CIBN: Money Laundering Implications

Money laundering has become a severe concern for the financial system, according to Ken Opara, the President/Chairman of Council at the Chartered Institute of Bankers of Nigeria (CIBN).

According to Opara, trade-based money laundering, specifically, posed a substantial risk to the global financial system’s integrity.

This issue, he noted, had extensive consequences for both regulators and operators involved in the financial industry.

He made these remarks during a breakfast session organized by the CIBN, focusing on the topic of countering trade-based money laundering and its implications for regulators and operators.

He said, “According to a report published by the Financial Action Task Force in 2022, trade-based money laundering accounts for a substantial portion of illicit financial flows worldwide. It is estimated that illicit proceeds worth $1.4tn to $2.3tn are laundered through trade-based schemes every year, significantly impacting economies and undermining legitimate trade activities.

“This report also highlights that trade-based money laundering poses unique challenges for regulators and operators. The complexity of global supply chains, the sheer volume of trade transactions, and the use of innovative techniques by money launderers necessitate a comprehensive and coordinated response from all stakeholders.

“It is essential to strengthen the capacity of regulators and operators to detect and prevent these illicit activities, safeguarding the financial system from exploitation.”

Highlighting the evolving dynamics of the global financial scene, Opara emphasized the critical need for heightened vigilance and proactive measures in the fight against money laundering.

At the event, Norman Wokoma, the keynote speaker, shed light on the nature of trade-based money laundering.

He explained that it entailed the exploitation of the international trade system to transfer value while concealing the illicit source of wealth.

Wokoma further elaborated that trade-based money laundering operated by manipulating the complexities of trade transactions, such as over- or under-invoicing, multiple invoicing, and misrepresentation of goods or services.

These tactics, he pointed out, served to distort the true value and nature of the underlying financial activities, making it difficult to detect illicit funds or track their origins effectively.

The consequences of trade-based money laundering, according to Wokoma, are far-reaching, affecting not only the financial system, but also society at large.

He argued that the profits generated from these illicit activities could be used to finance terrorism, support organized crime, or undermine economic stability, adding “Therefore, it is crucial for regulators and operators to collaborate closely and employ robust mechanisms to detect, prevent, and deter trade-based money laundering.”

CIBN breakfast session underscored the severe threat posed by trade-based money laundering to the integrity of the global financial system.

The event emphasized the importance of adopting proactive measures, raising awareness, and fostering collaboration among regulators and operators to effectively counter this form of illicit financial activity.

The Central Bank of Nigeria plays a significant role in the management of the country’s international trade and ensuring compliance, especially for banks and other financial institutions.

Umara Gubio, the Chief Risk and Compliance Officer at the Nigerian Export-Import Bank, drew attention to the ever-changing nature of trade-based money laundering.

Gubio claimed that criminals continuously adapt to new technologies, exploit vulnerabilities in trade systems, and develop innovative methods to launder illicit funds, adding “As a result, the scope of trade-based money laundering has expanded over time.”

Gubio emphasized the importance of acknowledging these evolving tactics and staying one step ahead of the criminals.

“Regulatory bodies, financial institutions, and other stakeholders involved in the trade industry must remain vigilant and employ robust measures to detect and prevent these sophisticated money laundering schemes”, he said

This on-going evolution of trade-based money laundering, he noted, necessitated a proactive and adaptive approach to combating financial crimes effectively.