NIGERIA
Summary
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Sanctions

None

FAFT AML Deficient

No

Higher Risk Areas

 

Compliance with FATF 40 + 9 Recommendations

US Dept of State Money Laundering assessment

Not on EU White list equivalent jurisdictions

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

Medium Risk Areas

Weakness in Government Legislation to combat Money Laundering

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Nigeria is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Latest FATF Statement  -  18 October 2013 

The FATF welcomes Nigeria’s significant progress in improving its AML/CFT regime and notes that Nigeria has established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in February 2010. Nigeria is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Nigeria will work with GIABA as it continues to address the full range of AML/CFT issues identified in its Mutual Evaluation Report.

 

Compliance with FATF Recommendations 

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Nigeria was undertaken by the Financial Action Task Force (FATF) in 2007. According to that Evaluation, Nigeria was deemed Compliant for 2 and Largely Compliant for 7 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR) 

Nigeria was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Perceived Risks:

Nigeria is a major drug transshipment point and a significant center for criminal financial activity. Corrupt officials and businessmen, criminal and terrorist organizations, and internet fraudsters take advantage of the country’s location, porous borders, weak laws, endemic corruption, inadequate enforcement, and poor socioeconomic conditions to launder the proceeds of crime. Criminal proceeds laundered in Nigeria derive largely from foreign drug trafficking and criminal activity rather than domestic activities. Drug traffickers reportedly use Nigerian financial institutions to conduct currency transactions involving U.S. dollars derived from the sale of illicit drugs.

Proceeds from illegal oil bunkering; bribery and embezzlement; contraband smuggling; theft, including bank robberies; and financial crimes, such as bank fraud, real estate fraud, and identity theft, also constitute major sources of illicit proceeds in Nigeria. International advance fee fraud, also known as “419 fraud” in reference to the fraud section in Nigeria’s criminal code, remains a lucrative financial crime that generates hundreds of millions of illicit dollars annually.

Money laundering in Nigeria takes many forms, including investment in real estate; wire transfers to offshore banks; political party and campaign financing; deposits into foreign bank accounts; abuse of professional services, such as lawyers, accountants, and investment advisers; reselling imported goods, such as luxury or used cars, textiles, and consumer electronics purchased with illicit funds; and bulk cash smuggling. Cybercriminals increasingly use more sophisticated techniques, such as e-mail hacking, intrusions, and the use of social media. There also have been a number of cases in which subjects located in Nigeria have owned and operated botnets through which they have conducted denial of service attacks. Nigerian criminal enterprises are often adept at evading detection and subverting international and domestic law enforcement efforts.

 

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SANCTIONS

There are no international sanctions currently in force against this country.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

28

World Governance Indicator – Control of Corruption

11

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

Nigeria hosts Africa's largest economy, with 2013 Gross Domestic Product (GDP) estimated in the $500 billion range, as well as its largest population of over 170 million citizens. This substantial market size, combined with consistent and strong GDP growth over the past decade, has attracted considerable investor interest. The Government of Nigeria (GON) actively seeks foreign investment and in 2012 Nigeria was the largest recipient in Africa, with over $7 billion in foreign direct investment (FDI) recorded. While Nigeria offers abundant natural resources and a low-cost labor pool, much of Nigeria’s market potential remains unrealized because of significant impediments to investment that include an inadequate power supply, lack of transportation infrastructure, delays in the passage of announced legislative reforms, an inefficient property registration system, non-comprehensive intellectual property protections and enforcement, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption.

The Nigerian economy has continued to grow rapidly in recent years despite these persistent structural weaknesses, with growth concentrated primarily in trade, agriculture, and telecommunications. While the agriculture sector sustains over 80 percent of rural households, the Nigerian economy remains heavily dependent on its oil and gas sector which accounts for 14 percent of GDP, over 90 percent of export earnings, and over 70 percent of government revenues. Nigeria ranks as Africa’s largest oil producer and the thirteenth largest in the world, producing high-value, low-sulfur crude oil. However, Nigeria’s oil output has contracted in the past three years and regulatory constraints, other uncertainties, and security risks have limited new investment in this sector. A significant bottleneck to broad-based economic development remains Nigeria’s underdeveloped power sector, which currently supplies less than 5,000 megawatts of power. A comprehensive reform of Nigeria’s power sector is ongoing, although many challenges remain before Nigeria will see a significant, sustainable improvement in power delivery to industrial and consumer end-users.

