NIGERIA: 2007-2008 INTERNATIONAL NARCOTICS CONTROL STRATEGY

UNCLAS ABUJA 000236

SIPDIS

SIPDIS

STATE FOR INL/AAE
JUSTICE FOR OIA, AFMLS, AND NDDS
TREASURY FOR FINCEN
DEA FOR OE, OI AND OC
LAGOS FOR DEA AND FBI

E.O. 12958: N/A
TAGS: EFIN SNAR KTFN KCRM NI
SUBJECT: NIGERIA: 2007-2008 INTERNATIONAL NARCOTICS CONTROL STRATEGY
REPORT (INCSR) PART II, MONEY LAUNDERING AND FINANCIAL CRIMES

REF: 07 STATE 138226


1. Although the Federal Republic of Nigeria is not an offshore
financial center, Nigeria's large economy is a hub for the
trafficking narcotics and other contraband. Nigeria is also a center
of criminal financial activity, reportedly for the entire continent.
Individuals and criminal organizations have taken advantage of the
country's location, weak laws, systemic corruption, lack of
enforcement, and poor socio-economic conditions to strengthen their
ability to perpetrate financial crimes at home and abroad. Nigerian
criminal organizations are adept at devising new ways of subverting
international and domestic law enforcement efforts and evading
detection. Their success in avoiding detection and prosecution has
led to an increase in many types of financial crimes, including bank
fraud, real estate fraud, and identity theft. In addition, advance
fee fraud, also referred to internationally as "419" fraud, in
reference to the fraud section in Nigeria's criminal code, is a
lucrative financial crime that generates hundreds of millions of
illicit dollars annually for criminals. Despite years of government
effort to counter rampant crime and corruption, Nigeria continues to
be plagued by crime. The Economic and Financial Crimes Commission
(EFCC) along with the Independent Corrupt Practices Commission
(ICPC) and the improvements in training qualified prosecutors for
Nigerian courts yielded some successes in 2006 and 2007.

2. In June 2001, the Financial Action Task Force (FATF) placed
Nigeria on its list of non-cooperative countries and territories
(NCCT). In December 2002, Nigeria enacted two pieces of legislation
to remedy the deficiencies. It passed an amendment to the 1995 Money
Laundering Act extending the scope of the law to cover the proceeds
of all crimes. The Government of Nigeria (GON) also passed an
amendment to the 1991 Banking and Other Financial Institutions
(BOFI) Act expanding coverage of the law to stock brokerage firms
and foreign currency exchange facilities, giving the Central Bank of
Nigeria (CBN) greater power to deny bank licenses, and allowing the
CBN to freeze suspicious accounts. In 2004, the Economic and
Financial Crimes Commission (Establishment) Act, established the
Economic and Financial Crimes Commission (EFCC),the body that
investigates and prosecutes money laundering and other financial
crimes, and coordinates information sharing. The Economic and
Financial Crimes Commission Act also criminalizes the financing of
terrorism and participation in terrorism. Violation of the Act
carries a penalty of up to life imprisonment. In May 2006, the FATF
visited Nigeria to conduct an evaluation of the revisions made to
the government's AML regime. FATF recognized that the GON had
remedied the major deficiencies in its anti-money laundering regime
and removed Nigeria from the NCCT list.


3. Since its inception in April 2004, the EFCC has had the mandate
to investigate and prosecute financial crime. It has recovered or
seized assets from people guilty of fraud both inside and outside of
Nigeria, including a syndicate that included highly-placed
government officials who were defrauding the Federal Inland Revenue
Service (FIRS). Several influential individuals have been arrested
and are currently awaiting trial. EFCC members also embarked upon a
campaign to identify and prosecute former officials. Some EFCC
members have been killed for their efforts to expose and enforce the
laws against corruption and financial crime.


