Tuesday, 27 May 2014

Full report for a bill for an Act to establish Financia Intelligence Agency in Nigeria

LEAD DEBATE ON THE GENERAL PRINCIPLES OF THE BILL FOR AN ACT TO ESTABLISH THE NIGERIAN FINANCIAL INTELLIGENCE AGENCY (NFIA) – AND FOR MATTERS CONNECTED THEREWITH
 1.         Mr. President, Distinguished
Colleagues, thank you for the rare privilege given me to lead this debate on the general principles and merits of the bill for an act to establish the Nigerian Financial Intelligence Agency.
2.         Mr. President, my dear colleagues, before I proceed to highlight the merits and imperatives of this bill, it is germane to provide you with background information surrounding Nigeria’s financial climate in the context of the global fight against terrorism, financing of terrorismand money laundering.
NIGERIA ON THE FINANCIAL ACTION TASK FORCE (FATF) TARGET LIST SINCE 2010
3.         As we speak Mr. President, Nigeria is on the Financial Action Task Force – targeted list i.e. those Countries that are considered ‘’Unsafe or high-risk jurisdiction’’ due to certain observed institutional and operational deficiencies. The implication of being on the target list is that Nigeria businessmen and women seeking financial instruments and facilities outside Nigeria or from international financial institutions cannot get them. Nigerians also face the same challenges when trying to open accounts in banks outside. No wonder, the much talked about Direct – Foreign Investment has not been forth coming. Nigeria’s students who school abroad cannot be trusted to obtain funding arrangements to continue schooling except they pay cash. Some of the observed operational and institutionaldeficiencies are:
 
a.       Deficient Anti-Money Laundering Act.
b.      Weak Terrorism Act.
c.       Absence of an Independent Financial Intelligence Unit.
d.      Absenceof Mutual Legal assistance act
e.       Absenceof Proceed of Crime/Asset recovery and management body.
f.        Absence of Whistle Blowers Act
5.         Mr. President it is to the credit of this Senate under your patriotic leadership and indeed, the 7th Assembly that some of the above mentioned deficiencies have been rectified e.g. the amendment of the Anti Money Laundering Act and the Terrorism Prevention Act in 2012. At the last FATF Regional Review group meeting in Paris in May 2013, it was noted that Nigeria has made considerable progress with the Money laundering Act and the Terrorism Prevention Act, however, one of the critical institutions responsible for generating intelligence on money laundering and financing of terrorism is still very weaklegally and operationally and that is the Nigeria Financial Intelligence Unit.
This bill then, is an attempt in the direction of rectifying one of such deficiencies.
WHAT IS FINANCIAL INTELLIGENCE UNIT?
6.         The Financial Intelligence Unit is essentially to provide Financial Intelligence to all law enforcement agencies and other relevant agencies and Ministries e.g. (DSS, EFCC, ICPC, NAPTIP, NDLEA, NIGERIA POLICE FORCE, NIGERIA CUSTOMS, DIRECTORATE OF MILITARY INTELLIGENCE, NIGERIA INTELLIGENCE AGENCY, FEDERAL INLAND REVENUE, FEDERAL MINISTRY OF JUSTICE, AND FEDERAL MINISTRY OF FINANCE) in the country as well as to all financial sectors regulators such as the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), the National Insurance Commission (NAICOM), and to a large extent to the the Federal Ministry of Industry, Trade and Investment, (FMIT/Special Control Unit on Money Laundering).
As you know, when these agencies operate, they want confidentiality in their relationship with the NFIU, however, if the NFIU is operating as a department of one the agencies that is also interested in the intelligence, the confidence is lost, this is one of the reasons why this Bill is critical.
7.         You may recall that the Nigerian Financial Intelligence Unit (NFIU) is currently domiciled within the Economic and Financial Crimes Commission (EFCC) as a Department as provided by Section 1 (2) (c) of the EFCC Act, 2004. However, this provision has since been found to be inconsistent with international standards and has affected the effective functioning of the NFIU.  This is because the provisions of that section merely describes EFCC as the NFIU and failed to provide for the distinct powers of the NFIU. Since the NFIU is not set up to be an enforcement agency, this provision negates the core objectives for which the NFIU was established in the first place.
8.         It is important to note further that there can only be one Financial Intelligence Unit in every country and Nigeria created one without giving it the full powers to operate.
9.         THE NFIA, when established is expected to play a dual role, notably at the domestic level, with agencies listed above and internationally with the FATF, EGMONT GROUP OF FIUs and the other FIUs in 139 jurisdictions/countries.
