module 6 6.00 forensic accounting and financial crime …
TRANSCRIPT
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MODULE 6
6.00 FORENSIC ACCOUNTING AND FINANCIAL CRIME
6.01 Learning Outcomes
On successful completion of this Module, students should be able to:
i. Evaluate financial crime in its various dimensions
ii. Determine and evaluate types of financial crimes within corporate organizations
iii. Examine the concept of White-Collar Crime
iv. Analyze the efforts of Nigeria’s anti-graft agencies in the fight against financial crimes
v. Discuss the extent of societal response to financial crimes
6.02 Overview of Financial Crime
The world changed on September, 11, 2001’, cried John Madinger, “In a few short minutes the
time it took for two towers to fall, thousands of lives and billions of dollars were lost”.
The investigators swarming over the records quickly followed the trail to Europe and the Middle
East, discovering that not only did the terrorist have enough money, they also had some left
over!........, so although the world changed, some things did not and one of these was the need
for criminal investigators to develop and perfect the techniques necessary to combat those who
violate society’s laws. We are trying to keep up with the criminals and, if they are playing in the
financial arena, we need to be able to understand the rules of that game’.
Definition
Forensic Accounting can be defined as the science of gathering and presenting financial
information in a form that will be accepted by a court of jurisprudence against perpetrator of
economic crime.
Forensic Accounting requires in-depth investigation, report articulation, giving legal support in
court as expert witness and giving expert opinion on critical issues concerning the field. The
process of engagement, legal requirements, investigation, report writing and exert testimony in
courts, among others are critical to its education.
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Accounting profession is beginning to change from examination for irregularities to examination
for fraud on the part of employees and management. Cases of bankruptcy has been seen and
reported over the years because of forgeries and fake preparation of accounting books to hide
the skimming of sums of funds from public corporation and public interest entities. The effect is
that investors lost life savings, government projects are not properly carried out and poverty
continued to spread and increase.
The above has affected the audit procedure to encompass “external third party” inquiries.
Financial institutions and reporting agencies are becoming more involved with business
organizations financial affairs by requiring more disclosures. More methods are being developed
to detect fraudulent schemes before huge losses are incurred.
Forensic Accountants should know what financial data are admissible in a court of law and the
financial investigators should know how to use financial information to enhance legal cases.
Apart from knowledge of accounting, law and criminology, a forensic accountant also needs to
be familiar with corporate financial planning and management. He also needs to have computer
skills, good communication and interview skills.
The Nigerian Society particularly since after the civil war, is plagued with the desire to get rich
quick. The following have been identified as the noted weaknesses contributing to the successes
of this desire:
a. Poor remunerations
b. Poor internal control
c. Inadequate training and re-training
d. Bad management
e. Absence of detailed operational manual
f. Non-segregation of duties
g. Inadequate knowledge of individual staff
h. Faculty personnel policies
i. Staff infidelity
j. Poor conduct of accounts
k. Societal factor
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Accountants in public practice, industries and public corporations must recognize financial crimes
at an early stage and document such crimes for judicial prosecution. But unfortunately, most
businesses and organizations do not recognize fraud schemes until it is too late.
6.03 Types of Financial Crimes
There are many types of financial crimes; some can be solved in short periods while others will
take longer periods. Times required are directly related to the complexity of the crime. Complex
financial crimes consume long time to gather huge amount of financial records to support
conviction. Greed usually is the denominator of all financial crimes.
Bribery
This is a crime of the offering and acceptance of money or favors for some kind of preferential
treatment or to influence another party for such treatment whether in public service or private
business. However, the problem while investigating bribery or kickback is the difficulty in tracing
it back through books and records. Where it is eventually discovered, the difficulty arises as to
who actually received the payment.
For this to be a crime, the value must be given with the intent to influence official conduct. „The
acceptance of a gift without corrupt prior intent is not bribery’. Dr. George Manning
Fencing
This is purchasing stolen goods from the thief. Often times, organized criminal syndicates stealing
large quantities of goods from hijacked trucks, ships planes etc, and selling and distributing them
to the public.
Skimming /Embezzlement
Diverting business receipts to personal use is skimming. Diverting funds or receipts of the
business by an employee is embezzlement. Cash businesses such as bars, restaurants, filling
stations, etc are susceptible to this crime.
Stock Fraud and Manipulation
This is the use of Counterfeit stock certificates by criminals to make illicit gains. A legitimate
corporation can be taken over and sold back and forth between insiders just to highly inflate the
market price. When the stock is sold at highly inflated price, the „dealers’ will disappear and the
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stock will crash back to actual. Extremely detailed investigation and analysis are required to
determine the criminal trend.
Racketeering
This is unlawful activities by highly organized and disciplined associations engaged in supplying
illegal goods and services.
United States Congress in 1970 passed the Racketeer Influenced and Corrupt Organization (RICO)
law criminalizing illegal acts such as gambling, murder, kidnapping, robbery, drug trafficking etc.
Not-for-profit Organizations’ Fraud
Religious institutions, social clubs, parental organizations, and various charities operate to
benefit members or people in the area they operate. But unfortunately, some others operate to
satisfy only the need of the owners. They hide under the guise to operate profit linked businesses
and evade taxes since not-for profit organizations are tax exempted outfits.
Corrupt Churches
Churches and other religious organizations are exempted from paying taxes. However, there are
organizations and individuals that use the cover to make profits and evade taxes.
Dr. George Manning in his financial investigation explains that; ”there are three facets of an
abusive church. First, the church appears to be an attractive group of motivated, high-principled
Christians or another religious sect they want to talk to you. They want you to be part of their
church. The rank and file of its membership sees the second facet: discipline and authority. The
word of the leader is law. No questioning is allowed. The leader is always demanding more from
you- more commitment to the church or group, more obedience to the leader’s directives, more
financial sacrifices, more separation from friends and family, and more adulation of the leader.
Its inners core of leadership sees the third facets: excess. The leader, his immediate family, and
his inner, favored group lead a life of open or secret extravagance.’
Forgery and Alterations
This is false making or material alteration, with the intent to defraud. The intent to defraud is the
‘key’ driver for the crime of forgery. It is immaterial that the alteration or false writing did not
deceive anybody. Whether the intent is target to a person or not is not material, as a general
intent to defraud is sufficient.
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Larceny
This is the wrongful taking or carrying away of another person’s property without his consent
and with intension to deprive the owner thereof the property permanently, (animus furandi). In
some statutes it is described as theft or stealing. If the intent is to return the item later, there is
no larceny. In order to constitute robbery, either force or fear must be used by the thief.
Robbery
This is the unlawful taking of any property from the possessor or owner by the use of force or
intimidation. A person is not guilty of robbery if forcibly taking his own property from the
possession of another.
Tax Evasion
This crime is completed when a false or fraudulent Tax Return is willfully and knowingly filed. Any
person who willfully delivers fraudulent or false accounts or financial statement is committing
this crime.
Bank Fraud
This could involve the bank customers and employees. It comes in diverse forms. They could
relate to passing of dud cheques, fraudulent loan schemes, and other schemes such as ATM
frauds. Customers defraud banks by presenting fraudulent documents to obtain funds.
Government Contract Fraud
This comes in various ways summarized as (a) Fraudulent billing for products and services. (b)
Providing faulty or inferior products or services (c) awarding contracts to non-existence persons,
family members, friends etc, with the intention not to execute the contract, but get paid. (d)
Providing substituted products (e) over-charging on government contracts.
Extortion
This is the threat by an individual to another for money. Commonly noticed in motor parks by
the touts, the area boys’ phenomenon, some security agencies, it is also known as ‘sorting’ in
tertiary institutions, etc.
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Money Laundering
This is the use of money derived from illegal activity by concealing the identity of the individuals
who obtained the money and converting it to assets that appear to have come from legitimate
source. Money laundering is a process to make dirty money appear clean.
Computer Thefts
Usually, this is viewed as a means of crime than a type of crime. Using this as an instrument of
crime, computer could be used to victimize own companies, countries or individuals.
Corporate Fraud
These are crimes by organizations or to organizations. Stealing company secrets for gain by staff;
copy & patent rights infringements; production, distribution and sale of harmful products to the
public.
Swindlers
These are con artists who rely on getting something for nothing. They rely on subtle sweet tongue
talk. First they must identify the victim. Second, they obtain the confidence of the victim. Third,
they sweet talk the victim to part with something. Fourth, they quietly ease out the victim to his
consternation and contemplation. ‘419’ schemes are a typical example.
Kidnapping
This is forcibly, secretly or by threat confining, abducting or imprisoning another person against
his will and without lawful authority, with intent to collect reward or ransom; inflict bodily harm
or interfere with any government or political function.
Pension Fraud
This is the diversion of pension funds with the intension of personal use and permanently unable
to account for such.
6.04 Common Typology of White-Collar Crime
Three factors have been identified by criminologists as being critical in all financial crimes.
1. Something of value must be present
2. An opportunity to take something of value without being detected and
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3. A perpetrator who is willing to commit the crime.
There are other schools of thought to the above. A school interpreted the above to be
-the Will to commit the crime by the individual
-the Opportunity to execute the crime, and
-the Exit, which is the escape from the sanctions against successful or attempted crime, this is
coined into WOE.
Yet another school of thought described the fraud and crime triangle of Perceived Opportunity,
Rationalization and Pressure.
Pressure (Incentive) and opportunity could be observed but rationalization (attitude) is usually
the toughest of the three to identify.
However, the thought advised that the triangle applies to mostly white collar and occupational
crimes and does not encompass predatory employee, that is, the criminal who takes up
employment with the intent of stealing from his employer.
The white collar or financial criminal has the same motive for crime, but through official position,
status, sophistication or professional acumen is able to affect the crime without the use of
violence.
Major examples of white-collar crimes are:
a. Falsification of financial figures
O p p o r t u n i t
y R a t i o n a
l i z a t i o n
Pressure
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b. Forgery of figures
c. Ghost workers
d. Premature writing- off of assets
e. Committing cash at hand into personal use
f. Eloping with organizational cash
g. Bribery & corruption
h. Intellectual property
i. Financial Institutions fraud
j. Health care fraud
k. Tax fraud
l. Security fraud
m. Money laundering
n. Feigned theft or robbery
o. Over invoicing
p. Defalcations
q. Fraudulent substitution
r. Unauthorized lending
s. Lending to ghost borrowers
t. Unofficial borrowing
u. Foreign exchange malpractices
v. Fictitious accounts
w. Fraudulent use of bank accounts
x. Falsification of status report
y. Mis-use of suspense accounts
z. Duplication of cheque books, drafts and mail transfers aa) Interception of clearing
cheques bb) Computer frauds cc) Teeming and lading, etc.
