Illicit Financial Flows: ICPC Tightens Noose On Real Estate Developers, Others

In recent times, the issue of Illicit Financial Flows has been receiving growing attention as a key development challenge.

Tackling corruption, particularly IFFs has become a matter of survival for Africa’s development and must be treated with urgency. There is broad consensus that the funds being bled out of Africa, could be channeled towards the continent’s development if successfully retained.

According to the Economic Development in Africa Report 2020 by the UN Conference on Trade and Development (UNCTAD), Africa loses about $88.6bn or 3.7 per cent of its Gross Domestic Product, annually in illicit financial flows.

Also, the High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) Report released in February 2021 cautioned that IFFs — from trade mis-invoicing, tax abuse, cross-border corruption, and transnational financial crime — drain resources from sustainable development, as well as worsen inequalities, fuel instability, undermine governance, and damage public trust.

In Nigeria, IFF reduces domestic resources and tax revenue needed to fund poverty-reducing programs and infrastructure in developing countries.

The Chairman of the Independent Corrupt Practices and Other Related Offences Commission, Prof Bolaji Owasanoye gave credence to this when he said that “Corruption, illicit financial flows, tax evasion have resulted in massive resource leakages which have hampered Nigeria’s development.”

He spoke at a capacity building workshop organized by the ICPC for investigators, prosecutors, and tax inspectors on investigating/prosecuting IFFs.

This workshop was targeted at building the capacity of the ICPC to check leakages and ensure there are more resources for the development of the country.

It is also part of a determined effort of the current leadership of the Commission to tackle the menace of IFFs which had affected the economy negatively.

The ICPC Boss said that Illicit Financial Flows impact a country’s economic and social development in a myriad of ways.

He said that undocumented flights of wealth to and from – as well as within – a country have severe repercussions on government revenues, noting that this wealth could otherwise have been invested in public spending and other forms of economic and social reforms.

Owasanoye told participants at the workshop that Nigeria is losing billions of dollars from expected revenue due to poorly structured contractual agreements and tax laws which encourage illicit financial flows by multinational corporations.

He said, “The drain on resources and tax revenues caused by IFFs has thwarted the expansion of basic social services and infrastructure programmes that are targeted at improving the wellbeing and capacities of all citizens, in particular, the very poor.

“IFFs in many developing countries, including Nigeria, mean fewer hospitals, schools, roads and job opportunities, as well as lower pensions. It is for these reasons that States must place significantly higher priority on seizing and confiscating illicitly obtained assets, and to channel such recovered assets to high-priority development needs.

“New paradigms and policies to counter IFFs must be established to produce an unbroken chain of work from tracing, freezing, seizure, confiscation and recovery of illicitly-obtained assets, through transparent management and liquidation of such assets, to distribution of the proceeds to high-priority development needs.

“It is this mechanism and paradigm that will enable countries to capture billions in assets and to directly channel them into, for example, more schools, hospitals, community clinics and infrastructure, as well as the much-needed payment of salaries for teachers, nurses and doctors. Such policies also can enable States to significantly reduce youth unemployment.”

The Chairman of the inter-agency committee on stopping illicit financial flows in Nigeria, Dr Adeyemi Dipeolu, who also spoke at the event identified poorly negotiated and hidden contract as one of the most identifiable ways through which IFFs are perpetrated.

However, he offered practical tips for successful negotiations and stressed on the need to have a strong inter-disciplinary committee.

Adeyemi further noted that training was necessary to develop a group of Nigerian officials skilled in international negotiations in general.

He emphasized that the capacity building is being organized to help investigators, prosecutors, and tax inspectors cope with international obligations.

Adeyemi said, “We want to develop core people who will make sure that agreement signed for the country and government do not lead to illicit financial flows.

“It is very important that you pay close attention to the other causes on disputes settlement matters, the agreements must comply with Nigeria’s legal regulations.”

Adeyemi advised the participants at the workshop to focus on areas of disputes during negotiations of contract agreements.

But the Director, Asset Tracing, Recovery and Management of the ICPC, Adedayo Kayode revealed that the Commission has commenced investigation into hundreds of real estates scattered in the Federal Capital Territory over suspected illicit financial flows.

In his paper on ‘Illicit Financial Flow in Real Estate’ delivered at the workshop, he said the probe will identify the property that was being funded with illicit financial flows.

As at 2012, the National Bureau of Statistics said the country’s housing gap was around 17 million housing units.

According to him, filling the gap has made the real estate sector lucrative. while it has also promoted illicit financial flows. He accused some real estate investors of concealing illicit financial flow in the sector.

According to him, most empty estates in the FCT were developed through illicit financial activities, adding that the nation needed a coordinated and concerted approach to fighting IFFs.

