ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany.
2009 Adv. Chitengi Sipho Justine1

cjnsipho@gmail.com

Regimes) compatible with their respective national legal systems.4 However, following the globalisation of money laundering there is general agreement that one of the most appropriate measures to obviate such threats of this crime with its attendant nefarious characteristics is for countries to borrow a leaf from one another.5 2.0 Main Text Therefore, as per the scope and gist, this article critically compares the anti- money laundering regimes of Nigeria, India and Germany with specific reference to i) predicate crimes; ii)suspicious transaction reporting and other reporting; iii)obligations imposed on non-financial businesses and professions; and iv) financial intelligence gathering. The paper will deal with the aforementioned in four consecutive segments under their respective headings, and finally deduce a conclusion highlighting the strengths and weaknesses of each comparator country so as to suggest how they may learn from one another. 2.1 Predicate Offences Money Laundering is a peculiar crime in that it is often the expression of other underlying economic criminal activities such as corruption or drug trafficking, inter alia.6 When these underlying crimes are committed, it is the instrumentality of
4

1.0 Introduction Money laundering being a burgeoning threat to the international economy as well as national economies and systems of governance, the fight against this menace needs concerted efforts by all countries.2 It may also adversely impact on investors confidence thereby affecting the growth of the economy. Therefore, not only does it result in loss of citizens rights but also has the potential to ruin the moral fabric of the society.3 Against the backdrop of sophistry of money laundering (in nature, content and character), different countries have taken different approaches to legislate anti-money laundering regimes (hereafter AML
1

-------------------------------------------------------------

Justine Sipho Chitengi (PhD Cand; LLM; LLB merit; BSc. Forestry; PGC; CPD; PGC; PGC; AHCZ) is an Advocate of the High Court for Zambia and author of a number of articles on Law and Policy.
---------------------------------------------------------2

A. Itzikowitz, Combating Money Laundering: The South African Solution in Goo, Arner and Zhou, The International Financial Sector Reform Standard Setting and Infrastructure Development cited in R. Ezeani, Impact of International and Domestic Laws on Money Laundering Activities in the ECOWAS: A Legal Perspective (2005) 2, available at www.aeandelegal.com/dynamicdata/flash/MONEY%20LA UNDERING%20in%20Ecowas%20reviewed.pdf accessed on 30 September 2009. 3 A. Bharti et al, The Economic Crimes Including Money Laundering; Its Legal and Financial Implications in UNAFEI, Group 2 Resource Material Series No.67, 128th International Training Course Reports [for India, Japan, Albania, Laos, Vanuatu, and Bangladesh], 246. Copy is available with the author.

A. Dadoo, Money Laundering (21 February 2008) available at www.globalpolitician.com/24153-financecrime#0200001E and accessed on 3 October 2009. 5 Cf: I. S. Kingwai (chairperson) et al, Components and Legal Frameworks for Combating Transnational Organised Crime: Criminalisation of Participation in Organised Criminal Groups/Conspiracy; Anti- Money Laundering System; Asset Forfeiture System (For Assets Derived from Organised Crimes) in UNAFEI, Group 3, Phase 2 Resource Material Series No.58, 116th International Training Course Reports [for Tanzania, India, Nigeria, Japan, Pakistan, and Italy], 259. Copy is available with the author. 6 N. S. Okogbule, Regulation of money laundering in Africa: the Nigerian and Zambian approaches in Emerald Insight, Journal of Money Laundering Control (2007) Vol. 10 No. 4, 449-463 at 451.

Page 1 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

money laundering that the proceeds are sought to be disguised to enable the perpetrators enjoy these profits without legal jeopardy. These underlying offences are known as predicate offences. According to the United Nations Office on Drugs and Crime, a predicate offence is ...the criminal activity from which the proceeds of the crime are derived, with money laundering being the derivative crime.7 Different countries take different approaches when legislating on predicate offences. On the one hand there are those that explicitly list specific criminal activities as predicate offences. One major defect with such approach is that it limits the scope of illegal activities that could precipitate money laundering, thus creating an avoidable loophole for accused persons to escape justice.8 On the other hand, there are countries that criminalise laundering of proceeds obtained from any criminal act whatsoever.9 2.1.1 Nigeria The Nigerian AML Regime is largely governed by three statutes namely; the Money Laundering Prohibition (Amendment) Act (hereafter MLPAA),10 the Advanced Fee Fraud and Other Fraud Related Offences Act11 and the 2004 Economic and Financial Crimes
7