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6.05 Profile of Financial Criminal
Most people are honest! This is a good assumption. The childhood stories you tell your children,
„I have never told a lie’, is a nice way to look at the world. Sad to say, the human history and
statistics that examine them, tell different stories. Many societies abhor violent crimes; some
others do not hold financial crime, whatever the yard stick, as reprehensible. Charles Ponzi (post
script), the evil of Ponzi schemes was celebrated as folk hero by those he helped defraud. Most
executives whose schemes can disrupt thousands and millions of lives have historically received
light sentences. However, many jurisdictions are now reviewing the sanctions and punishments
to what the society may consider deemed for the crimes.
After many works by psychologists and sociologists to understand the inner workings of the white
collar criminal, it was Edwin Sutherland (1939) in his work „White Collar Crime’ who posited that
the individual’s personality has no relevance to a propensity to commit such crimes.
Rather, he said that economic crimes come from the situations and social bonds within the
organization, not from biological and psychological characteristics of the individual. He also
clarified that criminality is not confined to the lower classes and social misfits but extends, where
financial fraud is concerned, to upper class, socially well-adjusted people. Later other scholars
posited that financial fraud is inevitable component of capitalism, where the culture of
competition promotes and justifies the pursuit of material self-interest to the detriment of
others and even in the violation of the law.
From the works of psychologists, two general types of profiling can be deduced for financial
criminals and fraudsters.
1. Competitive and calculating criminals that want to assert themselves
2. Situation dependent criminals who are desperate to save self, family, or companies from
embarrassment or disaster.
The competitive and calculating criminals are predators. They are habitual offenders; they have
above average intelligence, mostly well educated. Generally, they began the crime careers later
in life than other criminals. They take lots of risks (no surprise there), they lack feelings of anxiety
and empathy. However, Wall-Street’s insiders trading scandal psychologists study offered a
somewhat different view when they posited that individuals willing to commit such crimes had
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an “external locus of control”, that is, they lacked inner direction, self-confidence and self-esteem
but were motivated by their desire to fit in and be accepted; they define success by others’
standards.
CASE: IT IS NOT OKADIGBO!
Okadigbo Musa seemed a terrific employee as the Vice President of a foremost telecom outfit in
Lagos. He joined the company eight years ago. His resume listed academic brilliance and business
success. A hard worker and well „connected’, always available to assist and almost solved all the
logjams. Regarded as crises solving Director and appearing to have magic wand for all issues as
he always worked into nights and weekends, whatever it took to get the job done. He knows
employees’ names and remembers the names of many of the employees’ children. Then one day
Okadigbo wired =N=10 billion of the company’s money to a bank in Bahamas and took off after
it, eloping with his secretary and abandoning his wife of 15 years and two children.
There is a mistake somewhere! It is not Okadigbo!!, echoed through the office. To his friends and
colleagues, this is a dream; they will wake up to reality. To the forensic accountant that was called
in to investigate, the incident was in its main features unsurprising. Activities notwithstanding,
Okadigbo was a predator, a con man whose stock in trade was to steal for personal gain.
Thomas W. Golden in his work, wrote that “the predator develops considerable skills and make
a career of deceiving people, as though it were just another career track to follow. Predators are
dangerous and cause great harm. And once in place they’re hard to detect. The chances are good
that a predator who wants access to company assets will accomplish that goal regardless of the
controls established to prevent intrusion. Fraud detection and deterrence controls are often
robust enough to stop other types of white collar criminals, but they may not stop the predator.
The best defense against predators is a thorough background check before hiring”. This is a key
component in anti-fraud program.
Situation dependent criminals constitutes majority of corporate criminals and they are not
predators. These are ordinary people who commit crimes without the intent to harm others.
They are the more common offenders and their offences can do great harm which are not
premeditated or intended.
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CASE: HIS NAME IS Christian
At the start of an investigation, the forensic accountant and the client go through the
organizational chart allowing the client to discuss all he knows about lifestyle of each employee.
“What about Christian?” The forensic investigator might ask, pointing at a staff on the chart. “Oh
no, Christian?” the client may continue; “It can’t be him, he has been with us for over 15 years,
and just like his name, he is in charge of the Choristers in our local church where I worship also.
He helps a lot in the service at the vine yard of God! He always assists others on their duties, he
is always punctual at work, i mostly force him to go on leave so that he doesn’t break down. My
wife and I have visited his family on occasions, his children and mine are in the same football
team in their school. The client may believe that what he knows of Christian eliminates him from
the list of fraud suspect.
In fact, an experienced forensic accountant will understand that Christian fits into the profile of
a white collar criminal. I am not writing that all nice people are criminals, but that most white
collar criminals pretend to be nice so as to shade suspicion while their activities continues.
Christian fits into this profile.
Most situation dependent criminals usually justify their actions by not believing that what they
are doing is wrong. Some convince themselves that what they are doing is even to the good of
the company and everyone associated with it. They rationalize the crimes as immaterial,
innocent or deserved fringe benefit, but not wrong. Mostly they start small, but in time the fraud
grows in size and encompassing on scheme.
White Collar Criminal
• Older (30+ years)
• 55% male 45% female
• An appearance of a stable family situation
• Above average education
• Less likely to have criminal record
• Good psychological health
• Position of trust
• Detailed knowledge of accounting system + weakness
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• Prior accounting experience
Basic things to look out for in the profile are:
i Significant changes in behavioral pattern
ii Signs of emotional trauma,
iii Unwarranted attack to audit questions,
iv Unsolicited over benevolence behaviors
The introduction of Mortimer Feinberg and John J. Tarrant in their book Why Smart People Do
Dumb Things, was instructive enough; „if you are of above average intelligence – and if you have
mastered the use of high intelligence to solve problems and achieve goals – it is the premise of
this book that you are at risk of perpetrating fraud because of the strength of your cognitive
equipment’
CASE: ILLEGAL+ ILLEGAL & CRIMINAL
A bus passenger got ticket on Monday while hopping into bus to his office, he continuously used
the same Monday ticket throughout the week. In fact, he was challenged on Wednesday, but he
quickly told the bus conductor that he was in the bus but just got down to pay for pure water.
The bus attendant apologized for the „embarrassment’.
A trusted supplier of medicine and drugs to a Federal Medical Center suddenly fall into
temptation of profiteering and started mixing fake and substandard drugs in his supplies.
In the above two schemes; one is illegal and criminal the other is illegal. Discuss them
6.06 ICPC and EFCC Laws In Relation To Financial Crime
Federal Government of Nigeria set up two agencies to fight corruption and financial crimes which
has become worrisome due to schemes which has hitherto dealt terrible blows on the psyche of
the nation.
The first was Independent Corrupt Practices and Other Related Offences Commission (ICPC)
which was set up in 2000 to fight corruption and the second was Economic & Financial Crimes
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Commission (EFCC) which came up later in 2002 to fight financial crimes. They were empowered
to arrest, investigate and prosecute cases of economic crimes including corruption.
1. Independent Corrupt Practices and Other Related Offences Commission (ICPC)
This agency was created by CORRUPT PRACTICES AND OTHER RELATED OFFENCES ACT, 2000 and
commenced operation the same year.
The General Duties of the Commission to receive investigate complaint and prosecute offenders
as detailed in section 6 (a)-(f) are
a. Where reasonable grounds exist for suspecting that any person has conspire to commit
or has attempted to commit or has committed an offence under this Act or any other
law prohibiting Corruption, to receive and investigate any report of the conspiracy to
commit, attempt to commit or the Commission of such offence and, in appropriate
cases, to prosecute the offenders;
b. To examine the practices, system and procedures of public bodies and where, in the
opinion of the Commission, such practices, systems or procedures aid or facilitate fraud
or corruption, to direct and supervise a review of the,
c. To instruct, advise and assist any officer, agency or parastatals on ways by which fraud
or corruption may be eliminated or minimized by such officer, agency or parastatal;
d. To advise heads of the public bodies of any changes in practices, systems or procedures
compatible with the effective discharge of the duties of the public bodies as the
commission thinks fit to reduce the likelihood or incidence of bribery, corruption and
related offences;
e. To educate the public on and against bribery, Corruption and related offences; and
f. To enlist and foster public support in combating Corruption.
Section 8 (1) - (4) criminalize gratification
1. Any person who corruptly
a. Asks for, receives to receive or obtains any property or benefit of any kind for himself or
for any other person; or
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b. Agrees or attempts to receive or obtain any property or benefit of any kind for himself or
for any other person, on account of-
i. Anything already done or omitted to be done, or for any favour or disfavor
already shown to any person by himself in the discharge of his official duties or in
relation to any matter connected with the functions, affairs or business of a
government department, or corporate body or other organization or institution in
which he is serving as an official; or
ii. anything to be afterwards done or omitted to be done or favour or disfavor to
be afterwards shown to any person, by himself in the discharge of his official
duties or in relation to any such matter as aforesaid, is guilty of an offence of
official Corruption and is liable to imprisonment for seven (7) years.
2. if in any proceedings for an offence under this section it is proved that any property or benefit
of any kind, or any promise thereof, was received by a public officer, or by some other person
at the instance of a public officer from a person -
a. holding or seeking to obtain a contract, license, permit, employment or
anything whatsoever from a Government department, public body or other organization
or institution in which that public officer is serving as such;
b. concerned, or likely to be concerned, in any proceeding or business
transacted, pending or likely to be transacted before or by that public officer or
a Government department, public body or other organization or institution in which
that public officer is serving as such; and
c. acting on behalf of or related to such a person; the property, benefit or promise
shall, unless the contrary is proved, be presumed to have been received corruptly
on account of such a past or future act omission, favour or disfavor as is
mentioned in sub-section (1) (a) or (b).
3. In any proceedings for an offence to which sub-section (1) (b) is relevant, it shall not be
a defence to show that the accused –
a. did not subsequently do, make or show that act, omission, favour or
disfavor in question; or
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b. never intend to do, make or show the act of commission favour or disfavor.