4. The National Assembly passed the Money Laundering (Prohibition)
Act (2004),which applies to the proceeds of all financial crimes.
Nigeria also employs the 1995 Foreign Exchange (Monetary and
Miscellaneous Provisions) Act. The legislation gives the CBN
greater power to deny bank licenses and freeze suspicious accounts.
This legislation also strengthens financial institutions by
requiring more stringent identification of accounts, removing a
threshold for suspicious transactions, and lengthening the period
for retention of records. Money laundering controls apply to banks
and other financial institutions, including stock brokerages and
currency exchange house, as well as designated non-financial
businesses and professions (DNFBPs). These institutions include
dealers in jewelry, cars and luxury goods, chartered accountants,
audit firms, tax consultants, clearing and settlement companies,
legal practitioners, hotels, casinos, supermarkets and other
businesses that the Federal Ministry of Commerce designates as
obliged. The EFCC Act provides safe-harbor provisions to obliged
entities. Nigeria has no secrecy laws that prevent the disclosure of
client and ownership information by domestic financial services
companies to bank regulatory and law enforcement authorities.


5. The Special Control Unit against Money Laundering (SCUML),is a
special unit in the Ministry of Commerce which monitors, supervises,
and regulates the activities of all DNFBPs. Oversight, however, has
reportedly not been very rigorous or effective. Amendments to the
2004 EFCC Act gave the EFCC the authority to investigate and

prosecute money laundering, enlarged the number of EFCC board
members, enabled EFCC police members to bear arms, and banned
interim court appeals that hinder the trial court process.


6. The Nigerian Financial Intelligence Unit (NFIU, established in
2005),derives its powers from the Money Laundering (Prohibition)
Act of 2004 and the Economic and Financial Crimes Commission Act of

2004. Housed within the EFCC, it is the central agency for the
collection, analysis and dissemination of information on money
laundering and terrorism financing. The NFIU is a significant
component of the EFCC, complementing the EFCC's directorate of
investigations. It does not carry out its own investigations. Legal
provisions give the NFIU power to receive suspicious transaction
reports (STRs) submitted by financial institutions and designated
non-financial businesses and professions. The NFIU also receives
reports involving the transfer to or from a foreign country of funds
or securities exceeding $10,000 in value. All financial institutions
and designated non financial institutions are required by law to
furnish the NFIU with details of their financial transactions.


7. The NFIU fulfills a crucial role in receiving and analyzing STRs.
As a result of the NFIU's activities, banks have improved both their
timeliness and quality in filing STRs reported to the NFIU. The NFIU
has access to records and databanks of all government and financial
institutions, and it has entered into memoranda of understandings
(MOUs) on information sharing with several other FIUs. In 2006, the
NFIU received 3,772,843 currency transaction reports (CTRs). Out of
the 47 cases the NFIU developed, 12 investigations are ongoing, and
the NFIU disseminated 18 and placed 10 under monitoring. The NFIU
closed seven in-house cases. Because the disseminated cases are
still under investigation, no formal feedback came from stakeholders
for either 2006 or 2007. There were 73 money laundering convictions
from January 2005 through October 2006. The trial court process has
improved after several experienced judges received assignations
specifically to handle EFCC cases; encouraged, EFCC officials have
brought more cases to court. Additional information for 2007 is not
available.


8. Due to the activities of the EFCC, the enactment of new laws, and
a public enlightenment campaign, crimes such as bank fraud and
counterfeiting have been reported and prosecuted, sometimes for the
first time. The EFCC is the agency with the most capacity to
effectively investigate and prosecute financial crimes, including
money laundering and terrorist financing. The EFCC coordinates
agencies' efforts in pursuing financial crime investigations. In
addition to the EFCC, the National Drug Law Enforcement Agency
(NDLEA),the Independent Corrupt Practices Commission (ICPC),and
the Criminal Investigation Department of the Nigeria Police Force
(NPF/CID) are empowered to investigate financial crimes. Reportedly,
the Nigerian Police Force is incapable of handling financial crimes
because of alleged corruption and poor institutional capacity.