Commission (Establishment) Act (hereafter 2004 EFCCEA).12 Under this AML Regime, predicate offences include any criminal activity such as common theft.13 The author opines that this approach is good for Nigeria as it keeps her in tandem with international trends of widening the definition and scope of money laundering. Secondly, it a positive approach as it hits at the laundering of the proceeds of any crime so as to principally cripple its financing and logistic support which is the main aim of such international instruments as the United Nations Convention on Transnational Crimes and successful national legislation in countries like the United Kingdom.14 2.1.2 India India is a bit similar to Nigeria in that the fundamental Act itself, 2002 Prevention of Money Laundering Act (hereinafter 2002 PMLA)15 takes a general definition of any crime and does not restrict itself to specific predicate offences; yet, other statutes supplement it by explicitly identifying specific activities that constitute predicate offences. They include terrorist activities as per the 1967 Unlawful Activities (Prevention) Act (hereafter UAPA),16 and illicit traffic in drug and psychotropic substances as per the 1985 Narcotic Drugs and Psychotropic Substances Act (hereinafter 1985 NDPSA). This approach is commendable because it casts the net wide enough to capture all illicit activities, and at the same time provides itself with checks and balances not to lose focus. Such approach could have been prone to the criticism for ambiguity
12 13

UNODC, Predicate Offence in UNDOC, Money Laundering Terms Dictionary (2005). Accessed on 30 September 2009, at
http://www.babylon.com/definition/Predicate_offence/English
8

A. Adekunle, Seizure of Proceeds of Criminal Activity: Trends in Recent Financial Crimes Legislation in Nigeria in Modern Practice Journal of Finance and Investment Law (1999) Vol. 3, No. 2, 250 at 262. 9 R. Ezeani, Impact of International and Domestic Laws on Money Laundering Activities in the ECOWAS: A Legal Perspective (2005) 3, accessed on 30 September 2009 at www.aeandelegal.com/dynamicdata/flash/MONEY%20LA UNDERING%20in%20Ecowas%20reviewed.pdf 10 Of March 2004 amending the Money Laundering (Prohibition) Act No 7 of 2003 (hereinafter MLPA) 11 No 3 of 1995.

Repealing the December 2002 edition R. Ezeani, op cit, 3. 14 Proceeds of Crimes Act No c. 29 of 2002. 15 (28 November 2002), Section 3 16 Section 21

Page 2 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

and unpredictability in the law had it not been for the supplementary statutes. 2.1.3 Germany The German AML Regime is premised on Section 261 of the Criminal Code (Money Laundering; Disguising of Illegal Assets). It categorically identifies only 4 specific types of crimes as the money laundering predicate offences namely;17 i) all major crimes (Verbrechen), i.e. all offences carrying a minimum of one year's imprisonment such as human trafficking; ii) all less serious crimes (Vergehen) of illegal trade in narcotics and precursors;18 iii) certain Vergehen involving property, fraud, document and corruption offences committed on a commercial basis by a member of a gang formed for recurrent commission of such offences; and iv) all Vergehen committed by a member of a criminal association within the meaning of Section 129 of the Criminal Code such as gambling. The author is of the opinion that this approach of clearly listing which exact criminal activities constitute predicate offences has both pros and cons. The major advantage is that it enhances predictability in the law by eliminating ambiguity and uncertainty, while the main disadvantage is that the scope of the AML Regime is relatively narrowed resulting in some probable money laundering activities go unpunished. However, repeated national surveys have shown that though the number charges generated on these predicate
17

offences has been relatively small (average 20 annually), the rate of convictions has been almost 100%.19 Therefore, the author is of the view that Germanys approach on predicate offences is the best of the three because prosecution of economic crimes is very expensive; therefore, it must be about successful prosecutions and not so many cases that end unsuccessfully. 2.2 Suspicious Transaction Reporting and Other Reporting(s) By norm and practice, the Commercial Crimes Units of each country are empowered to receive suspicious transaction reports (STRs) and other types of reports on behalf of the prosecution authorities. In conformity with their respective legal systems, different countries define STRs differently. Some adopt a wider definition than others. Consequently, for those with narrow definitions, the obligation to generate STRs is circumscribed as those reports only arises if the offence suspected is a money laundering predicate offence. The same applies to the proscription of bank secrecy rules and lawyer/client confidentiality. The rules only fall away if money laundering predicate offence is involved. 2.2.1 Nigeria Due to its wider view of money laundering to cover laundering of proceeds of all crimes, Nigerias AML Regime has widened the latitude of matters to be reported. In Nigeria every suspicious transaction must be reported regardless of whether it involves laundering of proceeds of a crime or not.20Incidental to this, the Nigerian AML Regime has four philosophies underlying its
Per German Criminologist, Michael Kilchling quoted by P. Reuter and E. M. Truman, Combating Predicate Crimes Involved in Money Laundering in Chasing Dirty Money: The Fight Against Money Laundering (2004) IIE Publications, Washington D.C, 105, at 118. 20 See R. Ezeani, op cit, 9.
19

The European Commission, Money Laundering: How to Improve EU Rules for Prevention in Europa Internal Market, Single Market News (October 1998) Special Feature No. 14, 2. Copies of the report are available via the DG XV's website: http://ec.europa.eu/dg15 accessed on 28 September 2009. 18 Sentence No 1 of Section 29(1), the Narcotics Act (Betubungsmittelgesetz) or Section 29(1) of the Commodities Control Act (Grundstoffberwachungsgesetz)