4. Without prejudice to sub- section (3), where a Police officer or other public officer
whose duties include the prosecution, detection or punishment of offenders is discharged
with an offence under this section arising from –
a. the arrest, detention or prosecution of any person for an alleged offence; or
b. an omission to arrest, detain or prosecute any person for an alleged
offence; or
c. the investigation of an alleged offence,
It shall not be necessary to prove that the accused believe that the offence
mentioned in paragraph (a), (b) or (c), or any other offence had been committed.
Section 17 (1) & (2) criminalize gratification by and through agent
(1) any person who corruptly-
a. accepts, obtains or agrees to accept or obtain or attempts to obtain from any
person for himself or for any person, any gift or consideration as an inducement
or reward for doing, forbearing to do, or for having done, forborne to do, any act
or thing;
b. gives or agrees to give or offer any gift or consideration to any agent as an
inducement or reward for doing or forbearing to do, or for having done, or
forborne to do, any act or thing in relation to his principal’s affairs or business;
c. knowingly gives to any agent, or being an agent knowingly uses with intent to
deceive his principal, any receipt, account or other document in respect of which
the principal is interested and which contains any statement which is false or
erroneous or defective in any material particular, and which, to his knowledge, is
intended to mislead his principal or any other person, is guilty of an offence and
shall on conviction be liable to five (5) years imprisonment.
2. For the purpose of this section, the expression “consideration” includes valuable
consideration of any kind; the expression “agent” includes any person employed by or
acting for another; and the expression “principal” includes an employer.
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Section 9 (1) & (2) makes it an offence to make Corrupt offer to Public Officers.
1. Any person who corruptly-
a. gives, confers or procures any property or benefit of any kind to, on or for a public
officer or to, on or for any other person; or
b. Promises or offers to give, confers, procures or attempts to procure any property
or benefit of any kind to, on or for a public officer or any other person, on account of any
such act, omission, favour or disfavor to be done or shown by the public officer is guilty
of an offence of official corruption and shall on conviction be liable to imprisonment for
seven (7) years.
2. If in any proceedings for an offence under this section it is proved that any property
or benefit of any kind, or any promise thereof, was given to a public officer or some
other person at the instance of a public officer, by a person-
a. holding or seeking to obtain a contract, license, permit, employment or anything
whatsoever from a government department, public body or other organization or
institution in which that public officer is serving as such; or
b. concerned or likely to be concerned in any proceeding or business transacted,
pending or likely to be transacted before or by that public officer or a Government
department, public body or other organization or institution in which that public
officer is serving as such, or
c. acting on behalf of or relative to such a person, the property, benefit or promise
shall, unless the contrary is proved, be deemed to have been given corruptly on
account of such a past or future act, omission, favour or disfavor as is mentioned
in section 9 (1) and (2).
Section 10 makes corrupt demand by persons an offence.
Any person who –
a. asks for, receives or obtains property or benefits of any kind for himself or any other
person; or agrees or attempts to receive or obtain any property or benefit of any kind for
himself or any other person;
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On account of-
a. anything already done or omitted to be done or any favour or disfavor already shown to
any person, by a public officer in the discharge of his official duties or in relation to any matter
connected with the functions, affairs or business of a Government department, public body
or other organization or institution in which the public officer is serving as such; or
ii. Anything to be afterwards done or omitted, or any favour or disfavor to be afterwards shown
to any person, by a public officer in the discharge of his official duties or in relation to any such
matter as aforesaid, is guilty of an offence of official corruption and shall on conviction be liable
to imprisonment for seven (7) years.
Section 12 prevents employees in the public sector from fraudulent acquisition of property in
their office.
Any person who, being employed in the public service, knowingly acquires or holds,
directly or indirectly, otherwise than as a member of a registered joint stock company
consisting of more than twenty (20) persons, a private interest in any contract, agreement
or investment emanating from or connected with the department or office in which he is
employed or which is made on account of the public service, is guilty of an offence, and
shall on conviction be liable to imprisonment for seven (7) years.
Section 15 (a)-(c) criminalize deliberate frustration of investigation by the Commission. Any
person who, with intent to defraud or conceal a crime or frustrate the Commission in its
investigation of any suspected crime of Corruption under this Act or under any other law:
a. destroys, alters, mutilates, or falsifies any book, documents, valuable
security, account, computer system, diskette, computer printout or other
electronic device which belongs to or is in the possession of his employer, or has
been received by him on the account of his employment, or any entry in any such
book, document accounts or electronic device, or is privy to any such act; or
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b. Makes, or is privy to making any false entry in any such book, document,
account or electronic record; or
c. Omits, or is privy to omitting, any material particular from any such book,
document, account or electronic record; is guilty of a felony, and shall on
conviction be liable to seven (7) years imprisonment.
Section 19 makes it an offence to use office or position to obtain gratification; in the common
and general term of „making hay while the sun is shining’ in the office.
Any public officer who uses his office or position to gratify or confer any corrupt or unfair
advantage upon himself or any relation or associate of the public officer or any other
public officer shall be guilty of an offence and shall on conviction be liable to
imprisonment for five (5) years without option of fine.
Section 21 (1)-(3) criminalize bribery in relation to auctions.
1. any person who, without lawful authority or reasonable excuse, offers any
advantage to any other person as in inducement to or reward for or otherwise on account
of that other person’s refraining or having refrained from bidding at any auction
conducted by or on behalf of any public body, shall be guilty of an offence.
2. Any person who without lawful authority or reasonable excuse, solicits or accepts
any advantage as an inducement to or reward for or otherwise on account of his
refraining or having refrained from bidding at any auction conducted by or on behalf of
any public body, shall be guilty of an offence.
3. Any person guilty of an offence under this section shall on conviction of the
indictment be liable to a fine of the current price of the property and imprisonment for
three (3) years.
Section 22 (1) – (2) criminalize bribery for giving assistance in regard to contracts.
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1. Any person who, without lawful authority or reasonable excuse, offers an advantage to
a public servant as an inducement to or reward for or otherwise on account of such public
servant’s giving assistance or using influence in, or having given assistance or used in-
a. The promotion, execution, or procuring of –
i. Any contract with a public body for the performance of any work, the
providing of any service, the doing of anything or the supplying of any article,
material or substance; or
ii. any sub-contract to perform any work, provide any article,
materials or substance required to be performed provided, done or
supplied under any contract with a public body; or
b. The payment of the price, consideration or other moneys stipulated
or otherwise provided for in any such contract or sub- contract as
aforesaid, shall be guilty of an offence.
2. Any public servant who, without lawful authority or reasonable excuse, solicits or
accepts any advantage as an inducement to or reward for or otherwise on account of
his giving assistance or using influence in, having assistance or used influence in-`
a. The promotion, execution or procuring, or
b. The payment of the price, consideration, or
c. Other moneys stipulated or otherwise provided for in any contract, or sib-
contract as is referred to in sub-section (1) SHALL BE GUILTY OF AN OFFENCE.
Upon conviction shall be liable to a term of imprisonment for seven (7) years or one million naira
fine.
Section 23-(1)-(3) holds parties duty bound to report bribery transactions and specify sanction
for failure.
1. Any public officer to whom any gratification is given, promised, or offered, in
contravention of any provision of this Act, shall report such gift, promised or offer
together with the name, if known, of the person who gave, promised or offered such
gratification to him to the nearest officer of the commission or police officer.
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2. Any person from whom gratification has been solicited or obtained, or from whom an
attempt has been made to obtain such gratification, in contravention of any provision of
this Act, shall, at the earliest opportunity thereafter, report such soliciting or obtaining,
or attempt to obtain the gratification together with the name, if known, or a true and full
description of the person who solicited, or obtained, or attempted to obtain the
gratification from him, to the nearest officer of the commission or police officer.
3. Any person who fails, without reasonable excuse, to comply with sub-sections (1)
and (2) shall be guilty of an offence and shall on conviction be liable to a fine not
exceeding one hundred thousand naira or to imprisonment for a term not exceeding two
years or to both fine and imprisonment.
Section 22 (3)-(6) makes an offence for any public officer in the course of his official duties, to
inflate the price of any goods or service above the prevailing market price or professional
standards. This offence upon conviction shall attract imprisonment for a term of seven (7) years
and a fine of one million naira. Also, any public officer who, in the discharge of his official duties,
awards or signs any contract without budget provision, approval and cash backing shall be guilty
of an offence, upon conviction be liable to three (3) years imprisonment and a fine of one
hundred thousand naira. The section also mentioned that any public officer who transfers or
spends any sum allocated for a particular project or service, on another project, or service, shall
be guilty of an offence under the Act and upon conviction be liable to one (1) year imprisonment
or a fine of fifty thousand naira.
Section 27(1)-(5) gave the officers of the Commission power to investigate reports and
enquire into information.
1. Every report relating to the commission of an offence under this Act may be made orally or in
writing to an officer of the Commission, and if made orally shall be reduced into writing and read
over to the person making the report; and every such report shall be signed or thumb- printed
by the person making the report is an illiterate the officer obtaining the report together with a
statement to the effect that it was read over and interpreted to the maker.
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2. Every report, whether in writing or reduced into writing, shall be entered in book kept at the
office of the commission and there shall be appended to such entry the date and hour at which
such report was made.
3. where an officer of the commission has reasons to suspect the commission of an offence under
this Act following a report made under sub-section (1) or information otherwise received by him,
he shall cause investigator to be made for such purpose may exercise all the powers of
investigation provided for under this Act or any other law.
4. A report made under sub-section (1) of this section shall not be disclosed by any person to any
person other than officers of the Commission or the Attorney-General until the accused person
has been arrested or changed to court for an offence under this Act or any other written law
arising from such report.
5. Any document, certified by any officer of the Commission under subsection (2) in respect of a
report under sub-section (1) shall be admissible as evidence of the contents of the original and
of the time, place and manner in which the report was recorded.
Section 28(1)-(10) gives the officer of the Commission power to examine persons.
1. an officer of the Commission investigating an offence under this Act may-
a. Order any person to attend before him for the purpose of being examined in relation
to any matter which may, in his opinion, assist in the investigation of the offence;
b. order any person to produce before him any book, document or any certified copy
thereof, or any other article which may in his opinion, assist in the investigation of the
offence; or
c. By written notice require any person to furnish a statement in writing made under
oath or affirmation setting out there in all such information required under the notice,
being information which, in such officer’s opinion, would be of assistance in the
investigation of the offence.
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2. Sub-section (1)(b) shall not apply to banker’s books save in accordance with the provisions of
the evidence Act. Cap.2 LFN.
