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JMLC
15,1 The role of financial
intermediaries in elite money
laundering practices
58
Evidence from Nigeria
Olatunde Julius Otusanya, Solabomi Omobola Ajibolade and
Eddy Olajide Omolehinwa
Department of Accounting, Faculty of Business Administration,
University of Lagos, Lagos, Nigeria

Abstract
Purpose – One of the most pervasive economic crimes in the world today is money laundering. It has
been estimated that some $2 to $3.6 trillion of hot money is laundered through the financial market
each year. Such huge amounts of money cannot be successfully laundered without the involvement of
financial intermediaries (such as bankers and lawyers) who used their expertise to conceal and obscure
illegal activity. However, broader accounts of the role of financial intermediaries in corrupt practices
are relatively scarce. The purpose of this paper is to examine some predatory activities of financial
intermediaries in facilitating money laundering practices in Nigeria.
Design/methodology/approach – The paper locates the role of financial intermediaries within the
sociological theory of profession to argue that these professionals facilitate money laundering despite
their professional and ethical claims. The paper uses publicly available evidence to illuminate the role
played by financial intermediaries in elite money laundering.
Findings – The evidence shows that, in pursuit of organisational and personal interest, the financial
intermediaries create enabling structures that support illicit activities of political and economic elite in
Nigeria. The paper concludes that the establishment of money laundering laws and the creation of
anti-money laundering agencies had not brought about professional transparency and ethical conduct.
Practical implications – The paper therefore suggests that Nigeria needs to reform its financial
institutions to promote integrity, accountability and ethical professional conduct to curb money
laundering and to build trust in the Nigerian financial system.
Social implications – The social, economic and political effects of financial intermediaries’
anti-social practices are significant as huge amounts, often dwarfing the gross domestic product (GDP)
of many nation states, are involved. These questionable practices by financial intermediaries increase
profits, but harm citizens.
Originality/value – The paper is a general review of literature and evidence on contemporary issues.
Keywords Nigeria, Money laundering, Intermediaries, Financial intermediaries, Lawyers, Local banks,
Elite
Paper type General review

1. Introduction
Money laundering has traditionally been considered to be a process by which criminals
attempt to hide the origins and ownership of the proceeds of their criminal activities.
Journal of Money Laundering Control In the era of electronic transfers of money and easy mobility of capital, money
Vol. 15 No. 1, 2012
pp. 58-84 laundering is considered to be a major challenge as it has the capacity to finance
q Emerald Group Publishing Limited
1368-5201
corruption, narcotics, crime, pervert democracy and fuel inequalities (Sikka, 2008).
DOI 10.1108/13685201211194736 Money laundering is facilitated by banks, financial services companies and network
of business advisers (AAPPG, 2006; Lankhorst and Nelen, 2004). Modern financial The role
systems, in addition to facilitating legitimate commerce, permit criminals to transfer of financial
large amounts of money instantly using personal computers and satellite facilities
(Imah, 2003). A comprehensive analysis of such matters is beyond the scope of this intermediaries
paper. Instead, it explores some predatory activities of financial intermediaries in
facilitating money laundering practices in Nigeria, a mineral rich country of 148 million
people located in Africa. 59
It has been argued that due to the stricter controls on financial transactions by
government and financial institutions, criminals increasingly tend to call on the
assistance of financial and legal experts (Lankhorst and Nelen, 2004). Professionals[1]
are associated with money laundering activities. This study focuses on two professional
groups: the bankers and lawyers and banks. Banks, professional bankers and lawyers
(hereafter referred to as “financial intermediaries”) may be expected to combat money
laundering by enhancing transparency and accountability and by developing
techniques for curbing illegal money transfers. However, an emerging body of
literature argues that finance professionals including lawyers increasingly use their
expertise to conceal and promote money laundering and corrupt activities (Lankhorst
and Nelen, 2004; Sikka, 2008; US Senate Permanent Sub-Committee on Investigations,
2005; Bakre, 2007; Otusanya, 2011). The vulnerability of the financial system has
become more obvious because crime has become global, and the financial aspects of
crime have become more complex, due to rapid advances in technology and the
globalisation of the financial services industry (Imah, 2003; Imala, 2004). Private
banking facilities, offshore banking, shell corporations, free trade zones, wire systems,
and trade financing all have the ability to mask illegal activities (Imah, 2003; Sikka, 2008;
Palan et al., 2010). Thus, professionals use these technologies and structures to derive
private economic gain for themselves and their clients to the detriment of the public
interest they claim to be protecting (US Senate Sub-Committee on Investigations, 2006;
Bakre, 2007; Sikka, 2008; Otusanya, 2011). Bingham, The Honourable Lord Justice (1992)
quoting from Mitchell et al. (1998, p. 590) argued that:
Those knowledgeable enough or aided by experts are able to transmit “illicit funds through
the banking system in such a way as to disguise the origin or ownership of the funds” and
thus clean or launder the sum involved.
Despite their claims to be acting in a professional manner, financial intermediaries
(such as bankers and lawyers) and banks have been implicated in facilitating the flow
of public funds stolen from developing countries through structures in Western
countries (AAPPG, 2006; Bakre, 2007). Offshore tax havens[2] providing secrecy and
low regulation have been identified as key vehicles for the movement of hot money
(Palan, 2002; Tax Justice Network, 2006; Christian Aid, 2005; Palan et al., 2010).
Despite spending vast sums of money on law enforcement and economic
surveillance, it has been estimated that the cross-border illicit money flows are on the
order of $1-$1.6 trillion annually (Baker, 2005). The IMF estimates the magnitude of
money laundering worldwide at 3-5 per cent of the world’s gross domestic product
(GDP), thus giving us $2.17-$3.61 trillion laundered per annum (INCSR, 2008). To
combat the threat of money laundering, most governments have devised anti-money
laundering laws which require banks and financial services to implement suitable
system of internal controls and policies to identify their customers and suspicious
JMLC transactions – sometimes known as “know your customer” (KYC). Yet, professional
15,1 responses to laws may not necessarily be aligned with broader social interest and
financial intermediaries may have developed strategies of creative compliance.
It has been argued that despite the above and other laws, money laundering and
related crimes continue to thrive and remain attractive to some Nigerians:
The resulting effect of these abuses was that even institutions responsible for the custody of
60 law and order become vulnerable and overwhelmed by vices, such as corruption, greed and
economic mismanagement, which made Nigeria a safe haven for all forms of economic and
financial crimes (Ribadu, 2003, p. 13).
The social, economic and political effects of anti-social practices are significant as huge
amounts, often dwarfing the GDP of many nation states, are involved. In recent years,
considerable scholarly attention has focused on the expansion and growth of money
laundering activities, the involvement of professionals and vulnerability of financial
system (Mitchell et al., 1998; Imah, 2003; Imala, 2004; Sikka, 2008; Otusanya et al.,
2011), but there is little exploration of the role of financial intermediaries (bankers and
lawyers) and whether in pursuit of profits and personal interest their professional
energies might be used to facilitate money laundering.
The paper seeks to encourage debates about the darker side of the role of financial
intermediaries’ and their involvement in money laundering activity of elite in Nigeria.
In particular, it seeks to put their role in scrutiny and encourage reflections on some
questionable practices by financial intermediaries which increase profits, but harm
citizens. The paper is organised into five further sections. Section 2 examines the related
cases to illuminate the key role played by banks and lawyers in facilitating elite money
laundering practices. Section 3 locates the role of financial intermediaries within the
broader dynamics of sociology of profession to provide a framework for appreciating
how enterprise culture might persuade professionals to engage in predatory practices to
increase private profits. It also discusses the research methods adopted in the paper.
Section 4 examines the Nigeria’s money laundering regime to understand the legal role
of financial intermediaries in combating money laundering. Section 5 provides some
evidence to show that despite laws and regulations, bankers and lawyers are engaged in
facilitating money laundering practices in Nigeria. Section 6 summarises the paper,
discusses its significance and suggests some possible reforms.