Kayode stressed that the law enforcement agencies required continuous investment in capacity building to trace and follow the money.

While noting the need for implementation and investigation of breaches of the beneficial ownership rule, Kayode stated that data availability and intelligence sharing are imperative.

“ICPC in accordance with its mandate to curb corruption is presently investigating cases of the myriad of completed but abandoned estates scattered around the Federal Capital Territory to identify those that are instruments of IFFs.

“Furthermore, we are collaborating with the National Assembly to investigate, study and promulgate appropriate legislation to stem the tide of corruption in the real estate sector,” the director said.

He hinted that real estate is a key sector in the laundering of IFFs globally because it is little regulated. He added that laundering activity is conducted in collaboration with real estate developers and accomplices in the land administration departments.

“Launderers of illicit wealth in the Nigerian real estate sector often engage in cash purchases which are done through the use of foreign exchange often procured from Bureau De Changes. Often, after purchase, the property titles are not changed to reflect the new ownership,” he explained.

Kayode said the commission has been pushing hard on asset recovery both locally and internationally.

He said any asset that its legitimacy cannot be proven will be forfeited by their owners.

Kayode explained that even when money is received genuinely but transmitted through IFF, the deal which the money was applied to becomes illegal.
He said, “The hubs of real estate development in Nigeria are Lagos, Abuja and Port-Harcourt which Abuja is perceived to have the greater number of real estate development and higher property value. I am sure that this may be because Abuja is the seat of power.

“Because of the housing deficit and the boom that we are experiencing, in the housing industry, people see it as a very good opportunity to invest their illicit fund.”

The director said most of the suspicious deals done in the real estate sector are carried out in cash and funded by Bureau de Change operators.

“Most of the time, most of these people don’t pass the money through the financial system, what they do is to go to the bureau de Change to buy dollars and then pay in dollars.

“Often times also, after purchasing, the property titles are not changed to reflect the new ownership. So, even at the land registry, the registration of the property is still in the name of the original owner and the land and property must have changed hands many times.”

According to him, at the global stage, Dubai is the global headquarters of illicit financial flows due to its weak laws that conceals identities of money launders and illicit entrepreneurs.

He further revealed that Nigerians are among the top actors that own real estates in Dubai.

The ICPC director said, “Countries whose citizens are leading among Politically Exposed Persons (PEPs) and illicit actors that own real estate in Dubai are Armenia, Nigeria, Pakistan, Russia, South Africa and Thailand.

“We need a coordinated and concerted approach to fight IFFs. The effort of the government in the recent SIM card/NIN matching and deactivation of non-compliance is a good step in the right direction.”

Also, in his paper on the theme, ‘Investigating illicit financial flows in the education sector,’ the ICPC Director of Operations, Mr Akeem Lawal, said for anti-graft agencies to tackle IFFs in the education sector, they must increase profiling of persons under investigation and their family members; conduct net-worth analysis bearing in mind the provisions of the Public Service Rules and the Code of Conduct Bureau Act and collaborate with the Nigeria Immigration Service and embassies regarding the travel history of the subject under probe.

According to him, approximately 30 million pounds in school fees flows from West Africa into the UK’s private education system and most of those funds come from Nigeria. As such, he spoke on the importance of ascertaining if the funds are of the IFF nature.

He gave a number of approaches which he suggested anti-corruption agencies could adopt in order to curb the unwanted financial flow in the education sector.

“In investigating IFFs in Education sector, the Anti-Corruption Agencies must adopt the following processes: Increased profiling of persons under investigation and their family members; Net-worth analysis bearing in mind the provisions of the Public Service Rules and the Code of Conduct Bureau (CCB) Act; Collaborations with Nigeria Immigration Service, Embassies/High Commissions regarding travel history and purpose,” he said.

Lawal added that other processes that needed to be adopted include, collaboration/ investigation of schools in the country charging exorbitant fees; Investigating schools in Nigeria that only accept foreign currencies as school fees; and analysis of documents and information received to establish links and establish origin and movement of illicit financial flows for education purposes.

The director also outlined some areas to focus on while investigating IFFs in the education sector.

“Profiling information that a respondent’s children are schooling abroad, evidence of application for student visa, Value of the amount payable as school fees, currency of payment, particulars of sponsor/guarantors,” he said.

Other areas of focus he mentioned are; indication of huge transfers abroad in bank statement of accounts, transfer of money to BDC, disproportionality of legitimate earnings to amount transferred or converted to forex.

Lawal also emphasized the danger IFFs constitute to the socio-economic conditions of developing countries.

According to him, they impact negatively on “social and political advancement, power equality/wealth relations globally, state institutions by weakening them and infrastructural and economic development.

He said that IFFs thrive largely in countries with weak regulatory controls and high level of corruption.