A public hearing on the controversial Nigerian Financial Intelligence Agency Bill is scheduled to begin on Monday, December 16.
The Bill, which seeks to create a separate agency, independent of any other existing body or ministry, is believed to be aimed at whittling the powers of the Economic and Financial Crimes Commission ahead of the 2015 elections and the exit of several elected and appointed political office holders.
While the Chairman of the Senate Committee on Drugs, Narcotics and Financial Crimes, Senator Victor Rampyal Lar, has been stringently defending the Bill, which he sponsored, discerning Nigerians, including Lagos-based lawyer, Femi Falana (SAN), have risen against the proposal.
The fear is that the new agency is being created to grant soft landing to corrupt politicians ahead and beyond the 2015 elections.
A source in the Presidency told The Eagle Online that the biggest fear is that politicians will frustrate the work of the new agency, being an outfit that can sue and be sued.
The source said: “The way things are, there is no doubt that most of the corrupt politicians on the watch-list of the anti-graft agencies will use the court to stall any attempt to prosecute them with the sort of agency that is to be created.
“It is all an attempt to muzzle the anti-graft agencies, especially the EFCC, under which the Nigeria Financial Intelligence Unit operates.
“That way, the EFCC will no longer have access to records of financial transactions of these politicians.”
Falana, reacting to the Bill, co-sponsored by Sanators Sadiq Yar”adua, Benedict Ayade, M.S Saleh, Hassan Barata, Boluwaji Kunlere, Umaru Dahiru and Hussein Mudasiru, told Sahara Reporters: “Nigerian people are asking for how the current agencies will be independent of the government.
“That is away from the control of the executive.
“Creation of more agencies will make mockery of the recommendation of the Presidential Committee chaired by Mr. Stephen Oronsaye.
“The current agencies are not being adequately funded.
“Where will the fund for the new ones to be created coming from?
“It is illogical.
“It is primitive.
“Nigeria, despite our challenges is still a role model in law making.
“This was how they destroyed the Nigerian Police by creating State Security Service, Federal Road Safety Commission, etc.”
It was the same position that was taken by the Chairman, Civil Society Network Against Corruption, Olanrewaju Suraju, when he also spoke with Sahara reporters.
Suraju said: “The bill should be thrown into the dustbin.
“The sponsors of the Bill do not mean well for Nigeria and it is unfortunate that they have been using all avenues to misinform Nigerians about the benefits to be derived from the Bill.
“They even said that Nigeria is the only country that has not passed the Bill when in actual fact only about eight countries who perhaps do not take anti-corruption war very seriously have such independent FIUs or passed such law out of 134 countries that have financial intelligent units.
“It is rather unfortunate that we are today faced with efforts to draw the country back in her anti corruption crusade.
“Even though FIUs the world over enjoy operational independence, countries with serious anti-corruption measures usually house their FIUs under a bigger department in order to insulate them and protect them from political pressure.
“If Nigeria succeeds in passing this law, we shall be the 9th country with such FIU and join the league of Ukraine, Niue, Malta, Egypt, Jordan, Antigua and Barbuda.
“Our current practice is in consonance with international best practices and should not be tampered with unless we want to create another job for the boys.
“For instance, the USA, UK, Canada, Germany, France, Netherlands, New Zealand, Australia, Bulgaria, Poland, Netherlands, Spain, Russia, Monaco, Venezuela and a host of other countries with serious anti-corruption measures have their FIUs domiciled in bigger Ministries and Departments such as the Ministries of Finance and Justice or law enforcement agencies as we have here in Nigeria.”
Lar, the sponsor of the Bill, is however, insisting that it will be the best thing to have happened to the anti-corruption crusade in Nigeria.
He told newsmen: “This bill is aimed at establishing a national agency that will be responsible for the receipt of information from financial institutions and designated non-financial institutions, analysis of the financial information for the purpose of turning it into financial intelligence and dissemination of the financial intelligence to all law enforcement agencies.
“The bill will ensure that the NFIA is not tied to any agency but will have adequate measures to build an independent financial intelligence system.
“As you are aware, financial intelligence can also be used to assist in monitoring balance of payments, use of foreign currency and to prevent the abuse of the financial system by criminals.
“You know that 139 countries across all continents have established FIUs.
“Nigeria as a member of the international community needs to establish one in order to be able to exchange information with other FIUs.
“In West Africa, the FIUs have the Minister of Finance as policy minister but they are all fully independent.
“So, for the first time in Nigeria, there is an attempt to build a ‘Nigerian’ Financial Intelligence Unit as opposed to ‘EFCC Financial Intelligence’.”