2. Review of related cases

The emergence and scale of money laundering is, arguably, most plausibly understood as
institutional phenomenon. However, money laundering thrives on secrecy and the
service of knowledgeable elite (Nellen and Lankhorst, 2004; Sikka, 2008; Otusanya et al.,
2011) and, as our case study shows, cannot easily be carried out without the involvement
of financial intermediaries. As noted earlier, money laundering is the product of “deviant”
individuals who are greedy, lacking self-control. It has been argued that financial
institutions engaged in legitimate transactions and international financial transactions
and can also be used as vehicle for illicit activities. The growth in anti-money laundering
regulation and advances in technology have led to money launders using increasingly
complex commercial arrangements which require the services of bank professionals and
professionals outside financial services industry, including lawyers, estate surveyors
and valuers, company secretaries and tax consultants (Lankhorst and Nelen, 2004;
Chukwuemerie, 2006; Sikka, 2008). This section examines the role played by banks, The role
bank professionals and lawyers in fostering money laundering practice. of financial
2.1 Banks and bank professionals intermediaries
Banks and bank professionals play a key role in facilitating anti-social practices by
serving as the channel through which illicit funds or “dirty” money flow around the
world. Although banks are major vehicles for economic development, as they provide 61
funds for both the private and public sectors in an economy, they have been identified as
facilitators of anti-social practices (Oxfam, 2000; US Senate Sub-Committee on
Investigations, 2006, 2008). The scandals and collapse of Enron, WorldCom and others
big corporations in the USA have exposed the role of the bankers in selling the tax shelter
product to their clients and in money laundering (US Senate Sub-Committee on
Investigations, 2003, 2004, 2005, 2008; Ribadu, 2003). For example, the Berce Case and
others, as described in the state and federal court filings, highlight the central role
US banks have played in unfolding tax shelter scandals. While accounting and
investment firms devised the shelters, banks helped promote and sell them
(Washington Post, 31 August 2005). Tax Justice Network (2005, p. 33) noted that:
The banks also play a substantial role in the world of aggressive tax avoidance and evasion.
They are implicated of knowingly providing the funding to facilitate abusive tax product
designed by major firms of accountants.
Those named by US Senate Sub-Committee on Investigations, in 2005 included Hypo
Vereinsbank, which earned $5.45 million for its role in 1999 alone. Deutsche Bank also
reaped $79 million in fees for financing tax products produced by KPMG known as
BLIPS[3], another tax shelter, and in earlier deals called OPIS[4] (US Senate
Sub-Committee on Investigations, 2003, 2005). JP Morgan Chase and Citigroup were also
implicated for their role in the Enron debacle, which included providing finance through
offshore vehicles (Tax Justice Network, 2005). In 2006, the US Inland Revenue Service
also reported that the shelters of the type employed by the Wylys[5] with the Bank of
America’s assistance helped shield from taxes $900 million in income from hundreds of
wealthy business executives (US Senate Sub-Committee of Investigations, 2006).
The collapse of BCCI in 1991 exposed the role the bank had played in money
laundering and other financial criminal activities (Mitchell et al., 1998; Ribadu, 2003[6]).
The bank was reported to have had several branches in Columbia, through which drug
money were laundered and it actively sought to provide financial services to drug
traffickers, terrorist and dictators (Ribadu, 2003). The BCCI attorneys argued that it was
inevitable that a bank operating in so many countries and where banking laws afforded
maximum secrecy would be used by drug traffickers. As Walker (2000, p. 4) commented:
BCCI’s criminality included fraud [. . .] involving billions of dollars; money laundering in
Europe, Africa, Asia and the Americas; [. . .] among BCCI’s principal mechanisms for
committing crimes were its use of shell corporations and bank confidentiality and secrecy
havens; layering of corporate structure[7]; and its use of front-men[8] and nominees together
with the endemic corruption ingrained in BCCI’S operations made it an ideal environment for
crime.
BCCI was later found guilty of money laundering but noted that its guilty plea was
only admitting that a few of its employees had engaged in money laundering and their
guilt was based solely on a theory of corporate responsibility.
JMLC The investigations into the “Operation Casablanca”[9] implicated bankers and banks
15,1 in facilitating the movement of millions of dollars in drug proceeds. The investigation
revealed that Esperanza de Saad – Banco de Venezuela (BIV) Executive
Vice President/General Manager of the Miami branch, laundered approximately
$4 million. Marco Tulio Henriquez – Banco Del Caribe Vice President in Caracas was
also indicted. Bancomer, S.A., pleaded guilty and agreed to forfeit $9.4 million and to pay
62 $500,000 fine. Banka Serfin, S.A., pleaded guilty and agreed to the forfeiture of
$4.2 million and to pay $500,000 fine (Walker, 2000). It was also reported that the third
bank, Confin, S.A., which had been purchased by Citicorp, agreed to a civil action to the
forfeiture of $12.2 million (Walker, 2000). In addition, 11 money brokers and other
employees of Mexican banks pleaded guilty to criminal charges[10].
The role of bank and bank professionals was also uncovered in August 1999 when
the suspected $10 billion was laundered by the Russian oligarchs out of Russia after
the 1998 default through Bank of New York (Ribadu, 2003). The investigators noted
that the proceeds from criminal activity such as arms dealing, prostitution and other
illegal activities, were laundered by Mogilevitch and his associates through the Benex
scheme. Edwards[11] admitted to preparing false document to assist clients to obtain
visas to the USA. The couple also admitted netting $1.8 million in commissions from
their business and evading taxation (Walker, 2000). The two individuals charged
pleaded guilty to money laundering, while the bank implicated in the money
laundering was not charged (Walker, 2000; Ribadu, 2003).
Electronic transfers of money and the easy mobility of capital facilitate money
laundering by banks and financial service providers (AAPPG, 2006). The investigation
by the US Senate Sub-Committee on Investigations (2005) into the activities of former
Chilean Dictator, Augusto Pinochet[12], stated that at least 125 US banks[13] had been
used to move funds. The senate report identified banks and security accounts and
offshore vehicles connected to Pinochet in Britain, Spain, Gibraltar, the Cayman Island,
the Bahamas, Switzerland and Argentina, as well as 125 accounts in other banks that
unwittingly handled cash for Pinochet or his associates including Citigroup and Bank
of America (Guardian Unlimited, 20 March 2005). The banks’ profile did not identify
General Pinochet by name and at the time he was referred to as:
“[. . .] a retired professional, who achieved much success in his career and accumulated wealth
during his lifetime for retirement in an orderly way” (p. 25) [. . .] with a “high paying position
in public sector for many years” (p. 26) [. . .] whose source of initial wealth was “profits and
dividends from several business[es] family owned” (p. 147) [. . .] the sources of his current
income is “investment income, rental income, and pension fund payments from previous
post” (p. 147) (US Senate Sub-Committee on Investigations, 2004).
Citigroup has the accounts of 25,000 “of the world’s most successful and influential
families”[14], and the bank has 184 offshore subsidiaries as listed in Citigroup’s annual
SEC filing (Komisar, 2006). British and European banks in Britain, the Channel Islands,
Switzerland, Luxembourg, Ireland, New Zealand and Australia have also been reported
as facilitators of corrupt practices in developing countries (Tax Justice Network, 2005).
It has been estimated that African leaders had $20 billion in Swiss bank accounts alone
(Oxfam, 2000).
The secrecy and confidentiality structure in some 70 tax havens[15] around the world
is central to the activities of banks in big-money laundering (US Senate Sub-Committee
on Investigations, 2005, 2008; Tax Justice Network, 2005; Palan et al., 2010). As a result
of their activities, hundreds of billions of dollars are stashed away out of the reach of the The role
tax authorities (Romonet, 1997; US Senate Permanent Sub-Committee on Investigations, of financial
2008). It has been calculated that developing countries are denied £270 billion a year in
lost revenue through tax avoidance (Accountancy Age, 13 September 2005)[16]. Cobham intermediaries
(2005) estimated that $385 billion is lost each year by developing countries[17].