3. A person to whom an order under sub-section (1)(a) has been given shall-
a. Attend in accordance with the terms of the order to be examined, and shall continue to attend
from day to day where so directed until the examination is complicated; and
b. During such examination disclose all information which is within his knowledge.
4. A person to whom an order has been given under sub-section (1) (b) shall not conceal destroy,
remove from Nigeria, or mutilate, expend or dispose of any book, document, or article
specified in the order or relevant to the investigation, or alter or deface any entry in such book
or document, or cause such act to be done, or assist or conspire to do such act.
5. A person to whom a written notice has been given under sub-section (1) (c) shall, in his
statement, furnish and disclose truthfully all information required under the notice which is
within his knowledge, or which is available to him.
6. A person to whom an order or a notice is given under sub-section (1) shall comply with such
order or notice and with sub-sections (3), (4) and (5).
7. Where any person discloses any information or produces any book, document or article
pursuant to sub-sections (1),(3) and (5), neither the first –mentioned person, nor any other
person on whose behalf or direction or as whose agent or employee the first-mentioned
person may be acting, shall, on account of such disclosure or production, except a prosecution
for an offence relating to the violation of section (1), or for any offence under or by virtue of
any written law, or to any proceeding or claim by any person under or by virtue of any law or
under or by virtue of any contract, agreement or arrangement, or otherwise.
8. An officer of the commission Examining a person under section 27 of this Act, shall record
under section 7 of this Act, shall record in writing any statement made by the person and the
statement so recorded shall be read over to the maker who on being satisfied that it is a true
record of his statement shall sign same before a superior officer if the Commission; and where
such person refuses to sign the record, the officer shall endorse thereon under his hand the
fact of such refusal and the reasons therefore, if any, stated by the person examined; and any
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person who shall write for a person who is an illiterate shall also write on such document his
own name and address as the writer of the document.
9. The record of an examination under section, a written statement on oath or
affirmation made pursuant to or any book, document or article produced under
section, or otherwise in the course of an examination under section 27, or under a
written statement on oath or affirmation made pursuant to sections and shall,
notwithstanding any written law or rule of law to the contrary, be admissible in
evidence in any proceedings in any court-
a. For an offence under this Act; or
b. For the forfeiture of any property pursuant to section 6 or notwithstanding
that such proceeding is against the person who was examined, or who produced
the book, document or article, or who made the written statement on oath
or affirmation, o against any other person.
10. Any person who contravenes this section shall be guilty of an offence punishable with
a term of imprisonment not exceeding (3) three months.
Section 52(1) & (2) specifies the procedure for investigating the president, vice president, State
Government and Deputy Governor; those that are covered by immunity clause as specify in
section 308 of the Federal Republic of Nigerian Constitution, 1999.
1. When an allegation of corruption or anything purporting to contravene any provision
of this Act is made against the President or the Vice-President of Nigeria or against any
State Government or Deputy Governor, the Chief justice of the Federation shall, if
satisfied that sufficient cause has been shown upon an application on notice supported
by an affidavit setting out the Facts on which the allegation is based, authorize an
independent counsel (who shall be a legal practitioner of not less than fifteen years
standing) to investigate the allegation and make a report of his findings to the National
Assembly in the case of the president or Vice-president and to the relevant state House
of Assembly in the case of the state Government or the Deputy Governor.
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2. The Commission shall be enjoined to fully cooperate with such independent counsel
and provide all facilities necessary for such independent counsel to carry out his functions.
Summons against suspects.
Section 29 stipulates that the Commission may issue a summons directed to a person complained
against or any other person to attend before the commission for the purpose of being examined
in relation to the complaint or in relation to any other matter which may aid or facilitate the
investigation of the complaint; or in relation to any other matter which may aid or facilitate the
investigation of the complaint; and the summons so issued shall state the substance of the
complaint, and the time and place at which the inquiry is to be held.
Section 30 gave the guide that every summons issued by the commission under the Act, shall be
in duplicate and signed by the Chairman or such other officer as the Chairman may authorize to
issue summons.
Section 31 directs that every summons under the Act, shall be served by an officer of the
Commission in the manner prescribed in the sheriffs and Civil Process Act and any other laws
relating to the service of process and the person effecting the service shall have and exercise all
the powers conferred by the law and any other law relating to service of process and the person
effecting the service shall have and exercise all the powers conferred by the law and any other
law relating to the service of process.
Section 32 provided for substituted service where the person summoned by the Commission is
in the service of Government, the Commission may deliver the summons in duplicate to the head
of the department in which such person is employed for the purpose of its being served on that
person and such officer shall there upon cause the summons to be served on that person.
Section 34 stipulates that a person required to sign a receipt on the back of the duplicate
summons to the effect that he has received the summons who refuses to do so may be arrested
by the person serving the summons and shall be guilty of an offence and upon conviction be
liable to one- month imprisonment or five thousand naira option of fine.
Section 37(1)- (4) gave the Commission powers to seize property.
1. if in the course of an investigation into an offence under this Act, any officer of
the Commission has reasonable grounds to suspect that any movable or immovable
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property is the subject matter of an offence of evidence relating it the offence, he shall
seize such property.
2. A list of all movable or immovable property seized pursuant to sub-section (1) and
of the places in which they are respectively found shall be prepared by the officer of the
Commission effecting the seizure and signed by him.
3. A copy of the list referred to in sub-section (2) shall be served on the owner of
such property or on the person from whom the property was seized as soon as possible.
4. Where any movable immovable property liable to seizure under sub-section (2) is
in the possession, custody or control of a bank, sub-section (1),(2and)(3) shall not apply
thereto and the seizure shall be effected in the manner provided for, in sections 35 and
42.
Section 49 nullify any dealing with property after seizure by unauthorized persons
Where any property has been seized under this Act, and so long as such seizure remains
in force, any dealing effected by any person or between any persons in respect of such
property, except any dealing effected under this Act, or by virtue of this Act by an officer
of a public body in his capacity as such officer, or otherwise by or on behalf of the
Government of Nigeria, or the Government of a state, or a local Government or other
statutory authority, shall be null and void, and shall not be registered or otherwise given
effect to by any person or authority.
Section 43(1)-(5) gave the Chairman of the Commission power to investigate share accounts.
1. Notwithstanding the provisions of any other written law or any rule of law, the
chairman of the commission, shall upon a court order direct in writing, for the purpose of
any investigation into an offence under this Act or any other law prohibiting Corruption,
and upon a court order authorize any officer of the Commission to exercise, in relation to
any bank or financial institution specified in the authorization, all the powers of
investigation set out in sub-section (2)
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2. An officer of the Commission authorized under sub-section (1) may, in relation to
the bank or financial institution in respect of which he is so authorized- a. inspect and
take copies of any banker’s book, bank accounts or any documents belonging to or in the
possession, custody or control of the bank or financial institution including computer
data, disks, diskettes, printouts and any other electronic medium information or data is
stored;
b. inspect and take copies of any share accounts, purchase account, expenses
accounts or any other accounts of any person kept in the bank;
c. inspect the contents of any safe deposit box in the bank; or
d. Request for any other information related to any documents, accounts or articles
referred to in paragraphs (a), (b) and (c).
3. Notwithstanding anything in sub-section (2), an officer of the commission
authorized under sub-section (1) may take possession of any books, documents,
accounts, titles, securities or cash to which he has access under that sub-section where
in his opinion-
a. The inspection, the copying or the taking of extracts from them, cannot
reasonably be undertaken without taking possession of them;
b. They may be interfered with or destroyed unless he takes possession of
them; or
c. They may be needed as evidence in any prosecution for an offence under
this act or any other written law.
4. Any person who willfully fails or refuses to disclose any information or produce
any account, document or article referred to in sub-section (2) to any officer of the
Commission authorized under sub-section (1) shall be guilty of an offence and shall, on
conviction, be liable to a fine not exceeding ten thousand naira or to imprisonment for a
term not exceeding two years or to both.
5. Any person who discloses any information or produces any account or document
or article to an authorized officer of the Commission whether by himself or through any
agent shall not, on account of such disclosure or production, be liable to any prosecution,
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except for an offence under section 41(1) of this Act, or for any offence under or by virtue
of any law, or to any proceeding or claim by any person under or by virtue of any law,
contract, agreement or arrangement, otherwise.
Section 45(1)-(5) gave the commission power to seize movable property including cash in the
bank.
1. where the chairman of the commission is satisfied on information given to him by
an officer of the Commission that any movable property, including any monetary
instrument or any accretion thereto which is the subject- matter of any investigation
under this Act or evidence in relation to the Commission of such offence is in the
possession, custody or control of a bank or financial institution, he may, notwithstanding
any other written law or rule of law to the contrary by order direct the bank or financial
institution not to part with, deal in, or otherwise dispose of such property or any part
thereof until the order is revoked or varied.
2. No bank, agent or employee of a bank shall on account of such compliance, be
liable to any prosecution or to any civil proceedings or claim by any person under or by
virtue of any law, contract, agreement, or arrangement, or otherwise.
3. Any person who fails to comply with an order of the Chairman of the Commission
under sub-section (1) shall be guilty of an offence and shall on conviction be liable to a
fine not exceeding two times the amount which was paid out in contravention of the
Chairman’s order or fifty thousand naira, whichever is the higher, and to imprisonment
for a term not exceeding two (2) years.
4. The subject-matter of an offence under this Act or evidence of the commission of
such offence shall be liable to seizure and the seizure shall be affected-
a. by the issuance of a notice of seizure signed by the chairman of the
Commission or any other person authorized by him setting out there in the
particulars of the immovable property which is to be seized in so far as such
particulars are within his knowledge, and prohibiting all dealings in such
immovable property; and
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b. By publishing a copy of such notice in two newspapers circulating in Nigeria
which shall be in the English Language; and
c. By serving a copy of such Notice on the officer of the Ministry of Lands of the
Area in which the immovable property is situate.
5. The officer responsible for land matter referred to sub-section (4)(c) shall
immediately upon being served with a Notice of Seizure under sub-section (1) endorse
the terms of the notice of seizure on the document of title in respect of the immovable
property in the Register at his office.
Section 47(1) & (2) stipulates Forfeiture of Property upon prosecution for an offence.
1. in any prosecution for an offence under this Act, the court shall make an order for the
Forfeiture of any property which is proved to be the subject matter of the offence or to
have been used in the commission of the offence where-
a. the offence is proved against the accused; or
b. the offence is not proved against the accused but the court is satisfied:
i. That the accused is not the true and lawful owner of such property;
and
ii. That no other person is entitled to the property as a purchaser in good
faith for valuable consideration.