But will this not conflict with the roles of the EFCC, the Nigeria Police and the Independent Corrupt Practices and other related offences Commission?
Lar says no.
He offered his reasons: “As the name connotes, it is an intelligence agency that will assist the relevant agencies that are fighting all sorts of crime. It is not just about money laundering and financing of terrorism. Intelligence can be shared with NAPTIP, Police, DSS, EFCC, NIA, ICPC, DMI, DIA and NSCDC among others. Financial intelligence can also be used in preventing tax evasion and this will lead to increase in tax revenue.
“It is a good tool for providing information to government on financial flows into and out of the country.
“If you compare the functions and objectives of the NFIA, you see that it is different from the functions and objectives of Section 6 of the EFCC and the ICPC Acts. It is also not in conflict with the Code of Conduct Bureau Act and the functions of any other agency.”
However, the position of the EFCC clearly indicates that Lar is far from telling the truth on the position of the FIUs in most other countries.
According to the document submitted to the Lar-led committee, like Suraju said, the EFCC pointed out that only a few countries have such independent FIUs.
And there are just about nine of them.
The EFCC also faulted the proposed Bill on several other grounds.
As the fireworks for the proposed bill commences at 11am in the National Assembly, The Eagle Online reproduces below the position of the EFCC on the issue:
INTRODUCTION
The Nigerian Financial Intelligence Agency (Establishment,
etc) Bill 2013 which amongst others, seeks to amend the Economic and Financial Crimes Commission Act, 2004 and the Money Laundering (Prohibition) Act, 2011 should not be considered by the Senate for the reasons hereunder stated.
PART ONE
DOMICILIATION OF NFIU AND INTERNATIONAL PRACTICE
The Nigeria Financial Intelligence Unit (NFIU) is the Central Unit in Nigeria responsible for the receipt and analysis of financial disclosures (currency transaction reports and suspicious transaction reports) and dissemination of intelligence generated there-from to competent authorities. The NFIU which was established in June 2004 (barely a year after the establishment of the EFCC) but commenced operations in January 2005 is domiciled in the Economic and Financial crimes Commission even though, in consonance with best international practices, the NFIU operates independently of the EFCC in its coordination of Nigeria’s anti-money laundering/combating the financing of terrorism (AM/CFT). The NFIU also services all the stakeholders including law enforcement and regulatory agencies.
The EFCC was conceived originally as the Commission that would domicile the FIU. That informed the responsibility that was imposed on the EFCC by section 6 of the EFCC Act of 2003. However, when it was pointed out during the NCCTs process that no provision in the EFCC Act 2003 was made for the domiciliation of the FIU, the Act was amended in 2004 in which a new section 2( c) was introduced. The new Section 2 ( c) states that the EFCC is the “ designated Financial Intelligence Unit (FIU) in Nigeria which is charged with the responsibility of co-coordinating the various institutions involved in the fight against money laundering and enforcement of laws dealing with economic and financial crimes in Nigeria”. It is significant to note that this was a recommendation of the Presidential Committee on FATF Chaired by Mr. Stephen Oronsaye (then Principal Secretary to the President) who incidentally is still the Chairman of the Presidential Committee.
By housing it within the EFCC, the NFIU combines the unique features of an administrative type and law enforcement type FIU enabling it to enforce compliance when there is a violation. It is equally significant to note that the FATF was satisfied with the strategic location of the FIU when it came on onsite visit in May 2006. It was on the strength of this and several other complaint requirements that Nigeria was delisted from the Financial Action Task Force (FATF) Non Cooperation Countries & Territories (NCCTs) list. It was also because Nigeria met all the pre conditions that the NFIU was admitted into the Egmont Group of Financial Intelligence Units in 2007. The Egmont Group Standards and core principles in 2007 when NFIU was admitted and today have not changed and the NFIU was admitted even when the Egmont Group was aware of its location. More importantly, the USA Financial Crimes Enforcement Network (FINCEN) that sponsored Nigeria’s admission would not do so if NFIU was not qualified on all fours. The NFIU has since 2007 improved its systems considerably and can pass the scrutiny of any review by the Egmont Group and the Egmont Group has continued to relate with Nigeria as a fully fledged member without any inhibition with the possibility of Nigeria hosting its plenary in due course.
