03072019 - Buhari's Ruga policy, an explosive issue — SOYINKA

40— Vanguard, WEDNESDAY, JULY 3, 2019
Offshore banking and money
laundering (3)
WHY is money laundering
such a big issue? Why
have many countries,
individually and collectively devoted
so much time, energy and resources
into combating money laundering?
The reason is simple. Money
Laundering poses a grave and
present danger to the global
economy. How and why this is so
will be discussed this week.
Private sector
One of the most serious
microeconomic effects of money
laundering is felt in the private sector.
As stated last week, money
launderers often use front companies,
which co-mingle the proceeds of
illicit activity with legitimate funds,
to hide the ill-gotten gains. In some
cases, front companies are able to
offer products at prices below what
it costs the manufacturer to produce.
Therefore, front companies have a
competitive advantage over
legitimate firms that draw capital
funds from financial markets. This
makes it difficult, if not impossible,
for legitimate business to compete
against front companies with
subsidised funding, a situation that
can result in the crowding out of
private sector business by criminal
organisations. The management
principles of these criminal
enterprises are not consistent with
traditional free market principles of
legitimate business, which results in
further negative macroeconomic
effects.
Banks and financial institutions
Financial institutions that rely on
the proceeds of crime have additional
challenges in adequately managing
their assets, liabilities and
operations. For example, large sums
of laundered money may arrive at a
financial institution but then
disappear suddenly, without notice,
through wire transfers in response
to non-market factors such as law
enforcement operations. This can
result in liquidity problems and runs
on banks. Criminal activity has been
associated with a number of bank
failures around the globe, including
here in Nigeria as evidenced by the
trial of some former bank directors a
few years ago.
Banks are particularly susceptible
to risks from money launderers on
several fronts. There is today a very
small step between a financial
institution suspecting that it is being
used to launder money and the
institution becoming criminally
involved with the activity. Banks that
are discovered to be laundering
money are most certain to face costs
associated with the subsequent loss
of business as well as legal costs.
Banks and their directors face the
risk of criminal prosecution for
money laundering whether they
know the funds are criminally
derived or not.
More often than not, bank directors
are unaware that their institution is
being used to launder money.
Typically, an employee colluding with
a criminal will circumvent the bank’s
depository procedures to launder
money. However, the bank is still
liable for the actions of its employees.
It is, therefore, essential that banks
adopt and enforce the new legal
procedures in deposit taking and
keep tight controls on staff likely to
be useful to money laundering.
Two conflicts of interest arise here
that may dampen the enthusiasm of
banks in complying to such laws. The
first is that bank officials are under
increasing pressure to bring in new
business and drive up profits. It has
been argued that many banks remain
afloat due to money laundering
services. The second conflict is that
certain banks and countries have a
competitive advantage in providing
private banking services, that is,
client confidentiality. Bank secrecy
laws exist in 50 nations worldwide,
and for such banks, these are
important in attracting customers.
Any moves to abolish or continually
override such laws are likely to be
strongly opposed.
Effect on economic growth
Money launderers are not
interested in profit generation from
their investments but rather in
protecting their proceeds. Therefore
they invest their funds in activities
that are not necessarily economically
beneficial to the country where the
funds are located. Furthermore, to the
extent that money laundering and
Overall,
government in
Nigeria has been
very pro-active in
combating
money
laundering with
constant changes
to legislation to
meet emerging
trends
financial crime redirect funds from
sound investments to low quality
investments that hide their proceeds,
economic growth can suffer. In some
countries, for example, entire
industries, such as construction and
hotels, have been financed not
because of actual demand, but
because of the short-term interests
of money launderers. When these
industries no longer suit the money
launderers, they abandon them,
causing a collapse of these sectors
and immense damage to these
economies.
Effect on taxation
Money laundering diminishes
government tax revenue and,
therefore, indirectly harms honest
taxpayers. It also makes government
tax collection more difficult. This loss
of revenue generally means higher
tax rates than would normally be the
case if the untaxed proceeds of crime
were legitimate. It also threatens the
efforts of many countries to introduce
reforms into their economies through
privatisation. Criminal organisations
have the financial capacity to outbid
legitimate purchasers for formerly
state-owned enterprises.
Furthermore, while privatisation
initiatives are often economically
beneficial, they can also serve as a
vehicle to launder funds. In the past,
criminals have been able to purchase
marinas, resorts, casinos and banks
to hide their illicit proceeds and
further their criminal activities.
Countries cannot afford to have
their reputations and financial
institutions tarnished by an
association with money laundering,
especially in today’s global economy.
Confidence in markets and in the
signalling role of profits is eroded
by money laundering. The negative
reputation that results from these
activities diminishes legitimate
global opportunities and sustainable
growth while attracting international
criminal organisations with
undesirable reputations and shortterm
goals. This can result in
diminished development and
economic growth. Furthermore,
once a country’s financial reputation
is damaged, reviving it is very
difficult and requires significant
government resources to rectify a
problem that could be prevented
with proper anti-money-laundering
controls.
