Money laundering crept into the nation’s financial lexicon in the heydays of illicit drug business and the advanced fee fraud otherwise known, in local parlance, as 419. It was believed that those engaged in these lines of businesses used the proceeds from their illegal deals to trade in goods which when brought in and sold becomes clean money. But today, it is assuming another meaning as it has become a way of bringing back to the country money stolen and stashed abroad by Nigerians especially politicians and some other dubious characters who use them to distort the financial system and even to create security challenges.
Banks, local and foreign, make this possible and they have been making huge gains from the transactions. As political activities intensify, it is assumed that most politicians and some other mischief makers may want to bring in money into the country through unofficial channels.
The government and the security agencies are on the alert to handle any issue of this nature when it arises. But more strategically placed to check any illicit fund inflow is the nation’s apex bank, the Central Bank of Nigeria (CBN). And because Deposit Money Banks (DMBs) that manage the finances of most high net worth individuals, some of them not sufficiently patriotic, make fortunes from these transactions regardless of the risks involved, the CBN has had cause to roll out penalties for organisations that flout its Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) rules. It stipulates fines on banks, their directors and other key officials who are caught in the act.
Those sets of rules make it clear that banks and board members or chief compliance officers will all be sanctioned for 31 out of the 48 money laundering infractions listed in the new regime. For each of the 31 infractions, the new regime stipulates minimum fines ranging from N500,000 to N1.2 million on board members or chief compliance officers or the internal auditor, and fines ranging from N1 million to N20 million for the offending bank.
The rule further put banks and other financial institutions on notice that CBN AML/CFT Administrative Sanctions Regime demands unwavering compliance and failure to approve the AML/CFT policies and procedures by a bank attracts a minimum penalty as follows: N1 million on each member of the board and N20 million on the Deposit Money Banks (DMBs).
Also, failure to review/ update the AML/CFT policies and procedures at least every three years would attract a minimum penalty of N750, 000 on the executive compliance officer in the first instance and N750, 000 for each year that the contravention continues, and N500, 000 on the chief compliance officer in the first instance and N500, 000 for each year that the contravention continues.
Similarly, N5 million fine will be levied on the bank in the first instance and N1 million for each year that the contravention continues.
The CBN, recently, was compelled by political exigencies to recall this set of rules just in case those concerned may have decided to forget. It warned DMBs that it intends to bring down the hammer, if it has to, in response to any infractions. The banks were specifically warned not to play into the hands of politicians who may want to use them to launder monies into or away from the country in the run-up to the nation’s general election in 2019. The rule also affects lending to politically exposed persons. For this particular provision, the banks are aware of their acceptance criteria for lending to politicians. The apex bank has stated, in clear terms, that it is standing by to watch that things do not go wrong and that if they do, it will deal with it appropriately.
It is important that the banks adhere to the rules as stipulated by the Central Bank. This newspaper notes that returns on such high yielding but implicitly dangerous transactions can be tempting indeed. And considering the fact that the penalties attached to the infractions, when they occur, are not draconian enough, some banks may see it as a risk worth taking on the assumption that they may be lucky to get away with them. And even if they are caught, they can pay the fine and move on. It is from this perspective that we think that monitoring compliance with this rule may not be the job of the CBN alone. The security agencies sure have some role to play in ensuring that unwholesome characters do not use the opportunity of the election period to finance violence that may harm national security.
It is also imperative to point out that almost all import financing are carried out by banks including the reported influx of military hard and software. That is evidence that some banks are disposed to taking the risk in obedience to the aphorism that good businessmen consider the reward, not the risk. What this entails, in our view, is that the CBN and the security agencies have a lot of work to do to monitor and check illicit fund transactions as the election date comes closer.