable measures to prevent money laundering and terrorist financing.

• With the Financial Institutions well covered in terms of measures for combating money laundering, the current trends has made it imperative to focus on the new areas criminal now use to hide their illicit proceeds.

•Introduction


Slide 4

Definitions

• Money Laundering is the process of converting the

proceeds of illegal and criminal activities into acceptable

forms.

• Money Laundering is the act of concealing the criminal

origin of property, which could be money or physical

assets, and disguising its nature and source.

• Money Laundering is a derivative crime.


Slide 5

Definition by US Treasury Department

• Money Laundering is the criminal practice of filtering ill-gotten gains or ‘dirty’ money through a series of transactions so that the funds are ‘cleaned’ to look like proceeds from legal activities


Slide 6

• The Financial Action Task Force (FATF) (a Paris-based multinational or inter-governmental body formed in 1989 by the Group of Seven industrialized nations to foster international action against money laundering) provided this “working definition” of money laundering:

– The conversion or transfer of property (i.e. money, goods, commodities, etc.) knowing that such property is derived from a criminal offence, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such actions.

– The concealment or disguising of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property knowing that such property is derived from a criminal offence.

– The acquisition, possession or use of property, knowing at the time of receipt that such property was derived from a criminal or from an act of participation in such offence.

Working Definition-FATF


Slide 7

Predicate Offences

• Crimes such as– Smuggling human beings– Embezzlement & Fraud– Bribery– Corruption– Robbery– Drug trafficking– Prostitution, etc

• These crimes produce large profits, creating the incentive to “legitimize” the ill-gotten gains through money laundering.

• When a criminal activity generates substantial profits, the individual or group involved must find a way to control the funds without drawing attention to the underlying activity or persons involved.

• Criminals do this by:– disguising the sources– changing the form– moving the money to a place where it is less likely to attract attention


Slide 8

Stages of Money Laundering

• Placement

• Layering

• Integration


Slide 9

Placement Stage

• Usually the first phase: Most visible, most vulnerable• Goal:

– To introduce proceeds into the system without attracting attention

– Disposal of proceeds

• How: – Deposit of proceeds in FI

– Structuring/smurfing– Travel Agency– Insurance Policy– Property Purchase


Slide 10

• Usually second phase• Goals:

– Separate source from ownership– Break Audit Trail

• How: – Conversion/Movement of Funds from small to large notes– Cash export– Cash Deposits in Foreign Banks– Complex Wire Transfers– Barter/Antiques– Multiple Deposits– Use of Scattered Accounts– Mutual Funds– Resale of Property

Layering Stage


Slide 11

Integration Stage

• Usually Final Stage: The Victory Stage

• Goal: To enjoy the proceeds of the crime

• How: set up legitimate business through;– Investment in other Assets

– Funding of luxurious lifestyle

– Reinvestment in Predicate Crimes

• Loans

• Gifts

• False Invoicing

• Purchase of luxurious Assets, Real Estate, etc

• Investment in Business Ventures

• Investments in Safe countries


Slide 12

“willful blindness”

• The term “willful blindness” is a legal principle that operates in money laundering cases.

• Courts define it as the • “deliberate avoidance of knowledge of the facts” or

“purposeful indifference.” • Courts have held that willful blindness is the equivalent

of actual knowledge of the illegal source of funds or of the intentions of a customer in a money laundering transaction.


Slide 13

Risks Associated with Money Laundering

• Reputational risk is the potential that adverse publicity regarding a businesses practices and associations, whether accurate or not, will cause a loss of public confidence in the integrity of the institution.

– Borrowers, depositors, and investors might stop doing business with the institution because of a money laundering scandal involving the institution.

• Operational risk is the potential for loss resulting from inadequate or failed internal processes, people, systems and external events

– DNFI’s that rely on the proceeds of crime have additional challenges in adequately managing their assets, liabilities and operations.

– Increased borrowing or funding costs can also be included in such losses.

• Legal risk is the potential for lawsuits, adverse judgments, unenforceable contracts, fines and penalties generating losses, increased expenses for an institution, or even closure of such an institution.

• Concentration risk is the potential for loss resulting from too much credit or loan exposure to one borrower.