Conservative macroeconomic management over the past three years has provided Nigeria a stable base for future growth and the overall macroeconomic outlook for Nigeria is strong in the medium term, assuming that oil output stabilizes and oil prices remain strong. The Central Bank of Nigeria (CBN) has pursued broad financial sector reforms and its monetary policy has been successful in cutting consumer price inflation to the 8 percent range in 2013 from double digit levels in recent years. The CBN has also successfully smoothed exchange rate volatility and maintained a high degree of exchange rate stability.

Nigeria’s trade regime remains highly-protectionist and distorting, with restrictive import tariffs and outright import prohibitions in place to spur domestic agricultural and manufacturing sector growth. Nigeria’s bilateral trade with the U.S. totalled $18.2 billion in 2013. U.S. exports to Nigeria are primarily refined petroleum products, vehicles, cereals, and machinery. Nigeria’s 2013 exports to the U.S. totalled $11.7 billion, down 38.3 percent from 2012. Crude oil and petroleum products accounted for over 99 percent of 2013 Nigerian exports to the U.S. Nigeria enjoys preferential access to the U.S market under the African Growth and Opportunity Act (AGOA). However, non-oil exports to the U.S. under AGOA remain at low levels.

Although the bulk of Nigeria’s FDI has historically been concentrated in its oil and gas sector, substantial new investment is flowing into Nigeria’s power, telecommunications, real estate (commercial and residential), and agricultural sectors. The stock of U.S. FDI in Nigeria stood at $5.2 billion in 2010, up 5.1 percent from 2009. U.S. direct investment in Nigeria remains concentrated in the oil and gas sectors.

 

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FURTHER REPORTS

April 2016 - Extract from 2016 Article IV Consultation

Using Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Framework to Combat Oil Theft and Corruption The AML/CFT framework can help detect financial flows from theft and corruption, and facilitate confiscation of proceeds from crime. Some key components of the framework and how they can help tackle the proceeds of theft and corruption in the oil sector are analyzed below.

National Risk Assessment (NRA) on Money Laundering and Financing of Terrorism (ML/FT) The NRA is a cornerstone of the revised international standard on AML/CFT, the Financial Action Task Force (FATF) Recommendation. The NRA aims to identify and assess the ML/FT risks faced by the country and inform national policy making in establishing priorities with a view to mitigating these risks. Coordinated by the Nigerian Financial Intelligence Unit (NFIU) at the operational level, Nigeria launched its first NRA in 2013 and expects to conclude this exercise prior to the mutual evaluation of its AML/CFT framework in the first half of 2017. Twenty-six institutions/agencies are involved in the exercise, including law enforcement agencies such as the Economic and Financial Crime Commission (EFCC), the Independent Corrupt Practices and Other Related Offense Commission (ICPC), and Nigeria Customs Service; supervisory bodies such as the CBN; and the private sector. According to authorities, both oil theft and corruption are covered in the analysis.

CBN’s AML/CFT supervision

The CBN oversees banks’ implementation of AML/CFT obligations using a risk-based approach. Commercial banks in Nigeria are required to assess ML/FT risks and apply risk-sensitive controls including due diligence on customers and beneficial owners, monitoring of domestic politically exposed persons (including senior executives of stated owned corporations) and reporting suspicious transactions. It seems that banks have considered corruption as the most significant proceeds generating crime in Nigeria and taken mitigating measures, but have paid less attention to oil theft. The CBN is also charged with supervising more than 2,800 bureau de changes (BDCs) including with respect to the implementation of AML/CFT measures. BDCs may be particularly vulnerable to money laundering schemes that involve moving the criminal proceeds abroad through massive cash smuggling (see below). In 2015, the CBN inspected 135 BDCs (or 5 percent) and found their compliance level to be generally poor. BDCs filed no suspicious transaction reports (STRs) in 2014 and 2015.

NFIU’s strategic analysis

The NFIU has established a unit responsible for conducting thematic strategic analysis with a view to identifying ML and FT trends and typologies prevalent in the country. In this capacity, the NFIU relies mainly on the intelligence generated by itself and has not systemically benefited from other information in particular cases investigated by law enforcement agencies which were not triggered by NFIU. To date the NFIU has published one typology report on terrorist financing. It has however identified oil theft and corruption among priority topics for strategic analysis in 2016.

