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Corruption: Punishing conniving banks, officials

Source: Godfreytimes Blog.

This material belongs to: PUNCH.

The recent declaration of hostile action against corrupt bank executives and directors by the Central Bank of Nigeria raises some hope that the anti-corruption war may finally berth at the financial sector. Indeed, the ongoing assault on insider abuse announced by the CBN Governor, Godwin Emefiele, came amid a determination by government’s anti-graft agencies to sever the unholy alliance between corrupt officials and the banks. The full might of state authority should be quickly deployed to cleanse the banks.

That the required searchlight is only just being beamed on the banking sector is a manifestation of the snail’s pace of President Muhammadu Buhari’s anti-graft programme. But the Chairman of the Presidential Advisory Committee Against Corruption, Itse Sagay, put it succinctly that the “monstrous epidemic of high-profile corruption could not have afflicted Nigeria without bankers’ collusion”. Ibrahim Magu, the acting chairman of the Economic and Financial Crimes Commission, has voiced his exasperation with the hot embrace between corrupt public office holders and the deposit money banks. The commission lamented that the banks deliberately failed to comply with regulations, including the Money Laundering Act that requires reporting cash transactions of between N5 million and N10 million for individuals and corporate bodies to the Nigerian Financial Intelligence Unit respectively. Emefiele’s probe of insider abuse should, therefore, be strongly accompanied by an onslaught against money laundering.

Regulators and law enforcement agencies around the world are acutely aware that banks are the principal conduits for the proceeds of corruption. Some N1.34 trillion was stolen in Nigeria by just 55 persons between 2006 and 2013, according to Information and Culture Minister, Lai Mohammed. UNODC estimated in 2009 that $1.6 trillion or 2.7 per cent of global GDP was laundered annually. Laundering, the introduction of illegal proceeds into the financial system primarily through banks, says the FATF, negatively impacts on the financial system and on the economy by fuelling inexplicable money demand, inflation, exchange rate volatility and gradually integrating the system into the crime-corruption complex. It drives off foreign direct investments as investors avoid becoming part of a criminal complex: “It can weaken the social fabric and ultimately the democratic institutions in societies transiting to democratic systems…”

INTERPOL in collaboration with OECD member-states and multilateral agencies devised closer monitoring of banks to staunch the flow of illicit funds. For Nigeria, the institutions are simply not working. Revelations of the billions of dollars stolen from multiple government sources under the Goodluck Jonathan government expose impunity by the banks. Evidence given by bankers in ongoing trials show how the know-your-customer, reporting and information sharing rules with law enforcement are routinely flouted. Worse, unlike in other jurisdictions where institutions work, government is resolute and the rule of law means bringing even the high profile wrongdoer to justice, our crooked bankers escape censure.

This template has to change. Bankers who transport cash in local and foreign denominations in trucks and aircraft should be punished and flushed out of the system. Those who confessed to opening deposits by proxy and failed reporting rules should be prosecuted: turning state witness should only earn them lighter jail terms, not amnesty. Banks too should pay heavy fines to protect the integrity of the financial system. Serious countries don’t toy with financial misdeeds. For various contraventions, the US and the United Kingdom authorities in January slammed $425 million and £163 million fines respectively on Germany’s biggest lender, Deutsche Bank, bringing to over $10 billion it had been fined by various regulators since 2009.

According to CCP Research Foundation, in the five years to 2015 end, the world’s 20 biggest banks incurred £252 billion in fines, legal bills, customer compensation and anticipated liabilities. In China, the long-running anti-corruption war has seen the ouster and detention of many senior bankers and reviews of the banking regulations. Singapore shut down the local subsidiary of Swiss bank, Falcon Bank, and imposed $177 million in fines on four banks for their roles in the illegal transfer of $4 billion in a widening money laundering scandal involving Malaysia’s development bank.

We do not lack laws and institutions, what we lack is the strong political will by the leadership to enforce the law. What is more, poor coordination, absence of close monitoring and target setting; a weak and compromised judiciary, and the wrong people manning some critical institutions have also not helped matters. Buhari has a lot to do; he found Magu, who despite any shortcomings is passionate about fighting corruption; he found Sagay, a dogged crusader. The president should get every agency head to substantially demonstrate that they are on the same page with him in the determination to root out corruption. Those whose zeal cannot be counted on should be politely dropped. The CBN especially, is complacent and vacillating. Its officials who failed to stick to the rules by helping the hopelessly corrupt past government to move billions directly out of its vaults should be punished. Nigeria must move with global best practices by having career officials who can say no to corrupt officials as we had up to the late 1970s.

Heavy penalties such as huge fines, takeovers and withdrawal of licences should be imposed on errant banks that henceforth collude with public officials to launder money. Tainted bank executives should be prosecuted in the courts. The laws should, where necessary, be amended to provide for imposition of fines several times higher than the sums laundered, stolen or misused. Reforms should be revived at the CBN to strengthen its capacity for surveillance and update its technology and skills.