Page 3 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

reporting system.21 Firstly, the law creates control mechanisms to discourage huge financial transactions being conducted with the use of cash. Section 1(1) of PLMAA stipulates that no person or body corporate shall make or accept cash payment of a sum exceeding N500, 000 or its equivalent in the case of individuals, while in the case of a corporate body the amount is limited to N2, 000,000 unless the transaction is done through a financial institution. In doing so, financial institutions act as government agents for monitoring and regulating transactions involving huge sums. Secondly, and further to the above, PLMAA section 2(1) directs financial institutions to disclose any financial transaction exceeding a particular sum of money. It stipulates thus: A transfer to or from a foreign country of funds or securities of a sum exceeding US$10,000 or its equivalent shall be reported to the Central Bank of Nigeria. It goes further to provide that a report made pursuant to the above provision shall indicate the nature and amount of the transfer, the names and addresses of the sender and receiver of the funds or securities.22 The author submits that this provision is vital in the prevention of money laundering as perpetrators feel deterred from using of such financial institutions for money laundering, since publicity or the fear of publicity would expose their nefarious activities. Thirdly, in a bid to curb money laundering, like other comparator countries, Nigeria obligates financial institutions to enforce the Know-Your Customer (hereinafter KYC) requirements. This requires all financial institutions (including Bureaux de Change) to know the true identity of their customers and report to the relevant authorities any
21 22

suspicious transactions concerning those clients accounts.23 Financial institutions are therefore expected to be vigilant in reporting all unusual and complex transactions notwithstanding any oath, contractual obligations, or arrangements with the customer and such reporters are immune from civil and criminal liability for those reports done in good faith though no offence of money laundering was actually committed and they did not know precisely the nature of the underlying criminal activity.24 Fourthly, the PMLA imposes an obligation of record keeping imposed on such financial institutions. In Nigeria records of transactions and customer identity are to be kept for 10 years, and any banker or person engaged in financial activities, who destroys records before the end of the prescribed statutory period is guilty of an offence.25 In the authors considered opinion, this is another area where the Nigerian AML Regime has taken a huge vital strides as it has even gone beyond FATF Recommendation that Banks and Financial institutions maintain records of their clients identification and transactions for up to 5 years during the operational life of the concerned account(s). 2.2.2 India Section 12, 2002 PMLA and Rule 8 of Notification No. 9 of 2005 impose an obligation on banking companies, financial institutions and intermediaries of the securities market to verify the identity of clients, maintain records and furnish information to the authorities whenever there are suspicious transactions.26

23 24

Cf: Okogbule, op cit, at 453. MLPAA, Section 2(2)

Ezeani, op cit, 4 Ibid, 6 25 Ibid, 4 26 FIU-IND, Banking Company: Suspicious Transaction Report in Electronic File Structure, 2, available at

Page 4 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

Suspicious transactions entail any transactions which a reasonable person acting in good faith would conclude that they; gives rise to a reasonable ground to believe that they involve proceeds of crime; or appear to be made in circumstances of unusual or unjustified complexity; or appear to have no economic rationale or bona fide purpose. The author submits, therefore, that with respect the reporting of suspicious transactions, India has the most effective and comprehensive laws with very clear and detailed broad categories of reasons for suspicion. 2.2.3 Germany The cornerstone of the German AML Regime is the obligation on credit and financial institutions (including 'bureaux de change') to require identification of all their customers when beginning a business relationship (particularly the opening of an account or offering safe-deposit facilities), when a single transaction or linked transactions exceed 15,000 or when they suspect laundering.27 However, German legislation does not establish a specific sanction for the failure to report suspicions of money laundering, though it provides administrative sanctions (a fine up to 50,000) for informing the customer or a party other than a public authority of the filing of a report and for other types of administrative offences. If the financial institution does not report probable suspicions it becomes liable for an offence of negligent money laundering for which penalty is up to 2 years of imprisonment or a fine, and an offence of
www.pfiuindia.gov.indownloadsSTRBank.pdf and accessed on 3 October 2009 27 The European Commission, op cit.

obstruction of punishment, for which the penalty is up to 5 years of imprisonment or a fine.28 Though some authors have argued that in practice, administrative sanctions are available for serious cases of nonreporting,29 the author contends that Germany should consider amending its legislation to specifically impose a sanction for failure to report suspicious transactions. 2.3.0 Obligations on Non-Financial Businesses and Professions Combating money laundering and indeed any other white collar/organised crime demands the crossing out of the financial trading businesses to other businesses and professions as evidenced in the United Nations Convention against Transnational Organized Crime which requires member States to establish: ...a comprehensive domestic regulatory and supervisory regime for banks and non-bank financial institutions and, where appropriate, other bodies particularly susceptible to money-laundering, within its competence, in order to deter and detect all forms of money30 laundering.... Furthermore, FATF Recommendations require member states to empower their competent authorities to extend their mandate to obtain financial intelligence from non- financial institutions and other professions.31
28

J. A. A. Mndez et al, Germany: Report on the Observance of Standards and CodesFATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism (July 2004) IMF Country Report No. 04/213, IMF Publication Services, Washington DC, 4, para 18. 29 Ibid. 30 The Palermo Convention, 2000, Article 7. 31 Cf: L. Fernandez, Investigating Money Laundering 2 (September 2009) Lecture Materials: The Law Related to Anti- Money Laundering and Organised Crime, Masters Degree Program, South African- German Centre of Excellence, UWC, 2.

