MONEY LAUNDERING CONTROLS IN NIGERIA

UNCLAS SECTION 01 OF 05 ABUJA 002542

SIPDIS


SENSITIVE


TREASURY FOR DEP.SECRETARY'S OFFICE AND FINCEN


E.O. 12958: N/A
TAGS: KCRM EFIN SNAR NI
SUBJECT: MONEY LAUNDERING CONTROLS IN NIGERIA

REF: A. A) ABUJA 2521 B) STATE 170551

B. C) ABUJA 2416 D) ABUJA 2118


SENSITIVE BUT UNCLASSIFIED -- PROTECT ACCORDINGLY.


1.(U) The following assessment of Nigeria,s money laundering
control regime is provided for Washington end-users as a
reference guide and draws on recent Emboffs, discussions
with various GON law enforcement and Central Bank officials
responsible for money laundering and banking controls.


The Landscape
--------------


2.(SBU) There is no reliable estimate of the amount of
criminal money laundered in or through Nigeria. Canvassing
of senior GON law enforcement and Central Bank officials has
produced general agreement that non-drug criminal proceeds
account for at least half of Nigeria,s money laundering
program, if not more. All agree that no one source of
criminal activity can match the strength of the drug trade,
but all agree that these sources are many and include: public
corruption, "419" advance-fee fraud, trafficking in women and
children, and the illegal arms trade. This conclusion seems
sound given the apparent magnitude of the proceeds of
corruption alone, including the billions reportedly stolen
from public coffers under military rule. Only some in
Nigeria,s National Drug Law Enforcement Agency (NDLEA)
insist that drug proceeds account for the bulk of money
laundering here.


Legal Structure
--------------


3.(SBU) Nigeria,s legal tool for dealing with money
laundering lies solely within a 1995 decree signed into force
by former military dictator Sani Abacha. No law preceded it
and there has been no new legislation to date (though some
revisions are planned, as reported below). This law sought
to bring Nigeria into conformity with the 1988 UN Convention
on Narcotics and Psychotropic Substances (aka the Vienna Drug
Convention) by outlawing drug money laundering. In that
regard, the law seems to address adequately the laundering of
all proceeds from drug trafficking. Both the NDLEA and the
Central Bank of Nigeria (CBN) are identified as the competent
authorities charged with monitoring individuals, bank
deposits in excess of 500,000 naira (equivalent to USD 4,460)
or corporate entities, deposits in excess of two million
naira (equivalent to USD 17,800). The NDLEA, however, is
given the lead in investigating money laundering offenses as
it is granted sweeping powers to: place any bank account
under surveillance; tap any telephone line; access any
computer system; and obtain any private communications of
financial or commercial records. The CBN is not given these
investigative powers.


4(SBU) The law contains adequate provisions for the
prosecution of individuals directly involved or abetting the
laundering of drug proceeds, including bank officials and
even entire corporate entities. Tough penalties of
imprisonment up to 25 years are prescribed for convicted
offenders. The responsibility of proving the criminality of
proceeds, however, is not clearly defined -- whether the
prosecution,s to prove through investigation or the
defendant,s to show that the proceeds were of a legitimate
nature.


GON Authorities
--------------


5.(SBU) As noted above, the NDLEA is clearly identified as
the lead agency charged with investigating and prosecuting
money laundering. The CBN is identified as a cooperating
agency in monitoring banks, though criminal investigative
powers are reserved for the NDLEA. As of this writing, the
NDLEA has a Money Laundering Directorate (upgraded earlier
this year from a former sub-entity under the NDLEA,s
Investigations Directorate) consisting of the Assistant
Director heading this office and a staff of 15, of which 10
are investigators. This Directorate has no working fax or
international communications capability; communications to
Directorate staff requires passing a message through the
NDLEA Headquarters numbers or using the Assistant Director,s
personal cellular phone. The Directorate has no vehicles and
has not yet prosecuted any money laundering case. Though the
NDLEA has the legal authority to demand regular bank
reporting of deposits above the 500,000 naira threshold and
to demand bank records in the pursuit of a specific
investigation, it lacks the resources to store and analyze
this information.


6.(SBU) The CBN, also identified by the 1995 law as a
competent authority, houses a small Money Laundering
Surveillance Unit (MLSU) in Lagos. This unit is charged with
receiving reports from Nigeria,s 50-plus banks on deposits
over the 500,000 naira threshold and licensing the banks,
operations, including the selection of their senior
officials. The CBN seems to have much better relationships
with the banks it regulates, and it can conduct
administrative investigations but it does not have arrest or
prosecution powers. The CBN,s Deputy Governor, in a recent
discussion with Emboffs (ref a),also cited the existence in
Abuja of a CBN "International Financial Transactions
Surveillance Office (IFTSO)" that seeks to coordinate
inter-agency monitoring of potential international money
laundering through Nigeria, though the output of this office
is unclear. Indeed, given the CBN,s lack of law enforcement
jurisdiction, it is unlikely that such a body could produce
criminal investigations and prosecutions.


7.(SBU) Through its close interaction with Nigeria,s banks,
the CBN seems to understand the fundamentals of money
laundering better than the NDLEA, but it lacks the law
enforcement power endowed the NDLEA to demand bank records.
In a simple but poignant analysis of this dueling authority,
one official noted that "the NDLEA has the brawn and the CBN
the brain, but the two don,t work well together."