2.2 Lawyers and anti-social practices 63

The legal profession has also been identified as another professional group promoting in
various ways the ever-increasing patronage of the tax avoidance industry (the US
Sub-Committee on Investigations, 2003, 2006). It has been shown that lawyers have
acted as facilitators of anti-social practices (Lankhorst and Nelen, 2004; Meddleton and
Levi, 2004; Chevrier, 2004; Nicola and Zoffi, 2004; Nellen and Lankhorst, 2008). Thus,
lawyers have assisted in establishing offshore structures, drafting financial instruments
and providing legal opinions on the legality of offshore transactions (US Senate
Sub-Committee on Investigations, 2006), and have acted as nominee directors and
shareholders (Tax Justice Network, 2005).
The tax shelter as an offshore structure was designed, promoted, and implemented by
Seattle-based security firm, Quellos Group, LLC (“Quellos”), with the assistance of
lawyers, bankers and other professionals. Quellos sold the shelter, called POINT, to five
wealthy clients in six separate transactions. Together, the tax shelters were used in an
effort to erase over $2 billion in capital gains that would otherwise have been taxed,
costing the US Treasury lost revenue of about $300 million (US Senate Sub-Committee on
Investigations, 2006, p. 6). The sixth, and final, case history comprised the most elaborate
offshore operations reviewed by the Sub-Committee which showed that for over a 13-year
period from 1992 to 2005, two US citizens, Sam and Charles Wyly, assisted by an army of
attorneys, brokers, and other professionals, transferred over 17 million stock options and
warrants representing approximately $190 million in compensation to a complex array of
58 trusts and shell corporations (US Senate Sub-Committee on Investigations, 2006, p. 7).
A number of studies have cited cases where lawyers have been involved in anti-social
practices ranging from acting as “messenger boy” for their clients to being involved in
conflicts of interest (Spronken, 2001; Lankhorst and Nelen, 2004)[18]. The US Senate
Sub-Committee on Investigation (2006, p. 361) on law firms and tax haven abuses
confirmed the involvement of lawyers in anti-social practices when it reported that:
Apart from giving legal advice, the lawyers helped identify and negotiate with offshore
service providers to establish and manage offshore entities, devised ways to move assets
offshore and drafted the paperwork needed to implement these transactions[19] for their
clients.
In 2004, a British lawyer ( Jeffrey Tesler) served as the KBR consortium’s agent to bribe
Nigerian officials (US District Court Southern District of Texas, 2009). Also, in February
2009 a British tax lawyer, David Mills[20], was sentenced by an Italian court to a
four-and-a-half year prison sentence for accepting a bribe of $600,000 to act “as a false
witness” and “to shield” the Italian Prime Minister Silvio Berlusconi from corrupt
charges (The Guardian, 19 May 2009; The Australian, 21 May 2009). In February 2010,
the judges of the Court of Cassation (the highest appeal court in Italy) quashed the
sentence on a technicality, but made no comment on the merits of the case and upheld an
order that David Mills should pay e250,000 (£222,000) to the Italian state as
compensation for giving evasive evidence (The Guardian, 25 February 2010).
JMLC People may look to elected governments to make the necessary investment in social
15,1 infrastructures and to eradicate social inequalities or to use government revenues to
redistribute wealth and enable more people to live fulfilling lives, but such aspirations are
increasingly checked by corrupt practices and money laundering facilitated by lawyers
and bankers. In order to fully understand anti-social financial practices in Nigeria, it is
necessary to explore the role of professionals both inside and outside Nigeria, and also the
64 various institutional structures which enable anti-social practices to flourish.

3. The professionals and the claim of ethical conduct

The preceding section explored money laundering activities which have created
challenges for states. It was stated that globalisation of the world financial systems,
which are enmeshed in secrecy, confidentiality, light regulations and low taxation, has
provided shelter for footloose capital/money. Such processes are aided by a variety of
professionals (such as lawyers and bankers) who play a “creative role” in structuring
transactions and strategies to secure the optimal economic advantage for capital and the
easy flow of illicit money (McCahery and Picciotto, 1995; Sikka, 2003; Lankhorst and
Nelen, 2004; Palan et al., 2010). Anti-social financial practice is perhaps best theorised as
an activity that is increasingly undertaken by organised groups, corporations and elite
bodies which operate within the values of capitalism (Mitchell et al., 1998).
Traditionally, the literature about the professions draws attention to the processes by
which professionals (such as accountants, bankers and lawyers) have mobilised claims
of ethical codes, higher education, the command of knowledge and claims of serving the
public interest to cement their social power. Such professional claims are used to advance
their social, economic and political interests and to secure control of markets and niches
(Millerson, 1964; Willmott, 1986; Macdonald, 1995; Grey, 1998; Morris and Empson, 1998;
Leicht and Fennell, 2001). Although it is assumed that compliance with professional
standards, ethical codes and other rules somehow leads to good professional practice,
this by itself does not help us to understand the social and organisational context of these
groups. This is because the literature neglects the possibility that these professionals
may be lacking public accountability, and as a result this has not often been examined
(Mitchell et al., 2001; Mitchell and Sikka, 2004; Bakre, 2007).
The neglect of group dynamics presupposes that professionals are regarded as
isolated individuals and thereby pay little attention to what organisations do for them.
It has been argued that, when professionals work in organisations (where people are
managed, and performance is assessed and targets are set as part of the enterprise
culture), then such individuals are driven by commercial, rather than professional, logic
(Sikka, 2009; Suddaby et al., 2009). Thus, professionals in these organisations[21] face a
wide variety of institutional pressures which shape and constrain professionals to
behave in a particular way, in contrast to their professional claims (Leicht and Fennel,
1997; Gunz and Gunz, 2006). Their performance is assessed and promotions and other
reward systems are used in order to create a competitive atmosphere amongst
professionals which normalises certain standards of behaviour. Such reward systems
exert pressure on professionals to engage in predatory practices and thus undermines
their claim to be serving the public interest. Therefore, the changed institutional context
may herald changes in the professional values and norms traditionally associated with
professionalism and ethical codes (Hanlon, 1996; Leicht and Fennel, 1997; Sikka, 2004;
Gunz and Gunz, 2006). Such an enterprise culture becomes institutionalised,
as the individual professional begins to internalise these value systems and norms The role
through a variety of mechanisms. These internalised practices and behaviour facilitate of financial
the anti-social practices not only to increase their clients’ (MNCs and of political and
economic elites) but also their own profits and financial gain. intermediaries
In common with other organisations, banks, professional bankers and lawyers oil
the wheel of capitalism because they can design a variety of organisational structures,
companies and front companies, and can act as intermediaries to create space for 65
professional services. In other words, professionals offer technical expertise to devise
strategies that enable corporations and elites to build structures to escape rules and
regulations in order to increase their economic and financial gains (Mitchell et al., 2002).
It has been argued that these structures have been used to preserve some semblance of
professional norms and values whilst simultaneously encouraging commitment to the
employing organisation. However, the activity of professionals is constrained by
organisational policies and values, politics, and power because their rewards
ultimately depend on advancing organisational aims and objectives (Sikka, 2009).
The internationalisation of professional services shaped by the intense competition
and pressure to increase earnings and accumulate wealth by the social actors has
continuously created opportunities for the professionals, and the process is driven by
both economic and financial gain. Hanlon (1994, p. 150) has argued:
In respect of professionals in the private sector the emphasis is very firmly placed on them
being commercial and on performing services to customers, rather than on them being public
spirited on behalf of either the public or the state.
These financial intermediaries prioritise private profits and encourage competitive
individualism, with an emphasis on retaining the client, pleasing the customer and
promoting business virtues that increase profits (Grey, 1998; Leicht and Fennell, 2001;
Gunz and Gunz, 2006; Suddaby et al., 2007).
In an era of information technology, electronic transfers of money and easy mobility
of capital, financial intermediaries have used their knowledge of global financial systems
and their ability to structure transactions so as to disguise the origin and destination of
capital. Such processes are aided by a variety of structures embedded within the global
economy, which are shaped by the secrecy, confidentiality and anonymity, and poor
regulatory environment promoted by some onshore and offshore financial centres
(OFCs). It has been argued that most professional firms also have considerable links with
OFCs and tax havens. Such links and expertise can be used to devise schemes which are
beneficial to professionals (Sikka, 2008). The professional bankers and lawyers therefore
become facilitators who are often used by the political elite and public officials in
promoting their capital accumulation through the plundering of public funds and illicit
transfers overseas (Mitchell et al., 2002; AAPPG, 2006; Bakre, 2007).

3.1 Research method

There are considerable problems in collecting data on anti-social practices because
money laundering practices are carried out in secrecy. It is extremely rare for
participants to volunteer details of their practices. This section does not rely on a
statistical sample in any positivistic sense because perpetrators rarely provide
information about their money laundering activity and therefore the size of the
appropriate populations cannot be determined in any meaningful way. For this reason,
JMLC it is only possible to refer to publicly available evidence. It relies on episodes that have
15,1 been brought to the public attention by regulatory investigations, courts and
investigative journalism, all of which are ascribed a certain kind of hardness by
contemporary standards of evidence. This paper therefore uses court judgments, press
reports of investigations[22] and whistleblower accounts of money laundering practices
to provide evidence of cases where banks, professional bankers and lawyers have
66 perpetrated and/or facilitated corrupt practices. Although such evidence may be partial
and incomplete, it provides some evidence of anti-social financial practices. The cases
chosen and described in this paper provide evidence of the predatory practices which
have acted as an impediment to development in Nigeria over the years.