2. Where the offence is proved against the accused or the property referred to in sub-
section (1) has been disposed of, or cannot be traced, the court shall order the accused
to pay as a penalty a sum which is equivalent to the amount of the gratification or is, in
the opinion of the court, the value of the gratification received by the accused, and any
such penalty shall be recoverable as a fine.
Section 48.: 1. emphasizes that where in respect of any property seized under the Act, there is
no prosecution or conviction for an offence under the Act, the chairman of the commission may,
before the expiration of twelve months from the date of the seizure, apply to a judge of the High
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Court for an order of forfeiture of that property if he is satisfied that such property had been
obtained as a result of or in connection with an offence under section 8 to 19.
2. The judge to whom an application is made under sub-section (1) shall direct to be published a
notice in the Gazette and in at least two newspapers circulating in Nigeria, which shall be in
English language, calling upon any person who claims to have an interest in the property to
attend before that court on a date specified in the notice, to show cause why the property should
not be forfeited to the Government.
3. Where the judge to whom an application is made under sub-section (1) is satisfied-
a. That the property is the subject-matter of or used in the commission of an
offence under this Act: and
b. There is no purchaser in good faith for valuable consideration of the
property, he shall make an order for the forfeiture of the property.
4. Any property in respect of which no application is made under sub-section (1) shall, after
the expiration of twelve months from the date of its seizure, be released to the person from
whom it was seized.
From the above, it thus appears that the ICPC Act is detailed and directed to curb corruption and
corrupt practices in the public service and did not clearly specify the position of property after
forfeiture.
Economic & Financial Crimes Commission (EFCC)
The agency was set up by ECONOMIC AND FINANCIAL CRIMES COMMISSION (Establishment) ACT
2002 which was later repealed and ECONOMIC AND FINANCIAL CRIMES COMMISSION
(Establishment) ACT 2004 was enacted. The Agency was created to fight financial crimes in all
segments and strata in the nation.
Functions of EFCC:
Section 6 (b)-(q) of the act stipulates that the Commission shall be responsible for -
a. The investigation of all financial crimes including advance fee fraud, money laundering,
counterfeiting, illegal charge transfers, futures market fraud, fraudulent encashment of
negotiable instruments, computer credit card fraud, contract scam, etc.;
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b. The co-ordination and enforcement of all economic and financial crimes laws and
enforcement functions conferred on any other person or authority;
c. The adoption of measures to identify, trace, freeze, confiscate or seize proceeds derived
from terrorist activities, economic and financial crimes related offences or the properties the
value of which corresponds to such proceeds;
d. The adoption of measures to eradicate the commission of economic and financial crimes;
e. The adoption of measures which includes coordinated preventive and regulatory actions,
introduction and maintenance of investigative and control techniques on the prevention of
economic and financial related crimes;
f. The facilitation of rapid exchange of scientific and technical information and the conduct
of joint operations geared towards the eradication of economic and financial crimes;
g. The examination and investigation of all reported cases of economic and financial crimes
with a view to identifying individuals, corporate bodies or groups involved;
h. The determination of the extent of financial loss and such other losses by government,
private individuals or organizations;
i. Collaborating with government bodies both within and outside Nigeria carrying on
functions wholly or in part analogous with those of the Commission concerning -
i. the identification, determination, of the whereabouts and activities of
persons suspected of being involved in economic and financial crimes,
ii. the movement of proceeds or properties derived from the commission of
economic and financial and other related crimes;
iii. The exchange of personnel or other experts,
iv. the establishment and maintenance of a system for monitoring
international economic and financial crimes in order to identify suspicious
transactions and persons involved,
v. maintaining data, statistics, records and reports on person, organizations,
proceeds, properties, documents or other items or assets involved in economic
and financial crimes;
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vi. undertaking research and similar works with a view to determining the
manifestation, extent, magnitude, and effects of economic and financial crimes
and advising government on appropriate intervention measures for combating
same
j. dealing with matters connected with the extradition, deportation and mutual legal or
other assistance between Nigeria and any other country involving Economic and Financial
Crimes;
k. The collection of all reports relating suspicious financial transactions, analyse and
disseminate to all relevant Government agencies;
l. taking charge of, supervising, controlling, coordinating all the responsibilities, functions
and activities relating to the current investigation and prosecution of all offenses connected with
or relating to economic and financial crimes;
m. the coordination of all existing economic and financial crimes, investigating units in
Nigeria;
n. maintaining a liaison with office of the Attorney-General of the Federation, the Nigerian
Customs Service, the Immigration and Prison Service Board, the Central Bank of Nigeria, the
Nigeria Deposit Insurance Corporation, the National Drug Law Enforcement Agency, all
government security and law enforcement agencies and such other financial supervisory
institutions in the eradication of economic and financial crimes;
o. carrying out and sustaining rigorous public and enlightenment campaign against
economic and financial crimes within and outside Nigeria and;
p. Carrying out such other activities as are necessary or expedient for the full discharge of
all or any of the functions conferred on it under this Act.
Section 7 (1) set out its powers to be:
a. cause investigations to be conducted as to whether any person, corporate body
or organization has committed any offence under this Act or other law relating to
economic and financial crimes
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b. cause investigations to be conducted into the properties of any person if it
appears to the commission that the person’s lifestyle and extent of the properties are not
justified by his source of income;
And sec. 7 (2) gave the Commission responsibility to enforce the provisions of –
a. the Money Laundering Act 2004; 2003 No.7 1995 N0. 13
b. the Advance Fee Fraud and Other Fraud Related Offences Act 1995;
c. the Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act 1994, as
amended;
d. The Banks and other Financial Institutions Act 1991, as amended; and
e. Miscellaneous Offences Act
f. Any other law or regulations relating to economic and financial crimes, including the
Criminal code of penal code
The act in sec. 11 (a)-(h) gave the Commission liberty to train its operators fully to be properly
equipped in combatting economic and financial crimes; while sec.12 (a)-(e) established the
specialized units of the Commission.
Section 14 (1) (a-b) spelt out offences relating to financial malpractices to be (1) A person
who, being an officer of a bank or other financial institution or designated non-
financial institution -
a. fails or neglects to secure compliance with the provisions of this Act; or
b. fails or neglects to secure the authenticity of any statement submitted pursuant
to the provisions of this act, commits an offence and is liable on conviction to
imprisonment for a term not exceeding 5 years or to a fine of Five Hundred
Thousand Naira (N500,000) or to both such imprisonment and fine.
Section 16 (1) makes it an offence under the act to give false information to the Commission.
Section 16(3) encourages any regulatory agency or body in the financial sector to liaise with the
Commission to investigate and monitor the commission of economic and financial crimes in the
exercise of its functions.
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Section 20 of the act also provides that a convicted person under the act shall forfeit to the
Federal Government -
• all the assets and properties which may or are the subject of an interim order of the
Court after an attachment by the Commission as specified in section 26 of the Act
• any asset or property confiscated, or derived from any proceeds, the person obtained
directly or indirectly, as a result of such offences not already disclosed in the Assets
Declaration Form specified in Form A of the Schedule to the Act or not falling under
paragraph (a) of the subsection;
• any of the person’s property or instrumentalities used in any manner to commit or to
facilitate the commission of such offence not already disclosed in the
Declaration of Assets Form or not falling under paragraph (a) of the subsection.
Section 22 did not spare foreign investments and assets as it stipulates that:
1. Where it is established that any convicted person has assets or properties in a
foreign country, acquired as a result of such criminal activity, such assets or properties,
subject to any treaty or arrangement with such foreign country, shall be forfeited to the
Federal Government.
2. The Commission shall, through the office of the Attorney-General of the
Federation, ensure that the forfeited assets or properties are efficiently transferred and
vested in the Federal Government.
The act in section 26 gave the Commission mandate to attach and seize property (ies) of a suspect
while the investigation and trial is going on. Upon conviction, the property will be forfeited to
the Federal Government.
Section 31 (1), (2) & (3) stipulates that the forfeited properties should be disposed of and the
proceeds thereof shall be paid into the Consolidated Revenue Fund of the Federation. And where
any part of the property included in a final order is money in a bank account or in the possession
of any person, the Commission shall cause a copy of the court order to be produced and served
on the manager or any person in control of the head office or branch of the bank concerned and
that manager or person shall forthwith pay over the money to the Commission without any
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further assurance than this Act and the Commission shall pay the money received into the
Consolidated Fund of the Federation.
International Co-operation and Recovering the Proceeds of Corruption
The 2003 United Nations Convention Against Corruption (UNCAC):
Criminalization, International Co-operation & Recovering the Proceeds of Corruption addresses
international co-operation in, essentially, four ways:
• Mutual legal assistance;
• International confiscation/forfeiture co-operation;
• Miscellaneous aspects of international co-operation;
• Extradition.
Mutual Legal Assistance (MLA)
Article 46 provides that State Parties are required to provide MLA to one another in
investigations, prosecutions or judicial proceedings, including the taking of evidence, executing
searches or seizures, providing information, evidential items and expert evaluations. MLA shall
also be provided in relation to the identifying, freezing and recovering of the proceeds of crime.
Consistent with international instruments, UNCAC encourages the widest possible assistance
between State Parties, with the understanding that, for instance, dual criminality requirements
be construed broadly.
International Forfeiture Co-operation & Asset Recovery
In addition to Article 31 (Freezing, seizing etc, referred to above), UNCAC makes detailed
provision for the recovery of property/repatriation
Article 53 (Measures for direct recovery of property) provides that:
Each State Party shall, in accordance with domestic law, takes such measures as may be
necessary to permit another party to initiate civil action in its courts to establish title to
or ownership of property acquired through the commission of an offence established in
accordance with this Convention;
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Each State Party shall, in accordance with its domestic law, take such measures as may
be necessary to permit its courts to order those who have committed offences
established in accordance with the Convention to pay compensation or damages to
another party that has been harmed by such offences;
Each State Party shall, in accordance with its domestic law, take such measures as may
be necessary to permit its courts or competent authorities, when having to decide on
confiscation, to recognise another State Parties claim as a legitimate owner of property
acquired through the commission of an offence established in accordance of this
Convention.