– Lack of knowledge about a particular customer or who is behind the customer, or what the customer’s relationship is to other borrowers, can place a bank at risk in this regard.

– This is particularly a concern where there are related counter-parties, connected borrowers, and a common source of income or assets for repayment.


Slide 14

Money Laundering Risk Assessment


Slide 15

The Economic and Social Consequences of ML• Increased Crime and Corruption:

– helps enhance the profitable aspects of criminal activity.

– it will attract people who will commit crime.

– there will also be more corruption

• Undermining the Legitimate Private Sector:

– Money launderers are known to use front companies, and engage in

– legitimate business but are in fact controlled by criminals, and commingle the proceeds of illicit activity with legitimate funds, to hide the ill-gotten gains.

– These front companies use illicit funds to subsidize front company products and services at levels well below market rates.

– Thus, front companies have a competitive advantage over legitimate firms that draw capital funds from financial markets. This makes it difficult, if not impossible, for legitimate business to compete against front companies.

– They control whole industries or sectors of the economy of certain countries.

– Misallocation of resources from artificial distortions in asset and commodity prices.

– Evading taxation, thus depriving the country of revenue.

• Weakening Financial Institutions:

– Indeed, criminal activity has been associated with a number of bank failures around the globe. – Financial institutions that rely on the proceeds of crime have additional challenges in adequately managing their

assets, liabilities and operations.


Slide 16

The Economic and Social Consequences of ML

• Loss Of Control Of, Or Mistakes In, Decisions Regarding Economic Policy: – in some emerging market countries these illicit proceeds may dwarf government budgets,

resulting in a loss of control of economic policy by governments or policy mistakes due to measurement errors in macroeconomic statistics arising from money laundering.

• Economic Distortion and Instability: – Money launderers are not interested in profit generation from their investments but rather in

protecting their proceeds and hiding the dirty origin of the funds.

– They “invest” their money in activities that are not necessarily economically beneficial to the country where the funds are located.

• Loss of Tax Revenue: – Of the underlying forms of

– illegal activity, tax evasion is, perhaps, the one with the most obvious macroeconomic impact. Money

– laundering diminishes government tax revenue and

– therefore indirectly harms honest taxpayers. It also

– makes government tax collection more difficult.


Slide 17

The Economic and Social Consequences of ML

• Risks to Privatization Efforts: – Criminal organizations can outbid legitimate purchasers for formerly state-owned enterprises.

– while privatization initiatives are often economically beneficial, they can also serve as a vehicle to launder funds.

• Reputation Risk for the Country: – A reputation as a money laundering or terrorist financing haven

– Negative effects for development and economic growth in a country.

– It diminishes legitimate global opportunities

– Extra scrutiny will make them more expensive.

– Specific counter-measures taken by international organizations and other countries

– Reduced eligibility for governmental assistance.

• Social Costs: – It drives up the cost of government due to the need for increased law

– enforcement and health care expenditures to combat the serious consequences that result.

– It could even lead to the virtual takeover of legitimate governments.

– Transfers economic power from the market, government and citizens to criminals

• Control over Political Power– .


Slide 18

Terrorist Financing- What is it?• UN Convention for the Suppression of the Financing of Terrorism

(UNCSTF) • Terrorism financing (TF) occurs when a person by any means, directly or

indirectly, unlawfully and willfully provides or collects funds with the intention that such the funds will be used or in the knowledge that the funds will be used in full or in part, in order to carry out a terrorist act.

• FATF Special Recommendation II (on criminalization of terrorism financing) gave a similar definition.• Terrorist act – any act intended to cause death or serious bodily injury to a

civilian or any other person not taking an active part in the hostilities. Usually, the purpose is to intimidate a population or to compel a government to do or abstain from doing any act

• EFCC Act, 2004 Sect 15 (1)• A person who willfully provides or collects by any means, directly or

indirectly, any money from any other person with intent that the money shall be used or is in the knowledge that the money shall be used for any act of terrorism.


Slide 19

Difference Between ML and TF

ACAMS Study Guide for the CAMS Certification Examination Fourth Edition


Slide 20

…Beyond Financial Institutions

• The Institute of Chartered Accountants in England and Wales (ICAEW) has published advice for small businesses and consumers on how to prevent money laundering.

