ASSESSMENT OF MONEY LAUNDERING TYPOLOGIES FROM CORRUPTION IN NIGERIA

A publication of the Nigerian Financial Intelligence Unit

The Nigerian Financial Intelligence Unit (NFIU) is the central national agency responsible for the receipt of disclosures from reporting organisations, the analysis of these disclosures and the production of intelligence for dissemination to competent authorities. The NFIU is an autonomous unit, domiciled within the Central Bank of Nigeria and the central coordinating body for the country's Anti-Money Laundering, Counter-Terrorist Financing and Counter-Proliferation Financing (AML/CFT/CPF) framework. The Nigerian Financial Intelligence Unit (NFIU) is the central national agency responsible for the receipt of disclosures from reporting organizations, the analysis of these disclosures and the production of intelligence for dissemination to competent authorities. Das nigerianische Financial Intelligence Unit (NFIU) ist die zentrale nationale Agentur, die für den Empfang von Meldungen von meldepflichtigen Organisationen, die Analyse dieser Meldungen und die Erstellung von Informationen zur Weitergabe an zuständige Behörden zuständig ist. The NFIU is an autonomous unit, domiciled within the Central Bank of Nigeria and the central coordinating body for the country's Anti-Money Laundering, Counter-Terrorist Financing and Counter-Proliferation Financing (AML/CFT/CPF) framework. Die NFIU ist eine autonome Einheit, die innerhalb der Zentralbank von Nigeria angesiedelt ist und die zentrale Koordinierungsstelle für das Anti-Geldwäsche-, Terrorismusbekämpfungsfinanzierungs- und Proliferationsbekämpfungsfinanzierungs-Rahmenwerk (AML/CFT/CPF) des Landes darstellt.

No reproduction or translation of this publication may be made without prior written permission. Applications for such permissions, for all or part of this publication, should be made to No reproduction or translation of this publication may be made without prior written permission. Ohne vorherige schriftliche Genehmigung darf diese Veröffentlichung weder vervielfältigt noch übersetzt werden. Applications for such permissions, for all or part of this publication, should be made to Anträge für solche Genehmigungen, für die gesamte oder einen Teil dieser Veröffentlichung, sind zu richten an The Director/Chief Executive Officer, Nigerian Financial Intelligence Unit 12, Ibrahim Taiwo Street, Aso Villa Abuja, Nigeria 1, Monrovia Street, Block 3, Wuse II, Abuja, Nigeria (e-mail: info@nfiu.gov.ng) © 2023 NFIU. All rights reserved.

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CONTENTS

ACKNOWLEDGEMENT 4 LIST OF ACRONYMS 5 CHAPTER 1 INTRODUCTION 6 1.0 Background 6 1.1 Study Objectives 9 1.4 Methodology 10 CHAPTER 2: LEGAL AND INSTITUTIONAL FRAMEWORK IN THE FIGHT AGAINST CORRUPTION IN NIGERIA 11 Code of Conduct Bureau and Tribunal Act, 2004 11 Public Complaints Commission Act, 1975 14 Independent Corrupt Practices and Other Related Offences Act, 2000 14 The Economic Financial Crimes Commission Act 2004 15 Money Laundering (Prevention and Prohibition) Act, 2022 15 Nigerian Financial Intelligence Unit, Act 2018 16 Bureau of Public Procurement Act, 2007 16 Freedom of Information Act, 2011 16 Fiscal Responsibility Act 2007 16 Nigerian Extractive Industries Transparency Initiative Act, 2007 16 Mutual Assistance in Criminal Matters Act, 2019: 17 Proceeds of Crime (Recovery and Management) Act, 2022: 17 Companies and Allied Matters Act 2020 17 Petroleum Industry Act (PIA) 2021 18 The Finance Act 2021 18 Public Accounts Committee (PAC) 19 Technical Unit on Governance and Anti-corruption Reforms 19 Whistle-blowing Policy 19 CHAPTER 3: ASSESSMENT OF CORRUPTION IN NIGERIA 21 The UNODC 2019 Corruption Survey in Nigeria 21 Corruption Risk Assessment in the Ports Sector in Nigeria 22 Corruption Risk Assessment in Selected MDG-Related MDAs of Water Resources, Health and Education Sectors 23 Nigeria Corruption Index: 2020 Pilot Survey Report 24 Mapping and Scoping Survey of Anti-corruption and Governance Initiatives in Nigeria 25 Money Laundering and Terrorists Financing through Corruption in West Africa 25 National Inherent Risk Assessment of Money Laundering in Nigeria 26 CHAPTER 4: TYPOLOGIES AND CASE STUDIES OF CORRUPTION IN NIGERIA 28 TYPOLOGY 1: LAUNDERING THE PROCEEDS OF CORRUPTION BY POLITICALLY EXPOSED PERSONS 28 TYPOLOGY 2: LAUNDERING THE PROCEEDS OF CORRUPTION THROUGH UNDECLARED ASSETS 29 TYPOLOGY 3: LAUNDERING THE PROCEEDS OF CORRUPTION THROUGH LEGAL PERSONS AND BANK ACCOUNTS 31 CHAPTER 5 INDICATORS AND RED FLAGS 35 CHAPTER 6 CHALLENGES IN FIGHT AGAINST CORRUPTION 42 CHAPTER 7 CONCLUSION AND RECOMMENDATION 44 REFERENCES 52