Article 54 (Mechanisms for recovery of property through internationals co-operation in
confiscation) provides that:
Each State Party, in order to provide MLA pursuant to Article 55 of the Convention,
with respect to property acquired through on involved in a commission of an offence
established in accordance with the Convention shall, in accordance with its domestic law:
Take such measures as may be necessary to permit is competent authorities to give effect
to an order of confiscation issued by a court of another State Party;
Take such measures as may be necessary to permit its competent authorities, where they
have jurisdiction, to order the confiscation of such property of foreign original by
adjudication of an offence of money laundering or such other offence as may be within
its jurisdiction, or by other procedures authorised under its domestic law;
Consider taking such measures as may be necessary to allow confiscation of such
property without a criminal conviction in cases in which the offender cannot be
prosecuted by reason of death, flight or absence, or in other appropriate cases.
Each State Party, in order to provide MLA upon a request made pursuant to Article 55
shall, in accordance with its domestic law:
Take such measures as may be necessary to permit its competent authorities to freeze
or seize property upon a freezing or seizure order issued by a court or competent
authority or requesting State Party that provides a reasonable basis for the requested
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State Party to believe that there are sufficient grounds for taking such actions and that
the property would eventually be subject to a confiscation order (i.e. to permit its
competent authorities to give effect to a confiscation order issued by a court of another
State Party);
Take such measures as may be necessary to permit its competent authorities to freeze
or seize property upon a request that provides a reasonable basis for the requested Party
to believe that there are sufficient grounds for taking such action and that the property
would eventually be subject to an order of confiscation for the purposes of giving effect
to an order for confiscation order by a court of another State Party;
Consider taking additional measures to permit its competent authorities to preserve
property for confiscation, such as on the basis of a foreign arrest or criminal charge
related to the acquisition of such property.
Article 55 (International co-operation for purposes of confiscation) finds that:
• A State Party that has received a request from another State Party having jurisdiction over
an offence established in accordance with the Convention for confiscation of proceeds of
crime, property etc situated in its territory shall, to the greatest extent possible within its
domestic legal system:
Submit the request to its competent authorities for the purpose of obtaining a
confiscation order and, if such an order is granted, give effect to it; or
Submit to its competent authorities, with a view to giving effect to it to the extent
requested, a confiscation order issued by a court in the territory in the requesting State
Party in accordance with Articles 31 and 54, insofar as it relates to proceeds of crime,
property etc situated in the territory of the requested State Party.
Following a request made by another State Party, having jurisdiction over an offence
established in accordance with the Convention, the requested State Party shall take
measures to identify, trace and freeze or seize proceeds of crime, property etc for the
purpose of eventual confiscation to be ordered either by the requesting State Party or,
pursuant to a request made under Article 55, by the requested State Party.
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A description of property to be confiscated, a statement of facts, and a legal admissible
copy of the confiscation order shall be provided, as appropriate, by the requesting Party.
Co-operation under Article 55 maybe refused or provisional measures lifted if the
requested State Party does not receive sufficient and timely evidence, or if the property
is of a de minimis value.
Before lifting any provisional measure taken pursuant to Article 55, the requested State
Party shall, wherever possible, give the requesting State Party an opportunity to present
its reasons in favour of continuing the measure.
Article 55 shall not be construed as prejudicing rights of bone fide third parties.
CASE: CRIMINAL IN POWER
You were consulted by one of the anti-graft agencies to investigate allegations against a former
Executive Governor on misapplication, diversion and laundering of public funds during his tenure.
Specifically, you were to investigate among others:
a. The award of contracts on road projects
b. The award of contracts on hospital renovations and supply of drugs to Government
hospitals
c. The State Urban Water Projects and several rural development water projects
To confirm the need or otherwise of the above specific projects, the amount involved and the
state of the projects
You were able to establish that the suspect served as the Chief Executive of the state between
1999 and 2007.
The State has 30 local governments and a population of about 6.5 million people (demographic
extrapolation as at 2008)
THE JOB:
You are required to write a detailed programme on the steps to take in accomplishing the task.
The approach to the job here is quite different from the general auditing and investigation
procedures due to the nature and the people involved.
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Generally, it is important to note here that the success of any investigation depends a lot on
planning. This is done back in the office before execution and translation on site.
Letters of credence should be served; need to identify those that will be served.
Consider if service (or invitation for interview) should be made to the present state government,
the Commissioners and the Heads of the affected parastatals, the contractors (suppliers), the
communities (beneficiaries; state your reasons.
You established the following during preliminary over-view:
ALL the specified projects
Roads: 156 (covering 1,655 km)
Health: 101 Hospitals and Government health clinics
Water projects: 1,280 in several locations
OBSERVATIONS:
You noticed:
That the state Government, during the period you are investigating, made total capital payments
for the 8 years on the above interventions as follows
=N= Billions
-Roads 100
-Health 50
-Rural water 20
Total 170
i. ROADS =N=100 BILLION:
The government claimed that it rehabilitated 600 km roads and constructed 1,055 km road
projects.
However, you confirmed that the state government during this period rehabilitated about 250
km roads and constructed about 800 km roads.
Again, out of the 50 construction Companies referred to in the rehabilitation and construction of
the roads,
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-10 were not in existence;
-6 responded to our enquiries that they did not work for Edo State Government
during the period;
-4 responded that they have never worked for the State Government;
-20 refuted the length of roads ascribed against their names;
-5 companies did not respond, and
-5 companies accepted all the responsibilities.
You noted that the governor’s family interest conglomerate had controlling shares in the 5
companies that accepted responsibilities.
Be concise in stating how you made the findings taking them one by one.
The contract for road rehabilitation cost the State an average of =N=50 million per km totaling
=N=12.5 Billion; while that of road construction cost them =N=80 million per km totaling =N=64
Billion. That will give a grand total of =N=76.5 Billion
=N=100 less =N=76.5 will give =N=23.5 Billion amount directly unaccounted for on roads.
Check and confirm this
Construction Materials costs comparison
Items The State Cost Market Cost Difference
Cement 150,000 per bag 1,700 per bag 148,300
Asphalt 450,000 per tipper 100,000 per tipper 350,000
Laterite 165,000 per tipper 25,000 per tipper 140,000
overheads 5,000,000 per km 1,000,000 per km 4,000,000
Iron rods 180,000 per set on
bridge
35,000 per set on
bridge
145,000
5,945,000 1,161,700 4,783,300
The percentage of over valuation therefore is 412%
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This means that an average of =N=12.1 million will be enough for rehabilitation of 1 km of road
as against =N=50 million, while =N=19.4 will be enough for construction of 1 km of road as against
=N=80 million.
This leaves over valuation costs to be: =N=57.8 Billion
Check and confirm this
Rehabilitation: =N=12.5 less =N=3.2 (250 x 12.1) = N9.3 Billions
Construction: =N=64 less =N=15.5 (800 x 19.4) = N48.5 Billions
Grand total of amount that appears to be misappropriated is
=N=81.3 (57.8 + 23.5) Billions
ii. HEALTH =N=58 BILLION:
The State Government claimed that it rehabilitated 101 government hospitals and health clinics
including supplies of hospital drugs and consumables in the 8 years.
Take a trip for first hand assessment here also.
Your visits to all the mentioned hospitals showed that 56 of them built over 30 years before;
never saw any government intervention. Dilapidated and over grown by weeds, they could never
have received any rehabilitation. Total rehabilitation claimed here was =N=29.8 Billions.
You confirmed that over 500 local contractors and 5 Chinese Companies were used to supply
hospital drugs and consumables to the state Medical Stores with the headquarters in the state
capital while subsidiary stores are sited in the 3 senatorial zones of the state. Bulk supplies were
made for subsequent distribution to various government hospitals as per demand.
Some of the companies (175) were not in existence even though they made the supplies.
Many of the supplies made were near expiration, yet they were received into the store. Many
expired in the store before they could be distributed to areas of need.
Some of the drugs had no NAFDAC number, yet they were received into the store. You were
informed that „the power-from-above’ gave specific instruction never to reject any supply; else
such workers that rejected supplies will be dismissed.
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Detail concise steps you took to get these results.
You noticed that the Chinese Companies were paid 15% mobilization but did not supply the drugs
and consumable. They subsequently received 75% further payments, still no drugs were supplied.
The balance of 10% was never paid to them. This balance was eventually given as public relations
to some senior government officials to help pacify the health workers that wanted to embark on
strike.
When you contacted the Chinese Companies, they presented letter of agreement which
stipulates that the money given to them was meant for the development of pharmaceutical
companies in Malaysia and China for the governor’s family conglomerate. When you confronted
them with their signed copies for supply of drugs and medical consumables, they insisted that
the interpreter must have made mistake in that copy you are holding!
They confirmed that they have long completed the factories but cannot hand over since they are
waiting for their outstanding balances of 10% to be paid in line with the agreement.
Consider the need to verify that statement and the existence of any new pharmaceutical plants
in Malaysia and China.
The total amount involved in this money laundering and scam is =N=19.8 Billion.
Other supplies were made but the last outstanding balances of 10% of the contract sum, never
got to the contractors. These were all diverted to other personal unaccounted for expenses.
iii. RURAL WATER SUPPLY =N=20 BILLION:
The State Government claimed that it spent =N=20 Billion in water intervention in urban and
rural communities. It also claimed that it purchased chemicals for the State Water Board for
constant supply of clean water in all the urban public water supplies.
You certified that the State Water Board struggled to maintained water supply in the state capital
only. The General Manager, confirmed that water supply dropped from 3,000 cubic metric tons;
pre- that governor’s era; to 1,250 cubic metric tons during the time of the governor, due to lack
of fund. The General Manager was also not aware of any other functional urban water scheme
in the state apart from the state capital he mentioned.
The cost of chemicals supplied during the 8-year period, in all the 9 Urban water schemes, as
claimed by the government was =N=2 billion.
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You confirmed that only =N=198 million was paid for the state capital Urban water scheme. You
saw pipes and other materials for the urban water schemes littered in the urban towns of the
state only.
You confirmed that out of the 300 sunk bore holes, only 30 „Community bore holes’ worked for
between 8 – 12 months before they parked up. The others worked for between 1 day – 3 days.
You noticed that over 80% of the “bore holes” had only a length of 18” pipe buried in the ground.
Different capacities of overhead tanks were constructed to specifications and apparently filled
with water by water vendors; they served the number of day(s), depending on the usage. They
all worked on the day of commissioning.
Generators were supplied, you leant, but you saw none! You were informed that many of them
were removed by the contractors due to lack of payments.