• Said Felicity Banks, head of business law at the Institute: “Back in 1963, one of the biggest problems for the great train robbers was what to do with the stolen cash.

• In 2006, criminals will find it even harder, given the greater awareness of what money laundering is, why it is a criminal act in its own right, and the need for vigilance in preventing it.

• “Yet despite all the awareness activity, many businesses, especially smaller ones, are unaware of the potential dangers to themselves or their staff of getting caught up in money laundering schemes. The risks undoubtedly exist for all businesses. By following this advice, honest business people will be able to minimise that risk.”


Slide 21

…Beyond Financial Institutions (cont’d)

• Money laundering is an evolving activity, and must be continuously monitored in all its various forms in order for measures taken in this effort to be timely and effective.

• Dirty money moves through offshore entities, wire transfers, trusts, hawala, securities dealers, car dealers, correspondent accounts, etc.

• Dirty money, like water, finds the route of least resistance. As many governments around the world have implemented anti-money laundering obligations for the banking sector, we see a significant shift in laundering

• activity from the traditional banking sector to the non-bank financial

• sector and to non-financial businesses and professions.

• Not only banks, but also non-bank financial institutions and non-financial

• businesses (DNFI’s) have become attractive avenues for introducing ill-gotten gains into regular financial channels.

• The FATF uses its annual typologies exercise to “monitor changes and better understand the underlying mechanisms of money laundering and terrorist financing.” The objective is to report on some of the “key methods and trends in these areas” and also to make certain that the FATF 40 Recommendations and Special Recommendations on Terrorist Financing remain effective and relevant

ACAMS Study Guide for the CAMS Certification Examination Fourth Edition


Slide 22

• Both the EFCC, FMC and SCUML are fully convinced that effective AML/CFT practices should be part of the risk management and internal control systems in all DNFI’s worldwide.

• These National supervisors are responsible for ensuring that DNFI’s have minimum standards and internal controls that allow them to adequately know their customers.

• Voluntary codes of conduct issued by industry organisations or associations can be of considerable value in underpinning regulatory guidance, by giving practical advice to DNFI’s on operational matters.

• An example of an industry code is the “Global anti-money-laundering guidelines for Private Banking” (also called the Wolfsberg Principles) that was drawn up in October 2000 by twelve major global banks with significant involvement in private banking.

• Such codes cannot be regarded as a substitute for formal regulatory guidance.

AML/CFT- National Efforts


Slide 23

• Economic and Financial Crime Commission (EFCC)• Nigeria Financial Intelligence Unit (NFIU)• National Drug Law Enforcement Agency (NDLEA)• Central Bank of Nigeria (CBN)• Federal Min of Commerce (FMC)• Independent Corrupt Practices Commission (ICPC)• Federal Inland Revenue Services (FIRS)• National Insurance Commission (NAICOM)• Nigeria Customs Service (NCS)• Nigeria Immigration Services (NIS)• Nigeria Deposit Insurance Corporation (NDIC)

Institutional Framework- Local


Slide 24

• Bank for International Settlement• Basle Committee• Financial Action Task Force (FATF)• Inter-Governmental Body Against Money Laundering

(GIABA)• Egmont Group• Wolfsberg Group• United Nations Office of Drugs and Crime• The World Bank• British Council• European Union• Interpol• The Joint Money Laundering Steering Group• etc

Institutional Framework- International


Slide 25

• The Money Laundering (Prohibition) Act 2004 • The Advanced Fee Fraud Act 2006• The Bank’s (recovery of Debt) and Financial

Malpractices in Banks in Nigeria Act (as amended)• The Banks and other Financial Institutions Act 1991• for International Settlement• Finance Miscellaneous Offences Act • The ICPC (establishment) Act• The EFCC (establishment ) Act 2004• Dishonored Cheques Act• etc

Legal Framework- Local


Slide 26

• Directive 2005/60/EC of the European Parliament and of the Council.

• Office of Foreign Asset Control (OFAC)• US Patriot Act• SerbansOxrlys Act

Legal Framework- International


Slide 27

Financial Action Task Force-FATF

• An inter-governmental body whose purpose is to develop and promote international policies to combat money laundering and terrorist financing.

