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Illicit Financial Flows and ICPC’s efforts at combating the scourge in Nigeria

Illicit Financial Flows (IFFs) are illegal movements of money or capital from one country to another for various reasons. IFFs can be defined as funds…

Illicit Financial Flows (IFFs) are illegal movements of money or capital from one country to another for various reasons. IFFs can be defined as funds illegally earned, transferred, or utilised within a country and across international borders. It could be money legally earned but moved wrongfully.

Major sources of these funds are proceeds of corruption, theft, bribery, and criminal activities such as drug trafficking, smuggling, tax evasion, trade mis-invoicing, etc.

IFFs have affected Nigeria in various ways – through loss of revenue, underdevelopment, poor infrastructure, and health care, among others. The drain on resources and tax revenues caused by IFFs blocks the expansion of basic social services and infrastructure programmes that are targeted at improving the well-being and capacities of all citizens, particularly the very poor. In Nigeria and other developing countries, IFFs mean fewer hospitals, schools, police, roads, and job opportunities.

Several reports have alluded to the fact that the African continent is losing a large chunk of money meant for its development to illicit financial flow. For instance, the United Nations Conference on Trade and Development (UNCTAD), in its 2020 Economic Development in Africa Report says the continent loses about US$88.6 billion, 3.7 percent of its gross domestic product (GDP), annually to illicit financial flows. Also, the High-Level Panel on International Financial Accountability, Transparency, and Integrity for Achieving the 2030 Agenda (FACTI Panel) report released in February 2021 caution that IFFs – from trade mis-invoicing, tax abuse, cross-border corruption, and transnational financial crime – drain resources from sustainable development, as well as worsen inequalities, fuel instability, undermine governance, and damage public trust.

Also, the UN Office on Drugs and Crime (UNODC), in its Strategic Vision for Africa 2030 launched in February 2021, states that illicit financial flows remain a key impediment to Africa’s attainment of the 2030 Agenda and the African Union Agenda 2063 posits that multidimensional and transnational nature of IFFs, significant domestic resources – illicitly acquired and channeled out of the continent pose a development challenge to it.
To this end, discussions around IFFs have been intensified by major bodies saddled with the responsibilities of combating the scourge, and the Independent Corrupt Practices and Other Related Offences Commission (ICPC) has been leading the pack with strategies that would ensure that Nigeria and by extension, the African continent is on the same page with the rest of the world in the eradication of IFFs and its negative impacts on development financing and sustainable development. The Commission at this time is the focal agency on the Illicit Financial Flows and promotion of the Common African Position on Asset Recovery (CAPAR).

Also, since Professor Bolaji Owasanoye SAN, OFR, assumed office in 2019 and judging from many of his activities, it is crystal clear that one major area the erudite scholar of law plans to leave an indelible imprint is in the area of helping the country with strategies to curb IFFs.

At a recent workshop on IFFs, he noted that there was no gainsaying that meticulous negotiation skills were key in the fight against IFFs and by and large corruption. According to him, negotiations form a sizeable chunk of any international trade treaty and negotiators need to stay on top of their game so that loopholes will not be exploited to the detriment of the Nation’s economy, particularly through IFFs.

Looking at the way forward, the ICPC boss stated that West Africa needs to pursue a multi-track strategy to surmount the daunting challenges posed by economic and financial crimes, stressing that “the fortune of generations yet unborn relies on the actions that we take today”.

Owasanoye opined that globalization has made interactions with diverse global communities inevitable saying the rules of engagement are more often than not, unfavorable to poor economies of the global south who lack the development and technological advancements of the global north.
In his words: “This has often led to poorly constructed trade agreements which have ultimately been disadvantageous to the growth of the country and also opened loopholes to encourage illicit financial flows”.

The ICPC Chairman had at another forum illustrated the “archaic practice of European superpowers using their political might to cohesively reach a one-sided agreement with economic minions. This “Gunboat diplomacy” as he called it, eventually forced nations without the capacity to depend on imperialists for raw materials and overseas markets. According to Owasanoye, “This inimical approach was eventually countered by the Hague Convention (No 2): Respecting the Limitation of the Employment of Force for the Recovery of Contract Debts of 1907 and then replaced by diplomatic protection whereby states exchanged notes on how investors should be treated by other governments.”

ICPC is also focusing on the need to deepen transparency in the Oil and Energy Sector of the economy. At the Transparency and Accountability Summit organised by the House of Representatives Anti-Corruption Committee, Professor Owasanoye held that corruption and opacity of operations had undermined the benefit of the natural resource to the host communities and the country. He identified other inhibiting factors as incompetent governance, fraudulent revenue management, and insensitive treatment of environmental and host community issues.
According to him, a poor governance structure has fuelled many anomalies in the oil and gas sector including the menace of IFFs, asserting that “Deepening Transparency in the Oil and gas Sector will reduce IFFs thereby leading to increased revenue, improved health care, education, improve infrastructure development in Nigeria, and lead to better patriotism and nationalism from the citizenry.

Besides deepening transparency, the ICPC boss recommended some conscious and consistent actions to address the challenges in the sector, saying, “There is a need for consistent and transparent audits. Recall that for years, the NNPC never published an audit of its accounts until this Administration. The audit recommendations include financial audit, regular physical assets audit, and process audit for continuous improvement of the process,” he noted.

He further underscored the need for review and update of contract negotiation practices. “Many of the clauses and agreements that facilitate IFFs were consciously negotiated by the Government and the NNPC line officers. Some of these negotiators were not experts in their field and so made concessions against government interest. Terms of Contracts Agreements/Clauses should be very explicit and in clear language to avoid any form of ambiguity.
“More importantly, we must discard completely confidential clauses that forbid the operators or government from disclosing terms negotiated with parties. Given the fact that these agreements are about natural resources being public patrimony and assets, confidential clauses that fuel corruption and abuse should be outlawed,” he recommended.