4. Nigeria’s anti-money laundering regime

The financial and non-financial institution in any country play a fundamental role in
increasing the level of financial and other related services. As intermediaries they are
situated in a continuum that determines the effective and efficient management of
financial services through adherence to extant financial and anti-money laundering
regulations. The ability and inability of banks and lawyers to successfully fulfil their
role as intermediaries in curbing money laundering has been a central issue in a
number of money laundering investigations. This is because the financial system has
been argued to be the ultimate repository of illicit funds (Imala, 2004).
This section therefore examines the basic elements of Nigeria’s anti-money
laundering regime.
Money launderers want to be able to transfer funds across international lines, move
money quickly, and minimise inquiries into their finances and activities. Anti-money
laundering laws are designed to prevent terrorists and other criminals from utilising
financial institutions across the world to commit their crimes (US Senate
Sub-Committee on Investigations, 2004). In a bid to combat financial and economic
crimes, such as money laundering, international communities have through the United
Nations Conventions[23], and Financial Action Task Force (FATF) implemented
anti-money laundering measures to reduce money laundering practices. The signatory
countries to the UN Conventions are therefore required to implement the various
recommendations of the conventions. The failure of these countries to implement
anti-money laundering measures may lead to the blacklisting of a nation as a
non-cooperative country.
In line with international anti-money laundering obligations, the Federal
Government of Nigeria in 2004 passed into law the Money Laundering (Prohibition)
Act (MLPA) 2004 and the Economic and Financial Crimes Commission (EFCC)
(Establishment) Act 2004, aimed at combating economic and financial crimes. The
local and the international bodies were created to secure the stability, integrity and
viability of banking and other financial institutions. The money laundering act 2004
provides for specific implementations of the various aspects of the FATF and
40 recommendations of the UN Conventions against money laundering. MLPA (2004)
highlights specific provisions detailing the obligations of financial and non-financial
services provider (such as banks, banker and lawyers)[24] in preventing money
laundering. Chukwuemerie (2006, p. 173) noted that:
If the Act is faithfully implemented by the Economic and Financial Crimes Commission
(EFCC), the Central Bank of Nigeria (CBN), the National Drug Law Enforcement Agency
 (NDLEA), and the Ministry of Commerce on all of whom the Act vests supervisory and The role
implementive roles, the war against money laundering, though by no means an easy
enterprise in any jurisdiction, may well be won in the country very soon. of financial
intermediaries
Chukwuemerie (2006, p. 175) argued further that:
[. . .] prior to the present anti-money laundering campaign, the duty of a bank to exercise due
care in opening a bank account rested completely in the realm of the Civil Law of Torts. The 67
duty of care was so much for the good or safety of the bank [. . .] as it was for the good or
protection of the society. The duty bore no criminal element.
In order to enhance the monitoring process and keep track of financial transaction, it was
provided in s.2 of the MLPA that financial and non-financial institution should report a
transfer to or from a foreign country of funds or securities of a sum exceeding $10,000 or
its equivalent by any person or body corporate to the Central Bank of Nigeria (CBN) or
Securities and Exchange Commission (MLPA, 2004). This report shall indicate the nature
and amount of the transfer, the names and addresses of the sender and the receiver of the
funds and securities (s.2(2) MLPA, 2004). The act state further that where a financial
institutions suspects or has reasonable grounds to suspect that the amount involved in a
transaction is the proceeds of a crime or an illegal act, it shall require identification of the
customer not withstanding that the amount involved in the transaction is less than $5,000
or its equivalent. In s.9(1) every financial institution are expected to developed
programmes to combat the laundering of the proceeds of a crime or other illegal act,
which shall include; the designation of compliance officers at management level at its
headquarters and at every branch and local office, regular training programme for its
employees, the centralisation of the information collected, and the establishment of an
internal audit unit to ensure compliance with and ensure the effectiveness of the
measures taken to enforce the provisions of the act (MLPA, 2004, p. 7).
Notwithstanding the above provisions and realising that anti-social financial
practices flourish where there is secrecy, confidentiality and lack of transparency
(Chukwuemerie, 2006; Sikka, 2008; Otusanya and Lauwo, 2010; Otusanya et al., 2011),
MLPA (2004) incorporated a section to prevent the non-compliance by professional
institutions. These professionals are specifically required by s.12(4) of MLPA (2004) and
states that:
Banking secrecy or preservation of customer confidentiality shall not be invoked as a ground
for objecting to the measures set out in subsection (1) and (2) of this section or for refusing to
be a witness to facts likely to constitute and offence under this Act, the Economic and
Financial Crimes Commission (Establishment) Act and or any other law (MLPA, 2004, p. 9).
Section 12 of MLPA (2004), clearly provides for a derogation of any privacy or
confidentiality when dealing with money laundering matters, thus making it compulsory
for financial and non-financial institutions and other professionals to comply with the
provisions of the act’s in its totality. This therefore empowers the regulators and the
relevant government agencies against the problems associated with secrecy and
confidentiality in professional services (Chukwuemerie, 2006).
Within the context of the relevant sections of the money laundering act, the bankers
and lawyers are expected to cooperate with relevant government agencies and
regulators in the area of information disclosure which may be requested for to
aid investigation and also disclosure of information regarding what they perceive
JMLC to be suspicious transactions. Recognising the vulnerability of financial institutions to
15,1 money laundering activities, and the fact that the “know your customer”[25] principle is
key to money laundering prevention, the CBN put in place “Know Your Customer
Manual” (KYCM) for financial institutions operating in Nigeria, as in the case in most
other jurisdictions. Among other elements, this manual urges senior management to
ensure sound risk management and control environment. It recommends that banks
68 develop written anti-money laundering procedures, including “know your customer”
policies and procedures. Beyond the KYCM, the CBN also upgraded the status of money
laundering compliance officers in banks to the grade of general managers (Imah, 2003;
Imala, 2004). Non-compliance attracts a mandatory “[. . .] penalty of not less than N1
million or suspension of any license issued on a financial institutions [. . .]” by the
Governor of the CBN (see s.15 of MLPA, 2004).
In addition, the EFCC was created to enforce MLPA (2004), and to prosecute hiring
Nigerians involved in money laundering and other financial crimes. In pursuant of this
anti-money laundering law and to demonstrate strong political will by former President
Olusegun Obasanjo, to fight corruption and other financial crimes in Nigeria, the EFCC
state that:
The EFCC as the financial watchdog of Nigeria business environment is doing every thing
possible within its powers and mandate to see that Nigeria’s business environment reaches a
zero fraud tolerance level within the next few years (Ribadu, 2003, p. 28).
These are few of the several actions taken by the authorities in Nigeria to combat some
of the crimes which are at the root of money laundering. Despite the positive nature of
these developments, and subsequent arrests and indictments of alleged offenders,
it has been argued that too many high-ranking officials were either not prosecuted or
were merely fired (Fawehinmi, 2004; Ikubaje, 2005).