• It was created in 1989 under EU G8 group.

• It made 40 recommendations in 1990 and added 9 more recommendations after September 11 event.

• FATF Lists Countries and Territories that are not Cooperating in the Fight against Money Laundering


Slide 28

• Financial Action Task Force on Money Laundering —The Forty Recommendations and Interpretative Notes

• Financial Action Task Force—Special Recommendations on Terrorist Financing

• Basel Committee on Banking Supervision—Consolidated KYC Risk Management

• Basel Committee on Banking Supervision-Customer Due Diligence for Banks• Wolfsberg Statement on Monitoring, Screening and Searching• Wolfsberg Anti-Money Laundering Principles for Correspondent Banking• Wolfsberg Statement on The Suppression of the Financing of Terrorism• Wolfsberg Anti-Money Laundering Principles on Private Banking• Wolfsberg Group on Private Banking and Customer Due Diligence • Directive 2005/60/EC of the European Parliament and of the Council.• American Bankers Association • Office of Foreign Asset Control (OFAC)• US Patriot Act• The Joint Money Laundering Steering Group- Prevention of money

laundering/combating terrorist financing December 2007

Best Practices in Combating AML/CFT


Slide 29

• Delisting from the Non-Cooperative Countries and Territories

• Removal of the US directive on Nigeria.

• Admission to the Egmont Group of Financial Intelligence Units

• Nigeria’s mutual evaluation committee scored a pass mark

• The banks’ Compliance officers have organized themselves into the

Committee of Chief Compliance Officers of Banks in Nigeria (CCCOBIN).

Same for the Bureau de change association.

• All the banks in Nigeria have implemented the use of AML/CFT applications

in monitoring suspicious activities

• Over 350 convictions of money laundering offences especially on high

profile individuals previously thought to be “untouchable”

• All these have in return resulted to the following benefits • We need to replicate these by extending these benefits to DNFI’s

Successes from New Efforts at Combating ML/TF


Slide 30

Benefits of AML/CFT Regime

• Increased revenue due to competitive advantage• Reduced risk • Reduced costs (eliminate penalties / sanctions)• International Financing – Direct Foreign

Investment• International Support for Government through

sponsorship of development efforts and national security.

• Nigeria is now rated by S&P as BB+• Less harassment of Nigerians traveling abroad


Slide 31

• Up-to-date policies, procedures and controls approved by the Board

• Senior management responsibility – tone at the top

• Appointment of Money Laundering Reporting Officer

• Appointment of Chief Compliance Officer

• Identification of High Risk Customers for Transaction monitoring and reporting

• Identifying Cheque Offenders

• Proper records management

• Risk Based Approach

• Awareness/training programs

• Legacy Accounts Remediation process.

• Customer due diligence

• Know your customer/know you customers’ business/know your key shareholders/ know your staff/know key transactions

• Identifying and reporting suspicious transactions

• Effective Internal Audit over the AML/CFT program

Key Elements of A Good AML/CTF Program


Slide 32

Best Practice in AML/CFT• Practice KYC, KYCB,KYE, CDD, EDD

• Account Monitoring

• STR/CTR/FTR Reporting

• Record Keeping

• Ongoing Training

• No Tipping Off

• Spread the Compliance Culture.

• Risk based Approach

• AML Solutions

• Attitude towards Regulation

• Sanctions • Senior Management Buy in• Good interface between regulators and the company• Ensure all statutory returns are sent to required regulatory body as at when

due. • Policies /procedures approved by the Board• Appointment of Chief compliance officer at senior management level• Audit and Self Assessment


Slide 33

Introduction to KYC

DNFI’s ARE FIRST LINE OF DEFENCE AGAINST DIRTY MONEY

DNFI’s MUST OPERATE WITH HIGH INTEGRITY TO PRESERVE THEIR REPUTATION

DNFI’s MUST MAINTAIN GOOD RELATIONSHIP WITH THEIR CLIENTS-RELATIONSHIP BUILT ON TRUST


Slide 34

• Why is Due Diligence Conducted?– To assess potential risks ( Reputational, ML/CFT/Legal, operational, concentration….)– To risk profile customers– To determine what level of due diligence needs to be performed ( Enhanced, Simplified,…)