The ICPC Chairman also called for the curtailing of discretionary powers in granting incentives as well as stronger oversight of the operations in the oil and energy sector especially commercial and tax obligations of multinational corporations, stressing that, “Aggressive tax avoidance by multinational corporations is costing Nigeria much in IFFs and this must be addressed. Some corporations falsify trade records, fuel transfer pricing, inflate operational costs, and retain on the payroll as expatriates – staff who work remotely but make huge emoluments claims for these, among other anomalous practices.”

Prof. Owasanoye continued by explaining that ICPC has built the capacity of line officers from the Ministries, Departments, and Agencies (MDAs) on the negotiation of agreements in sectors that facilitate IFFs notably oil and gas, trade and investment, taxation, and environment.
“We teach officers what to look for in agreements and commercial arrangements in the quest to trace, stop and recover diverted or stolen assets. We also focus on triggers for capital flight such as the use of arbitration clauses to undermine national development.” He said.

The strengthening of tech-driven solutions for the prevention of IFFs is another aspect the Commission is exploring. Recently, ICPC partnered with the National Information Technology Development Agency (NITDA), for IFFs Hackathon Demo Competition. The initiative was aimed at developing indigenous solutions to curb IFFs in MDAs, check illegal transfer/movement of funds within Nigeria and across international borders, and ensure effective monitoring of procurement processes.

The Hackathon provided young Nigerians the opportunity to contribute their creativity and entrepreneurial skills by leveraging emerging technologies to combat corruption and other unethical practices impacting negatively on the socio-economic fortunes of the nation.

The E-Procure Group won the prize money of N1.5 million for emerging as the winner of the IFF Hackathon Demo. The group emerged top after a contest with six other innovators in the task of developing indigenous solutions to curb IFFs in MDAs and scrutinizing the movement of funds within Nigeria and across international borders to ensure the effective monitoring of procurement processes. The seven young innovators used the School Feeding Programme (SFP) of the government as a case study at the Hackathon Demo event.
While speaking at the event, Professor Owasanoye explained that the experience gathered by the Commission in its investigation into the School Feeding Funds led to the Hackathon Demo, stating that, “Appropriate technology deployment would have given law enforcement agencies, administrators and regulators of the process adequate leverage to know what school-feeding funds were being used for.
“Technology penetration in Nigeria today makes this very possible. Such platforms would help nip anomalies in the bud and save the government huge sums of money as well as prevent abuse, corruption, and money laundering,” He affirmed.

He advised young Nigerians to use their creativity and entrepreneurial skills in leveraging emerging technologies to combat corruption and other unethical practices that impact negatively on the socio-economic fortunes of the nation.

Generally, ICPC, in its quest to find a lasting solution to the unpleasant IFFs phenomenon is also beaming its searchlight on areas that are prone to IFFs such as tax avoidance, tax evasion, base erosion, and profit shifting.
The Commission has initiated a System Study and Review of the IFFs in the Oil and Gas, and as well as Tax sectors. It has also constituted an IFFs/Tax Fraud Group to address the menace.
ICPC has hosted four international conferences to sensitise Nigerians, Africans, and the world on the ills of IFFs and how to collectively work together to stop/combat the menace.

The Commission has also scaled up its operations in profiling all companies mentioned in petitions to the Commission to ensure that they are not in any way short-changing the nation.
Leveraging on two aspects of its three-pronged mandate of prevention and public education, ICPC is re-awakening the consciousness of Nigerians by stimulating dialogues and conversations among critical stakeholders, because public awareness is a key tool in fighting against evolving illicit financial operations.

The Federal Government is also not resting on its oars in its efforts to block the loopholes through which funds are ferried out of the country as it has set up an Inter-Agency Committee on Stopping IFFs since 2019. The committee is chaired by the Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, and the members include ICPC, EFCC, CBN, NFIU, FIRS, NCS, NDLEA, NEITI, FMF and SEC. The committee is tasked with the mission of promoting financial integrity and transparency in consonance with the far-reaching recommendation of the Thabo Mbeki High Panel Report on IFFs.

On International Conference on IFFs, the Commission has hosted an international conference in collaboration with the Inter-Agency Committee on stopping IFFs from Nigeria, the African Union Advisory Board on Corruption (AU-ABC), and Coalition for Dialogue in Africa (CoDA), to discuss issues surrounding IFFs.
While speaking during one of the sessions devoted to building the capacity of key government officials drawn from all the states in Nigeria on IFFs, the ICPC boss declared that for the country to make any meaningful progress, relevant government agencies must block monies that were going out via different means such as tax evasion, and under-handed business practices by multinational corporations. He bemoaned the fact that a substantial amount of money meant for development was lost to IFFs, thereby leaving the country where the business took place to “bear the brunt and the consequences of environmental degradation and other challenges.”

The ICPC boss explained that the continent could generate much revenue through its economy to meet its obligations and development needs if the resources that were shipped out of African shores to other jurisdictions were prevented.

Judging from the engagements of the Commission, and the responses from stakeholders on the issue of IFFs, Professor Owasanoye’s strategies, inventiveness, and goal to eradicate IFFs in Nigeria and by extension Africa is on the course. All that is required is the willingness of the citizens to play their role by giving their much-needed cooperation and support to the Commission to rid Nigeria of all forms of corruption.

Abdulsalam is an Assistant Superintendent with the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Abuja

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