Gemstones and Money Laundering in Nigeria: A Critical Look
Gemstones and Money Laundering in Nigeria: A Critical Look
The primary reason for most criminal activities is money. This holds true for money laundering as well. Here is a look at the money laundering affecting the Nigerian gemstones as well as the global gemstones industry.
The primary reason for most criminal activities is money. This holds true for money-laundering as well. What is money-laundering? It is the process through which criminals camouflage the unlawful origins of their wealth. The purpose of this is to prevent law enforcement agencies from catching their crime.
For criminals, money-laundering is of critical importance as it allows them to enjoy their illegally acquired wealth without the fear of being caught. Today, the amount being laundered is in the trillions. According to a study by the United Nations Office on Drugs and Crime (UNODC), criminal proceeds from drug trafficking and organized crimes amounted to 1.6 trillion to 2.2 trillion in 2014. This has probably increased in the past five years.
Since it is the outcome of all profit generating crime, money laundering can take place anywhere in the world. However, money launderers tend to prefer regions or countries where the risk of detection is less or where the anti-money laundering programs are largely ineffective. Unfortunately, Nigeria happens to be one of those countries. The sector that money launderers are increasingly targeting is the Nigerian Gemstones industry.
The Money Laundering Problem Facing the Global Gemstones Industry
Traditionally, money laundering has been performed through traditional banking channels. This means that money laundering has traditionally affected only banks and law enforcement agencies. However, things are changing now with many small businesses being touched by money launderers. Businesses that are the most vulnerable to the money launderers are the dealers of gemstones.
Recently, there have been increased instances of gemstones being smuggled and then traded in black markets worldwide. The proceeds from this trade are used to perform money laundering. Money launderers are increasingly targeting the gemstones industry because gemstones are valuable. This makes it possible for the criminals to convert huge amounts of illegally acquired money into white money through the purchase and sale of gemstones.
The process of money laundering starts when money or wealth is acquired through criminal activities or illegal means. The person performing this heinous act then processes the illegally acquired money through several transactions aimed at ‘cleansing’ the money. The purpose of this is to show that the money has been acquired through legal means.
While there is no single method of performing money laundering, one thing remains constant: the money needs to be ‘cleaned’. Criminals draw dealers of gemstones into money laundering schemes by using their illegally acquired money to buy the precious stones. The criminals then resell the stones and introduce the proceeds into the financial system as ‘clean’ or legally acquired money.
As a direct effect, there is artificial increase in the price of gemstones in Nigeria. The upward trend in prices has been going on for many years. It has created instability and artificial distortions in the market rates and prices. As long as rules and practices remain impeding, there would remain financial risks. This is likely to prove detrimental in the long run because legitimate prospectors would move away from Nigeria to other producing nations with effective strategy in combating non – disclosure and the illicit practices of money launderers linked to the trade and mining of gemstones.
The good news is that several countries are taking measures to deal with the menace of money laundering. In the U.S, the Bank Secrecy Act and the Patriot Act requires all dealers of gemstones to have a comprehensive anti-money laundering program.
In addition to the above, dealers need to comply with the requirements set by the Foreign Assets Control (OFAC) which sanctions screening of the dealers. Dealers that do not comply with these requirements risk facing civil and criminal activities.
Another country taking measures to make the precious metal and gemstones dealers less vulnerable to money launderers is Singapore. In September last year, the Ministry of Law in Singapore proposed a new regulatory regime that requires dealers to register with the ministry.
The proposed law instructs dealers to file cash transaction reports and suspicious transaction reports with the ministry. It also requires them to perform customer due diligence for cash transactions that exceed $20,000.While Nigeria has started to take measures to protect the Nigerian gemstones, it is still some way off from matching the above-mentioned countries in dealing with the menace of money laundering.
How Money Launderers Are Using Nigeria’s Gemstones and What Laws Are There to Discourage Them
In several African countries, including Nigeria, money laundering is still a major concern. The criminals perform money laundering through several different methods. This includes taking the illegally acquired cash out of the country, contracting with foreign companies, and concealment of the money’s true money by buying and selling an asset.
In Nigeria, money laundering is widespread and there are several reasons for this. This includes the existence of the black market, the imperfect anti-money laundering programs, corruption among the law enforcers, limited financial information exchanging with law enforcement agencies in other countries, and miscalculated foreign exchange transactions.
The good news is that Nigeria has some laws in place to tackle the menace of money laundering. Additionally, the government is initiating a new policy agenda that aims to protect the country’s solid mineral resources, which include the Nigerian gemstones.
The laws in place in Nigeria to deal with money laundering include Money Laundering Prohibition Act (2004), the Economic and Financial Crimes Commission (EFCC) Act (2004), the Money Laundering Prohibition Act (2011), the Money Laundering Prevention and Prohibition Bill, and the Criminal Matters Bill 2016. The purpose of the last two bills was to ensure that adequate punishment is handed to perpetrators of money laundering.
The EFCC act authorizes law enforcement agencies to investigate alleged acts of money laundering and solve crimes by checking bank accounts. The Money Laundering Prohibition Act (2011) is the current anti-money laundering law in the country.
As for the new policy agenda that aims to protect the country’s solid mineral resources, the idea is to ensure due diligence in the mining, marketing, and sales of gemstones that they are in line with international practices. The hope is that the proper policing of the gemstone industry across the value chain will help to keep the gemstones smugglers and money launderers at bay. However, we will have to wait to see if the efforts of the Nigerian government bear any fruit.