• Who Conducts Due Diligence ?– The person entering the business relation (due diligence on business, on all parties involved)– The compliance /AML officer– If required a Lawyer ( Legal aspects)– Management depending on risk level and business type, e.g. PEPS

• When is Due Diligence Conducted?– Before entering into business relationship– Before an occasional transaction is carried out – When there is suspicion of Money Laundering or Terrorist financing

• How is Due Diligence carried out? – Obtain information from all independent sources (Name, address, identification…)

• How Much Due Diligence Needs to Be Conducted?– Depends on the risk profiling

• How Much Time is Allocated for Due Diligence Completion?– As much as is needed until fully satisfied and intimate conviction that our utmost as been performed

• Can I Be Sued for Failing to Conduct Adequate Due Diligence?– You can be liable for failing to perform your due diligence as a professional of the financial sector. – You have an obligation of means not of result ( you have to be able to prove to 1/3 party that you

have done your most to perform your due diligence. • What to do when CDD fails?

– Close the account– Refuse to establish the relationship– Make a suspicious transactions report

Customer Due Diligence- Questions


Slide 35

CM(KYC + KYCB + KYT + KYE) = CDD

• Where:

KYC = Know Your Customer (Identification, Address, Location, etc as in mandate forms-customer profile)

KYCB = Know Your Customers' Business (Transaction Profile, Type & Nature of business, Sources of Funds, Risk Profile, etc as in KYC Assessment Form)

KYT = Know Your Customers’ Transaction (Transaction Monitoring)

KYE = Know Your Employee (Staff on-boarding practices should include background checks and a continuous monitoring system for fidelity)

CM = Continuous Monitoring (changes in customer behaviour through transaction monitoring and other activities)

CDD = Customer Due Diligence

• How does this fit into the FATF 40+9 recommendations?

• CDD will prevent:• MONEY LAUNDERING (using the 40 Recommendations)

• TERRORISM (Using the 9 Recommendations)

The CDD Mathematical Formula


Slide 36

• Full identification of customer and business entities, source of funds and wealth

• Development of transaction and activity profiles of each customer’s anticipated activity

• Definition and acceptance of the customer in the context of specific products and services

• Assessment and grading of risks that the customer or the account present

• Account and transaction monitoring based on the risks presented• Investigation and examination of unusual customer or account activity• Documentation of findings • Appropriate internal and external reporting• Auditing of the KYC system• Staff training about the importance of KYC• Records keeping

Main Elements of a KYC Program


Slide 37

Customer Due Diligence and Tipping Off• A risk exists that customers could be unintentionally tipped off when the

financial institution is seeking to perform its customer due diligence (CDD) obligations in these circumstances.

• The customer’s awareness of a possible STR or investigation could compromise future efforts to investigate the

Beneficial Owners: • Identifying the beneficial owners, including forming an understanding of the

ownership and control structure, and taking reasonable measures to verify the identity of such persons could pose a real problem for institutions.

• The types of measures that would be normally needed to satisfactorily perform this function would require identifying the natural persons with a controlling interest and identifying the natural persons who comprise the mind and management of the legal person or arrangement.

• Where the customer or the owner of the controlling interest is a public company that is subject to regulatory disclosure requirements, it is necessary to seek to identify and verify the identity of any shareholder of that company.

Major Areas of Verification Difficulty


Slide 38

Money Laundering in DNFI’s• Designated Non-Financial Institutions (DNFIs)-Defined

The MLPA 2004 defines DNFIs to include dealers in:– Jewelry, – Cars and Luxury Goods, – Chartered Accountants and Audit Firms, – Tax Consultants, – Clearing and Settlement Companies, – Legal Practitioners,– Supermarkets, – Hotels and – Casinos or – such other businesses as the Federal Ministry of Commerce and industry may

from – time to time designate.