Compelling Reasons Why the NFIU Should Be Independent:
10.       The Financial Action Task Force (FATF) Standards on money laundering and financing of terrorism under Recommendation 29 in 2012 sets out the basic principles and objectives of a financial intelligence unit as follows:
 “Countries should establish a financial intelligence unit (FIU) that serves as a national center for thereceipt and analysis ofsuspicious transaction reports; and other information relevant on money laundering, and terrorist financing for  dissemination of the results of the analysis to relevant agencies;
11. Further note that the legal mandate to be given to the NFIU is in compliance with Nigeria’s obligation under theUnited Nations Convention against Corruption (UNCAC) 2005. The UNCAC also emphasized the need for the FIU to be established by State Parties in compliance with Article 58 of that Convention which reads:
“States Parties shall consider establishing a financial intelligence unit to be responsible for receiving, analyzing and disseminating to the competent authorities reports of suspicious financial transactions”.
12.       The NFIU is currently member of the EGMONT Group of FIUs. The EGMONT Group is the global body that sets standards for FIUs’ operations and is made up of 139 FIUs from different jurisdictions/countries. NFIU was admitted in 2007 but is yet to meet up with the Group’s principles on confidentiality, security and operational independence of the FIU.
13.       Several reports by the International Monetary Fund (IMF), GIABA, EGMONT Group of FIUs reflect the urgent need for the NFIU to have a different framework from the EFCC and to ensure that a budget is provided for the NFIU through the “appropriation budget” so as to ensure the security of information and data in the NFIU;
14.       One of these reports include the recently concluded GIABA Plenary in Accra which observed as follows:
 “That the Plenary cannot exit Nigeria from the Expedited Regular Follow up process to the voluntary biannual process on grounds of certain remaining deficiencies pointed out by the Working Group on Mutual Evaluation and Implementation (WGMEI) during its meeting on Tuesday May, 7, 2013. The outstanding issues are:
a.       Lack of operational autonomy of the NFIU
b.      Lack of comprehensive legislation on mutual legal assistance
c.       Lack of a comprehensive legislation on recovery of stolen assets and proceeds of crime.
15.       In line with these international standards, all the law enforcement agencies and the regulators in Nigeria have expressed their support for the legal framework of the NFIU.
16. Consistent observations by the international community on Nigeria despite the establishment of the EFCC, is that Nigeria does not have a single platform for the receiving financial intelligence reports. This prompted the EFCC through a board resolution to modify the EFCC Act without reference to the National Assembly by trying to create the NFIU AS AN INDEPENDENT BODY. THIS MOVE STILL DID NOT ADDRESS THE ISSUES, AS A LAW, IPSO FACTO CANNOT BE CHANGED BY THE RESOLUTION OF A BOARD.
17.       In the light of the above international obligations and standards imposed by various international instruments to which Nigeria has acceded to, it is imperative that steps are taken to properly define and establish the NFIU by clearly defining its mandates in the law.
OBSERVED CHALLENGES OF THE NFIU:
18.       A few examples of the constraints faced by the NFIU currently are described below:
 (a)        The “Commission” is the term recognized under the Money Laundering Prohibition Act, 2011 and not the NFIU even in areas where the NFIU is the only recognized entity to perform those functions related to the receipt of suspicious transaction reports. As such the law is defective and the NFIU is constantly confronted with situations where such reports are rendered to various units of the EFCC, in clear breach and departure from the intended rationale behind the establishment of the NFIU. A good example is Section 6 of the MLP Act, 2011 as amended in 2012.
(b)       Further recall that an attempt to amend Section 6 in December 2012 to read “NFIU” instead of “Commission as the entity to receive suspicious transaction report in line with international standard was rejected by the Senate because the NFIU is yet to be defined in the law;
(c)          The attendant non-cooperation of other law enforcement agencies in working with the NFIU is as a result of lack of confidence in the independence of the NFIU and clear definition of the mandate of the NFIU which should be distinct from the mandate of the EFCC;
(d)       The need for high-level confidentiality in the conduct of the NFIU cannot be guaranteed as it is currently constituted;
 (e)        Inadequate funding is hindering the implementation of the core functions of the NFIU as no separate budgetary provision has been made for it in the EFCC budget.
19.       In practical terms, the question is whether Nigeria really has a FIU? Strictly speaking, we do not have a FIU as what is currently in existence is an “EFCC Department” glorified as a “FIU”.