Page 5 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

2.3.1 Nigeria The 2007 US DoS Report32 notes that under the MLPAA and the 1995 Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Nigerias AML Regime extends to nonfinancial businesses and professions such as hotels, legal practitioners, and other businesses designated by the Federal Ministry of Commerce. The laws also require the designated non-financial institutions to furnish the authorities with details of their financial transactions, especially STRs, and reports involving the transfer of funds or securities exceeding $10,000 to or from foreign countries. The report, however, noted that the oversight of compliance by the Ministry of Commerce has not been rigorous or effective, hence, recommended further strengthening of the supervision of non- financial institutions by removing the oversight function from the Ministry of Commerce.33 The author is of the view that PLMAA Section 16 impliedly imposes an obligation on all persons (including non- financial business entities) not to assist, condone, or acquiesce the commission of money laundering. If they do not do so, they risk being held complicity to the offence with a stiffer penalty than that for the launderer himself.34 Perhaps the rationale for such disparities is to deter non- financial businesses and professions like lawyers from rendering the much needed expertise to the launderers for purposes of perpetrating the crime as enunciated by the Germany Federal Constitutional Court.35 Moreover, it

is equally an offence under for nonfinancial institutions or professions to conspire with, aid, abet or counsel any person to launder money,36 punishable with compulsory winding up in serious cases.37 The author opines that such provisions are good deterrent measures in the fight against financial crimes and conform to well-known principles governing corporate criminal liability.38 However, for developing countries like Nigeria, such penalty is too harsh as one of the social implications of such a winding up would be unemployment. In a country where the rate of unemployment is already very high, such measures are likely to aggravate socioeconomic problems instead of remedying the same mischief.39 2.3.2 India The 2002 PMLA makes it obligatory for financial institutions and their intermediaries (who may be non- financial businesses or profession) to maintain a record of all probable suspicious transactions or series of transactions, the nature and value of which is prescribed by the Central Government.40 It is also a mandatory requisite for these institutions to validate and preserve the records of identity of all its clients in the prescribed manner for a period of five years from the date of cessation of transactions between them; and be ready to tender such records within a prescribed time and manner once called upon by the designated authorities.41

32

Cited in Financial Standards Foundation, Nigeria: AntiMoney Laundering/Combating Terrorist Financing Standard (2008) available at www.eStandardsForum.org accessed on 3 October 2009, 1, para 3. 33 Ibid. 34 PLMAA, Section 14(1) 35 See A. Bussenius, Money Laundering by Defence Counsel: The Decision of the Federal Constitutional Court

in Germany Law Journal (1 September 2004) vol. 5, No. 9, 490. 36 PLMAA Section 17 (a) 37 Ibid, Section 18(1) (2) 38 L.C.B. Gower et al, Gowers Principles of Modern Company Law (1979), 4th ed., Stevens & Sons, London, 126 39 Cf: Okogbule, op cit, 454. 40 Section 11 41 See Dadoo, op cit for a lengthy discussion of section 11.

Page 6 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

Further, when read together, Sections 8A and 38 of the 1985 NDPSA also criminalise the concealing or disguising of the true nature, source, location and disposition of any property, not necessarily by financial institutions alone, with the knowledge that such property is derived from an offence. These provisions actually apply the international principle of dual criminality in that it prohibits the aforementioned vices as criminalised in India or any corresponding law of any other country. The author submits that this is a positive feature of the Indian ant- money laundering regime as far as non- financial businesses or professions are concerned as the law essentially imposes obligations on the non- financial institutions even for breaches committed outside abroad. The author is of the view that Indias AML Regime on non- financial businesses and professions is sufficient and favourable. For example, on the footing of the 1967 UAPAs alone so many companies have been wound up with their directors imprisoned in certain cases for non-compliance with its Sections 21 and 24. These sections make a punishable offence the holding of proceeds derived from terrorist activities, and impose a duty on Directors of financial and nonfinancial companies compulsorily transfer shares of all members suspected of terrorist activities into the name of the government, respectively.42 In fact, India is known for its record of prosecuting directors of both financial and non- financial businesses for economic crimes as evidenced by a long list of cases such as Standard Chartered Bank v. Directorate of Enforcement;43 State of Maharashtra v. Syndicate Transport Co. (P) Ltd;44 M.C.D. v. J.B. Bottling Co. Pvt. Ltd;45
42 43