5. The role of financial intermediaries

Money laundering requires secrecy, knowledge of global financial systems and ability
to structure transaction to disguise their origins and destinations (Sikka, 2008;
Otusanya et al., 2011). In Nigeria, corruption money, money stolen by government
officials, proceeds from fraud including advance fee fraud, account for more than
90 per cent of laundered money (Ribadu, 2003). Money laundering becomes lucrative
because intermediaries can collect as much 20 per cent of the money laundered as a fee
(Mitchell and Sikka, 2004). As Leba (2009) observed, the critical demand of treasury
looters is of cause confidentiality and the ability of the recipient banks to repackage the
bloated loot to give it the air of legitimate cash lodgement, the rate of interest paid by the
bank on such deposits is generally not a critical factor for the unlikely bank of noveau
riche. It also make no difference that the bank will turn round and offer the same funds to
desperate investors at over five times the rate paid to these custodians of stolen funds
(The Vanguard, 7 September 2009). It has been argued that financial intermediaries,
particularly banks and lawyers, are both actors and structures that facilitate the corrupt
practices of public officials in siphoning and laundering money both in and outside
Nigeria (The Punch, 4 September 2006). The growing role played by professional
services providers turn up ever more frequently in anti-money laundering
investigations. This section therefore provides evidence to show the role played by
financial intermediaries in money laundering in Nigeria.
 A number of reports by the Nigerian authorities and international regulators have The role
exposed the involvement of several Western banks in facilitating corrupt practices in of financial
Nigeria. The former EFCC Director of Operation[26] has accused banks of being actively
involved in the perpetration of corrupt practices (The Punch, 13 August 2006). intermediaries
He observed that:
Banks aided perpetration of money laundering and other financial malpractices through
under cover banking transactions, where the identities of customers were concealed. Most of 69
the customers involved in the practice were politicians and government officials (The Punch,
13 August 2006.).
Investigations into Abacha’s dealings (in Nigeria, Europe and America) showed over
130 networks of bank accounts both in Nigeria and abroad where some of the money
stolen was stashed (Tell Magazine, 7 October 2002). Evidence shows that a number of
local banks[27] were used to launder General Abacha’s loot to Western banks[28] which
had been implicated in providing infrastructures and safe havens for illicit funds
(Tell Magazine, 7 October 2002). The British Financial Services Authority revealed that:
[. . .] 23 London banks had handled $1.3 billion belonging to family and friends of the late
General Sani Abacha, and others were German Deutche Bank, France, Switzerland and
United States of American banks[29] (BBC News, 3 October 2001).
While relatively few funds were found in Britain, the electronic footprints of more than
$1.3 billion were unearthed. Indeed, a Swiss Investigating Committee discovered that
more than half of the money in Swiss accounts had been laundered through Britain and a
further third through the USA, both countries that pay extensive lip-service to
condemning the scourge of money laundering (Scher, 2005). President Obasanjo stressed
that:
It is morally reprehensible, unjust, unfair and against all established human values to engage
in actions that actually encourage corruption in poor nations to fatten your own country [. . .]
The thief and the receiver of stolen items are guilty of the same offence (Scher, 2005, p. 20).
The investigations into the activities of political elite in 2007 by the EFCC, indicted a
number of banks in facilitating money laundering by political elite in Nigeria. For
instance, former Governor Dariye used bank accounts in the UK[30], Cyprus, Denmark,
Bahamas, and in the USA (The News, 20 December 2004; Nigeria World, 15 March 2006).
Before a Commission of Inquiry in Jos in 2006 a London Metropolitan Police detective
stated that:
Governor Dariye has 13 accounts in Barclays Bank, England and one in National Westminster
Bank and gave Mrs, Joyce Oyebanjo; Ms Christie Bentu and Mr John Mekwenye as the
Governor’s cronies in these deals (ThisDay, 8 November 2006; The Punch, 13 June 2007).
The charge sheet against the former governor indicated that the activities of the
Western banks were facilitated through Nigerian banks (International Bank,
International Trust Bank, Allstates Trust Bank and Lion Bank Plc.) using a number
of cronies and nominee companies (Certified Court Charge No. FHC/ABJ/CR/85/2007,
2007). The charge sheet alleges that:
[. . .] the banks facilitated the movement of the various sums which they knew represent the
proceed of crime with the aim of concealing the nature of the proceeds of the said crime
(Certified Court Charge No. FHC/ABJ/CR/85/2007, 2007).
JMLC Governor Orji Uzor Kalu of Abia State operated and used 59 Nigerian and foreign bank
15,1 accounts. Seven of the banks were in the USA, one was in Senegal and the other
51 accounts were operated in five Nigerian banks[31] to launder different sums which
were proceed of crime with the aim of concealing the nature of the proceed (The Punch,
26 July 2007; Certified Court Charge No. FHC/ABJ/CR/56/2007, 2007). The report from
The News (30 July 2007, p. 21) indicated that:
70 In all, 106 transfers were allegedly made from the three accounts belonging to the state
government by the trio of Kalu, his mother and Abone in favour of Slok Nigeria Limited. Slok,
according to the charge sheet, received the sum of N910 million from the state coffers between
May 2003 and December 2003 which were facilitated by local banks with the help of
professional bankers.
In the case of former Governor Nnamani, $8.9 million (N1.11 billion) was laundered at
different times to 20 different named accounts which were hosted by banks in the USA
for the former Governor and his accomplice[32] (Certified Court Charge No.
FHC/l/230 C/2007, 2007). James Onanefe Ibori used a number of local banks, and a
London bank, for illegal transfers and money laundering[33] (ThisDay, 31 October
2007). Former Governor Fayose used Barclays Bank Plc., London, and Citi Bank in
New York to launder several sums by one Mr Toney Orubuloye through the said
Mr Abiola Ayobola[34] (The Punch, 30 September 2006).
The former Chairman of EFCC, Malam Nuru Ribadu, noted that there were some
bank officials that were dedicated to the convicted former Inspector Genera of Police,
Tafa Balogun, that were helping him to launder his looted funds. These were the type
of bank officials that often went directly to government officials to assist them to
transfer stolen money (ThisDay, 11 August 2006). In the case of the former Inspector
General of Police (Tafa Balogun), Gbenga Ajala, the relationship Manager of the then
Fountain Trust Bank Plc., was indicted for designing and facilitating the transfer of
illicit funds through the various phoney companies he used for concealing corrupt
practices (Court Charge Sheet, FHC/ABJ/CR/14/2005). Different accounts were opened
in the name of these phoney companies through which different sums were transferred
representing the proceed of illegal act to wit: theft, property of the Nigeria Police Force
which aim is to conceal the nature of the proceeds of the said illegal act (Court Charge
Sheet, FHC/ABJ/CR/14/2005).
Guaranty Trust Bank Plc. and Intercontinental Bank Plc. were named in the case of
the former Governor of Edo State, Lucky Igbinedon (Certified Court Charge No.
FHC/EN/6C/2008; The Punch, 24 January 2008). Guaranty Trust Bank was again
implicated in the money laundering of the former Governor of Adamawa State
(ThisDay, 6 August 2008; The Punch, 6 August 2008).
The upsurge in money laundering has been partly attributed to the liberalisation of
the financial sector in the late 1980s which resulted in a phenomenal increase in the
number and complexity of banks and financial institutions (Imala, 2004). This
development, in turn, resulted in stiff competition, ineffective internal control systems,
and weak corporate governance, among others, thus, further providing easy avenue for
money launderers to use financial system to achieve their nefarious objective.
Managing directors of Nigerian banks are expected to submit Suspicious Transaction
Reports (STR) to EFCC and to alert the Nigeria Financial Intelligent Unit about any
transaction over a prescribed amount through STRs. Despite the anti-money
laundering laws and regulations, these banks failed to disclose all these suspicious
transactions to the regulators. It has been argued that most of the huge funds being The role
recovered by the EFCC from the former state executives were transferred out of the of financial
country through some officials of the banks. These activities of the banks were not
brought to the attention of the EFCC by the traditional watchdog of the banking intermediaries
system the CBN in spite of its acclaimed excellent supervision, audit and control
(The Vanguard, 7 September 2009). The EFCC unearthed the various roles played by
banks in the course of investigations and the quizzing former governors. 71
For example, the EFCC reportedly ordered a high-profile investigation into the
activities of Zenith Bank Plc., over an alleged money laundering deal worth N3.2 billion
after investigation abroad showed that large sums of money was moved from Nigeria
to Europe without the bank reporting to the commission as required by the extant laws
guiding banking operation in Nigeria (The Saturday Tribune, 20 December 2008).
Though most banks were reported to have implemented the STR policy but, some
commentators observed that:
Some banks do not make STR report to EFCC and that is why the bank is bearing the brunt of
the problem. Had the bank reported, following standard operation procedure and guidelines
on STRs, the bank would not be in this mess (The Sun, 23 December 2008).
The EFCC also noted that:
The problem is that their (bank) staffs do deals with customers to get money from the system.
You have people getting loan that are bad from day one, cheques being paid without cash
backing and so on, so we are investigating these cases and the banks have been largely
cooperative (The Punch, 2 February 2009).
A former Managing Director of First Bank of Nigeria Plc., Jacob Ajekigbe, also accused
bank workers for conniving with fraudsters to commit fraud in the nation’s banking
industry when he stated that:
Unfortunately, some of these practices are staff-induced and this calls to question the loyalty
and professional ethics of the employees of our banks, even though one may argue that it is a
reflection on the larger society (The Punch, 2 February 2009).
Another commentator also noted that:
As a matter of fact, due to the highly lucrative huge benefits (including super profits)
generated to the banks through such illicit activities, the banks go the extra-mile after the
perpetrators of these acts by offering them huge competitive incentives. Highly sophisticated
and impressionable classy looking young ladies; spotting very expensive imported skimpy
outfits have been strategically recruited and assigned tasks to hunt for this first-class clients
(Nigerian Muse, 29 May 2008).
The Chairman of the EFCC, Farida Waziri, noted that:
Since we sanitised the banks, I thought that we have had respite, but what is going on
through the banks is so bad, even some banks use stock exchange to perpetrate so much
corrupt deals, thereby, corrupting the same system that made them who they are (The Punch,
16 July 2008; Nigerian Tribune, 16 July 2008).
The recent banking crisis has also brought to the lime light the involvement of bank
executives in money laundering. The Guardian newspaper described the activities of
the bank executives when it reported that:
JMLC The dismissed bank executives were alleged to have violated virtually all the rules [. . .] loans
were alleged to have been granted without adequate collaterals; loans, including those given
15,1 our to themselves and their friends, were not serviced and they became “bad loans”; reports
submitted to the Central Bank were “cooked”, that is “faked”; bank executives were becoming
stupendously rich as individuals while the banks they managed were becoming bankrupt or
“failed”; they were “laundering” money and using their friends as “fronts” to collect loans from
their own banks; they were spending the banks’ money recklessly and illegally; some of them
72 could not immediately explain huge withdrawals and transfers of funds from their banks and
appeared to have made attempt to disguise the original sources of such funds (The Guardian,
17 September 2009).
In 2009, the EFCC arraigned former Managing Director of Finbank Plc., Okey Nwosu
and three other directors of the bank before a Federal High Court, Lagos, over alleged
role in N100 billion money laundering (The Sun, 3 December 2009). The EFCC
investigations shows that the former bank chiefs laundered about N32.2 billion and
failed to take all reasonable steps to give true and fair view of the state of affairs of
Finbank Plc. to the CBN by incorrectly reporting a total of N47.4 billion borrowed under
the CBN’s Expanded Discount Window in the Finbank Plc. statement of assets and
liability. It was also reported that he conspired to launder N24.3 billion by withdrawing
the money from the bank’s account illegally (The Sun, 3 December 2009; ThisDay,
1 September 2009).
The Managing Director of Oceanic Bank Plc., Cecilia Ibru, was said to have granted
approval for loans way beyond her limit:
As CEO of Oceanic Bank Plc., Ibru’s approval limit was N1 billion. But she single-handedly
approved loans of N3 billion and above without recourse to the bank’s board. She also moved
£1.7 billion to the United Kingdom in one fell swoop. The amount was then spread into other
foreign accounts. All the documents she sent to the CBN and other regulating agencies were
cooked (The Sun, 30 August 2009).
Cecilia Ibru was also accused of using companies to launder funds (e.g. Cloudy Heights,
Enifor, Prisky Gold, Bliss Bloss, Velvox and Circular Global) which she used to acquire
over 275 million shares in First Bank Nigeria Plc. for N275,795,139. She also used the
companies to acquire: over 64 million shares in Union Bank of Nigeria valued at N64,
218,000; 93 million shares in the United Bank for Africa for N93,750,000; and shares in
Oceanic Bank for N1,076,220,421. Other acquisitions included: 13 million shares
in Oando for N13, 200,000; 388 million units of shares in other companies; and 600 million
shares in BGL Plc. Prisky Gold, another company with which she had links, was used to
purchase the following shares: 48.8 million in Access Bank Plc.; 8,140,500 in Dangote
Flour; 12,480,000 in Dangote Sugar Refinery; 12,500,000 in Fidelity Bank; 27,434,791 in
First Bank; 25,316,400 in Japaul Oil; 10, 280,000 in Zenith Bank; and 200,000,000 in
Transcorp Plc. Africa Lloyd, another company traced to her, purchased 431,201,702
million shares in Oceanic International Bank Plc. (The Sun, 9 October 2010).
On account of her involvement in financial crime and other related offences, Cecelia
Ibru, a former Managing Director of Oceanic Bank pleaded guilty to three of the
25 allegations leveled against her by the EFCC. The presiding judge at the Federal
High Court, Ikoyi, Mr Dan Abutu, sentenced her to 18-month jail term and forfeiture of
199 assets and cash running into about $1.2 billion[35] (N191 billion) (The Sun,
9 October 2010; The Vanguard, 9 October 2010).
 In 2009, Erastus Bankole Akingola, a former Executive Vice-Chairman and Chief The role
Executive Officer of Intercontinental Bank Plc. was accused of money laundering and of financial
unethical financial practices. After investigations by the EFCC, Akingbola was charged
to court on a 22-count charge relating to money laundering, theft, market manipulation, intermediaries
tax fraud, obtaining by false pretence, the criminal granting of loans, and insider trading
and abuse of office (EFCC News, 13 August 2010). The EFCC alleged that:
[. . .] the Group Chief Executive of Intercontinental Bank engaged in serious economic and
73
financial crimes involving the sum of N346.19 billion and £10.926 million (EFCC News,
25 August 2010).
Further analysis of the charge sheet showed that between July 2007 and March 2009
Akingbola was responsible for the illegal transfer of the sums of £450,629.74,
£534,885.26, £100,000.00 and £8,540,134.54 belonging to Intercontinental Bank to the
client account of a firm of solicitors (Fuglers) in London who were not solicitors to
Intercontinental Bank and had never been used by Intercontinental Bank for the
provision of any service (EFCC News, 25 August 2010; Zero Tolerance, 2 October 2010).
It was also alleged that, between March and April 2008, Akingbola had illegally
transferred two sums of N5.5 and N1.729 billion belonging to Intercontinental Bank into
the account of Summit Finance Company Ltd, a company in which Akingbola was a
major shareholder. Akingbola subsequently paid the aggregate sum of N255 million out
of the above sum to himself and to Tropics Finance Ltd, where his wife, Antonia
Akingbola was Managing Director (EFCC News, 25 August 2010; Zero Tolerance,
2 October 2010).
The EFCC report also showed that sometime in May 2009 Akingbola caused the sum
of N1.21 billion to be illegally transferred from Intercontinental Bank into the account of
Tropic Securities Ltd, a company in which Akingbola and his wife Akingbola, were the
major shareholders and directors (EFCC News, 25 August 2010; Zero Tolerance,
2 October 2010). An internal investigation of Intercontinental Bank, concluded on
21 December 2009, revealed that between 13 May and 30 June 2009 a total sum of
N8.685 billion was converted and stolen from Intercontinental Bank and its subsidiaries
for the benefit of Tropic Finance Ltd and other companies (EFCC News, 25 August 2010).
Furthermore, in September, 2009 several attempts were made by persons unknown,
but on behalf of Akingbola, to move the suspected proceeds of his economic crimes cited
above out of the jurisdiction of Nigeria, including, in particular, an attempt by his wife
and others to give instructions for the transfer of about N1.2 billion from the account of
Tropic Finance & Investments Ltd Other such attempts involving associated
companies[36] and members of Akingbola’s family were, however, foiled by the EFCC
(EFCC News, 25 August 201; Zero Tolerance, 2 October 2010). Akingbola pleaded not
guilty to the charges and was granted bail. The case is still before the Federal High Court,
Lagos, for the determination of Akingbola’s corrupt financial practices perpetrated in
his capacity as CEO of Intercontinental Bank.
Lawyers were also implicated in the political elite corruption cases. The EFCC has
revealed that lawyers made themselves available as bribe-couriers to corrupt public
officers (Nigerian Tribune, 2 February 2009). She also accused senior lawyers of
frustrating the fight against corruption, stalled prosecution of their client being tried by
the commission. Lawyers were in the habit of exploiting the weakness of the Nigeria’s
judicial processes by filing frivolous applications in order to frustrate the trial of suspects
JMLC for corruption and money laundering (Nigerian Tribune, 2 February 2009). The EFCC
15,1 Chairperson stated that:
The activities of some unscrupulous lawyers who fraudulently obtained money from their
clients under the pretext of delivering same as bribe to officials of the Commission to “kill”
cases under investigation (Nigerian Tribune, 2 February 2009).

