Terror Funding: Fears as US set to probe Nigerian banks

CBN head office

It has now been confirmed that BNP Paribas’ guilty plea and agreement to pay nearly $9 billion for violating U.S. sanctions is part of a larger U.S. Justice Department shift in strategy that is expected to snare more major banks and other firms across the financial food chain.
The latest admission of guilt by BNP Paribas may have triggered a fresh enthusiasm on the US Justice Department to also extend its investigations to Africa especially among big banks on the continent with strong international links.
Some Nigerian banks, according to US sources, are under the searchlight of the Department in the wake of growing terror insurgency in the country now rated the largest economy in Africa by GDP. Specifically, the banks are being investigated to establish their links, if any, with funding of the various terror cells across the continent particularly Boko Haram.

Two other major French banks, Credit Agricole and Societe Generale, Germany’s Deutsche Bank AG, and Citigroup Inc’s Banamex unit in Mexico are among those being investigated for possible money laundering or sanctions violations, according to people familiar with the matter and public disclosures.
The Justice Department and other U.S. authorities, including the Manhattan District Attorney, are probing Credit Agricole and Societe Generale for potentially violating U.S. economic sanctions imposed against Iran, Cuba and Sudan, one of the sources said.
In the case of Nigeria, there had been widespread suspicion that a few banks in the country may have compromised in helping to move funds for members of the dreaded sect.
Recently, there were fears that Nigeria may be blacklisted by international anti-money laundering watchdogs based in the United States of America (USA) over its inability to track the source of funds of the dreaded Islamic sect, Boko Haram, and curb terrorism financing in general.
Signals from Financial Action Task Force (FATF), the global standard setter for measures to combat money laundering, terrorist and proliferation financing, indicated that despite the earlier warnings to Nigeria on its non-compliance level, the country was yet to take any concrete step to stem the rising spate of financial crimes including terrorism financing, money laundering and corruption.
In its recent report, dated February 11th 2014, the FATF listed Nigeria among the countries that have not made significant progress in addressing the lacunas in their Anti-Money Laundering and Combating Terrorism Financing (AML/CFT) regimes. The agency advised the international financial community on the potential risks in the country.
Recent happenings, especially the activities of Boko Haram and startling revelations from various probes by the National Assembly, are putting Nigeria under global focus and scrutiny.
It will be recalled that on June 23, 2006, FATF decided to remove Nigeria from its list of Non-Cooperative Countries and Territories (NCCTs). Since July 2001 Nigeria has been on this shame list. The cost to the economy is incalculable: inflow/outflow of transactions to Nigeria has around it a cautionary flag to the rest of the world; numerous Nigerians operating outside the country have had their financial dealings cancelled/ monitored.
In the same vein, Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) in its 2011 annual report clearly showed that the sources of money laundering, corruption, tax fraud, narcotics, trafficking and capital market related crimes were identified as the major challenges facing Nigeria.
The data from GIABA, an institution of the Economic Community of West African States (ECOWAS) responsible for facilitating the adoption and implementation of AML/CFT in West Africa, stated that the National Drug Law Enforcement Agency (NDLEA) seized 195, 283, 917 kilogrammes of various types of illicit drugs, mostly cannabis valued at over N140 million. The country also generated 8,725, 213 Currency Transaction Reports (CTRs), 2,031 Suspicious Transaction Reports (STRs) and 83 confirmed cases of money laundering in the reviewed period.
Commenting on the report, Director-General, GIABA, Dr Abdullahi Shehu, regretted that despite the support of GIABA, Nigeria still engages in predicate offences that assist the growth of money laundering.
“There are still gaps in the AML/CFT regimes that require priority attention. While arrests and prosecutions for money laundering offences have been increasing, they have not led to commensurate increase in conviction and deterring punishment,” he said.
In a telephone interview with Political Economist Correspondent from New York City, USA, the Nigerian born GIABA boss said he had held various meetings with top government officials and was optimistic that the AML/CFT measures being currently put in place by the government would assist in fighting the scourges.
The GIABA boss listed counter-measures to include development of a National AML/CFT strategy and action plan 2011-2015; passage of money laundering prohibition Act (MLPA) 2011; AML/CFT compliance examination/inspection; registration of DNFLs; gazetting of AML/CFT guidelines for the Securities and Exchange Commission (SEC) and the National Insurance Commission (NAICOM), and development of AML/CFT risk-based supervision framework.
Meanwhile, the implications of FATF delisting would be devastating for the already comatose economy. It means Nigeria’s business environment is risky for foreign investment, an indication that the nation’s financial sector is no longer safe.
Furthermore, it will be difficult for Nigerians living overseas to open accounts, especially in branches of multinational financial institutions.
The financial offences watchdog recommends that financial institutions should give special attention to business relations and transactions with persons, including companies and financial institutions, from the “non-cooperative countries and territories.”
It would be recalled that Nigeria lost an estimated $25 billion in the four years that it was on the delisted list.
The loss refers to cash quantification of what would have accrued to the country’s treasury through direct foreign investments.