The domiciliation of the NFIU within the EFCC is also strategic as it makes it easier to perform its functions within and it is in tandem with similar practices in several other countries of the world. Over 90 % of FIUs in the world operates the administrative type of FIU which we are operating in Nigeria and they are domiciled in various law enforcement agencies, ministries and departments without separate enabling laws. The benefit of not having a separate law is that the FIU will be insulated from litigation, injunctions and award of damages that can hamstring its operations including political influence on key appointments such as the appointment of the proposed Director-General.
It is important to note that the Egmont group of FIUs recognizes the various types of FIUs that vary from country to country; thus it encourages every Country to adopt a type convenient to its purpose. For instance, the USA, Canada, Bulgaria, Poland, Netherlands, Spain, Romania, Russia, Monaco, Venezuela and a host of other Countries have their FIUs domiciled in one Ministry or the other.
In the USA, it is domiciled in the Treasury Department and the Director is appointed by the Secretary of the Treasury while that of Canada is housed under the Ministry of Finance and the Director reports to the Minister of Finance. South Africa is housed under the Ministry of Finance; Japan, Switzerland and Germany housed theirs in the Police. France’s FIU is in the Ministry of Finance while Israel’s FIU is housed in the Ministry of Justice.
The United Kingdom operates a hybrid system which combines administrative type and a law enforcement type and housed under the National Crime Agency formerly Serious Organized Crimes Agency (SOCA) and the Director is appointed by the Head of the Agency. See the attached document for the comprehensive list FIUs in the world and the ministries or government departments housing them. Suffice it to say that out of 134 countries with FIUs or their equivalents, only countries such as Egypt, Antigua, Belgium, Jordan, Romania and Ukraine have stand alone FIUs while other Countries with stringent anti-money laundering regimes have their FIUs housed in their various ministries and departments.
The administration of the FIU in Nigeria as presently constituted is even more autonomous in its operations than that of the United Kingdom and Canada where their directors report to the Heads of the respective Agencies where they are housed.
It is also imperative to note that the structure of the NFIU as it is today, has been operating for the past Nine years and neither Financial Action Task Force (FATF) and Egmont Group of FIU and GIABA has raised any issues on its operational structure and autonomy. Instead, the Unit has helped to move Nigeria from blacklisted rating as a non-cooperative country in the fight against money laundering and combating the financing of terrorism, first to the grey rating and on the 18th of October, 2013, to clean slate as Nigeria has been completely removed from the grey list. In addition, the NFIU as presently constituted has become a model for other FIUs in West African sub-region. Most recently, the Director of Liberia FIU has sought to come and understudy the operation of the Nigerian FIU to enable them operate their FIU in line with Nigerian model.
To this extent, it will be critical to undermine the current effective structure of the NFIU to an otherwise unwieldy structure as being envisaged by the proposed Bill which has the propensity to dismantle the current structure and substitute it with a cumbersome and costly structure that has no pair anywhere in the world.
There are three basic characteristics of an FIU as prescribed by Egmon Group of FIUs which includes: (1) Receiving Information, (2) Analyzing information and (3) Disseminating information. Hence, it will take it off the realm of an FIU if the proposed NFIA is allowed to operate as a juristic person with the power to process, “interpret”, sue and be sued as being envisaged by the proposed NFIA Bill.
A cursory look at Section 2 (a) of the proposed Bill seeks to give the proposed NFIA the power to sue and be sued. This will not augur well in the effective performance of the duties of the proposed agency as this will expose the Agency to litigation and give a suspect under investigation the right to bring an action against the agency to restrain it from conducting an analysis on any allegation of suspicious transaction and the moment the agency is so restrained, it will be faced with the task of moving the Court to set aside the restraining Order before it can effectively give a report or information required pursuant to its mandate. It will also be vulnerable to the claims for damages and other legal consequences lack of which it currently enjoys. To a greater extent creating an NFIA with power to sue and be sued will limit the speed it requires to respond to request for information and constrain the operations and activities of an otherwise protected unit.
On the contrary, the current structure of the NFIU has the following advantages amongst others:
Speed and efficiency in its operations
NFIU combines the unique features of an administrative type and law enforcement type FIU enabling it to enforce compliance when there is a violation.
Insulation from litigation and other legal consequences for its actions;
Higher degree of independence from direct political influence or interference.
Effective interface interface between the financial and other sectors subject to the reporting obligation on the one hand and law enforcement authorities on the other hand thus avoiding the creation of direct institutional links between this institutions and law enforcement agencies while bringing disclosures to the attention of law enforcement agencies.
Financial institutions are more confident to disclose information if they know that dissemination will be limited to cases of money laundering and financing of terrorism.
d. The FIU is neutral, technical and specialized interlocutor for reporting entities of financial institutions.
e. Information can be easily exchanged with all other types of FIU.