9. In 2007, the EFCC marked significant successes in combating
financial crime. Through EFCC efforts, a former inspector general of
police was arrested and prosecuted for financial crimes valued at
over $13 million. The GON seized his assets and froze his bank
accounts. Currently serving a prison sentence, he still faces 92
charges of money laundering and official corruption. Five former
state governors are under investigation for money laundering. The
EFCC is working with the FBI on a case involving a group of money
brokers laundering money through banks in the United States. In
2006, the EFCC received a surge of petitions and leads provided by
whistleblowers. Reportedly, many of these alleged abuses of office
involved politically exposed persons (PEPs) and/or their
collaborators. As the period coincided with preparations for the
general elections in 2007, some of the investigations politically
charged. The Legal and Prosecution Unit, responsible for the
prosecution of all cases, is examining 437 of these cases for
possible prosecution. The Unit prosecuted several high profile cases
involving powerful and well connected persons and their associates.



10. The EFCC filed 588 cases between 2006 and mid-2007. In 2007,
the Legal Unit had obtained 53 convictions by mid-year.
Investigations led to the recovery of approximately 30 Billion Naira
(approximately $259 million). Suspects returned several billion when
it became apparent that the Commission was about to expose the
abuses. Some governors were arrested for laundering their state
government funds. The Executive Chairman, appearing before the
Senate to present a report of the Commission's activQies, revealed
allegations of corrupt practices and abuse of office reportedly
associated with 31 out of the 36 then serving Governors. Some of
these Governors had a constitutional immunity guaranteed that
expired in May 2007. They are now standing trial in various courts

for various offenses including money laundering.


11. While the NDLEA has the authority to handle narcotics-related
cases, it does not have adequate resources to trace, seize, and
freeze assets. Cases of this nature are usually referred to the
EFCC. Depending on the nature of the case, the tracing, seizing, and
freezing of assets may be executed by the EFCC, NDLEA, NPF, or the
ICPC. The proceeds from seizures and forfeitures pass to the federal
government, and the GON uses a portion of the recovered sums to
provide restitution to the victims of the criminal acts. The banking
community is cooperating with law enforcement to trace funds and
seize or freeze bank accounts. Since its establishment the EFCC has
reportedly seized assets worth $5 billion.


12. Section 20 of the 2004 EFCC Act provides for the forfeiture of
assets and properties to the federal government after a money
laundering conviction. Foreign assets are also subject to
forfeiture. The properties subject to forfeiture are set forth in
EFCC Act Sections 24-26, and include any real or personal property
representing the gross receipts a person obtains directly as a
result of the violation of the act, or traceable to such receipts.
They also include any property representing the proceeds of an
offense under the laws of a foreign country within which the offense
or activity would be punishable for more than one year. All means of
conveyance, including aircraft, vehicles, or vessels used or
intended to be used to transport or facilitate the transportation,
sale, receipt, possession or concealment of the economic or
financial crimes is likewise subject to forfeiture. Forfeiture is
possible only under criminal law. There is no comparable law
governing civil forfeiture, but the EFCC has established a committee
addressing this deficiency by drafting legislation.


13. The EFCC has the authority to prevent the use of charitable and
nonprofit entities as money laundering vehicles, although it has not
reported any cases involving these entities.


14. Nigerian criminals initially made the advance fee fraud scheme
infamous. Today, nationals of many African countries and from a
variety of countries around the world also perpetrate advance fee
fraud. While there are many variations, the main goal of 419 frauds
is to deceive victims into the payment of a fee by persuading them
that they will receive a very large benefit in return, or by
persuading them to pay fees to "rescue" or help a newly-made
"friend" in some sort of alleged distress. A majority of these
schemes end after the victims have suffered monetary losses, but
some have also involved kidnapping, and/or murder. Perpetrators use
the internet to target businesses and individuals around the world.


15. The Government of Nigeria continued throughout 2007 with its
effort to eradicate 419 crimes. GON efforts previously led to the
successful prosecution and conviction of a number of them, but the
problem is far from over. Following the promulgation of the Advance
Fee Fraud Act of 2006 the EFCC held an interactive session with
stakeholders. The EFCC also briefed cyber cafe operators, business
centers, internet service providers, telecommunication companies and
banks on their responsibilities under the new law. One of the
requirements is to register their businesses with the EFCC. To keep
pace with the sophistication with which the fraudsters operate, the
EFCC deployed interception technology to enhance the investigation
of crimes particularly those committed through cyberspace. The
Advance Fee Fraud Unit burst several employment, credit card, and
e-payment scams, shut down several domains and cloned websites,
raided residential houses, seized computers, and blocked fraudulent
e-mail addresses, telephone lines and faxes associated with cyber
crimes. Although the EFCC has tried to combat 419-related cyber
crimes, there have been few recorded successes as a result of its
cyber crime initiatives.