and Emperor v. Dhanraj Mills Ltd, inter alia,46where the obligations on nonfinancial businesses have been re-echoed. 2.3.3 Germany In Germany, the law concerning nonfinancial institutions is entrenched in the new requirements detailed in the Geldwschegesetz (hereinafter GwG)47 and in line with the second EC Money Laundering Directive which obligate additional professions outside financial institutions (in particular, lawyers, estate agents, notaries, tax consultants and accountants) to the identification and reporting requirements. In practice, the provision is almost obsolete as almost negligible reports are made annually; in 2002 only three such reports were made.48 The author opines that this may be attributable to the fact that prosecuting legal entities is problematic because traditionally only natural persons are subject to prosecution under German criminal law. Therefore, officers of a company who are responsible for acts done in the name of the company are sought to be made personally liable for acts which result in criminal action being taken against the Company; and this only happens in very special circumstances which do not include money laundering so far.49 With reference to professions like lawyers, the situation is still problematic because the threshold to impugn the blame is too high. A lawyer is only under duty to report if he actually knows, and not only suspecting, that his/her client is involved in money laundering that lawyer.50
45 46

Cf: Muralidhar and Deva, op cit, 9. (2005) 4 SCC 530 or AIR 2005 SC 2622 44 AIR 1964 Bom 195.

1975 Cri LJ 1148 (Del) (FB) AIR 1943 Bom 182. 47 Money Laundering Act as amended on 8 August 2002. 48 Mndez et al, op cit, 8, para 41 49 R. Klinger and A. Sebok, Survey Response, Laws of Germany in Fafo, Commerce, Crime and Conflict: A Survey of Sixteen Jurisdictions (2006) Fafo AIS, Germany, 8- 10. 50 Bussenius, op cit, 490

Page 7 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

2.4.0 Financial Intelligence Gathering Financial intelligence gathering has been defined as: investigations in which on behalf of law enforcement- financial expertise is used in order to gather, check, refine, process and analyse (financial) information.51 Statements from informers, as well as publicly accessible information may be used by the Financial Intelligence Units (hereinafter FIUs). The FATF Recommendations which leave it up to the individual countries decide the kind of FIUs that they consider appropriate.52 As such some countries allow their FIUs to accept information obtained through under-cover agents sting operations53 while others do not. Ordinarily, FIUs are the central authorities mandated with receiving of STRs and other reports though it is acceptable in some countries to have various government units, permanent or temporary investigative groups/wings helping the FIUs.54 2.4.1 Nigeria Upon promulgation of the 1995 MLD, Nigeria established a Money Laundering Surveillance Unit in the Central Bank of Nigeria55 which was later replaced with a much more effective one called the Economic and Financial Crimes Commission in 2002 tasked with the gathering of financial intelligence, inter alia.56 The Commission has power to conduct investigation as to whether any person has committed an economic or financial crime. It also has power to conduct investigations into the properties of any
51

person if it appears to it that the extent of the properties and life style of the person are not justified by his official income. In the exercise of these powers the Commission is under the control of the Attorney General of the Federation who may from time to time give directions to the Commission. The law makes it mandatory for any officer of a bank or other financial institution to take reasonable care to comply with the Commission57 as failure to do so is an offence punishable by imprisonment.58 2.4.2 India The Government of India set up Financial Intelligence Unit (hereinafter referred to as FIU-IND) on 18 November 2004 as an independent body to report directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.59 The FIUIND operates as a repository for (STRs) which are then forwarded to a department within the Ministry of Finance investigations and decision on whether to prosecute or not.60 This is a unique feature about Indias AML in this context as it delegates powers to subjective agencies to use their discretion whether or not to prosecute. In fact there are a number of other national agencies responsible for overseeing specific pieces of legislation governing economic crimes with too wide latitudes of discretion; such as the Commissioner of Customs, and the Narcotics Control Bureau, inter alia. The flaw is that such wings not under obligation
57 58

M. Pfeiffer Financial Investigations and Criminal Policy (1988) 2 Journal of Money Laundering Control, Washington D.C, 33 at 34 52 Cf: Fernandez, op cit, 3. 53 Ibid, 9
54 55 56

FATF, Recommendation 27. See also Fernandez, op cit, 2.

Kingwai op cit, 255 Economic and Financial Crimes Commission Act of 2002, Preamble.

Enforcement

Ibid. Ezeani, op cit, 8- 9 59 FIU-IND, op cit 60 ASIA/PACIFIC GROUP ON MONEY LAUNDERING (APG), India: Anti- Money Laundering and Combating the Financing of Terrorism in 1st APG Mutual Evaluation against the FATF 40 Recommendations and 9 Special Recommendations (13 July 2005), para 10, www.apgml.orgdocumentsdocs8India%20Mutual%20Evalu ation%20Executive%20Summary.pdf accessed on 3 October 2009. See also T. Jyoti, Crime and Money Laundering- The Indian Perspective (2004) Oxford University Press, London, 9.

