NIGERIA: BANKS NEED HELP TO IMPLEMENT MONEY LAUNDERING LAW

UNCLAS SECTION 01 OF 02 LAGOS 000448

SENSITIVE
SIPDIS

STATE PASS OPIC FOR DERB, ZHAN, MSTUCKART, JEDWARDS
STATE PASS TDA FOR LFITTS, PMARIN
STATE PASS USAID FOR NFREEMAN, GBERTOLIN, GWEYNAND, SLAWAETZ
STATE PASS EXIM FOR JRICHTER, KJACKSON, KJANIK
DOC FOR 3317/ITA/OA/KBURRESS
DOC FOR 3310/USFC/OIO/ANESA/DHARRIS
DOC FOR USPTO-PAUL SALMON
TREASURY FOR DFIELDS, AIERONIMO, RHALL, DPETERS
TRANSPORTATION FOR KSAMPLE

E.O. 12958: N/A
TAGS: EFIN EINV ECON EAID PGOV NI
SUBJECT: NIGERIA: BANKS NEED HELP TO IMPLEMENT MONEY LAUNDERING LAW

Ref: A) Lagos 409


1. (SBU) Summary: The Money Laundering (Prohibition) Act (MLA) 2004
sets strict reporting requirements on financial institutions in an
effort to counter money laundering in Nigeria. Local banks
established the Committee of Chief Compliance Officers of Banks in
Nigeria (CCCOBIN) in 2007 as an industry self-help measure to
improve compliance to the MLA. However, the current regulatory
system does not provide effective protection for whistleblowers, and
banks are in need of technical and human capacity development
assistance. Some banks are allegedly complicit in the transaction
of illicit moneys. End Summary.

Law Regulates Financial Transaction
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2. (U) The Money Laundering (Prohibition) Act 2004 (MLA) sets strict
reporting requirements on Nigerian financial institutions for
transactions of large sums. The Economic and Financial Crimes
Commission (EFCC) established the Nigerian Financial Intelligence
Unit (NFIU) in 2004 as an enforcement agency for the MLA. The MLA
requires reporting to the NFIU within seven days any single
transaction over USD 4,200 by an individual, USD 42,000 by a
corporate body, and foreign transfer of funds exceeding USD 10,000.
There is a fine of USD 8,400 per day past the seven day window for
failing to comply with the reporting requirement. The MLA also
allows financial institutions, when suspicious about the legality of
a transaction, to seek information from the customer about the
origin, destination, and purpose of the transaction, and the
identity of the beneficiary. Regulatory authorities can place bank
accounts involved in suspicious transactions under surveillance; and
banks cannot invoke customer confidentiality as a ground for
objection. To counter the laundering of illicit funds through
businesses, the MLA now requires businesses to report their returns
starting six months after incorporation.

CCCOBIN Promotes Compliance
--------------


3. (U) In 2007, compliance officers from all 24 Nigerian commercial
banks voluntarily came together to create the Committee of Chief
Compliance Officers of Banks in Nigeria (CCCOBIN) as an industry
self-help measure to better implement the MLA. Sadiq Bello, CCCOBIN
Chairman/ General Manager of Guaranty Trust Bank, and Pattison
Boleigha, CCCOBIN Secretary/ General Manager of Access Bank, told
EconOffs October 15 that the Committee meets monthly to discuss
policy developments and ways to improve internal compliance
capacity. One key achievement was the establishment of a common
platform for the opening of new accounts.

Banks Lack Capabilities to Track
Funds Outside of Financial System
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4. (SBU) The enforcement of the MLA has driven illicit funds out of
the formal financial system and into less formal and less regulated
non-financial areas such as real estate development, hospitality
businesses, and casinos, or out of the country altogether. Bello
and Boleigha said local banks currently lack the technical and human
capacity to counter money-laundering activities and to trace the
origins of illicit funds. For instance, banks could not trace the
cash that changed hands in the Nigeria Delta from illegal oil
bunkering, which could be laundered in legitimate businesses or be
used abroad to purchase arms for the Delta conflict. According to
Boleigha, the high cost of purchasing monitoring software
discourages financial institutions from upgrading existing systems
or procuring new ones. He also said banks lack appropriate resource
materials to train their staff on how to identify suspicious
transactions, obtain information from customers, and file timely and
accurate reports in accordance with the MLA's requirements.
According to media report, on October 28, EFCC Chairman Farida
Waziri said that while banks have been compliant with the NFIU's
reporting requirements, they have submitted incomplete reports in

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most cases. Bello and Boleigha requested USG assistance in training
compliance officers and providing training resource materials.

No Protection for Whistle Blowing
--------------


5. (SBU) The CCCOBIN executives expressed concerns about the lack of
protection for whistleblowers in the industry. Bello recounted
stories of customers contacting and threatening bank management as
little as one day after they were reported to the EFCC. While the
law provides for the punishment of EFCC officials who leak sensitive
reporting information, no mechanism has been set in place to protect
bankers from customers who trace the origin of their arrest or
indictment, Bello emphasized. Boleigha said banks are torn between
customer satisfaction and following compliance procedures because
most customers do not understand or appreciate the need for extra
paperwork and documentation. To support the banks, the CBN and NFIU
could issue public directives clearly listing laws and regulations,
proffered Boleigha.

Trawlers Association Says Banks "Complicit" in Piracy
-------------- --------------


6. (SBU) Margaret Orakwusi, President of the Nigerian Trawlers
Owners Association, told EconOff October 28 that the banks either
were ineffective in countering or directly complicit in the
facilitation of illicit money transfers through the system. (Note:
Nigerian fishing trawlers have been hard hit by piracy, and the
Trawlers Association purportedly had made ransom payments in recent
months. (Ref A) End Note) Orakwusi said ransom payments (sums
undisclosed) made in several separate piracy incidents were
deposited in cash into accounts at three large local banks.
According to Orakwusi, the bank tellers did not inquire as to the
source and purpose of the large deposit as required by the MLA. She
had also heard stories of young bankers going directly to the
militants and pirates to collect deposit money. She contended that
bankers are under intense pressure to increase their deposit
portfolios, and, as a result, may be complicit in handling illicit
monies.


7. (SBU) Comment: Enforcement mechanisms, including safeguards for
whistleblowers, are missing in the Nigerian anti-money laundering
framework. Lacking real support from the Nigerian regulatory
authorities, local commercial banks need technical and human
capacity assistance to improve and institutionalize their internal
compliance systems. Despite the MLA, our contacts suspect that
money from illicit sources may be deposited in or transacted through
most, if not all, the 24 banks in Nigeria's system. The Federal
Bureau of Investigation Legal Attache, based in ConGen Lagos, is
tentatively planning a 2009 joint training course for both Nigerian
law enforcement agencies and major Nigerian commercial banks
regarding anti-money laundering and other topics. End Comment.


8. (U) This cable has been cleared by Embassy Abuja.
Blair