All of these advantages are attributable to the fact that the FIU is domiciled in the EFCC that that has enforcement powers pursuant to the EFCC Act.
Perhaps, one very critical point is the avoidance of duplicity of government departs and agencies in other to minimize exposure to recurrent and capital expenditure that drain the nations resources and tax payers money. The Commission recalls the Steve Orosanya’s recommendations to the presidency on rationalization of existing agencies and MDAs and his recommendation that the proliferation of agencies performing the same functions is causing a toll on the Country thereby recommending the merger of some existing agencies. Therefore setting up an agency like the NFIA will only help to add additional pressure on the nation’s economy.
As discussed above, the structure of the present FIU is cost effective and its operations have been effective. For avoidance of doubt, there is nothing in the proposed Bill that gives the FIU more powers and privileges than it currently has other than the fact that the new NFIA being proposed will have a governing Board, Technical Advisory Committee and a retinue of new staff and various departments and special units (see Section 14 of the proposed bill) all of which will put additional pressure on the economy. For as long as there is no lacuna in the operations of the current FIU that the Bill seeks to rectify, the creation of the proposed NFIA is therefore superfluous more so, when neither FATF, the Egmont Group nor Giaba, the West African Sub regional body has complained about the current structure or the operations of the NFIU to warrant the establishment of an agency to be called NFIA. The NFIU as presently structured enjoys a greater level of operational autonomy in line with international best practice and standard; hence, the proposed Bill for the establishment of NFIA is unnecessary and pointless.
CONCLUSION
Nigeria is not under any threat or sanction by the international community on account of the absence of a separate law for the NFIU or its domiciliation. The NFIU also enjoys a good measure of legal recognition. For instance, the MLPA while recognizing that the EFCC is the designated Financial Intelligence Unit in Nigeria equally makes clear that the FIU is the central unit responsible for the receipt, analyses and dissemination of financial information to competent authorities (See S25 of the MLPA as amended). There is no confusion therefore as to the function or responsibility of the FIU. Agreed that many agencies no doubt need more sensitization on the role and activities of the NFIU and how they can relate with it to maximize its benefits. The solution however, does not lie in the creation of NFIA.
In the light of the foregoing, it is the view of the Commission that a special Agency such as the NFIA need not be created by a separate law. Rather, the FIU should continue to be housed by the EFCC in tandem with international best practices and tradition.
PART TWO
COMMENTS ON THE NIGERIAN FINANCIAL INTELLIGENCE AGENCY BILL 2013
PRINCIPLE
The fundamental nature of a Financial Intelligence Unit (FIU) is that it operates from behind the scenes and focuses on its work of financial intelligence analysis. The Bill as structured brings the Nigerian FIU to the forefront and has saddled it with regulatory powers. This leads to conflict of duties with existing regulators, such as the Central Bank, the National Insurance Commission, the Securities and Exchange Commission and the Special Control Unit against Money Laundering as the proposed NFIA takes over most, if not all of their existing duties.
It must be appreciated that an FIU is not a regulator. Once it starts engaging in regulatory functions, it loses the distinct feature of an FIU and this could affect its objectivity.
Furthermore, the NFIA as proposed is to be a standalone agency, not domiciled within an existing institution. While this is not unheard of, it represents a deviation from international norms where FIUs are domiciled within existing institutions. Currently, the FIU of Nigeria is domiciled within the EFCC. The peculiar advantage with this arrangement is that the anonymity of the Nigerian FIU is enhanced, while it draws on the law enforcement advantages of the EFCC. Making it a standalone agency waters down the enforceability component it currently enjoys.
Under the circumstances, the Bill is ill advised and unnecessary. Apart from the contradictory nature highlighted later on, it portends a reversal of the gains in the domestic AML/CFT architecture.
THE BILL
Section 1 (b): The proposed Financial Intelligence Agency (NFIA) is not a regulator and as such cannot have regulatory powers.
Section 3: The Membership of the Board of Directors of the proposed NFIA is not reflective of law enforcement agencies and anti-corruption agencies who are the primary stakeholders in the NFIA. For instance, EFCC, ICPC and Code of Conduct Bureau are excluded.
Section 4 that provides for tenure of office is self serving. The Director -General is a member of the Board pursuant to the provisions of Section 3 (2) (g), therefore, he should also be subject to the provisions of the section as to removal of members of the Board.