74 Prime Chambers, a law firm owned by Professor Agbe Utuama[37], was used to launder
N383.52 million ($3.07 million) from the Delta State Government Treasury by Governor
Ibori (Nigerian Tribune, 14 December 2007; The Guardian, 14 December 2007).
In addition, a UK-based lawyer, Bhadresh Gohil, was also implicated in 2011 for the role
he played in the money laundering charges against the former Governor of Delta State,
James Ibori. Gohil was recruited and was purported to have design a simple scheme and
set up a fake company as a consultancy called Africa Development Finance (ADF) that
charge exorbitant fees (five to six times of that charged by top UK solicitors), for their
alleged service and to arrange the sale of the Delta and Akwa Ibom States shares in
V Mobile[38]. Gohil created a pretence that it was necessary for Delta State and
Akwa Ibom State to consult another company – ADF and charged $19 and $18 million,
respectively, and sent to Access bank in Nigeria (Sahara Reporter, 10 March 2011). Once
funds were received at the Access Bank in Nigeria, various company[39] vehicles were
used to launder the cash. On the account of the above, the Judge described Gohil as the:
“Architect” and the predicate offender in a thoroughly dishonest scheme which had been
devised simply to divert resources of Nigerian state funds into the pocket of others from the
sale of “V Mobile share [. . .] Gohil went to extra ordinary lengths to carry out the fraud with
no regard for his professional duties” (Sahara Reporter, 10 March 2011).
as a consequence of his role in facilitating Jame Ibor’s, illegal transfers of state funds to
private coffers, the prosecuting judge sentence Gohil, to over seven years in prison on
eight count charge of conspiracy to defraud, conspiracy to make false instrument,
money laundering and proceeds of crime (Sahara Reporter, 10 March 2011).
The Administrator of the National Judicial Institute, Justice Timothy Oyeyipo,
was removed from office over allegations of corrupt practices. The EFCC recovered
N1.4 billion in a secret account, and N300 million was recovered from a contractor as a
result of an inflated contract (Nigerian Tribune, 18 August 2008; The Guardian,
18 August 2008). Rowberry Morris, a firm of solicitors in the UK, was also indicted in
the case of Dariye for assisting in money laundering and for handling the purchase of
property for Dariye (ThisDay, 27 September 2006).