ACKNOWLEDGEMENT

We extend our profound gratitude to all those who contributed to the successful completion of this report on assessment of money laundering typologies from corruption in Nigeria. We would like to express our heartfelt appreciation to the following agencies for their unwavering support and contributions to the project: We extend our profound gratitude to all those who contributed to the successful completion of this report on assessment of money laundering typologies from corruption in Nigeria. Wir sprechen allen unseren tiefen Dank aus, die zum erfolgreichen Abschluss dieses Berichts über die Bewertung von Geldwäschetypologien durch Korruption in Nigeria beigetragen haben. We would like to express our heartfelt appreciation to the following agencies for their unwavering support and contributions to the project: Wir möchten den folgenden Behörden unseren aufrichtigen Dank für ihre unermüdliche Unterstützung und ihren Beitrag zu dem Projekt aussprechen: The Code of Conduct Bureau (CCB), for their commitment to enforcing code of conduct for public officers and for their cooperation throughout the project. The Code of Conduct Bureau (CCB), for their commitment to enforcing code of conduct for public officers and for their cooperation throughout the project. Das Code of Conduct Bureau (CCB) für sein Engagement bei der Durchsetzung des Verhaltenskodex für Beamte und für seine Zusammenarbeit während des gesamten Projekts. The Economic and Financial Crimes Commission (EFCC), for their valuable insights and expertise in investigating financial crimes and their commitment to fighting corruption in Nigeria. The Economic and Financial Crimes Commission (EFCC), for their valuable insights and expertise in investigating financial crimes and their commitment to fighting corruption in Nigeria. Die Economic and Financial Crimes Commission (EFCC) für ihre wertvollen Einblicke und ihre Expertise bei der Untersuchung von Finanzverbrechen sowie für ihr Engagement bei der Bekämpfung der Korruption in Nigeria. The Independent Corrupt Practices and other Related Offences Commission (ICPC), for their dedication to eradicating corrupt practices in Nigeria and for providing us with vital data and information. The Independent Corrupt Practices and other Related Offences Commission (ICPC), for their dedication to eradicating corrupt practices in Nigeria and for providing us with vital data and information. Die Independent Corrupt Practices and other Related Offences Commission (ICPC) für ihr Engagement bei der Beseitigung korrupter Praktiken in Nigeria und für die Bereitstellung wichtiger Daten und Informationen. The Nigeria Extractive Industries Transparency Initiative (NEITI), for their extensive knowledge and expertise in promoting transparency and accountability in the extractive sector. The Nigeria Extractive Industries Transparency Initiative (NEITI), for their extensive knowledge and expertise in promoting transparency and accountability in the extractive sector. Die Nigeria Extractive Industries Transparency Initiative (NEITI) für ihr umfassendes Wissen und ihre Expertise bei der Förderung von Transparenz und Rechenschaftspflicht im Rohstoffsektor. The Technical Unit on Governance and Anti-Corruption Reforms (TUGAR), for their technical support and guidance on anti-corruption reforms and governance issues. The Technical Unit on Governance and Anti-Corruption Reforms (TUGAR), for their technical support and guidance on anti-corruption reforms and governance issues. Die Technical Unit on Governance and Anti-Corruption Reforms (TUGAR) für ihre technische Unterstützung und Beratung bei Antikorruptionsreformen und Governance-Fragen. We would also like to thank all the individuals and organizations that provided us with the necessary resources and support to carry out this project. We would also like to thank all the individuals and organizations that provided us with the necessary resources and support to carry out this project. Wir möchten uns auch bei allen Einzelpersonen und Organisationen bedanken, die uns die notwendigen Ressourcen und Unterstützung zur Durchführung dieses Projekts zur Verfügung gestellt haben. We are grateful for their contributions and invaluable feedback, which helped to shape this report. We are grateful for their contributions and invaluable feedback, which helped to shape this report. Wir sind dankbar für ihre Beiträge und ihr unschätzbares Feedback, das zur Gestaltung dieses Berichts beigetragen hat. Finally, we acknowledge the contributions of our team members, whose tireless efforts and dedication made this report possible. Finally, we acknowledge the contributions of our team members, whose tireless efforts and dedication made this report possible. Abschließend würdigen wir die Beiträge unserer Teammitglieder, deren unermüdlicher Einsatz und Engagement diesen Bericht ermöglicht haben. Their commitment to excellence and professionalism was exemplary, and we are grateful for their contributions to this project. Their commitment to excellence and professionalism was exemplary, and we are grateful for their contributions to this project. Ihr Engagement für Exzellenz und Professionalität war beispielhaft, und wir sind dankbar für ihre Beiträge zu diesem Projekt. Thank you all for your support and contributions to this report on assessment of money laundering typologies from corruption in Nigeria. Thank you all for your support and contributions to this report on assessment of money laundering typologies from corruption in Nigeria. Wir danken Ihnen allen für Ihre Unterstützung und Ihre Beiträge zu diesem Bericht über die Bewertung von Geldwäschetypologien durch Korruption in Nigeria.