Money laundering is a problem
not only in the world’s major
financial markets and offshore
centres, but also for emerging
markets. Indeed, any country
integrated into the international
financial system is at risk. As
emerging markets open their
economies and financial sectors,
they become increasingly viable
targets for money laundering
activity. Increased efforts by
authorities in the major financial
markets and in many offshore
financial centres to combat this
activity provide further incentive for
launderers to shift activities to
emerging markets. There is
evidence, for example, of increasing
cross-border cash shipments to
markets with loose arrangements for
detecting and recording the
placement of cash in the financial
system and of growing investment
by organised crime groups in real
estate and businesses in emerging
markets. Unfortunately, the negative
impacts of money laundering tend
to be magnified in emerging
markets.
Although the economic costs are
particularly emphasised, we must
also remember the social and
political dimensions of crime and
related money laundering, the
suffering of the victims and the
overall weakening of the social fabric
and collective ethical standards. This
is particularly true of Nigeria where
corruption remains endemic and
fuels money laundering activities. All
of this lends urgency to antilaundering
efforts which attack
criminal activity at the most
vulnerable point-where its proceeds
enter the financial system.
Overall, the government here in
Nigeria has been very pro-active in
combating money laundering with
constant changes to legislation to
meet emerging trends. Aside from
the creation of the Economics and
Financial Crimes Commission,
EFCC, legislation was also passed
to grant independence to the
Nigerian Financial Intelligence Unit,
NFIU, in line with international
standards and commitment. It is
hoped that other areas requiring
attention such as a revamp of the
criminal justice system will receive
attention so as to add fillip to the
overall fight against money
laundering. One of such is the
Companies and Allied Matters
Amendment Bill which is still
awaiting the assent of the President.
It is hoped that the Bill, which
contains many innovative features
aimed at further making it difficult
for criminals to lauder the proceeds
of illicit activity, will receive the
attention it deserves.
UACN unveils growth
strategy, pays N1.8bn
dividends
By Emmanuel
Elebeke
ABUJA—THE Office of
the Presidential Amnesty
Programme yesterday
signed a Memorandum
of Understanding
with the National Board
for Technology Incubation,
NBTI to sharpen the skills
and expertise of the delegates
of the amnesty programme.
The MoU was the final
stage of a joint collaboration
between the Federal
Ministry of Science and
Technology, the NBTI, the
Presidential Amnesty Office
and NAFDAC to ensure
that Amnesty delegates
trained and empowered
on food and cosmetics
products get their products
registered and patented
with NAFDAC.
Speaking after signing
the MoU, the Special Assistant
to the President on
Niger Delta and Coordinator,
Presidential Amnesty
Programme, Prof.
Charles Dokubo, represented
by Dr. Monima
Alabraba said the goal was
to empower the amnesty
delegates to be gainfully
employed and in long run
By Nkiru Nnorom
LAGOS—IN view of
the losses recorded
by UACN of Nigeria Plc
in the year ended December
31, 2018, the company
has revealed plans to undertake
a comprehensive
review of its organisational
structure to ensure increased
autonomy and effectiveness
of its subsidiary
companies.
The company recorded
N5.3 billion operating loss
in 2018 following losses in
its animal feeds and other
edibles business.
But despite the weak
performance, the company
declared N1.8 billion dividends,
which translates to
64 kobo per ordinary share
of 50 kobo each.
Addressing shareholders
at the company’s Annual
General Meeting, AGM,
in Lagos, the chairman,
Mr. Dan Agbor, said the
company will also
strengthen and empower
the management and
Boards of the subsidiary
companies in order to
equip them to drive value
creation, while at the same
time increasing their accountability
to deliver the
Group’s ambitious plans.
He disclosed that the
company is currently
working on a plan to stabilise
its real estate business,
UACN Property Development
Company,
UPDC, which constituted
a drain on the group’s performance.
Agbor explained that the
animal feeds and other
edibles businesses were
negatively impacted last
year due to heightened
competition with the attendant
pressure on prices
and margins and assured
that the company is working
tirelessly to deliver
improved performance.
He, however, noted that
the company recorded
growth in its packaged
foods, logistics, paints and
quick service restaurant
businesses.
“We are encouraged by
the initiatives implemented
thus far but recognize
that a significant
amount of work lies ahead.
It is important to mention
that one of the key elements
of the strategic plan
of your management is for
the company to operate as
a much simpler and leaner
holding company with the
main focus being on the
subsidiary companies.
“Your company’s role as
a lean holding company
will revolve around allocating
capital with a focus on value
to shareholders, strengthening
corporate governance,
driving talent acquisition,
management and succession
planning,” Agbor said.
Amnesty office, NBTI sign
MoU on improving delegates'
expertise
stem the tide of youth restiveness
in the region.
He said he was glad to
see that the MoU
reached final stage, thanking
the ministry and NBTI
for accepting to collaborate
with the Amnesty Office to
ensure that Amnesty delegates
trained and empowered
on food and cosmetics
products register
their products with the
NAFDAC.
‘‘The use of this incubation
centres by delegates
is of immense support as
it will aid the delegates in
improving their expertise
in their various areas of
specialization.
‘‘The legal departments
of both organizations with
the NAFDAC Desk Unit
had worked assiduously to
come up with this MoU
which will benefit the Amnesty
delegates,’’ he said.
Earlier, the Director
General of NBTI, Dr. Mohammed
Jibrin, explained
that the scheme called NBTI
Community Incubation is basically
aimed at imparting
knowledge of technologies
based on raw materials available
within the domains of the
benefiaries.