• The FMC has also included the following business within the definition of DNFI’s:

– Dealers in precious metals and stones– Trust and company service providers, estate agents– Pool betting and lottery– Non-governmental Organisations


Slide 39

Money Laundering in DNFI’s-Activities for Mandatory Disclosure

• Activities for Mandatory Disclosure– Buying and selling of real estate– Managing client money, securities or other asset– Management of Bank, saving or securities accounts– Organisation of contributions for creation, operation or management of companies– Creation, operation or management of legal persons or arrangements and buying

and selling of business entities– Acting as a formation agent for legal persons– Acting as (or arranging for another person to act as) a director or secretary of a

company, a partner or partnership or similar position in relation to other legal persons

– Providing a registered office business address or accommodation, correspondence or administrative address for a company a partnership or any other legal person or arrangement

– Acting as (or arranging for another person to act as) a nominee shareholder for another person

– Acting as (or arranging for another person to act as) a trustee of an express trust – Opening of accounts wire transfers and currency exchange that are not mentioned

above.


Slide 40

Money Laundering Methods in DNFI’s

• Money launderers can move money out of one country by simply using their illicit funds to purchase high-valued products, and then exporting them at very low prices to a colluding foreign partner, who then sells them in the open market at their true value. Some of the money laundering methods include:

– Casinos and Other Businesses Associated– with Gambling– Dealers in High-Value Items– (Precious Metals, Jewelry, Art, etc.)– Travel Agencies– Vehicle Sellers– Gatekeepers: Notaries, Accountants,– Auditors, Lawyers– Investment and Commodity Advisors– Trust and Company Service Providers– Real Estate Industry– Manipulation of Prices in Import and– Export Transactions– Black Market Peso Exchange ACAMS Study Guide for the CAMS Certification Examination Fourth

Edition for more details


Slide 41

Money Laundering in DNFI

Under the MLPA 2004, the DNFIs have the following statutory obligations to perform: • Registration with FMC / SCUML• Identification/Verification of Customers• Record-Keeping• Establishment of robust Internal Control System (Plocies & procedures)• Rendition of statutory Reports (CTRs & STRs)• Appointment of Compliance Officers at senior level • Training and awareness creation among employees• Limitation to make or accept cash• Maintenance of Register for transactions of US $5,000 or equivalent• Mandatory Disclosure if they are engaged in some activities designated

by the FMC.


Slide 42

Questions DNFI’s Employees Must Ask

• When dealing with your customers, ask yourself these questions: – How well do I know this customer? – Does the transaction make sense considering the customer's

profile? – Do I fully understand the transaction the customer wishes to

complete? – Am I comfortable with this transaction? – Is this the usual method for conducting this type of business

transaction?

• If in doubt, there may be a possibility that your customer is using your institution to launder money


Slide 43

Challenges of Implementing AML/CFT in DNFI’s

• Structures Designed to Hide Beneficial Ownership• Shell Companies• Secrecy / Confidentiality• High Cost of Technology• Information Gathering (KYC)• Viable Controlling Authority• Senior Management Buy in• Cost of the implementation of AML/CFT


Slide 44

Suggested Solutions

• Successful collaboration between regulators and operators.

• Formation of a vibrant association of operators that are knowledgeable and willing to support the AML/CFT regime.

• Strong awareness campaign on the benefits of AML/CFT Compliance in DNFI

• Ensure senior management buy in

• Invest in Technology

• Review of legislation to address all identified loop holes


Slide 45

Collaboration With The FIU• DNFI’s should partner with the SCUML and the NFIU in identifying

the proceeds of crime• Every year Law Enforcement investigations are launched as a result

of information provided by DFNI’s to the FIU. • Law enforcement personnel consider this information vital to identify

suspected money launderers. • One single indicator does not prove that a suspicious transaction is

money laundering. A criminal or money launderer is typically identified from a combination of facts and events from various DFNI’s.

• When we are suspicious of activities that may be connected to money laundering, we should inform the NFIU and the SCUML or a law enforcement agency.

• Getting a second opinion can help decide whether the activity is in fact money laundering. The role of corporate Legal Counsel in deciding the legal implications is also key.


Slide 46

• The craze for various Targets

• KYC as a tool for business profitability.

• Use of Consultants to do KYC and its implications

• Refocusing responsibility to our Relationship Managers to ensure proper CDD.

