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Equipping Investigators With Requisite Skills To Stem Illicit Financial Flows

  MAY 1, 2021 | EASTERN PILOT Currently, it is easy for money to flow across borders and this connectivity between international financial s...



Currently, it is easy for money to flow across borders and this connectivity between international financial systems promotes economic growth, but it also gives rise to a global problem referred to Illicit Financial Flows (IFF).

The term Illicit Financial Flows refers to financial flows that are illicit either by virtue of their origin (e.g. stemming from organised crime), their utilisation (e.g. to finance terrorism) or the nature of the transfer itself (e.g. money laundering).

Interestingly, the effects of IFFs are particularly devastating for developing countries and increasingly undermine international efforts to promote sustainable development.

Undoubtedly, criminal activities associated with IFFs, such as human trafficking or the illegal trade in drugs, destabilise countries and regions and thus increase the risk of violent conflicts.

The think tank Global Financial Integrity estimates that developing countries and emerging economies lose more money through illicit financial outflows than they receive in foreign direct investment and official development aid combined.

IFFs therefore prevent countries from making urgently needed investments in health, education and other public services.

Not only do countries lose resources, but their success in preventing ‘dirty money’ from entering the financial system also determines their access to international finance.

In preserving the integrity of the financial system and complying with international anti-money laundering standards, the Independent Corrupt Practices and Other Related Offences Commission recognises the fact that tackling the issue of Illicit Financial Flows is therefore a prerequisite for sustainable economic growth.

It was in a bid to address these challenges, which prevailed long before the COVID-19 pandemic and economic crisis, that the ICPC organised a training session tagged “Capacity building for investigators on investigating Illicit Financial Flows.”

Speaking at the event which held virtually, an Associate Fellow, Chatham House, Mr. Mathew Page revealed that no fewer than 35 past and present governors and 299 former office holders in Nigeria have been linked with multi-billion choice properties in London and Dubai.

The Politically Exposed Persons, according his presentation at the event have spent over $400m to acquire 800 properties in Dubai.

Some of those implicated include a Northwest governor, two former Deputy Presidents of the Senate and a former National Chairman of the Peoples Democratic Party (PDP).

Others are 15 former ministers; one judge; 14 police, security and military chiefs; lawmakers; five staff members in the Presidency; 11 officers of the Nigerian National Petroleum Corporation; and 16 heads of departments and agencies.

Also on the list are 50 businessmen serving as fronts for Politically Exposed Persons; 158 suspected PEP proxies; and 13 known Nigerian law enforcement agency suspects.

He listed the Real Estate sector and payment of school fees abroad as means being used by High-Risk PEPs to launder stolen funds abroad, especially in Dubai, the United Kingdom and the United States.

He said PEPs and public officers in Nigeria used to engage in Illicit Financial Flows in the Real Estate sector “both as a means to launder money and as something to spend launder money on.”

On laundering in Dubai, Page said it has been possible for high-profile Nigerians because of “global nexus of IFFs, accessibility, permeability, reliability and affordability.”

He said the UAE had also been “reluctant to cooperate and share information.”

Page said: “There are 800 plus properties linked to Nigerian PEPs. They are worth $400m plus.

He said while a serving governor in the Northwest has eight Dubai properties ($5m), a former PDP national chairman acquired 11 Dubai and two London homes at $18m.

He said a former Deputy Senate President secured 14 Dubai properties at $12m and one of his successors bought eight Dubai assets and three UK properties at $15m.

Page said it has been easy to transfer large sums out of Nigeria by PEPs and public officers because of permissive environment, techniques used to avoid detection, the role of professional enablers, commercial banks, Bureau De Change and cash couriers.

He said Nigerian PEPs have also been using proxies, families, shell companies and links to trade-based money laundering.

He asked anti-corruption investigators in Nigeria to “examine bank transfers to Dubai, verify asset declarations, and investigate middlemen and property marketers.”

On IFFs to the United Kingdom, he gave six examples of how top Nigerians allegedly used payment of school fees to launder money.

Page said: “Former Plateau State Governor Joshua Dariye was charged with corruption in 2007 and convicted in 2018.