Definitional Differences Mask Deficiencies
--------------


8.(SBU) In talks with Nigerian law enforcement officials,
actions often described as pertaining to "money laundering"
are in fact the seizure of cash assets directly related to
crimes. Under various Nigerian laws -- e.g. the 1995 "419"
advance-fee fraud law -- physical and cash assets seized by
law enforcement personnel through the course of enforcement
action are subject to forfeiture upon conviction. When
pressed for elaboration, however, these officials admit that
few or no additional or separate criminal cases are opened
into the movement of criminal proceeds; i.e. the
investigation of bank records or the investigation of
individuals abetting the placement of criminal funds. When
defendants are prosecuted for organized crime activities --
drug trafficking, 419 fraud, car theft -- money laundering is
seldom if ever added as a charge for prosecution. In a
recent meeting with Post's RNLEO, the Director General of the
West African Institute for Financial and Economic Management
(WAIFEM),a former senior CBN official, stated that there has
not been one money laundering case prosecuted in Nigeria.
While this statement remains unverified, it highlights the
anemic law enforcement response to Nigeria,s considerable
money laundering problem.


The FATF,s Naming of Nigeria as a "NCCT"
--------------


9.(SBU) In declaring Nigeria a "Non-Cooperating Country or
Territory (NCCT)," the Africa-Middle East Review Group
(AMERG) of the Financial Action Task Force (FATF) pointed to
the lack of the a response from the GON to 12 questions posed
in a formal letter from the AMERG as part of the AMERG,s
review. The FATF report also cites several apparent serious
deficiencies in Nigeria,s money laundering control regime.
Unfortunately, the GON seems to have focussed on its failure
to respond to the AMERG,s questionnaire in a timely fashion
as the cause of its NCCT status, while not paying due
attention to the substantive concerns of the AMERG.


10.(SBU) In the FATF,s formal NCCT report, Nigeria was
faulted for deficiencies in the areas of the FATF,s NCCT
criteria: 5, 10, 17, 19, and 24. (the report and the entire
list of NCCT criteria can be found on the FATF,s website --
www.oecd.org/fatf) These criteria, in order, are: a)
inadequate rules for the licensing and creation of financial
institutions, including assessing the backgrounds of managers
and beneficial owners; b) excessive secrecy provisions; c)
lack of identification of the beneficial owner(s) of legal
and business entities; d) administrative obstacles to
international cooperation; and e) lack of an exchange of
mutual legal assistance.


11.(SBU) Clearly some of these cited deficiencies are the
result of the GON,s failure to respond to the FATF,s
questionnaire. The perceived failure of the GON to install
an adequate structure to screen bank managers, beneficial
owners and account holders may not take into account some
provisions under Nigerian law and within CBN regulations.


12.(SBU) On the other hand, the FATF review strangely omits
any failure of Nigeria to comply with FATF recommendation
number 4 -- "extending the offense of drug money laundering
to one based on serious offenses." Neither does the review
note that fails to meet NCCT criterion number 29 --"absence
of a financial intelligence unit or of an equivalent
mechanism."




No Full Coverage of Predicate Offenses
--------------


13.(SBU) Nigeria lacks a money laundering law that covers the
full range of money laundering derived from "serious
offenses" (FATF Recommendation number 4). Most observers
agree that the 1995 law should be amended or superceded by
legislation that allows for additional predicate offenses.
There is a move afoot, led by the NDLEA, to expand the 1995
law to cover a number of specific offenses including those
mentioned in para 2. Clearly this is essential for an
effective anti-money laundering effort in Nigeria and we
should support it. In promoting this legislative reform,
however, the NDLEA wishes to maintain its supremacy in
coordinating all of Nigeria,s anti-money laundering efforts.
This would essentially put the NDLEA into a much broader
legal mandate on criminal investigations -- cutting across
jurisdictions of the Police, Central Bank, and the
Anti-Corruption Commission. We do not see this as practical
or advisable. The NDLEA is struggling to fulfill its current
mandate as a drug enforcement agency; it does not have the
resources to carry out effectively such a broad mandate and
scope of responsibility. We are encouraging the Office of
the Presidency to create a new centralized unit to fulfill
this function, such as the proposed Financial Crimes
Commission (see below).


No Financial Intelligence Unit or Central Body
-------------- -


14.(SBU) Closely related to this deficiency is the need to
replace the NDLEA with a centralized government unit that can
coordinate government-wide anti-money laundering activities,
serve as a clearinghouse for intelligence, and serve as a
central interface for international queries on money
laundering investigations. Highlighting all of these
deficiencies is our recent request, based on President
Bush,s new Executive Order of September 23 seeking to freeze
the assets of suspected terrorists, to screen accounts
connected with 27 individuals identified by the USG as
terrorists. The Government of Nigeria is not able to provide
a full response, as there is no one centralized database on
money laundering.


GON Commitment: A new Financial Crimes Commission
-------------- --------------


15.(SBU) In part responding to international concern over
Nigeria,s money laundering problem, President Obasanjo is
currently planning the creation of a Financial Crimes
Commission (FCC) that would centralize all law enforcement
and policy coordination against myriad financial crimes in
Nigeria. This proposal originated in the office of the
President,s Special Advisor for Drugs and Financial Crimes
and sought to create an agency akin to the NDLEA that would
conduct a more aggressive and better coordinated law
enforcement effort against financial fraud and money
laundering. The proposed FCC apparently would reside in the
Office of the President and would have full investigative and
prosecutorial powers. It would be staffed by officers on
detail from the Police, NDLEA, CBN, and other security
agencies. We see this as the best option for Nigeria,s
addressing the FATF,s concerns -- offering an agency that
could centralize the GON,s anti-money laundering campaign
while housing a "FIU" to serve as a clearinghouse for money
laundering intelligence in part to improve cooperation with
the international community. In an October 8 meeting with
the Ambassador, President Obasanjo,s National Security
Advisor stated that the FCC proposal would soon be sent to
the National Assembly for approval; he expressed confidence
that the FCC would be created by the end of the year.


Jeter