Construction Materials costs comparison per bore hole
Items The state Cost Market Cost Difference
Bore hole
construction
20 =N= million 2 =N= million
(overall average
due to deep
water level)
18 =N=million
Overhead
tanks
construction
30 =N= million 8 =N= million
(150,000 litters
for community
water scheme)
22 =N= million
Others/Generators 10 =N= million 5 =N=million 5=N= million
TOTAL 60 =N= million 15 =N= million 45 =N= million
This means that the state lost 80% (non-existent bore holes) at =N=60 million per bore hole and
=N=45 million on inflated prices per contract of bore hole awarded by the state in the remaining
20%.
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Confirm the calculation
Total bore hole costs =N=18 billion (300 x 60 per bore hole)
80% is =N=14.4 billion out right scam on the state
Then 20% of the 300 bore holes are 60.
=N=45 million loss on these 60 bore holes is =N=2.7 billion
Grand total scam on the whole =N=20 billion water scheme during the 8 years of the Governor is
=N=17.1 billion plus =N=1.8 billion on water chemical inflated prices; =N=18.9 billion
DURING THIS PERIOD EXCHANGE RATE WAS BETWEEN =N=130-140 PER $
CHANNELS NOTED FOR THE LAUNDERING.
1. Several millions were paid directly into the immediate family members bank accounts,
these were severally pooled together when the need arises; e.g. part payment for the
petro-chemical refinery work in Durban, South Africa. a) Children
b) Wives (3 were identified)
c) Brothers and sister.
2. Several billions were directly paid into the family conglomerate for “jobs done”. You did
not sight any other contract papers apart from some of the road construction.
3. =N=990 million was used to „equip’ e-library at a private University; this was “in
settlement of consultancy the University offered for inspecting drugs supplied to the state
by the Contractors”!
Also, =N=800 million was made as donation by the State Government to the University
for Mandela Chair. You discovered that this University belongs to one of the governor’s
concubine. It is pertinent to note here that the State University was on strike due to salary
problems about this same period.
4. Several billions were paid on over bloated contracts by political associates’ contractors
and including their companies.
5. Donations were made to political party and social clubs from the state funds.
6. Oversea cash transfers and purchase of assets across the globe were noted. You were
able to track, a refinery in Gambia, a CASTLE in Cape Town (43 bed rooms all furnished);
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in the garage were parked 15 different choice cars: Mercedes Benz, Bentley, Chrysler,
Fords, Toyota, and others; gulf course, full staff compliments paid fully into a dedicated
bank account to take care of the absent’ master’s property! You heard about other
properties in London and Dubai.
6.07 Societal Responses to Financial Crime
“Corruption is a major cause of poverty as well as barrier to overcoming it. The two scourges
feed off each other, locking their populations into a cycle of misery”. - Peter Eigen, Chairman TI
commenting on the 2005 Corruption Perception index (CPI)
Financial crimes and corruption have been a bane to national development, incidentally the
societal responses and reactions have been „mutually exclusive’ towards them.
Occasionally, it is when the victims of these corrupt practices send rejoinders that the public gets
to know. What are called corrupt practices occur in various forms in every aspect of society. The
ubiquitous police man brazenly and openly collecting bribes from motorists; the Customs officer
colluding with smugglers; the lecturer offering good grades for cash or sex; the hundreds of
thousands of inflated contracts; banks engaging in money laundering and even embezzlement of
funds belonging to churches and mosques, the 419 facets & schemes, all constitute different
tentacles of this hydra-headed monster called corruption and financial crime which almost defies
definition.
In the segment of society that benefits from the crime; about 90% in that society sees nothing
wrong with the situation, but in the segment of the society that is deprived; the willingness to
revolt against the system is constant.
Nothing is wrong?
a. Nothing is wrong, when a known financial schemer, in a hurry to launder back money,
sunk bore holes in his remote village, opened health centre, built the local post office and
the cottage market, single handedly, built and furnished church, „the referred house of
God’. His seat in the house of God will be in the front, reserved and none will „ever’ sit
on it. He will be begged to accept a chieftaincy title, which the community „humbly
presents to their illustrious son’. It is possible that he gives food stuff to many people in
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the community and even set up special scholarship trust for the indigent or those that
could be „wangled’ to participate in the scheme. To this community, he is qualified to be
the next governor of the state. They will do all within their remit and power to be sure
that he succeeds if ever he had that dream; let him just indicate interest. In this
circumstance, he is a heroic son of the soil. Meanwhile, he is in the wanted list on charges
of financial sleaze in another country. But, to the people he deprived, he is a monster and
should not be walking the streets. The case of EFCC vs Nwude, Anajemba vs ors stands
out. (post script)
b. Nothing is wrong, when a sitting governor bent all rules, due to immunity, (he cannot be
criminally prosecuted while in office); channeled all the state resources to better his
family and political associates. To them, they will hire and arm thugs to work for him
during the next election. But he is having a confirmed ticket for the next available flight
out of the country, on his last day in office as the governor. Some of them will plan to
hand over to the new surrogate governor, outside the country.
Good governance and corruption simply cannot co-exist simultaneously; when one enters the
system or management of government, the other departs, corruption and good governance here
are also mutually exclusive.
From the Federal, to the states and LGCs, the Chief Executive has assumed absolute power
without the checks and balances which characterize true democracies. Yet, as we have known
since Lord Acton, power tends to corrupt, and absolute power corrupts absolutely. Yet what has
emerged under the guise of democracy in Nigeria is one Federal, 36 States and 774 Local
Governments where the Chief Executives wield absolute power over their domain’ Sam Amuka,
Publisher Vanguard Newspapers
If concentration of power promotes corruption, concentration of the source of national wealth
in one sector crude oil and natural gas allied with absolute political power has guaranteed that
corruption will thrive unless determined efforts are made to check it. Nigeria is one of the few
nations in the world, all oil producing incidentally, where wealth without work is prevailing. There
is hardly any great wealth in Nigeria today that is not traceable to corrupt self-enrichment or
political patronage. And since the patronage can only be granted by the Lords of the Manors,
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then it is understandable why political rivalry has turned so deadly. Murder as we all know is the
ultimate sort of corruption. Yet, it is inevitable given the scenario we have painted. From
Executive Lawlessness and corruption all other forms of corruption derive their sustenance and
work their way throughout the rest of society.
However, solutions to most of the financial crimes and corruption tendencies depend mostly on
the political will of the rulers. Clear example was during Buhari- Idiagbon era, albeit military
dictatorship, but that regime brought back discipline into the Nations polity. Drug „mafia’ which
was the global octopus to financial crimes of money laundering, came to the barest minimum.
The maxim “When the citadel of justice is corrupted, what will happen to the body polity” comes
to the fore.
The demonstration of Paul Kagame the Rwandan President is worthy of note. The Country
targeted key areas of the public sector that are prone to breeding corruption; transport &
housing
With housing, instead of housing public servants centrally, including ministers, they opted for
providing monthly allowance together with low interest rate loans that enable especially first
home owners to purchase their own houses, according to categories and terms of employment.
Government, in other words is no longer in housing business - other than devising schemes for
public servants to be appropriately supported according to their seniority and classification of
employment.
They reason that even if some of these innovations may in some cases have initial financial
implications, in the long run, they will benefit. The important issue is to break the culture of
entitlement and dependence on the state and corruption that often accompanies it. It is
important to note, once again, that opposition to such initiatives has largely come from individual
leaders that stand to gain from bad governance
The case of transport is perhaps more telling in terms of implementing preventive measures
against bad governance and corruption. In their case, senior public servants, including ministers
had taken to driving large four-wheel drive vehicles that had been baptised in Rwanda the name
"health centres" - because ordinary Rwandans justifiably reasoned that each of such vehicles
cost the equivalent of constructing and running a health centre
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For a number of years, they debated this issue in the Cabinet and arrived at a consensus that this
lifestyle was neither materially nor morally sustainable. Corruption in terms of falsified vehicle
maintenance, ghost drivers, non-delivered or diverted fuel and spare parts, and various other
fraudulent schemes involving both public officials together with private sector-based garages
was costing Rwandans dearly
Subsequently, they reached a consensus of resolving this problem with a "ownership" and "co-
financing" formula. The principle is simply that a senior public servant or a cabinet minister is
given 50% of financing by Government, and has to secure a loan to finance the other 50% to
acquire a vehicle of his or her choice. The vehicle is looked after by its owner for a period of five
years, after which individuals take total ownership, assuming that they remain in public sector
employment for five years. How they drive the vehicle, whether the individual drives or hires a
driver is entirely his or her business.
It was one thing to reach such a consensus and quite another to implement policies derived from
it. Even though they resorted to extraordinary and somewhat unconventional measures to
implement the consensus. After two years of complacency and inertia, police and other state
agencies had, one morning, to literally seize government vehicles from senior public servants
including ministers. Only then was it possible to "persuade" government officials to implement
the "coownership and "cofinancing" scheme. For upcountry official operations, institutions may
hire vehicles from the private sector on a needs basis.
Within a week, most people realized that the co-sharing scheme was a wonderful idea. No work
was disrupted and transportation atmosphere changed for the better almost overnight.
In this guise, Nigerian government during the regime of President Obasanjo, advanced
adulterated form of this scheme which was christened „monetization’; but in our own case it
became another corruption breeding ground. Several scams, from denial offer to current
occupier, to exorbitant interest rates, far above banks’ lending rates approved by the Central
Bank of Nigeria, appeared in the scene.
Government should initiate policies that will not promote or encourage bribery and corruption.
All government policies must be made known to the public through publicity and education.
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Another school of thought saw the approach of societal perception of financial crime from the
point of degree of physical harm to individuals. Some rated financial crime more serious when
compared with the traditional kinds of crime. Acceptance of a bribe by a city politician and an
armed robbery that netted =N=200,000.00 were rated the same, while a fraud by a vegetable
seller and an embezzlement of =N=300.00 were perceived to be the same.
6.08 The “Perp Walk” For White-Collar Crime Defendants
Rationalization enables a person to take that final step towards crime.
During admission seeking interrogations, many suspects confess to the crime but they hardly say
„I stole the money’ instead they talk about justification for their action.
I have intention to pay back, it was just a loan. (Pulling paper from drawer) see I kept track
of all my loans so that I could pay it all at once.
I am just getting my share; my boss has been cheating on taxes for years.
I am sure my employer is aware of it. Everyone in this industry takes kickback and that’s
why they don’t pay me much.
I know my boss would give me a substantial raise if he could do it without people knowing.