• The use of the deferral process for documentation to balance CDD process.

• Pressure from the Top.

• Reporting Structure

• Support and tone at the Top.

• Relationship managers who visit customers to obtain information to update their customers KYC also achieve a continuous presence and share of the “customers’ wallet”

CDD Vs Business Objectives


Slide 47

Creating The Balance

• There are no Disclosure provisions under the local laws of most countries which while obligating financial institutions to report suspicious transactions does not also provide for their protection from criminal or civil liability when they file a report, even if their suspicions prove to be wrong.

• The issue of customer confidentiality which the financial institutions have sworn to protect.

• The abuse of information by officers of the Supervisory authorities.

• The urge for profitability by the financial institutions


Slide 48

Consequences of Non-compliance with AML/CFT• All DNFI’s must seek to comply with all laws and regulations applicable to

the conduct of its business or related activities.

• Failure to comply with anti-money laundering or anti-terrorism laws or regulations can expose DNFI’s to severe civil and criminal penalties, including loss of professional licensing and imprisonment of his principal officers

– Additional risks include but are not limited to reputational harm and impairment;

– monetary losses resulting from asset forfeiture actions, fraud and charge offs;

– substantial legal fees;

– delay or denial by The Federal Ministry of Commerce of applications submitted for mergers or acquisitions and other needs; and

– Loss of Foreign Direct Investments and offshore facilities from foreign business partners banks


Slide 49

Financial Cost of A DNFI Failure to Comply with AML/CFT

• Through the withdrawal of business by customers

• The termination of mutual assistance between businesses

• Claims against the DNFI’s,

• Investigation costs,

• Asset seizures and freezes,

• Default in settlement of bills

• The need to divert considerable management time and energy to resolving problems that arise

• Suffer fines, criminal liabilities and special penalties imposed by supervisors.

• Cost implications for its business

• Legal costs.

• Loss of profitable business;

• Liquidity problems through withdrawal of funds;


Slide 50

Conclusion

• The world is dynamic and criminals will continue to be inventive in ways to try to use financial institution to launder the proceeds of crime.

• Financial institutions and regulatory bodies need to constantly evaluate this risk and future risks by enhancing the compliance functions.

• Due to the achievement recorded by banks in reporting, focus have shifted to the DNFI’s.

• It is a matter of urgency for DNFI’s to institute self regulation as is the practice as in other jurisdictions so as to strengthen the culture of compliance through peer pressure.

• DNFI’s are encouraged to adopt all the measures put in place by the SCUML and other local regulatory and international best practice organisations in other to contribute their own efforts in combating money laundering and terrorist financing.

• The benefit for DNFI’s in collaborating with SCUML is enormous


Slide 51

The DNFI’sThe DNFI’s

The International The International CommunityCommunity

FMC/SCUML/FMC/SCUML/NFIU/EFCCNFIU/EFCC

The Compliance Challenge

DNFI’s and Compliance Authorities Like the SCUML must work DNFI’s and Compliance Authorities Like the SCUML must work together to combat ML and avoid International & reputation together to combat ML and avoid International & reputation

sanctions on the countrysanctions on the country


Slide 52

Questions & Questions & IssuesIssues


Slide 53

• The FMC should amend the Guideline issued to DNFI’s to include that all new registrations of businesses designated as DNFI’s should include evidence of a good AML/CFT program along with a completed checklist.

• A Bill to be sponsored to include registration of all Trade Unions and Associations of DNFI’s with the FMC.

• Trade Unions and Associations should be empowered to come up with codes of conduct of Guidelines to regulate its members compliance with the requirements of the FCM and the SCUML in the new AML/CFT regime.

• DNFI’s should form themselves into collaborative groups to jointly hire professionals to handle all AML/CFT issues in their institutions to avoid the huge costs involved.

• The FMC should include the following entities in the DNFI list for Nigeria:• Shipping Companies• Freight & Forwarding Agents• Destination Inspection Agents• Port Workers

Recommendations


Slide 54

•Pattison Boleigha•Bsc, MBA, FCA, AIT•Chief Compliance Officer•+234-8022924308•[email protected]; [email protected]

Thank You

combating monel laundering

Economy & Finance