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17 December 2012
The shadow of foreign anti-corruption and anti-money laundering enforcement actions continues to hang heavily over Nigeria. The past few months have witnessed new enforcement activity, all heavily linked to previous action taken in the United Kingdom and the United States and by the Organisation for Economic Cooperation and Development.
Following the significant fines collected by the US government in the wake of Foreign Corrupt Practices Act enforcement actions arising from the Bonny Island liquefied natural gas project, a number of Nigerian bodies have asked what Nigeria gained from the fines collected from the member companies of the TSKJ consortium involved in the affair. One Nigerian non-governmental organisation demanded that Nigeria seek "its own share" of the total fines paid (around $1.7 billion). In August 2011 the Socio-Economic Rights and Accountability Project (SERAP) wrote to the Economic and Financial Crimes Commission (EFCC) to ask the agency to ensure that multinational corporations pay commensurate damages to the Nigerian people for the foreign bribery committed in the country. Specifically, SERAP demanded that the EFCC:
"urgently take steps to seek adequate damages and compensation against multinational corporations who have been found guilty in the US of committing foreign bribery in Nigeria and to take all necessary steps to effectively bring to justice the Nigerian officials complicit in such cases of bribery."
It is unclear whether such demands produced any action from the EFCC or any other Nigerian agency. However, a number of companies, including Halliburton and Julius Berger, did reach settlements with the Nigerian government in response to allegations of impropriety related to the Bonny Island project and a number of prosecutions were commenced. The nature and terms of these settlements have not been publicly disclosed, but they are thought to have involved payments to the Nigerian government, deferred prosecution agreements and the imposition of compliance monitors (hitherto unknown in Nigeria). The settlements are thought to have been concluded during 2010. Like similar prosecutions in the past, the prosecutions appear to be progressing slowly.
In October 2012 reports appeared in the Nigerian press suggesting that the settlement sum paid by Julius Berger as part of its settlement with the government could not be accounted for, and that the Nigerian government had come under increased pressure from the US government to produce results in action taken against individuals alleged to have received the money that changed hands in relation to the project. The speculation was that the Nigerian government had, as prompted by groups such as SERAP, approached the US government with a view to receiving some of the fines paid, and that the US government's response was to require Nigeria to demonstrate that it was serious about combating corruption by producing results in the Nigerian enforcement proceedings. However, this story has now gone quiet.
Another recent development related to the conviction of James Ibori, a former governor of Delta State, by an English court earlier this year. In May 2012 a prominent Nigerian lawyer and businessman was reported to have been questioned by the EFCC in relation to allegations that he had been involved in the laundering of moneys stolen by Ibori and used to purchase an aircraft. It appeared that either the EFCC had no evidence to substantiate the allegations, or that the individual's political connections were such as to ensure that the allegations did not lead to criminal charges.
In recent weeks, things have changed dramatically. First, reports appeared in the press that charges were about to be brought against the individual, and copies of what were claimed to be the charge sheet appeared in the media. On the day that the charges were to be formally brought, the Lagos State High Court was informed that the accused had been admitted to hospital and so could not attend court. However, at the same time, the individual obtained an order from a Federal High Court judge restraining the EFCC from continuing with the prosecution pending the determination of a judicial review action. Such action had been commenced in the Federal High Court to question the propriety of the charges filed by the EFCC in the Lagos State High Court.
The EFCC is reported to have attempted to arrest the individual at the hospital. This attempt was rebuffed by the hospital authorities, which maintained that he was too ill to appear in court and could not be moved. It has been reported that the EFCC has now stationed officers at the hospital to ensure that the individual can be apprehended.
This recent drama strengthens the impression that Nigeria is unable – or unwilling – to enforce its anti-corruption and anti-money laundering laws, and that steps initiated outside the country continue to be the most effective action in the enforcement arena.
This impression is further reinforced by recent efforts by the Nigerian authorities to enforce the anti-money laundering legislation affecting financial institutions and designated non-financial professions and businesses. In August 2012 the Central Bank of Nigeria (CBN) issued a circular to banks and other financial institutions directing that, as part of their 'know your client' procedures, all banks and financial institutions had to obtain evidence from designated non-financial professions and businesses that they were registered with a special government anti-money laundering unit. The circular used the term 'designated non-financial professions and businesses', which comes from the Financial Action Task Force's (FATF) 2008 anti-money laundering guidance. The term was defined to include:
"dealers in jewellery, cars and luxury goods, chartered accounts [sic], audit firms, tax consultants, clearing and settlement companies, legal practitioners, hotels, casinos, supermarkets, or such other businesses as the Federal Ministry of Commerce may from time to time designate."
The 'know your client' regulations must be implemented for existing customers by February 2 2013, giving existing designated non-financial professions and businesses customers six months to register with the special unit.
Unfortunately, a number of banks appear to have misunderstood the circular and are demanding that all new customers, whether or not they fall within the CBN's definition of designated non-financial professions and businesses, provide evidence of registration with the special control unit. Further, there appears to be no statutory justification for the CBN directive, which purports to rely on the Money Laundering Act 2011. First, the act does not mention designated non-financial professions and businesses, but continues to reference designated non-financial institutions, which was the FATF term that preceded designated non-financial professions and businesses, and which included all the activities set out above. Second, the statute does not appear to empower the special control unit to require all designated non-financial institutions to register with it. The CBN circular appears to accept the existing FATF language with no regard for the actual position of the Nigerian law. The legal profession is taking a keen interest in developments and, if the CBN does not withdraw or amend the circular before January 31 2013, litigation may follow in order to prevent the CBN from effectively preventing lawyers who refuse to register from receiving banking services.
For further information on this topic please contact Babajide Oladipo Ogundipe at Sofunde Osakwe Ogundipe & Belgore by telephone (+234 1 462 2502), fax (+234 1 462 2501) or email (firstname.lastname@example.org).
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