THE ROLES OF ACCOUNTING FIRMS IN MONEY LAUNDERING IN NIGERIA (CASE STUDY OF ACCOUNTING FIRMS IN NIGERIA)

ABSTRACT

This study was intended to evaluate the roles of accounting firms in money laundering in Nigeria. This study was guided by the following objectives; Ascertain how Accounting firms help to reduce, and prevent money laundering in Nigeria, Eliminate the constraint encountered by accounting firms in money laundering in Nigeria, 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

The design is concerned with determination of cause and effect relationship; Secondary data sources were used in other to analyze it using qualitative approach.

The study findings revealed that money laundering and other financial crimes have become more devastating to the Nigerian economy than those of developed countries. Most accounting firms in their pursuit for higher financial rewards, promotions and status, practices such as corruption and money laundering, seem to be crafted and sanctioned by highly paid executives at senior levels in organizational structures. In an environment of poor regulation, enforcement, secrecy and lack of ethical constraints, the occasional investigation by regulators and financial penalties do not seem to deter some company executives, or dull the systemic pressures for higher profits and returns. The relationship between money laundering and the professions in developing countries like Nigeria can be situated in a contradictory role of capital accumulation ambition for the ruling elite and the professional groups and defense of capitalism for the developed capitalist countries, whereas money laundering has become one of the most notorious sources of concern in the world’s financial systems and markets, through which huge volumes of money are illegally moved about, between nations and economies, causing very disturbing distortions in the monetary management and economics.

This study will be of great importance to the government, corporate individual, financial and non-financial institution since it will help to determine the actual income of every companies and banks so as to pay the exact tax.

CHAPTER ONE

INTRODUCTION

Background to the Study

Money laundering poses a serious threat to individuals, businesses, financial systems, markets and governments as this financial crime affect and destruct the economy development of a country(both developed, developing and undeveloped), for example developing countries such as Nigeria loses billions every year to to Money launderers.

Many international and regional government has begin to acknowledge that money laundering has become a continuous serious threat to the global economy development of the financial system as well as the global community.

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.

Most of our financial institutions today fail to recognize that the phenomenon “fraud” can appear to be more dangerous when compared to other forms of problem like armed robbery attack which can only affect the institution within a short period of time, such may have no long term effect on their operations. However, any significant fraud committed in an institution, not only undermines or shakes up it’s financial stability but can severely affect the reputation of the institution thereby resulting to investor’s loss of confidence.

According to the United State Treasury Department “money laundering “ is the process of making illegally gained proceeds (i.e. dirty money ) appears legal (clean) and this involves three steps: placement, layering and integration. This is the more reason why many regulatory and governmental authorities issues estimates each year for the amount of money laundered, either worldwide or within the national economy. In 1996 the international monetary fund estimated that two to five percent of the world wide global economy involved money laundered.

Furthermore, Osisoma (2009) refers to money laundering as a second-order financial crime which derives from an underlying criminal activity often called predicate offences. It generates proceeds which when laundered results in the offences of money laundering. i.e. money laundering is a cross border crime.

Summers (2000), states that the observable fact of money laundering is a characteristic of organized crime with researcher and academic estimating that the money laundering generate about US$100 billion; while the British Intelligence estimated that the total amount being laundered annually is about US$500 billion.

While firms operating in the same country generally have to follow the same AML laws and regulations, accountancy firms in Nigeria all structure their AML efforts slightly different. That is why, most financial institutions globally, and many non-financial institutions, are required to identify and report transactions of a suspicious nature to the financial intelligence unit of the country.

Furthermore, the international monetary fund working paper concludes that money laundering impacts financial behavior and macro-economic performances in different forms such as policy mistakes due to measurement errors in nationals account statistics, volatility in exchange and interest rates due to unanticipated cross border transfer of funds, the threat of monetary instability due to unsound asset structures, effect of tax collection and public expenditure allocation due to misreporting of income, misallocation of resources and contamination effect on legal structures due to the perceived possibility of being associated with financial crime.

John and Gary (2001) explains that the exploit of money laundering and currency maneuvering can harmfully undermine currencies and interest rates, more predominantly in a developing economy like Nigeria.e.g. a developing country such as Nigeria roles on the acquisition of other currencies in order to fulfill the international obligations in satisfying local needs, thus inversely uncurbed money laundering practice into the system. As profit making is not only the stimulating factor for investing the proceeds of economic crimes in any business, it is always convenient for money launderers to move funds around as the situations may demands.

Accounting firms and professionals are deeply implicated in the global financial crisis of any country, due to their inability to carryout financial transaction with due diligence, transparency and inconformity/compliance with stated accounting guidelines and regulation which in turn create rooms for criminal and fraudulent activities such as money laundering, tax evasion, and others.

The magnitutde of this financial crime(money laundering) calls for a reassessment of all areas of business and economic activities including accounting guidelines and standards, although the observable fact of money laundering has taken an increased attention from every country in the world, it is still a controversy in the criminal phraseology.

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.

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.

This proposal will also provide a literature review in order to better understand the theories of money laundering and the roles and responsibilities of accountancy firms in combating the nemesis.

This study will also provide the review of international and national policies and legislation frameworks designed to prevent and detect money laundering in Nigeria.

It will also provide logical solution approach in dealing with financial crime such as money laundering in financial and non-financial sector in Nigeria