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 -------------- ¶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 -------------- ¶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 LAGOS 00000448 002 OF 002 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