Page 8 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

to report suspicious transactions to other relevant authorities for effective gathering of financial intelligence.61 2.4.3 Germany The German FIU was only established on 15 August 2002 and joined the Egmont Group in June 2003. It was formed as a distinct entity within the BKA which provides for a specific police character of the FIU. To ensure a full range of expertise, the FIU has opted for a multi-disciplinary approach and has recruited consultants from the banking sector and a firm of auditors. The FIU is required to (1) collect and analyse STRs filed, in particular checking against data stored by other offices, and (2) report to the federal and Land prosecuting authorities without delay information that concerns them as well as any connections between criminal acts ascertained. Apart from these standard tasks, within the FIU there are specialisations in the areas of data processing, operational/strategic analysis and policy-making. The FIU does have access to numerous sources of information, whether financial, administrative, or law enforcement to enable it to adequately undertake its responsibilities.62 For purposes of financial intelligence gathering, a search and seizure warrant may be issued authorizing an appropriate person (a) to enter and search premises specified in the application for the warrant; and (b) to seize and retain any material found there which is likely to be of substantial value
61

(whether or not by itself) to the investigation for the purposes of which the application is made.63 Searches and seizures are, however, subject to the constitutional safeguard of the right to privacy which may limit, time, space, and nature of article to be seized (scope).64 The prosecutors are allowed to take drastic measures against a lawyer who is suspected of having committed money laundering by accepting dirty money from a client. In this situation the StPO (Criminal Procedure Code) can justify not only searches and seizures but also the surveillance of (taping into) telecommunication lines in counsels office.65 The author submits that such unique empowerment on the part of prosecutors has contributed to the strength and effectiveness of the German FIU. The major weakness that critics have highlighted about Germanys financial intelligence gathering is that for instance, there is no general provision in Germany in relation to feedback, especially between the FIU and the institutions filing the STRs contrary to the FATF 40 Recommendations66 3.0 Conclusions 3.1 Nigeria From the foregoing and indeed on a plethora of literature, it is clear that though a developing country, Nigeria has enacted adequate and sufficient legislation to deal with money laundering. This, coupled with the apparent political will from the current government has greatly enhanced the antimoney laundering regime in Nigeria. Nigeria has continued to constantly review and her legislation in line with the trends in
63

I. Dettmann-Busch (Moderator) et al, Capacity Building for FIUs: A Regional Exchange for Practitioners on Financial Analysis Techniques and Global AML/CFT standards (4 - 8 August 2008), FIU (Financial Intelligence Units) Workshop on Financial Analysis Techniques, organized by InWEnt and Capacity Building International (Germany) in collaboration with the Asia/Pacific Group on Money Laundering (APG) and the Office of Technical Assistance (OTA) of the U.S. Department of the Treasury, New Delhi, 2. 62 Dettmann-Busch (Moderator), op cit

Durchsungsbefehl, vide Paras 104 ff German Code of Criminal Procedure. 64 Fernandez, op cit, 8- 9 65 StPO, Sections 97, 100a, and 102. See also Bussenia, op cit, 2. 66 Mndez et al, op cit, 10, table 2.

Page 9 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

money laundering activities. More importantly, Nigeria has significantly improved her laws in the area of compliance and prevention resulting in the FATF removing her from the non-cooperative countries and territories (NCCT) list in May 2006 after having placed her on that list for 5 years.67 These are very positive features about Nigerias AML Regime. Unlike Germany which does not explicitly stipulate specific sanctions for non- reporting of suspicious transactions68, Nigeria has clear laws on sanctions for not reporting suspicious transactions. For instance, in the early 2000 banks like Devcom, Manny Bank & Trust Bank have been charged for noncompliance with money laundering provisions; and some car dealers such as Carlink and Alpha Motors, inter alia, have been shut down.69 3.2 India India has adopted the most comprehensive and elaborative laws in terms of substance, content and procedure but relatively weak in terms of enforcement. For instance, though the anti- money laundering Act was only enacted in 2002, as early as 1985 India had already criminalised the concealing or disguising of the true nature, source, location and disposition of any property derived from illicit activities70 which in essence is money laundering. Secondly, India has a very robust (quick action) responsive approach to legislating on money laundering so as to be in tandem with international trends and keeping abreast new techniques being devised and employed by
67 68

launderers. For instance, the UAPA which was enacted in 1967 initially intended to punish unlawful activities of individuals and associations, has since September 21, 2004, been extensively amended include terrorist activities as predicate offences of money laundering, yet there has not been tangible enforcement of the same.71 3.3 Germany The German AML Regime is the most successful of the three in terms of repressive measures as it has proven to be effective and efficiently implemented as evidenced in successful prosecutions.72 Germany has adopted a very comprehensive set of repressive measures with regard to money laundering. 73 However, there are a few deficiencies that must be addressed in order for Germany to comply with some of the FATF standards; such as the absence of specific sanctions for not reporting suspicious transactions. A specific sanctions regime for non- compliance with the identification requirements in case of suspicious transaction should be 74 incorporated within the legal framework. REFERENCES (A) PRIMARY SOURCES Table of Cases Cited 1. Emperor v. Dhanraj Mills Ltd, AIR 1943 Bom 182. 2. M.C.D. v. J.B. Bottling Co. Pvt. Ltd, 1975 Cri LJ 1148 (Del) (FB) 3. Standard Chartered Bank v. Directorate of Enforcement, (2005) 4 SCC 530 or AIR 2005 SC 2622.