Section 6: This section deals with the functions of the proposed NFIA and it again takes on wide ranging regulatory powers that are not the feature of an FIU but of a regulator. An example here is section 6(g) and (l) which will lead to direct interference with DNFIs and take over the functions of regulators.
Section 6(o): The registration and regulation of Designated Non Financial Institutions is the statutory responsibility of the SCUML under section 5 of the Money Laundering Prohibition Act 2011 (as amended). First, the NFIA should not be a regulator for that sector, as it is not compatible with the workings of an FIU. Second the SCUML model has been very effective and several countries are beginning to copy from Nigeria. Therefore, to jettison this laudable initiative that is being hailed as the “Nigerian Model” and is beginning to be copied globally is unfortunate and ill advised.
Section 6 (p)(q): The proposed NFIA is taking on duties that it should not engage in. It is acting as a regulator AND also involving in direct sensitisation thus eroding the character of an FIU.
Section 7 (3)(4)(5): The proposed NFIA has no business involving in direct training or sensitisation with FIs or DNFIs and making money out of it (Section 15(1)(e)). Particularly, the training of law enforcement agents or investigators as envisaged in sub-section (5) is not its business.
Section 9 (1)-(2): Director-General of the Agency -The provision of the section 9 (2) (b) regarding the qualification of the Director-General which states that a person to be appointed shall be “a security officer or a legal practitioner with not less than ten years cognate experience in financial crimes prevention, application of anti-money laundering measures or financial sector regulations” is too narrow, self serving and restrictive.
Section 9 (6)- Salary and emolument of the Director-General: Again, the provision of the Bill that the salary and emolument of the Director-General of the Agency shall not be less than that of a permanent secretary in the public service sector of the federation is self serving and too ambitious, hence should be deleted. The Commission recommends that instead, the Section should be redrafted to read: “ The Director-General appointed under Section 9(1) of this Section, shall be appointed upon such terms and conditions as the Agency may, after consultation with the Federal Civil Service Commission, determine”. In the alternative Section 11 (2) of the proposed Bill should also be made applicable to the Director-General.
Section 9(5): The proposed NFIA is being politicised unnecessarily by the provision that upon recommendation of the Board, the DG can be removed. This is also in conflict with section 4 (b) where the President can remove without recourse to the Board or without recourse to anyone.
Section 10 (1)-(3)- Delegation of powers by the Director-General. This provision is unnecessary. It should be expunged as being superfluous and surplus to the proposed law.
Section 12 (1) – Exclusion of the Director-General from security screening. Perhaps, one of the most objectionable sections in the proposed Bill is section 12 (1) which provides that “ A person other than the Director-General shall not be appointed or seconded to perform any of the functions of the Agency unless” the person has passed security check. The implication of this section is that the Director-General does not require security or background check before he or she is appointed. This provision should be reviewed for possible deletion in view of the fact that there should not a waiver of background check for the Director-General, being the chief executive officer of the Agency.
Section 15 (1) (e) (g): The proposed NFIA is not a business entity and cannot be seen to be charging fees for services rendered. It is not a money making venture.
Part V and VI, Sections 19-28: The entirety of section 5 is inconsistent with the workings of an FIU. The proposed NFIA seeks to regulate FIs and DNFIs across board. An FIU is not a regulator or supervisory body.
Section 39: The section seeks to dissolve the Nigerian Financial Intelligence Unit. By law, the Nigerian Financial Intelligence Unit is the EFCC and this section in effect dissolves the EFCC. Is that the intention?
Section 40 (1) Transitional and saving provisions: Another fundamental flaw in the proposed Bill is section 40 (1) which seeks to automatically elevate the current director of the FIU to the position of Director-General upon the commencement of the Bill. This provision which is regarded as self-serving and narrowly tailored to upgrade an individual erodes the power of the President to appoint the Director-General upon the recommendation of the Attorney-General of the Federation pursuant to section 9(1) of the proposed Bill which provides that “There shall be for the Agency, a Director-General, to be appointed by the President on the recommendation of the Minister”. Even though, this is section is also not clearly drafted as the word minister is ambiguous, the interpretation section of the Bill states that the word “minister” refers to the Attorney-general of the federation and Minister of Justice. Be that as it may, the Commission views Section 40 (1) dealing with the transitional; and savings provisions as the usurpation of the powers reserved for the president.
Interestingly, nowhere in the entire Bill is there a provision for the senate confirmation for the appointment of the Director-General of the Agency.
Respectfully Submitted,
Dated: December 12, 2013
ADEGBOYEGA AREMO, ESQ.
SECRETARY TO THE COMMISSION.
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