Modibbo R. HammanTukur Director/CEO Nigerian Financial Intelligence Unit

LIST OF ACRONYMS

ACA: Anti-Corruption Agencies

AUCPCC: African Union Convention on preventing and Combating Corruption

BDC: Bureau De Change

BPP: Bureau of Public Procurement

CAMA: Companies and Allied Matters Act

CCB: Code of Conduct Bureau

CRA: Corruption Risk Assessment

EFCC: Economic and Financial Crimes Commission

GIABA: Inter-Governmental Action Group Against Money Laundering in West Africa

GIFMIS: Government Integrated Financial Management Information System

ICPC: Independent Corrupt Practices and Other Related Offences Commission

IFFs: Illicit Financial Flows

IPPIS: Integrated Payroll and Personnel Information System

LEA: Law Enforcement Agencies

MDAs: Ministry Department and Agencies

MDG: Millennium Development Goals

NEITI: Nigeria Extractive Industries Transparency Initiative

NFIU: Nigerian Financial Intelligence Unit

NIRA: National Inherent Risk Assessment

OECD: Organization for Economic Cooperation and Development

OGP: Open Government Partnership

PEP: Politically Exposed Person

PFM: Public Finance Management

PIA: Petroleum Industry Act

PND: Post No Debit

PSC: Project Steering Committee

PSSP: Port Service Support Portal

SCUML: Special Control Unit Against Money Laundering

STR: Suspicious Transaction Report

TSA: Treasury Single Account

TUGAR: Technical Unit on Governance and Anti-corruption Reforms

UNCAC: United Nations Convention Against Corruption

UNCTAD: United Nations Conference on Trade and Development

UNODC: United Nations Office on Drugs and Crime

CHAPTER 1 INTRODUCTION

1. 0 Background

Corruption has been a persistent problem in Nigeria for decades, undermining economic development, eroding public trust, and impeding progress towards a more just and equitable society. Despite efforts by the government, civil society, and international organizations to combat corruption, it remains deeply entrenched in many aspects of Nigerian society, affecting everything from public procurement and law enforcement to healthcare and education. Corruption has been a persistent problem in Nigeria for decades, undermining economic development, eroding public trust, and impeding progress towards a more just and equitable society. Korruption ist seit Jahrzehnten ein hartnäckiges Problem in Nigeria, das die wirtschaftliche Entwicklung untergräbt, das Vertrauen der Öffentlichkeit untergräbt und den Fortschritt hin zu einer gerechteren und gerechteren Gesellschaft behindert. Despite efforts by the government, civil society, and international organizations to combat corruption, it remains deeply entrenched in many aspects of Nigerian society, affecting everything from public procurement and law enforcement to healthcare and education. Trotz der Bemühungen der Regierung, der Zivilgesellschaft und internationaler Organisationen zur Bekämpfung der Korruption bleibt diese in vielen Aspekten der nigerianischen Gesellschaft tief verwurzelt und betrifft alles von der öffentlichen Beschaffung über die Strafverfolgung bis hin zu Gesundheitswesen und Bildung.