6. Summary and conclusions

This paper sought to stimulate debate about the key role of financial intermediaries
which may increase profits, but impoverish citizens and society through the operations
of money laundering. The paper therefore argued that money laundering, like much
other corrupt practices, is often a furtive and murky affair in which key players often
do not wish to talk and information is thin or incomplete. As the case study illustrates,
money laundering on any scale is difficult to accomplish and conceal without the active
and creative involvement of professionals (bankers and lawyers) who are able to
design novel schemes which might impedes the tracing of the illicit transactions.
In pursuit of profit and higher financial rewards, promotions and status, money
laundering seem to be crafted and sanctioned by highly paid executives at senior level.
Methodologically and empirically, it has been argued that in an environment of poor The role
regulation, enforcement, secrecy, confidentiality and lack or moral constraints, the
occasional investigation by regulators and financial penalties do not seem to deter elite
of financial
and financial intermediaries, or dull the systemic pressures for capital accumulation intermediaries
and higher profits and returns (Sikka, 2008; Bakre, 2007). Studies of organised crime in
various fields show that free market motivation can nurture opportunities to break the
law. These motives and opportunities can be linked with the profit motive of business, 75
competitive positions, the professional culture and resulting tension between aims and
means (Landhorst and Nelen, 2004). Therefore, to survive in marketplace it may be
tempting to breach legislation or other rules.
This study shows that banks assisted a number of elites in laundering their illicit
funds stolen from government treasury. The banks managed a number of accounts and
certificates of deposit for government officials, their family members and cronies, with
little or no attention to the bank’s anti-money laundering obligations, turning a blind eye
to evidence suggesting that the banks were handling the proceeds of corruption, and
allowed numerous suspicious transactions to take place without notifying the
regulators. In addition, there were also regulatory failure, conflict of interest and uneven
anti-money laundering enforcement because the regulators were slow and passive.
These are some of the recurring themes which show that anti-social practices have
become ingrained in Nigerian society.
As can be seen from the cases presented, the existence of money laundering
practices within banking and non-financial institutions allows for the operation of
money laundering activity over a long period before it is detected. It has been argued
that the mingling of illicit funds with the huge volume of legitimate transactions using
regular financial system provides cover, especially when employees of banks or
financial service providers work with the criminal to deflect adverse attention from
authorities and regulators (Walker, 2000). In the case of Abacha and the state
governors, the money siphoned from the government treasury passed through local
banks, even including the CBN to Western countries with shell companies, cronies
often obscuring the origins and destination of illicit funds. The money laundering
activities were allegedly circumventing anti-money laundering laws, and regulatory
provisions. None of the banks and lawyers implicated did presented these suspicious
transactions to the regulators and relevant agencies of the government (such as CBN,
EFCC) as required by law. This therefore suggests that the determination and resolve
on the part of the government to maintain and enforce the rule of law, justice and
equity was lacking. The chairman of the EFCC, listed the challenges facing the
commission to include:
Attitudinal fixations and societal tolerance of corrupt conduct, insufficient commitment by all
tiers of government, attempt to blackmail and politicise the work of EFCC, constitutional
constraints and lack of cooperation by some countries in loot recovery (ThisDay, 11 August
2006).
The evidence has shown that regulators did fail to exercise meaningful oversight of the
banks and non-financial institutions to comply with statutory and regulatory
anti-money laundering requirements. The regulators were too tolerant of the bank’s
weak anti-money laundering program, too slow in reacting to respect deficiencies and
failed to make prompt use of available enforcement tools. This regulatory failure has
raised a number of concerns among academics, policymakers and non-governmental
JMLC organisations for the ongoing battle against corruption, since it makes it more difficult
for Nigeria to stop corrupt leaders and other criminals from misusing the financial
15,1 system.
Money laundering has become a critical problem affecting the socio-economic
structure of the Nigerian society (Bakre, 2008; Otusanya, 2010, 2011). This is because it
facilitates elite and official corruption which has now become endemic in Nigeria. The
76 involvement of financial intermediaries in money laundering forces ordinary consumers
to pay higher prices and also degrades the quality of life for millions of people. Their
involvement in money laundering challenges the very fabric of society (Sikka, 2008).
As former chairman of EFCC observed:
The possible social and political costs caused by infiltration of dirty money and proceeds
from illicit sources such as smuggling, and the activities of organised crime, drug trafficking,
prostitution crimes, embezzlement, insider trading, bribery, tax related economic crimes,
cyber crimes and other fraudulent business are significantly alarming (Ribadu, 2003, p. 21.)
As a consequence, over 80 per cent of Nigeria’s money has gone to waste. Though, this is
a country with massive resources but people are suffering simply because we have poor
management. For example, Ribadu, states that what most of the governors get from the
federation account monthly is enough to develop their respective states but regretted
that instead of applying the funds for the good of the public, they disappeared into
private bank accounts (ThisDay, 11 August 2009). There are number of cases of
government officials who connived with banks to steal government money. This money
is being converted and transferred to other countries with the help of banks, bank
officials and lawyers.
Despite the need to develop regulatory structures to satisfy social expectations
(e.g. to health, transport and education) and to increase and protect government
revenues, any attempt to do this has been frustrated by the close links between the
professionals and the economic and political elite. Further reforms could include the
imposition on bank directors and owners of law firms of personal accountability for
wrongdoing and the barring of such professional firms and institutions through
revocation of their operating licenses.
In respect of the implication of banks, bankers and lawyers in money laundering
practices, their role has rarely been investigated. Professionals too are under systemic
pressure to increase profit. Without disrupting the link between profits and professional
rewards and personal penalties for erring banks, bankers and lawyers there is little
chance of these professionals behaving responsibly. It is therefore suggested that the
activities of erring professionals should be investigated by independent regulatory
institutions in order to document their involvement in money laundering and anti-social
financial practices and for them to be sanctioned appropriately.
With respect to the domination and control of government structures, existing law
needs to be strengthened in order to compel state officials and the political elite to declare
and disclose their assets and bank accounts. The potential for abuse is further
exacerbated by the immunity from legal action enjoyed by the political elite. Changing
the law which exempts the president, governors and their deputies from the tax system
and the removal of the “immunity clause” from the constitution are necessary
pre-conditions for reshaping the Nigerian state and for preventing the elite from ruling
with impunity. A requirement of public disclosure would reduce the secrecy that
facilitates corrupt government activities, and make public officials more circumspect
in discharging their official duties. No doubt such changes would generate debate and The role
some would be opposed to them, but such a debate is vitally needed in Nigeria. A major of financial
difficulty, however, is that, it is only possible to eradicate money laundering practices if
they are visible. Reform of the various institutions themselves and the strengthening of intermediaries
anti-money laundering law are needed so that money laundering and other corrupt
practices become more visible and less secretive. The laws and administrative rules that
constrain the regulators should therefore be revised to promote transparency in dealing 77
with anti-social practices. The anti-corruption regime must be complemented by a
judiciary which is willing to enforce the law free from partisan pressures.
Anti-social practices are a global phenomenon supported by both local and
international structures. Weak institutional structures in Nigeria have made anti-social
practices more rife and more profitable and these practices have also been enabled by
global structures. They have encouraged rent-seeking and have reduced public revenue.
This study could be extended by examining the role of international cooperation in
curbing anti-social financial practices in order to improve our understanding as to why
international cooperation has failed to produce effective solutions to such practices in the
global economy.
This study has contributed to the body of knowledge on the persistence of money
laundering practices in Nigeria. It has drawn attention to the role played by the banks,
bank employees (bankers) and lawyers. It has further shown that the involvement of
the professionals in money laundering, which is rarely examined in the literature, has
played a key role in the prevalence of corrupt practices in the domestic business
environment and in politics in Nigeria. The results of this research have potential
policy implications for future economic, social and political development, and for the
structure of regulatory bodies and other structures in curbing money laundering and
other anti-social financial practices in Nigeria.