Financial Standards Foundation, op cit, 1. Mndez et al, op cit, 10, para 40. 69 See back page of The Guardian Newspaper of Friday 30 June 2003 quoted in R. Ezeani, Impact of International and Domestic Laws on Money Laundering Activities in the ECOWAS: A Legal Perspective (2005) available at www.aeandelegal.com/dynamicdata/flash/MONEY%20LA UNDERING%20in%20Ecowas%20reviewed.pdf accessed on 30 September 2009. 70 1985 NDPSA, Section 8A

71

Cf: Judge Dr. S.Muralidhar and S. Deva, Survey Response, Laws of India in Fafo, Commerce, Crime and Conflict: A Survey of Sixteen Jurisdictions (2006) AIS, New Delhi, 9. 72 Mndez, op cit, 9, para 44 73 Ibid, 1-2. 74 Ibid, 10, table 2.

Page 10 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

4.

State of Maharashtra v. Syndicate Transport Co. (P) Ltd, AIR 1964 Bom 195. List of Conventions 1. United Nations Convention on Transnational Crimes. 2. United Nations Office on Drugs and Crime. List of Official Reports 1. A. Bharti et al, The Economic Crimes Including Money Laundering; Its Legal and Financial Implications in UNAFEI, Group 2 Resource Material Series No.67, 128th International Training Course Reports [for India, Japan, Albania, Laos, Vanuatu, and Bangladesh]. Copy is available with the author. 2. ASIA/PACIFIC GROUP ON MONEY LAUNDERING (APG), India: AntiMoney Laundering and Combating the Financing of Terrorism in 1st APG Mutual Evaluation Against the FATF 40 Recommendations and 9 Special Recommendations (13 July 2005), para 10, available at www.apgml.orgdocumentsdocs8India %20Mutual%20Evaluation%20Execut ive%20Summary.pdf and accessed on 3 October 2009. 3. European Commission, Money Laundering: How to Improve EU Rules for Prevention in Europa Internal Market, Single Market News (October 1998) Special Feature No. 14, 2. Copies of the report are available via the DG XV's website: http://ec.europa.eu/dg15 accessed on 28 September 200 4. FIU- IND, Banking Company: Suspicious Transaction Report in Electronic File Structure, 2, available at www.pfiuindia.gov.indownloadsSTRBa nk.pdf and accessed on 3 October 2009

R. Klinger and A. Sebok, Survey Response, Laws of Germany (2006) in Fafo, Commerce, Crime and Conflict: A Survey of Sixteen Jurisdictions (2006) Fafo AIS, Germany. 6. US DoS Report of 2007. List of International and Regional Instruments 1. European Commission Money Laundering Directive. 2. FATF Recommendations. List of National Statutes and Rules 1. Nigeria: Money Laundering Prohibition (Amendment) Act 1 Of March 2004 amending the Money Laundering (Prohibition) Act No 7 of 2003 Advanced Fee Fraud and Other Fraud Related Offences Act No 3 of 1995. Economic and Financial Crimes Commission (Establishment) Act of 2004 Repealing the December 2002 edition Foreign Exchange (Monitoring and Miscellaneous Provisions) Act of 1995. 2. India: Economic and Financial Crimes Enforcement Commission Act of 2002. Narcotic Drugs and Psychotropic Substances Act of 1985. Prevention of Money Laundering Act of 28 November 2002. Rule 8 of Notification No. 9 of 2005. Unlawful Activities (Prevention) Act of 1967. 3. Germany: Code of Criminal Procedure (Durchsungsbefehl). Commodities Control Act (Grundstoffber-wachungsgesetz). Criminal Code (Money Laundering; Disguising of Illegal Assets). Money Laundering Act as amended on 8 August 2002 (Geldwschegesetz). 5. Page 11 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