It is important to point out that the reason why FATF prescribes for an independent FIU is to maintain checks and balances and prevent the manipulation of financial intelligence. For Nigeria to meet the standards of FATF and Egmont, the NFIA must have the following powers as set out in the Bill:
a)     Powers to receive disclosures from reporting entities (such as banks, capital market operators, insurance companies, BDCs,) relating to suspicious transactions and other reports such as currency transaction reports and customs declarations;
b)     Powers to undertake operational analysis: this include the power to analyze the information to ensure that where crime is committed, including terrorism, the information can be transmitted to the relevant law enforcement agency such as DSS, ONSA, DMI, EFCC, ICPC, NSCDC, NIS, NCS, NAPTIP, NPF, DIA,
c)      The power to work with the regulators to ensure compliance by financial institutions and non-financial institutions with the anti-money laundering laws and financing of terrorism measures
d)     The power to undertake strategic analysis in order to understand crime patterns and to advise government based on the patterns on the best policy available to prevent a particular crime from reoccurring
e)     Power to disseminate financial intelligence to all law enforcement agencies when relevant.
f)       Power to ensure that the information it receives are secured and handled in a confidential manner and restricted to only those with the security clearance to deal with such information.
g)     Operational independence – powers to deal with information received in a discrete manner without interference in order to ensure that information is not used to vindicate any body. Since information received by the NFIU is only suspicion, it should not be used by law enforcement agency until after the NFIU has analyzed it and considered it fit to be sent to a law enforcement agency. However, because of lack of independence at the moment and because of the location of the NFIU in the EFCC, the NFIU lacks independence and lacks security and confidentiality for its information. The NFIU does not have powers to secure its information because it is within the EFCC premises and within the EFCC ICT platform thus giving EFCC undue advantage over other law enforcement agencies.
h)     Powers to act as the only one “central agency for the receipt, analysis and dissemination of financial intelligence”
i)       Powers to have adequate financial, human and technical resources
j)       Powers to ensure that its staff maintains high professional standards, including standards to maintain high integrity.
k)     Powers to ensure that the FIUs can engage independently with other agencies and international bodies without interference.
l)       The FIU must also be to comply with the Egmont Group’s Statement of Purpose and Principles for Information Exchange Between Financial Intelligence Units for Money Laundering and Terrorist Financing cases.
Overview of the Nigeria Financial Intelligence Agency Bill
20.       The Bill has 43 sections and 10 parts.  The part covers the following issues:
PART I - OBJECTIVES OF THIS ACT
PART II - ESTABLISHMENT OF NIGERIAN FINANCIAL INTELLIGENCE AGENCY
PART III - MANAGEMENT AND STAFF OF THE AGENCY
PART IV - FINANCIAL PROVISIONS
PART V - REGISTRATION AND SUPERVISION OF MEMBERS AND ENTITIES
PART VI - APPLICATION OF COUNTER–MEASURES AND RISK MANAGEMENT
PART VIII - MONEY LAUNDERING REPORTING OFFICERS
PART IX - LEGAL PROCEEDINGS AGAINST THE AGENCY
PART X - MISCELLANEOUS PROVISIONS
21. The consequential amendments that will be made to existing laws as follows:
 (a)     The Economic and Financial Crimes Commission (Establishment) Act, 2004 is amended by deleting sections 1 (2) (c); 6 (j) (iv), and 6 (l) of the Act among others.
 (b)     The Money Laundering (Prohibition) Act, 2011 (as amended)   is amended in sections 1, 4, 5,6, and 13 by substituting for the words “Commission” and “Federal Ministry of Commerce” with the words “Nigerian Financial Intelligence Agency” among others
Financial Compendium
22.       Since the NFIU is already in existence, the Senate is now required to give the NFIA an enabling law and this will not create additional financial burden on the treasury. This is because the NFIU has an existing office and 70 personnel that are currently on EFCC payroll. What would be required is a take-off grant.
23.       Mr. President, other countries in the region have taken even greater strides to deal with these issues more than Nigeria has and we need to act fast to meet the requirements. Across the world, 139 FIUs, such as the FIC Ghana, CENTIF (FIU), Senegal, CENTIF, Cote d’ Ivoire, FICSouth Africa, FINCEN (FIU) USA, UKFIU, FINTRAC, CANADA, and FIU India, have ministerial level supervision in order to ensure its operational independence and access to funding from their parliament.
24.       In conclusion, Mr., President, it is our responsibility to finish the work we have started by the amendment of the Money Laundering Act, and the Terrorism Prevention Act and to further ensure that the NFIA can gather intelligence to prevent the crime of terrorism, terrorist financing and money laundering.
25. I wish to end Mr. President by drawing this simple analogy, any facility for all should be kept in a position that it is accessible by all. If it is kept in possession of one, access to it can only be at the whims and caprices of the custodian. This is the position of financial intelligence derived from the NFIU today.
 

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