Africa lost between US1.2 and US1.4 trillion over three decades through illicit financial flows, says GIABA DG

Director General (GIABA) Dr. Abdullahi Shehu

The Director General of Inter-Government Action Group against Money Laundering in West Africa (GIABA) Dr. Abdullahi Shehu disclosed a study by African Development Bank (AFDB) has revealed that Africa lead the rest of the developing world, having lost between US1.2 and US1.4 trillion over the 30 year period 1980- 2009 through illicit financial flows.

Dr. Abdullahi Shehu was recently speaking at the opening ceremony of two day regional workshop on AML/CFT requirements for accountants at the Kairaba beach Hotel on Wednesday.

Meanwhile, the GIABA boss further stated that worldwide estimates of the amount of money laundered annually range between US700 billion and US1.8 billion, about 5% of the world GDP. A study by Kar & Freitas, also revealed that developing countries lost between US585.9 billion and US918.6 billion annually over a 10 year period from 2001 to 2010.

``From the available data, it can be argued that Africa is a global creditor because illicit flows from the continent over the 30 year period grew much faster than it attracted net-transfer, while the net drain is about four times its total external debt. The studies on illicit financial flow from Africa confirm that West and Central Africa lead the other regions of the continent in the outflow of illicit capital, with Nigeria, Congo and Code d’Ivoire in that order o n top. Curiously, two of the three are countries are in West Africa, and this calls for closer attention on the region, `` he said.

According to him, Accountants perform a range of activities including financial and tax advice, creation of corporate vehicles or other complex legal arrangement such as trusts; buying or selling of property and performing of financial transactions which make them attractive to and potentially vulnerable to criminals. There is need to highlight that the laundering of money helps criminals to avoid prosecution and evade tax or hide their wealth.

``Money laundering and the financing of terrorism are financial crimes with economic effect. They can be threaten the stability of a country’s financial sector or undermine its political stability and development. Effective anti-money laundering and combating the financing of terrorism regimes are essential to protect the integrity of market and of the global financial system as they help mitigate the factors that facilitate financial abuse. Action to prevent and combat money laundering and the financing of terrorism thus responds not only to a moral imperative, but also to an economic need`, `` he said.

``Money laundering is a derivative crime and it is often fuelled and facilitate by micro-criminality, including racketeering, drug trafficking and smuggling, fraud and corruption. We have own challenges with these predicate offences in this region, thus necessitating concerted efforts to deal with those problems. No one should be in doubt that accountants have a critical role to play in the prevention and control of money laundering, `` he said.

Regional and national AML/CFT measures were implemented with emphasis on financial institutions. With the strengthening of AML/CFT regime in FL’s channels of money laundering have become more difficult to exploit through the sector. Consequently, crimes look for other vulnerable sectors through which they could launder their proceeds or move funds for the purposes of supporting terrorist activities. One such vulnerable sector is the Designated Non Financial, Businesses and Professions (DNFBPs), comprising of accountants, real estate agents, lawyers, notaries and other independent legal professionals.

In February 2012, the FATF, together with other global body networks, revised to provide for a strong framework to act against criminal by clarifying and strengthening the existing obligation, addressing new threats to the international financial system and providing competent authorities with enhanced tools to counter the evolving threats posed by money laundering and terrorist financing. The revised standards also expanded the scope of predicate offence to include tax crimes and stressed the need for greater transparency of legal persons and arrangement, especially as it relates to beneficial ownership.

``This revision has brought about new challenges for all stakeholders, including accountants, particularly as regards the identification and verification of ownership, conduct of money laundering and terrorist financing (ML/TF) risk assessment and application of risk-based approach in the implementation of AML/CFT programmes``.

The GIABA boss further said the FATE recommendation 22 and 23 provide details of the preventive measures to be taken by the BNFBPs including accountants/ accounting firms in an AMLTCFT regime. In particular, accountants are required to adopt and implement robust AML/CFT measures in the area of customer due diligence, record keeping, due diligence with regard to politically exposed persons, new technologies and reliance on third parties.

In addition, DNFBPs are to report suspicious transaction to FIUs, put in place robust internal control and pay attention to high risk businesses, as well as all complex and unusual large transaction in order to safeguard their system and national economic from abuse by criminals.

``Our experience in the region has shown that while AML/CFT laws and regulations apply to DNFBPs including accountants, the majority of operators in the sector are unaware of, do not understand or poorly comply with their AML/CFT obligation. Similarly, institutional frameworks for regulating and supervising the DNFBPs are either weak or not well defined. These account for the weak performance of the DNFBPs in the adoption and implementation of the FATF standards as revealed in the manual evaluation reports of countries in the region, `` he said.

He continue that ``the most worrisome of all is that member states have great difficulties getting professional bodies, particularly accountants to implement some aspects of the AML/CFT requirements, especially reporting of suspicious transactions on account of secrecy and client confidentiality. Let me seize this opportunity to state that through client confidentiality is essential to protect the confidentiality of the financial affairs of clients; the FATF recommendations require that such secrecy should not inhibit the implementation of AML/CFT standards. Similarly, the reporting obligation of accountants across our member states is statutory and therefore serves the legitimate public interest, `` he said.