Guardian Wanted: Ethical bond for Nigeria’s financial system WEDNESDAY, 21 AUGUST 2013 00:00 BY CHIJIOKE NELSON BUSINESS SERVICES - MONEY WATCH EVERY financial system has its own regulations governing activities, irrespective of other external and internal influences bordering on bilateral relations, foreign portfolio inflows, international laws, culture, literacy and economic development levels, among others. All of these combined form the rules and regulations, which invariably determine what morals and ethics are. Suffice it to say that even these dynamics are usually articulated, at least, to a certain degree, in the regulations. But there are questions overhang: Are morals and ethics just personal awareness and codes? Is it noble to imbibe them? Are there benefits? Are there real reasons to involve morals and ethics in business? Indeed, a mere knowledge does not in totality guarantee adherence, except through personal will. This is where the need to imbibe the “spirit” of the codes and not only the words of the codes plays off. Again, this would require efforts of individuals and groups. The current financial system’s re-engineering in the country “speaks” more of violations of these morals and ethics and the manifest dangers, which were accentuated in pretense that all was well, when in reality, nothing was a semblance of well. At the onset of the reforms, it was discovered that corporate governance codes, which were written in “black and white” were grossly abused, if not abandoned in its entirety. The result was a near collapse of the financial system and the consequences are yet to be settled even now. As at now, banks are still making provisions for the bad portfolios that resulted from the neglect of the morals and ethics years after. Before now, the abuse of these codes, even in the financial system aided money laundering activities, which eventually brought some uncomplimentary designation to the country. No doubt, the financial system benefitted from the rot at the beginning, until what seemed like nemesis turned up. At least, at a point, Nigerian banks were subjected to several procedures and protocols before they can transfer money outside the country or do transactions with their foreign counterparts. Beside reputation, there is certainly a lost business in that regime and that was not a healthy development for the economy. Of course, money laundering is facilitated majorly by the financial system. Perhaps, it is the reason for the insistence of the Financial Action Task Force (FATF) to audit the banking activities and what could possibly be a test of their adherence to morals and ethics in relation to money laundering rules. Should the individuals and groups be prodded and monitored to uphold the principles of morals and ethical behaviours? For our experience as a nation so far, it is worthwhile that these codes be assimilated as though a personal trait. Evidently, the prevailing attitude is that of cooperation when the taskmaster is around and lip service when kept at bay. But the repercussions have always been detrimental and lessons forgotten after the initial pains. Why would the banks need reminder to do what they are expected to do or ethical. Recently, indications emerged that the impending visit of Financial Action Task Force (FATF), which listed Nigeria in its grey book, elicited directives from the Central Bank of Nigeria (CBN) to banks over the state of their records and some oversight functions in their operations. The governor of the apex bank, Mallam Sanusi Lamido Sanusi, had at a conference recently, hinted that the bank would soon carryout an audit of senior officials of banks at chief levels, to ascertain their qualifications for those positions, noting that there are rules governing those positions. There were palpable fears that some in those positions may become casualties due to qualification challenges. But the same issue may have topped the agenda of FATF audit. So, why would banks allow this to happen, even for a long time, knowing the rules governing the appointment? On the other hand, why would the individual fail to develop self or the bank fail to develop the individual, knowing what is required in terms of qualification? On July 10, CBN notified banks and other financial institutions in a circular about the proposed visit of the International Cooperation Review Group (ICRG), an arm of FATF, by September this year. The body in 2009 placed the country among the grey list of nations that had not made significant progress in their Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime. But, in another circular dated July 18, 2013, to banks, discount houses and development banks, the apex bank noted that some of these financial institutions do not have substantive Chief Compliance Officer (CCO), while those in the position were in acting capacity for a long period of time, which negates the importance of the office. To all intents and purpose, the scenario can easily be adjudged as a calculated move by the defaulting banks to achieve whatever they want to achieve. This is again where the issue of adherence to ethics is called to question. The Acting Director of Financial Policy and Regulation Department, I.T. Nwaoha, had explained that the directive to the affected institutions to appoint the CCOs, not below the grade of a General Manager, was to, among other things, enforce the provisions of the relevant Acts and circulars on money laundering at various levels of the banks. Here again, if the course (anti-money laundering) is being fought together with the financial institutions, is not morally right for them to comply without being monitored and prodded? Note that Section 9(1) of the Money Laundering Prohibition Act 2011, as amended, required banks to designate, at management level, CCOs in their head offices and branches, who have relevant competence, authority and independence to implement the banks’ AML/CFT compliance programme. By this Act, which governs the operations of the industry as respects money laundering, moral and ethical issues can be extracted and defaulting financial institutions are culpable. They cannot claim ignorance of this Act and have no excuse not to comply because there many qualified unemployed candidates to fill that gap. While the fight to pull out the country’s name on the list is ongoing as CBN affirmed, based on the discussions at Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) plenary meetings in May and FATF Public Statement in June, it was agreed that Nigeria had largely addressed its action plan and improved its overall supervisory AML/CFT framework. But as a confirmation, FATF’s ICRG insisted and scheduled to conduct an on-site auditing in Nigeria by September to ascertain the claims on the processes of implementing the required reforms and actions that are underway to address the identified challenges. The group’s audit will also evaluate both public and private sector institutions’ implementation framework, while a favourable report from the auditing will enhance Nigeria chances of exiting the uncomplimentary grey list. Against this backdrop, the apex bank has the institutions in its purview to forward the particulars of the current CCOs and letters of approval of same, obtained from Banking Supervision Department of CBN, to the Financial Policy and Regulation Department later than August 1. The financial institutions are also urged to display AML/CFT notice in their banking halls; make available actual implementation and documentation of customer identification, verification requirements, customer due diligence, among others. They should also make available evidence of various trainings conducted for staff on AML/CFT issues, evidences of record keeping for a minimum of five years after severance of relationship with customers, appointment of CCOs, stating clearly their level, functions and support staff and availability of AML/CFT manual. The puzzle is still ongoing. Are banks going to comply because of the impending “August visit,” and return to status quo when the exercise is over. But it is also possible that we would be exonerated this time around by putting up all manners arrangements and cover ahead of the visit and be reversed within a short while if we fail to solidify the structure now. We are talking about the understanding of the reason for the codes or ethics, not merely the codes. Are there financial systems where these codes are really working? Though it may not be perfect anywhere, but the much that are maintained have sustained those systems from being listed in the grey book. Certainly, not all the countries in the world are in that grey list and the success cannot be separated from their ability to carve a niche for themselves in adherence to ethical standards. Individual morals would also have been above the average and it is possible in Nigeria.
Posted on: Wed, 21 Aug 2013 07:27:35 +0000
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