EFCC’s investigation and prosecution

Supported by intelligence generated by the NFIU, the EFCC investigates and prosecutes ML and predicate offences including oil theft, and assists the ICPC in investigating corruption cases. These activities are carried out at regional level. In oil producing regions, oil theft is considered a priority and constitutes the majority of investigations. While some investigations on oil theft resulted in successful convictions, majority of the proceeds generated are widely believed to have been moved abroad thus prove difficult to trace and recover.

Anti-corruption work of ICPC and Code of Conduct Bureau (CCB)

The ICPC is charged with investigating and prosecuting corruption related offences defined under the ICPC Act and other Acts. It is empowered to trace, seize, freeze, confiscate and forfeit all proceeds of corruption and related offences. The CCB is mandated by the third and fifth schedules of the Constitution to receive assets declarations by public officers; examine the declaration; retain custody of such declarations and make them available to Nigerian citizens.

Tackling cash smuggling

One potential means to move ill-gotten funds abroad is massive cash smuggling. A Joint Task Force comprising, among other, the Nigeria Customs Service (NCS) and the EFCC has been set up to tackle the issue. The NFIU also receives from the NCS information on declarations of cash transportation of a value over USD 10,000 or equivalent, but is not informed when custom officers take provisional measures (such as seizure).

Policy Advice

The authorities’ efforts to tackle theft and corruption in the oil sector should be pursued further. Enhancing implementation of existing measures:

-      Expedite the NRA process and ensure it provides a comprehensive assessment of risks posed by oil theft, corruption, tax evasion and related money laundering and informs the national policy on AML/CFT (short term);

-      Conduct robust strategic analysis on macro-relevant crimes including oil theft, corruption and tax evasion supported by enhanced information sharing between the NFIU and law enforcement agencies, and publishing typology reports in a timely manner (short term);

-      Strengthen AML/CFT supervision of banks focused on the risks of laundering of the proceeds of corruption and in particular oil theft (short term);

-      Seek synergy between AML/CFT policy and national strategies on combating oil theft and anticorruption (medium term);

Reviewing the legal and regulatory framework to fully address risks associated with oil theft, corruption and the laundering of proceeds generated:

-      Review the anti-corruption legal framework to ensure all corruption acts are criminalized in accordance with the United Nations Convention against Corruption and the offences are applicable to directors and senior executives of NNPC (short term);

-      Review the AML/CFT regulatory framework of BDCs with a view to improving AML/CFT compliance (medium term).

Enhancing transparency of assets owned by senior officials. In this regard, measures can be built upon the existing constitutional requirement on public officers to declare assets:

-      Require the publication of comprehensive asset declarations by senior officials, including directors and senior executives of NNPC and of the oil sector regulator. It should cover assets owned abroad and assets of which the official (or executive, director) is a beneficial owner (short term).

-      Ensure non-declaration or false declaration are subject to dissuasive sanctions (short term).

 

Read Full Report

 

17 May 2015 - Extract from IMF Country Report: Nigeria: 2014 Article IV Consultation-Staff Report

Since the 2012 FSAP update, the authorities have been active in strengthening the framework for Anti-Money Laundering (AML)/Countering the Financing of Terrorism (CFT). To support the broader financial inclusion agenda, tiered-Know Your Customer requirements have been introduced to facilitate account opening and operation (within limits) even with basic identification (e.g., a telephone number). In addition, several CBN circulars have been issued relating to different aspects of AML/CFT; the Financial Intelligence Unit (FIU) has issued a strategic analysis on terrorism financing, providing clear guidance on indicators of terrorism finance that can be monitored; and the authorities have provided training to the financial sector on various aspects. These efforts have led to Nigeria being removed from the Financial Action Task Force (FATF) list of jurisdictions with significant deficiencies in their AML/CFT regimes.

 

Nigeria is due to undergo a FATF mutual evaluation in 2016; in that context, the Presidential Committee on Financial Action Task Force is overseeing the preparation of a national risk assessment, which is anticipated to be completed in 2015. In addition, the FIU is planning additional strategic analyses covering fraud and oil & gas theft issues within the next year. With new channels of financial activity likely to emerge, especially within the context of financial inclusion, staff encouraged enhanced vigilance and broadened oversight to adequately capture these in the framework and ensure the continued integrity of the financial system.

 

http://www.imf.org/external/pubs/ft/scr/2015/cr1584.pdf