Much Ado About Money Laundering and the Proceeds of Crime

Introduction 

International consensus about the evil of money laundering, has rightly focused on its twin corollary – the proceeds of crime. The two are obviously complementary, and are two sides of the same coin. After all, the whole essence of money laundering is to conceal or disguise the illicit origins of funds, while its goal – if successful – is to portray the end product  (proceeds of such ill-gotten wealth) as ‘clean’ or legitimate. It involves a complex web of placement of “dirty” money into a financial system; layering it (moving the money through multiple transactions and accounts to conceal it origin); and integration (making the laundered money available for use as if it originated from a legitimate source. It is thus, the “washing” of this “dirty” money that is called “laundering”.

In Nigeria, the law has often struggled to keep pace with these challenges. The relevant codes in this regard – the Money Laundering Act, 2022 and the Proceeds of Crime (Recovery and Management) Act, 2022 – are far from perfect in themselves, and a close look at their fine print will bear this out. It appears to me that certain provisions of both laws might be unconstitutional. I shall, anon, demonstrate my reasons for holding this view.

The Money Laundering Act

Section 18(1) of this law declares, peremptorily, that “money laundering is prohibited in Nigeria”, whilst subsection (2) thereof outlines the specific circumstances which constitute the offence. These include the following: concealing or disguising the origin of, or converting or transferring, removing from the jurisdiction, acquiring, using, retaining or taking possession or control of any fund or property (which a person) intentionally, knowingly or reasonably ought to have known, is or forms part of the act. Subsection 6 of Section 18 of the Act goes ahead to outline the various “unlawful acts” referred to in subsection 2, as follows:-

a. Participation in an organised criminal group;

b. Racketeering, terrorism, terrorist financing;

c. Trafficking in persons, smuggling of migrants, sexual exploitation, sexual exploitation of children;

d. Illicit trafficking in narcotic drugs and psychotropic substances;

e. Illicit arms trafficking, illicit trafficking in stolen goods; 

f. Corruption, bribery, fraud, currency counterfeiting;

g. Counterfeiting and piracy of products, environmental crimes;

h. Murder, grievous bodily injury;

i. Kidnapping, hostage taking, robbery or theft;

j. Smuggling (including in relation to customs and excise duties and taxes), tax crimes (related to direct taxes and indirect taxes); 

k. Extortion, forgery, piracy;

l. Insider trading and market manipulation; and

m. Any other criminal act specified in this Act or any other law in Nigeria – including any act, wherever committed in so far as such act would be an unlawful act if committed in Nigeria.

Retention of the proceeds of any unlawful act as defined in the Act or such property (including acquiring, using or merely taking possession thereof) constitutes an offence under the Act punishable with fine and imprisonment: Section 20 of the Act. This provision appears to be at odds with those of Section 8 of the Proceeds of Crime (Recovery And Management) Act, 2022, which stipulates that the standard of proof of the commission of an offence in that Part of the Act (Sections 7- 25) is the one applicable in Civil Proceedings, i.e., on a balance of probabilities. This is contrary to the one which normally obtains in criminal proceedings, i.e., beyond reasonable doubt (see Section 135 of the Evidence Act, 2011)

I believe, however, that the anomalies in this law transcend the above highlighted inconsistency with the Proceeds of Crime Act. This is because, in my view, the attempt by the Money Laundering Act to regulate “business relationship” (which is defined in Section 30(c) thereof as “an arrangement between a person and a financial or designated non-financial institution for the purpose of concluding a transaction”) might – depending on the context – violate the trade and commerce remit of the National Assembly under Item 62 of the Exclusive Legislative List of the 1999 Constitution. 

That constitutional provision restricts the Assembly to regulating only “trade and commerce between Nigeria and other countries (including import of commodities from Nigeria) and trade and commerce between (the 36) States (of the Country)”. In other words, only international trade is permitted. This simply means that the National Assembly is incompetent to regulate domestic, local or intra-State trade and commerce. It follows that, notwithstanding its provisions to the contrary, the Money Laundering Act is inapplicable to such transactions.

Accordingly, its attempt in Section 30 thereof to regulate so-called “designated non-financial businesses and professions (including dealers in jewellery, real estate, estate developers, hotels, legal practitioners, pools betting, mortgage brokers, accountants, etc) – except to the extent that such businesses are engaged in international trade or commerce – is ultra vires the National Assembly, invalid, null and void. It must be pointed out that this is not a novel point, because in ATTORNEY-GENERAL OF OGUN STATE v ABERUAGBA (1985) 1 NWLR Pt. 3 Pg. 395, the Supreme Court construed identical provisions in item 61 of the 1979 Constitution as words of limitation, not of emphasis. Suffice it to say, therefore, that –  apart from Abuja, the FCT (which the National Assembly legislates for without limitations by virtue of Section 299 of the Constitution), the transactional or trade and commerce provisions of the Money Laundering Act are only applicable to trade across Nigeria’s borders; they don’t apply to local, domestic or intra-State trade and commerce. 