Notes
1. Under the law (Money Laundering (Prohibition) Act 2004), professional accountant, legal
practitioners, car dealers, audit firms, tax consultants, hotels casino, supermarket, are some
of the bodies that fall within the category of designated non-financial institutions.
2. Offshore tax havens are regions which are relatively small geographically, and which offer
shelter to international capital through bank secrecy, confidentiality, little (or no) regulation,
and low (or no) tax (Palan, 2002; Palan et al., 2010).
3. BLIPS was a tax-avoidance scheme designed by KPMG called bond linked issue premium
structure.
4. OPIS is the offshore portfolio investment strategy.
5. Wylys is an offshore trust set up by Sam and Charles Wyly in the 1990s to their benefit and
their families (US Senate Sub-Committee of Investigations, 2006, p. 120).
6. The Times, 3 April 2004, London.
7. The BCCI former heads, Agha Hasan Abedi and Swaleh Naqvi were part of the corporate
structure implicated.
8. Ghaith Pharao and Faisal Saud Al Fulaij.
9. “Operation Casablanca” is the name given to the investigation launched by US Customs
Service in an attempt to identify those involved in the laundering of drug trafficking
proceeds being moved from the USA to Colombia in the late 1995 to May 1998.
JMLC 10. Among this group was Victor Manuel Alcala Navarro, also Known as Dr Navarro, who
pleaded to 28 felony counts for introducing the confidential information to Mexican bankers
15,1 who were willing to launder drug money (Walker, 2000, p. 7).
11. Lucy Edwards was an enthusiastic promoter of Bank of New York services in Russia. Her
husband, Peter Berlin, owned a company Banex International that he used as conference
business, providing advice to Russian bankers wishing to operate within the US financial
78 system (Walker, 2000, p. 8).
12. Augusto Jose Ramon Pinochet Ugarte was the former President of Chile and a controversial
political figure whose name was known worldwide. After taking power in a 1973 coup, he
served as President of Chile until 1990 and as Commander-in-Chief of the Chilean Army until
1998. After stepping down from the army, he became a “Senator for Life” until his death in
2006 (US Senate Sub-Committee on Investigations, 2005, p. 8).
13. For details of the various accounts and networks of banks including Riggs Banks, Citigroup,
Banco de Chile-United States, Espirito Santo Bank including Riggs Banks, Citigroup, Banco
de Chile-United States, Espirito Santo Bank, see US Senate Sub-Committee on Investigations
(2005, pp. 8-80).
14. Notable among them were those of El Hadj Omar Bongo, dictator of Gabon since 1967, whom
the banks had helped to move and hide more than $130 million via a network of accounts and
shell companies (Komisar, 2006).
15. Tax Justice Network (2005) reported that there were 74 tax havens around the world: 23 in
the Caribbean and the Americas; 26 in Europe; nine from the Indian and Pacific Oceans; nine
from the Middle East and Asia; and seven from Africa. They are enclaves where banks, as a
result of their code of confidentiality, secrecy and low regulation that reins supreme in tax
havens, provide a convenient cloak for embezzlement and other criminal activities.
16. The amount lost each year was through the use of offshore bank accounts, trusts and
companies which dwarfs most countries’ annual overseas aid budgets (Accountancy Age,
13 September 2005).
17. From these estimates, the shadow economy has $285billion, offshore asset-holding and
corporate profit-shifting contributing $50billion each.
18. One of the most prominent class-action law firms in the USA was indicted on charges that it
paid more than $11 milion (£6 million) in bribes to clients who had agreed to act as lead
plaintiffs in dozens of corporate cases (Telegraph, 20 May 2006).
19. Among the names revealed by the report were: Pretter, Tedder & Graves, a Californian law
firm; Jackson & Walker, a Texas law firm; Charles Lubar of the London Office of Morgan; and
Lewis & Bockius, a Philadelphia-based law firm. Others were: the Dallas office of Jones, Day,
Reavis & Pogus; Meadows Owens, a law firm; Cravath, Swaine & Moore; and Bryan Cave. The
evidence showed that Cravath, Swaine & Moore; and Bryan Cave received substantial fees for
their work on the POINT strategy. Cravath received at least $125,000, and Bryan Cave
received about $1.3 million (US Senate Sub-Committee on Investigations, 2006, p. 369).
20. David Mills is the estranged husband of British Olympics Minister, Tessa Jowell.
21. These organisations can be professional service firms (PSFs) or non-professional
organisations (NPOs). The term “PSFs” is used to describe organisations involved in a
variety of activities, from law, civil engineering and architecture to audit and accounting,
consulting, advertising and software production (Morris and Empson, 1998). “NPOs” may
include professionals serving in government, government departments, agencies and private
companies.
22. EFCC, the Independent Corrupt Practices and Other Related Offences Commission (ICPC).
23. The UN Convention against Narcotics and Psychotropic substance of 1988 was the first The role
effort by international community to address the problem aimed at curtailing laundering of
proceeds of drug trafficking.
of financial
24. For detail analysis of the Nigeria’s Money Laundering Act 2004, see Chukwuemerie (2006,
intermediaries
pp. 173-90).
25. It requires banks to establish the identity of any customer and the nature of their business as
well as other relevant information including third party references and confirmations before 79
entering into relationships with the customers (Imala, 2004, p. 34).
26. Alhaji Ibrahim Lamorde was then the Acting Chairman of EFCC after former Chairman
Mallam Nuhu Ribadu was forced on purported compulsory study leave at the Institute of
Policy and Strategic Studies in Kuru, Jos.
27. First Bank of Nigeria Plc., Inland Bank (Nigeria) Plc., former Nigerian Intercontinental
Merchant Bank Limited, Lagos, Union Bank of Nigeria and Universal Trust Bank Nigeria
Limited, Lagos (Tell Magazine, 7 October 2002).
28. Abacha was found to have accounts in Luxemburg, Liechtenstein, Jersey, America, and over
140 accounts in Switzerland (Scher, 2005).
29. The banks reportedly named were Deutsche Bank, Commerzbank, BNP Paribas, Credit
Agricole Credit Suisse, UBS, HSBC, Barclays, NatWest, Goldman Sachs, Merrill Lynch and
Citibank (BBC News, 3 October 2001).
30. Barclays Bank Plc., National Westminster Bank, and UBS are in London.
31. These banks were United Bang for Africa Plc., Fidelity Bank Plc., Intercontinental Bank Plc.,
Guaranty Trust Bank Plc., First Inland Bank Plc., Spring Bank Plc. (Certified Court Charge
No. FHC/ABJ/CR/56/2007).
32. Chinero Nwigwe, Sunday Onyekazuru Anyaogu, Sylvia Onwubuemeli, Rainbownet Nig.
Ltd, Hillgate Nig. Ltd, Cosmos FM, Capitalcity Automobile (Nig.) Ltd, Renaissance
University Teaching Hospital, Renaissance University and Mea Mater Elizabeth High
School (Certified Court Charge No. FHC/l/230C/07).
33. The HSBC in London and Oceanic Bank Plc., Zenith Banks Plc. in Nigeria (ThisDay,
31 October 2007).
34. Toney Orubuloye was the son of the then Vice-Chancellor, Ado Ekiti University, while
Mr Abiola Ayobola was a banker working with Standard Trust Bank, subsequently merged
with United Bank for Africa (UBA Plc.).
35. She is to forfeit shares in 298 unlisted and listed blue chip companies. She had shares in
Guinness Nigeria, Zenith Bank Plc., United Bank for Africa, Diamond Bank Plc., First Bank
of Nigeria Plc., Nestle Nigeria Plc., Nigerian Bottling Company Plc., GTBank Plc., Unilever,
Africa Petroleum, Dangote Sugar, Oando Plc., PZ Industries Plc. and many others. She is also
to forfeit choice properties in Ikoyi, Victoria Island, all in Lagos State, Abuja, Delta and
Rivers states. The convict is also to forfeit assets in Dubai, United Arab Emirates and the
USA (Vanguard, 9 October 2010).
36. Tropics Holdings Ltd, Tropics Securities Ltd, Tropics Finance & Investments Company Ltd,
and Tropics Properties Ltd (EFCC News, 25 August 2010).
37. Professor Agbe Utuama who was then the Commissioner of Justice and Attorney General of
the State, became the Deputy Governor of Delta State after General Election of 14 May 2007
before the election was upturned by the Appeal Court ruling in December 2008 following
irregularities and electoral fraud during the election.
JMLC 38. V Mobile is the third largest wireless network in operation in the whole of Africa continent
now known as “Airtel”.
15,1
39. These companies include: Brookes Aviation, E F Smuels, Ascot Offshore Nigeria Ltd,
Esconet and Cran Brasil Nominees Ltd Both De Boer and McCann were FSA approved and
were recruited by Gohil to play a part (Sahara Reporter, 10 March 2011).

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Further reading
Certified Court Charge No. FHC/ABJ/CR/14/2005 (2005), The Federal Republic of Nigeria vs Tafa
Adebayo Balogun and Others’, The Federal High Court, Abuja.
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advance fee fraud”, EFCC, 3rd Proceedings of the National Seminar on Economic
Crime, pp. 29-32.
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84
Corresponding author
Olatunde Julius Otusanya can be contacted at: jotusanya@[Link]

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