EFFECT OF MONEY LAUNDERING ON DEVELOPING ECONOMY (CASE STUDY OF NIGERIA)
1.1 Background to the Study
Money Laundering and other financial crimes in whatever form and nature have potentially devastating impacts on economy, security and social wellbeing of the people. It is perhaps pertinent to stress that as modern financial system encourages and facilitates local and international commerce, antithetically, financial criminals are also enabled by modern financial global liberalization to transfer millions of dollars around the world instantly through available information communication infrastructures such as internet, electronic money transfer (wire transfer) and the rest.
In anticipation of the concept of money laundering phrase, which has almost been talked about and documented over the past seven (decades), it is extra-ordinary that this subject has been given in research studies, regardless of the fact that organized crime has been given fewer research studies and it has been part of the society for a longtime.
Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions (US dollars) and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter, prevent and apprehend money launderers. Financial institutions have likewise undertaken efforts to prevent and detect transactions involving dirty money, both as a result of government requirements and to avoid the reputational risk involved. Issues relating to money laundering have existed as long as there have been large scale criminal enterprises. Modern anti-money laundering laws have developed along with the so-called modern “War on Drugs”.
In more recent times anti-money laundering legislation is seen as adjunct to the financial crime of terrorist financing in that both crimes usually involve the transmission of funds through the financial system although money laundering relates to where the money has come from, The motivation for financial crime such as money laundering are usually built around some risk factor which include the incentive (or pressure), opportunity and rationalization surrounding the financial criminals, no doubts, money laundering has put accounting firms image in a negative state.
Furthermore, the term, “Money laundering” is the concealment of the source, nature, existence, location and disposition of money and/or property obtained illegally or from criminal activities such as embezzlement, drug trafficking, prostitution, 419, corruption and large scale crime.
The origin of this money laundering could not be ascertained by anyone, but there are several opinions that it started several thousand years ago with Chinese merchants, and also from mafia ownership of laundmarts, in the United states where they needed to prove their genuine source for their monies as they earned their cash from extorting, gambling, and bottle liquor. Due to the growing of organized crimes such as financial terrorism, tax evasion and others, money laundering is believed to be the third serious crimes by some academic researchers, with an estimated 60% to 70% of it occurrences in the world.
Be that as it may, this paper shall seeks to examines the impact of money laundering and other financial crimes on the economy and socio-political development of Nigeria as a developing nation.
1.2 Statement of the Problem
Despite the evidence, the consequent poverty all over Nigeria and the continued reluctance of these MNCs to cooperate with the regulators in Nigeria, little have been done by the authorities in the developed home countries of the MNCs and other foreign capitalist, to curb the money laundering activities and other trans-organised financial crimes atrocities being constantly collaborated or sometimes perpetrated by these MNCs and some other foreign capitalist elite operating in Nigeria. Instead, the Financial Action Task Force, FATF that had threatened Nigeria with economic sanctions, if Nigeria did not put in place a draconian money laundering legislation by December 2002, all its member countries except France, have failed to ratify the United Nations Convention Against Corruption as at June, 2005 (see This Day, June 9, 2005). However, it is interesting to note that the implications of these foreign entities in criminalizing the Nigerian business culture and subverting the nation’s due process are diametrically opposed to the anti-money laundering conventions globally. These include the United Nations (UN), European Union (EU), United States (US) conventions and the International Financial Reporting Standards (IFRS), which are all meant to criminalize cross-border corruption, trans-organized financial crimes and ensure accountability and transparency in the global financial system. These conventions and standards seem to have failed to achieve these purposes in Nigeria.
1.3 Objective of the Study
The Objectives of this study are as follows;
- Determine the economy effect of money laundering in Nigeria
- Examine the effectiveness of the Anti-Money laundering laws and regulations used for prevention of money laundering in Nigeria.
- Determine the adequacy of the various legislative and institutional frameworks for tackling money laundering.
- Ascertain the negative implication of money laundering and other trans-national organized crime to Nigeria economy.
- Identify the causes of money laundering in Nigeria.
- Suggest possible recommendation for winning the fight against money laundering and other financial crimes in Nigeria.
1.4 Research Question
The following research question were raised to guide the study
- What are the economy effects of money laundering in Nigeria?
- How effective is the Anti-Money laundering laws and regulations used for prevention of money laundering in Nigeria?
- What is the adequacy of the various legislative and institutional frameworks used for tackling money laundering?
- Negative implication of money laundering and other trans-national organized crime to Nigeria economy.
- What are the major causes of money laundering in Nigeria?
- Possible recommendation for winning the fight against money laundering and other financial crimes in Nigeria.
1.5 Significance of the Study
Conceptually according to GIABA Report (2010), corruption (along with corrupt institutions and personnel) is a collaborator in money laundering and, in practice, it represents a major opposition to anti-money laundering system and measures as the latter can hardly thrive in the absence of the former. The link between corruption and money laundering is, at least, two-fold: the proceeds of corruption, particularly when substantial, are susceptible to be laundered; and the combined effects of corruption and poor governance institutions can and do blunt the effective operation of anti-money laundering systems.
The results from this study are useful to various sector of the economy, particularly the financial sector. It will broader the literatures on economic implications of money laundering in Nigeria and assist policy makes in formulating new anti-money laundering policy to curb money laundering in Nigeria.
This study will be of great importance to the government, business organizations, foreign elites, multinational companies, corporate individual, financial and non-financial institution including small and medium scale enterprises since it will help to determine, and provide insight on the negative and devastating impact money laundering on the economy if not tackled. It will also help to create responsibilities for all those in the regulated sector to disclose relevant information relating to money laundering to the relevant authorities as the need arises.
It will also assist the investors and depositors to know the financial position of the institution they are investing in if it is going to be a profitable or not, and for all those in the regulated sector i.e. statutory auditors, a tax advisor, A forensic accountant, external auditor/accountant (someone who provide accounting service to others) by providing them with fundamental legal rules as related to money laundering.
Finally it will be of great significance to schools and students, it will serve as a reference point for future researchers who will want to research more on the topic.
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