16. The EFCC's success in investigating and prosecuting financial
crime, especially high-level corruption, has brought it both the
support of the international community and the ire of corrupt
officials. In December 2007, the Government of Nigeria reassigned
the EFCC Chairman, the country's highest ranking and most publicly
visible anti-corruption official, Nuhu Ribadu, to a year-long
training course. This reassignment coincides with the high-profile
trials of several officials, including seven former governors.
Ribadu has served as the face of Nigerian AML/CTF efforts, and his
removal could undermine the perception of the GON's commitment to
fighting corruption. The reassignment of Ribadu may also impact the
NFIU's autonomy and its ability to act independently.


17. Nigeria criminalized the financing of terrorism under the
Economic and Financial Crimes Commission (Establishment) Act of

2004. The EFCC has authority under the act to identify, freeze,

seize, and forfeit terrorist finance-related assets. Nigerian
financial institutions periodically receive the UNSCR 1267 Sanctions
Committee's consolidated list, but have not yet detected a case of
terrorist financing laundered through the banking system.


18. Nigeria is a party to the 1988 UN Drug Convention, the UN
Convention against Transnational Organized Crime, the UN
International Convention for the Suppression of the Financing of
Terrorism, and the UN Convention against Corruption. Nigeria has
also ratified the African Union Convention on Preventing and
Combating Corruption. Nigeria ranks 147 out of 180 countries in
Transparency International's 2007 Corruption Perceptions Index.


19. The United States and Nigeria have a Mutual Legal Assistance
Treaty, which entered into force in January 2003. Nigeria has signed
memoranda of understanding with Russia, Iran, India, Pakistan and
Uganda to facilitate cooperation in the fight against narcotics
trafficking and money laundering. Nigeria has also signed bilateral
agreements for exchange of information on money laundering with
South Africa, the United Kingdom, and all Commonwealth and Economic
Community of West African States countries. The EFCC worked with
foreign partners to raid notorious cyber cafes to curtail the
activities of the 419 fraudsters. The EFCC collaborated with the
United States Postal Services and the UK Serious and Organized Crime
Agency (SOCA) to intercept over 15,000 counterfeit checks. A
collaboration scheme between the EFCC, the United States, the UK and
the Dutch was constituted to more effectively address the problem of
international fraud including identity theft and e-marketing fraud.
Nigeria is a member of the Intergovernmental Task Force against
Money Laundering in West Africa (GIABA),a FATF-style regional body.
GIABA's Director General holds the Directorship General. The NFIU is
a member of the Egmont Group.


20. The Government of Nigeria continued to pursue money laundering
both within and outside the country in 2007. Nigeria should continue
to pursue its anti-corruption program and support both the ICPC and
EFCC in their mandates to investigate and prosecute corrupt
government officials and individuals. Nigeria should take steps to
ensure the autonomy and independence of those entities. The Special
Control Unit Against Money Laundering (SCUML) should strengthen its
supervision of designated non-financial businesses and professions
by transferring supervisory authority from the Ministry of Commerce.
The GON should continue to engage with the FATF and other relevant
international organizations to identify and eliminate remaining
anti-money laundering deficiencies. Nigeria should ensure that the
Police Force has the capacity to function as an investigative
partner in financial crime cases, as well as work to eradicate any
corruption that might exist within that and other law enforcement
bodies. Nigeria should continue to support the EFCC's efforts,
including drafting a law for civil forfeiture provisions to the
AML/CTF framework, and pursuing those who commit financial crime,
regardless of political status. Nigeria should continue towards
implementation of a comprehensive AML regime that promotes respect
the rule of law; willingly shares information with foreign
regulatory and law enforcement agencies; is capable of thwarting
money laundering and terrorist financing; and maintains compliance
with all relevant international standards.

SANDERS