“Despite facing corruption charges, he was able to send his children to UK boarding schools and universities. His children have not been implicated in any wrongdoing.) Estimated Fees Paid: £240,000+

“A senior Nigerian legislator who has been a career politician for the last 25 years had children attending independent British schools and universities. The politician also owns several high-end properties in United Kingdom. Estimated Fees paid: £665,000+

“In 2012, a British court convicted former Delta Sate governor James Ibori of fraud and money laundering. Despite this conviction, he continued to send his children to UK schools and universities. (Note: His children have not been implicated in any wrongdoing.) Estimated Fees paid: £286,000+

“A prominent career politician from Northern Nigeria with minimal income outside official earnings sent several children to UK private schools and universities. The politician’s spouse allegedly owns high-end property in the United Kingdom. Estimated Fees paid: £861,000+

“A career Nigerian politician who has served in various government positions over two decades sent children to top British boarding schools and universities .The politician also owns high-end property in the United Kingdom. Estimated Fees paid: £447000+

“A prominent career politician from Southern Nigeria sent multiple children to top British boarding schools and universities. The politician also owns luxury property in the United Kingdom. Estimated Fees paid: £343,000+”

Page said while the annual earnings of a minister or state governor is about N7.8m, the average annual school fees overseas is about N12.3m.

Speaking at the event, the Chairman of ICPC, Prof. Bolaji Owasanoye (SAN), said the commission has dragged about 2,000 corporate entities into the country’s tax net.

He said the 2,000 corporate entities were discovered during investigations carried out by the commission, adding that their names have been forwarded to the Federal Inland Revenue Service (FIRS) for profiling.

He said: “Some of these entities are not registered and do not pay tax while others are registered, but still do not pay tax. The ICPC has been able to recover significant amount in taxes for the government.”

Owasanoye added: “The loss of revenue is a major challenge to developing countries, particularly Nigeria.

“The meeting is therefore, designed to build the capacity of our investigators to enable them trace the areas in which the government is losing money, look for the likely places people hide money, stop the illicit financial flows, and recover the funds.

“We are already working with the FIRS and getting a lot of tax evaders and defaulters into the nation’s tax net. One of the takeaways from here is the kind of question an investigator needs to ask in tracking IFFs and money laundering.”

The ICPC boss said it was necessary to “widen the revenue base, improve tax collection, combat tax evasion and illicit financial flows as well as asset recovery to improve the country’s finances.”

The Policy Advisor, Civil Society Legal Advocacy Centre (CISLAC), Vaclav Prusa in his presentation on “IFFs in investment: A case study on P&ID,” said that contracting without any transparency and disclosure leads to fraudulent and potentially unfavorable international contracts in the natural resource management.

The Contract was signed in 2010 with Process and Industrial Developments Ltd incorporated in British Virgin Islands and the Nigerian Ministry of Petroleum and Resources

After three years, P&ID claimed that Nigeria did not perform its obligations and sought damages for lost profits under the rules of the Investor-State Arbitration (ISA);

The UK-based tribunal awarded P&ID $6.6bn in damages and seven per cent interest per annum. However, in 2018, Nigeria raised belatedly allegations of corruption in the attempt to avoid enforcement of the award in English courts.

Following that, in December 2019, Nigeria applied to the court for an extension of time to challenge the initial arbitral award.

Nigeria’s key argument was that it has a prima facie case of fraud against P&ID, which justifies the extension of time required to challenge the arbitral award.

In an interesting turn of events, on the 4th of September 2020, the High Court granted Nigeria an unprecedented extension of time to bring challenges under sections 67 and 68(2)(g) of the English Arbitration Act 1996 (“the 1996 Act”).

In his presentation at the event on the P&ID case, Prusa said there is a need for transparency in the contract-based Investor-State Arbitration; noting that there is no justification to conduct ISA in secret.

He stated that existing contracts can be renegotiated as international arbitration institutions can amend their procedural rules to the same effect, while contracting parties should, in principle, favour contract transparency

He said, “Nigeria can pass a law to ensure that the state’s capacity to consent to arbitration in future contracts is limited.”

He said National Arbitration can amend contract-based ISAs towards transparency and limit secrecy; noting that internal review into international contracts managing natural resources needs to be conducted;


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