Narcotics Act (Betubungsmittelgesetz). 4. United Kingdom Proceeds of Crimes Act No c. 29 of 2002. (B) SECONDARY SOURCES List of Books and Articles Consulted 1. A. Adekunle, Seizure of Proceeds of Criminal Activity: Trends in Recent Financial Crimes Legislation in Nigeria in Modern Practice Journal of Finance and Investment Law (1999) Vol. 3, No. 2, 250. 2. A. Bharti et al, The Economic Crimes Including Money Laundering; Its Legal and Financial Implications in UNAFEI, Group 2 Resource Material Series No.67, 128th International Training Course Reports [for India, Japan, Albania, Laos, Vanuatu, and Bangladesh], 246. Copy is available with the author. 3. A. Bussenius, Money Laundering by Defence Counsel: The Decision of the Federal Constitutional Court in Germany Law Journal (1 September 2004) vol. 5, No. 9. 4. A. Dadoo, Money Laundering (21 February 2008) available at www.globalpolitician.com/24153finance-crime#0200001E and accessed on 3 October 2009. 5. A. Itzikowitz, Combating Money Laundering: The South African Solution in Goo, Arner and Zhou, The International Financial Sector Reform Standard Setting and Infrastructure Development cited in R. Ezeani, Impact of International and Domestic Laws on Money Laundering Activities in the ECOWAS: A Legal Perspective (2005) available at www.aeandelegal.com/dynamicdata/fl ash/MONEY%20LAUNDERING%20in %20Ecowas%20reviewed.pdf accessed on 30 September 2009.

6.

7.

8.

9.

10.

11.

12.

Financial Standards Foundation, Nigeria: Anti-Money Laundering/Combating Terrorist Financing Standard (2008) available at www.eStandardsForum.org accessed on 3 October 2009. I. S. Kingwai (chairperson) et al, Components and Legal Frameworks for Combating Transnational Organised Crime: Criminalisation of Participation in Organised Criminal Groups/Conspiracy; Anti- Money Laundering System; Asset Forfeiture System (For Assets Derived from Organised Crimes) in UNAFEI, Group 3, Phase 2 Resource Material Series No.58, 116th International Training Course Reports [for Tanzania, India, Nigeria, Japan, Pakistan, and Italy ],259. Copy is available with the author. J. A. A. Mndez et al, Germany: Report on the Observance of Standards and CodesFATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism (July 2004) IMF Country Report No. 04/213, IMF Publication Services, Washington DC. L.C.B. Gower et al, Gowers Principles of Modern Company Law (1979), 4th ed., Stevens & Sons, London. M. Pfeiffer Financial Investigations and Criminal Policy (1988) 2 Journal of Money Laundering Control, 33, Washington, DC. N. S. Okogbule, Regulation of money laundering in Africa: the Nigerian and Zambian approaches in Emerald Insight, Journal of Money Laundering Control (2007) Vol. 10 No. 4, 449. P. Reuter and E. M. Truman, Combating Predicate Crimes Involved in Money Laundering in Chasing Dirty Money: The Fight Page 12 of 13

ORGANISED CRIMES & THE LAW: A Comparative Study on Combating Money Laundering in Nigeria, India and Germany

Against Money Laundering (2004) IIE Publications, Washington D.C. 13. R. Ezeani, Impact of International and Domestic Laws on Money Laundering Activities in the ECOWAS: A Legal Perspective (2005) 3, available at www.aeandelegal.com/dynamicdata/fl ash/MONEY%20LAUNDERING%20in %20Ecowas%20reviewed.pdf accessed on 30 September 2009. 14. T. Jyoti, Crime and Money Laundering- The Indian Perspective (2004) Oxford University Press, London. Seminars, Workshops, Presentations and News papers 1. I. Dettmann-Busch (Moderator) et al, Capacity Building for FIUs: A Regional Exchange for Practitioners on Financial Analysis Techniques and Global AML/CFT standards (4 - 8 August 2008), FIU (Financial Intelligence Units) Workshop on Financial Analysis Techniques, organized by InWEnt and Capacity Building International (Germany) in collaboration with the Asia/Pacific Group on Money Laundering (APG) and the Office of Technical Assistance (OTA) of the U.S. Department of the Treasury, New Delhi. 2. I. S. Kingwai (chairperson) et al, Components and Legal Frameworks for Combating Transnational Organised Crime: Criminalisation of Participation in Organised Criminal Groups/Conspiracy; Anti- Money Laundering System; Asset Forfeiture System (For Assets Derived from Organised Crimes) in UNAFEI, Group 3, Phase 2 Resource Material Series No.58, 116th International Training Course Reports [for Tanzania, India, Nigeria, Japan, Pakistan, and Italy], 259. Copy is available with the author.

3.

4.

L. Fernandez, Investigating Money Laundering 2 (September 2009) Lecture Materials: The Law Related to AntiMoney Laundering and Organised Crime, Masters Degree Program, South African- German Centre of Excellence, UWC, Cape Town. The Guardian Newspaper of Friday 30th June 2003 quoted in R. Ezeani, Impact of International and Domestic Laws on Money Laundering Activities in the ECOWAS: A Legal Perspective (2005), accessed on 30 September 2009 at
www.aeandelegal.com/dynamicdata/flash/MO NEY%20LAUNDERING%20in%20Ecowas%2 0reviewed.pdf

Page 13 of 13