Instead I take a little bit, but I am actually saving the company money because only I get
the raise. I am the hardest working employee here.
You did not give me any health insurance coverage, and I need to provide for my children.
What do you expect me to do?
CASE: AN EDUCATED, UPSTANDING CITIZEN: Adapted from Psychology of the Fraudster’ By
Thomas W. Golden
This case is presented at some length because it touches on many elements in the psychology of
the fraudster: the profile of good citizenship, even professional engagement in good works and
church affairs, combined with hidden wrongdoing. The case also offers a first example of the
forensic accounting investigative team at work. It is staged in US, but with few local mixes for
clearer understanding.
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The board of a religious foundation dedicated to helping people displaced by flood in need of
medical assistance asked for a review of its controls over receipts and expenses. A forensic team
examining the executive director’s expenses noticed that some personal expenses had been
charged to the foundation, including =N=400,000 for schoolbooks recently purchases for her
children. The team expended the review to an entire year and found evidence that car repairs,
groceries, liquor, theater tickets, and a flight to Miami by the director and her family had been
paid for by the foundation. The forensic accounting investigators showed the evidence to the
board chairman, who was puzzled and who assured the team that the board had not authorized
these expenditures. The board then authorized a broader investigation. The question on
everyone’s mind was: were these simply clerical errors, misunderstandings-or the work of a
dishonest executive director?
Throughout the investigation, the forensic accounting investigators stayed in continual contact
with the executive director to give her the impression that she was leading the investigation and
had nothing to fear. The forensic accounting investigators were surprised that she might be a
fraudster; she did not fit the pre-conceived profile of the white-collar criminal they had in their
heads.
Eventually, the investigation determined that the foundation had been paying the private school
tuition of the executive director’s children, bringing the total of unauthorized expenses to at least
=N=25 million. With no remaining doubt that it had identified a fraudster in the organization, the
team now needed to determine whether there might be other fraudulent schemes or
coconspirators. Only more investigative work would provide the answers. The Association of
Certified Fraud Examiner (ACFE) fraud manual instructs that “once a fraudster has been identified,
forensic accounting investigators should:
Look for additional schemes
Look for co-conspirators
Look to see what the targets have touched and test those areas
Having thoroughly examined the director’s expenses, the forensic accounting investigators
thought about what other possibilities for fraud existed. They learned that the director had been
directly involved in conducting fund-raising, and so they needed to track the donations received.
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This search for possibly unrecognized revenue would prove to be an especially challenging task.
The director could easily have converted contributions to the foundation for her personal use
without anyone knowing about it. It would be very difficult indeed to confirm revenue from
donors only to her.
“Knowing where to look” is greatly facilitated by understanding the operations of the organization
and the scope of transactions that a suspect has generated or approved. The forensic team knew
that the director favored churches as targets for fund-raising. A good place to start was with a
study of her travel around the country, based on her expense report vouchers and correlated
with churches near the hotels where she stayed. Each time that the forensic accounting
investigators identified a church where she had conducted an appeal, they looked for a deposit
in the foundation’s bank account. They then began calling each church to track donations. They
did not disclose that they were investigating ‘suspected criminal behavior’- only that they were
auditing the foundation’s books and confirming donations. If the response was that a donation
had not been made and in fact no such appeal had taken place, the forensic accounting
investigators simply apologized for troubling that church.
Before long, they found what they were looking for. At a local church in a particular state, the
minister told the forensic accounting investigators that the executive director had addressed the
congregation one Sunday morning and was handed a cheque for =N=5 million: a combination of
donations from worshippers and a contribution from the church’s discretionary fund authorized
by the minister himself. The forensic accounting investigators requested a copy of the check,
front and back, and the minister faxed it promptly. They noted the absence of any endorsement-
only the handwritten account number of an account different from the foundations but matching
the executive director’s personal account number. Here was another fraud scheme in addition to
the false reporting of expenses. There was no firm means of determining how many appeals the
director had made in the three years of her directorship or how much she had stolen. Without a
court order, the forensic accounting investigators could not obtain her personal banking records,
although
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“a good investigative procedure in determining possible theft is to determine valid sources for
all deposits on a bank statement’. The minister mentioned that the appeal had been videotaped,
and he provided the team with a copy.
The team now brought its findings to the foundation’s board:
i The executive director had stolen at least =N=25 million through expense
reimbursement and fraudulent payments for personal expenses.
ii She had diverted to her own use cheques made payable to the foundation and
intended for support of its programs.
iii The team had been unable to determine how many foundation donations she had
diverted.
iv The target was not aware that forensic accounting investigators knew of her frauds.
Board members were stunned and not yet ready to take the matter to the prosecutor. “There
has to be a reasonable explanation for these allegations,” some board members said.
Others were worried about the adverse publicity that a criminal prosecution would bring in
addition to its effect on their reputations and the future of the foundation.
As the next step, the forensic accounting investigators prepared for an admission seeking
interview in an attempt to get the executive director to admit to the thefts.
During that interview, they would also attempt to get the suspect to admit to other frauds or to
provide access to her banking records. Eventually, she confessed. Her explanation? "I only
borrowed the money and had every intention of paying it back." She rationalized her actions by
reasoning that if she could circulate in high society, shed be in a better position to solicit large
donations for the foundation.
To fit in with wealthy donors, she believed that her children had to attend the best private schools
and that she needed to travel and dress appropriately. She honestly believed that she was doing
nothing wrong in taking "only a little" to meet these "needs,"
It is critical that forensic experts understand how rationalizations of this kind underlie white-
collar crime. This executive director, an educated and upstanding citizen, fits the profile of most
people they will encounter in an audit-yet there was a difference. Rationalization cuts right to
the heart of the psychology of the fraudster: the ability of fraudsters to convince themselves that
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what they are doing is acceptable enables otherwise good people to do stupid things. Most
people engage in rationalization daily, whether deciding to have a second portion of dessert, skip
the last set of exercises, or play golf instead of mowing the lawn. But few people act as the
executive director did, rationalizing fraud as ultimately in the best interest of the charitable
foundation she served.
6.09 Perpetrators, Lifestyles and Motivations
“Money, money, money, must be funny, in the rich men’s world” that was the music of ABBA, in
late 70’s. this music aptly captures money as it comes and goes, but those that taste it sees it as
absinthe in “Worm wood” by Marie Corelli; they will never let go.
Many elements could be seen or depicted in the lifestyle of financial criminals. But the
denominator usually is societal status, ego, and public or personal aggrandizement. Belonging
to „class symbol’ primarily is accountable for predator financial criminals. They like to make
„noise’ about how successful they are, easily and freely give to charity, especially in public to
draw attention, cling to choice cars; choppers and mini plane, why not? They prefer to live in
castles where they can give directives and be noted, women, holiday and recreations are some
of their pass-times.
They may not forgive you should you make mistake during introduction in a public function. The
gathering should note that he is the Chief, Dr, Professor, Sir, etc; that he did not come to the
gathering in his plane, because there is no airport inside the venue, however, he came in his
Rolls-Royce, and the beautiful damsel, (waving at a beauty beside him) is his wife (rightly or
wrongly so). He will prompt you to remember to announce that he made donations to the
development of the town hall, recall he donated to the church building and have scholarship
schemes for indigent scholars, a philanthropist per excellent, and the savior of common man.
He will be smiling in self-fulfillment. Some may indulge in financial crime to get rich quick and
join politics, even then, as a governor he eventually turned to become; he will continue the
stealing only that now, he will be stealing with impunity. This is the predator; personal ego.
However, for the “petty” financial criminals, many due to financial insecurity will only continue
to be indulged as long as the opening is available. These may not live extravagantly, or shuttle
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overseas for holiday, they may indulge in flashy cars (but not many at a time), they will make
penitent confession to the priest, “I am stealing from my employer”, but they will not stop as
long as the opening is there. As long as human needs are numerous, they will continue to crump
up, they will continue to see reason and excuse for more stealing. Until they are caught!
Their secret and motivation is their earlier successes and the temporal satisfaction of their
immediate need. They will be spurred to do more. Just like the rat, it will taste a bit of the bate,
to know whether it is trap or worse still, poison. Once nothing happened, it will go for a bigger
chunk of the deal!
Anti-Money Laundering Procedure
Money laundering activities is common among Politically Exposed Persons (PEP) in Nigeria. Given
the rate of authority and amount of funds under their control which makes them susceptible to
money laundering. This does not mean that those in private practices are not involved in money
laundering crime, as they are also culpable of laundering funds from criminal proceeds.
According to CBN (2009) Circular on Anti-Money Laundering/Combating Financing of Terrorism
(AML/CFT) a Politically Exposed Persons (PEPs) are individuals who are or have been entrusted
with prominent public functions both in foreign countries as well as in Nigeria. Examples of PEPs
include, but are not limited to;
i Heads of State or government;
ii Governors;
iii Local government chairmen;
iv Senior politicians;
v Senior government officials;
vi Judicial or military officials;
vii Senior executives of state-owned corporations;
viii Important political party officials;
ix Family members or close associates of PEPs; and
x Members of Royal Families.
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Accounting firms investigating money laundering case are expected to establish appropriate risk
sensitive policies and procedures in order to prevent and detect activities related to money
laundering and terrorist financing including those policies and procedures which provide for:
i Identification and scrutiny of complex or unusually large transactions, unusual patterns
of transactions with no apparent economic or lawful purpose and any other activities that
the accounting firm has reasonable grounds to regard as particularly likely, by its nature,
to be related to money laundering or terrorist financing;
ii Prevention of use of products favouring anonymity;
iii Determination of whether a client is a politically exposed person (PEP);
iv Customer Due Diligence, is a process that is structured to help a company gain knowledge
their current and potential clients, validate their identity and monitor their business
relationships and transactions.
v Record keeping, which involves maintaining detail data of customer due diligence and
supporting evidence for business relationships, which need to be kept for a minimum of
five (5) years after the end of a relationship;
vi Internal control, risk assessment and management, compliance monitoring, management
and communication; and
vii Additionally, accounting firms are required to take measures to make relevant employees
aware of the law relating to money laundering and terrorist financing, and to train those
employees in how to recognize and deal with transactions which may be related to money
laundering or terrorist financing.
6.8 Review Questions
1. Define financial crime (5 Marks)
2. List and explain the different types of financial crime (10 Marks)
3. Explain the concept of white-collar crime (5 Marks)
4. Do a synthesis of the effort of Nigeria’s anti-graft agencies in the fight
against financial crime (7Marks)