Accordingly, only international business men and women are affected by (and need worry about) the registration requirements of its Special Control Unit on Money Laundering, (otherwise called SCUML) provisions. Startling as this might sound, I do believe that this is the unintended consequence of a dispassionate analysis of the Money Laundering Act: only State Houses of Assembly can legislate on intra-State or domestic business relations or trade and commerce, including those conducted by the entities or enterprises described as “designated non-financial businesses and professions” under Section 30 of the Act. Over to them.

The Proceeds of Crime Act

It is my humble view that this statute dovetails into the Money Laundering Act because, as previously noted, their provisions are mutually-reinforcing and, are therefore, complementary. This is clearly evident from Section 1(1) thereof which provides that its objective is, inter alia, to “provide for an effective legal and institutional framework for the recovery and management of the proceeds of crime, benefits derived therein, instrumentality of unlawful activities, and unclaimed properties reasonably suspected to be proceeds of crime”.

Notwithstanding those lofty goals, however, I submit that a few of its core provisions are a cause for grave concern, not least of which are those which allocate the burden of proof and define “unlawful activity” under Sections 74 and 82 thereof, respectively. The former provides, inter alia, that “the Defendant in any proceedings under this Act bears the burden of proving that he is the legitimate owner of the assets suspected to be proceeds of crime, or derived from unlawful activity, or that the assets are of legitimate origin and not proceeds of unlawful activity”.

Quite apart from its somewhat inelegant drafting (“the Act” is undefined, as it is presumably, different from “this Act” used therein), it is clear that the intention behind the provision which imposes on a Defendant the burden of proving his/her innocence of the offence of possession of assets suspected to be proceeds of crime, or were derived from unlawful activity, or that their source is legitimate and not proceeds of unlawful activity is an excessive (and, I would argue, illegitimate) extension of the proviso to the constitutional burden on an accused person to prove particular facts, by virtue of the proviso to Section 36(5) of the 1999 Constitution. 

That provision guarantees that “every person who is charged with a criminal offence shall be presumed to be innocent until he is proven guilty”. This is commonly known as, the presumption of innocence. This presumption is at the heart of our adversarial criminal jurisprudence, and is contained in both the African Charter and the Universal Declaration of Human Rights. Our criminal justice system is accusatorial (Anglo-Saxon based) and not inquisitorial (French based).The innocence of an accused is presumed, until the contrary is proved. See the cases of ADETOUN OLADEJI v NBL (2012) NGSC 1. It is therefore, curious, that the Proceeds of Crime Act should attempt to take away this constitutional presumption of innocence (Section 36 of the 1999 Constitution), even casually and surreptitiously.

It is even more curious that few, if any, commentators have observed this great travesty. Because, in my humble view, travesty is what it is – pure and simple. The Act does not merely impose the burden of proving a particular fact on a Defendant (as contemplated by the Constitution); rather, it goes further to impose on the Defendant the entire burden of proving his innocence of the offence of wrongful possession and illicit origin of the proceeds of crime with which he/she is charged. I submit that this goes too far, and is extreme beyond measure. I respectively submit that it is outrightly unconstitutional, and should accordingly, be struck down for that singular reason. Such a flagrant violation of the constitutional presumption of innocence is virtually unprecedented in our criminal jurisprudence, and should not be tolerated or allowed to stand.

Beyond that, however, yet another problematic clause in the Proceeds of Crime Act is its definition of “unlawful activity” in Section 82 thereof as, inter alia, “an act or conduct, committed directly or indirectly which constitutes an offence or which contravenes a law in force in Nigeria whether the act, omission or conduct occurred before or after the commencement of this Act.” The defect in this clause is, to me, quite glaring: it is partly retroactive, and contravenes the provisions of Section 4(9) of the 1999 Constitution, which provides, inter alia, that “the National Assembly or a House of Assembly shall not, in relation to any criminal offence whatsoever, have power to make any law which shall have retrospective effect.” Need I say more?. Yes, as affirmed in a plethora of decisions by appellate courts, which prohibit the retrospectivity or retroactivity of legislation. See the cases of SELE v THE STATE (1993) 1 NWLR Pt. 269 Pg. 276 and IKPASA v THE STATE (1982) 3 NCLR 152. 

THOUGHT FOR THE WEEK

“I believe that the root cause of every financial crisis, the root cause, is flawed government policies”. (Henry Paulson)