Illicit Financial Flows (IFFs) have become a significant problem for many developing countries, including Nigeria. The United Nations estimates that $88.6 billion is lost annually as “capital flight” from Africa.1 According to a 2020 report2 by the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Office on Drugs and Crime (UNODC), illicit financial flows refer to activities considered as criminal offences, but also some behaviours related to tax and commercial practices. The International Classification of Crime for Statistical Purposes (ICCS) provides definitions of illegal activities generating IFFs3. The proposed framework identifies four main types of activities that can generate IFFs: 1) tax and commercial activities; 2) illegal markets; 3) corruption; and 4) exploitation-type activities and financing of crime and terrorism. The ICCS, on the basis of the United Nations Convention against Corruption (UNCAC), identifies a broad range of criminal acts to be considered as corruption. These include bribery, embezzlement, abuse of functions, trading in influence, illicit enrichment and other acts. IFFs related to corruption take place when the economic returns from these acts, directly or indirectly, generate cross-border flows and when financial assets are transferred across borders to commit these crimes. The Independent Corrupt Practices and Other Related Offences Commission (ICPC) in report of the Study on IFFs in Nigeria published Illicit Financial Flows (IFFs) have become a significant problem for many developing countries, including Nigeria. Illicit Financial Flows (IFFs) sind für viele Entwicklungsländer, darunter Nigeria, zu einem erheblichen Problem geworden. The United Nations estimates that $88.6 billion is lost annually as “capital flight” from Africa.1 According to a 2020 report2 by the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Office on Drugs and Crime (UNODC), illicit financial flows refer to activities considered as criminal offences, but also some behaviours related to tax and commercial practices. Die Vereinten Nationen schätzen, dass Afrika jährlich 88,6 Milliarden Dollar durch „Kapitalflucht“ verliert. According to einem Bericht der Konferenz der Vereinten Nationen für Handel und Entwicklung (UNCTAD) und des Büros der Vereinten Nationen für Drogen- und Verbrechensbekämpfung (UNODC) aus dem Jahr 2020 beziehen sich illegale Finanzströme auf Aktivitäten, die als Straftaten gelten, aber auch auf Verhaltensweisen im Zusammenhang mit Steuer- und Geschäftspraktiken. The International Classification of Crime for Statistical Purposes (ICCS) provides definitions of illegal activities generating IFFs3. The International Classification of Crime for Statistical Purposes (ICCS) provides definitions of illegal activities generating IFFs3. Die Internationale Kriminalitätsklassifikation für statistische Zwecke (ICCS) enthält Definitionen illegaler Aktivitäten, die IFFs erzeugen3. The proposed framework identifies four main types of activities that can generate IFFs: 1) tax and commercial activities; 2) illegal markets; 3) corruption; and 4) exploitation-type activities and financing of crime and terrorism. Der vorgeschlagene Rahmen identifiziert vier Haupttypen von Aktivitäten, die IFFs erzeugen können: 1) Steuer- und Handelsaktivitäten; 2) illegale Märkte; 3) Korruption; und 4) Ausbeutungsaktivitäten und Finanzierung von Kriminalität und Terrorismus. The ICCS, on the basis of the United Nations Convention against Corruption (UNCAC), identifies a broad range of criminal acts to be considered as corruption. Die ICCS identifiziert auf der Grundlage des Übereinkommens der Vereinten Nationen gegen Korruption (UNCAC) eine breite Palette von Straftaten, die als Korruption anzusehen sind. These include bribery, embezzlement, abuse of functions, trading in influence, illicit enrichment and other acts. Dazu gehören Bestechung, Veruntreuung, Amtsmissbrauch, Handel mit Einfluss, unrechtmäßige Bereicherung und andere Handlungen. IFFs related to corruption take place when the economic returns from these acts, directly or indirectly, generate cross-border flows and when financial assets are transferred across borders to commit these crimes. IFFs im Zusammenhang mit Korruption entstehen, wenn die wirtschaftlichen Erträge aus diesen Handlungen direkt oder indirekt grenzüberschreitende Ströme erzeugen und wenn finanzielle Vermögenswerte über Grenzen hinweg transferiert werden, um diese Verbrechen zu begehen. The Independent Corrupt Practices and Other Related Offences Commission (ICPC) in report of the Study on IFFs in Nigeria published The Independent Corrupt Practices and Other Related Offences Commission (ICPC) in report of the Study on IFFs in Nigeria published Die Independent Corrupt Practices and Other Related Offences Commission (ICPC) im Bericht der Studie über IFFs in Nigeria veröffentlichte

1 See