EFCC: A Classic Case Of The Law Of Unintended Consequences

Jay L. Adedeji

Before 2004, the fight against corruption has been a myth at best. Hitherto, most Nigerians had watched our political leaders, public officials, operatives in the private sector, and other individuals in society make up rules of how to obey laws (or not to obey them), at will, so long as such actions served their purposes. However, at the beginning of his second term in office, President Olusegun Obasanjo (OBJ), announced to the nation that the “fight against corruption” would be one of the basis of his administration going forward. In order to match his words with action, the president proposed the Economic and Financial Crimes Commission (EFCC), and without much fanfare, the agency that would be etched in the psyche of Nigerians as the crusader against graft and corruption, was born. In this season of political intrigues, it’s almost become impossible to think of the eventual outcome of the 2007 elections without factoring in the actions of EFCC as probably the final arbiter as to who makes the final cut to contest for the presidency, who shelves their political ambitions, or worse still, who will be indicted, prosecuted, and possibly end up in prison for financial and economic crimes. Without doubt, the EFCC is really a classic case of the law of unintended consequences.

The “law of unintended consequences” states that the actions of people – and especially of those in government – always have effects that are unanticipated or “unintended.” The concept of unintended consequences is one of the building blocks of political economy. Adam Smith’s “invisible hand,” is not only the most famous metaphor in social science, it is also an example of a positive unintended consequence. According to Rob Norton, a political economist with Fortune magazine, Smith had maintained that each individual, seeking only his own gain, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. Most often, continued Norton, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692, for example, John Locke, the English philosopher, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Locke had argued that instead of benefiting borrowers, as intended, it would hurt them. People would find ways to circumvent the law, with the costs of circumvention borne by borrowers. To the extent that the law was obeyed, Locke concluded, the chief results would be less available credit and a redistribution of income away from widows, orphans, and all those who have their estates in money.

Trends in How Public Officials Loot the Treasury and how Private Sector Operatives Engage in Financial Crimes

In a somehow unprecedented disclosure by a public official in recent times, the Accountant General of the Federation (AGF), Alhaji Ibrahim Dankwambo, enumerated how public servants loot the treasury, saying that they deliberately manipulate the accounting system through provision of unreliable information for payroll and other estimates to defraud government. The AGF made this disclosure while participating in the 5^th National Seminar on Economic and Financial Crimes in Abuja. In his paper, “Managing Public Funds: Ethical Challenges, Conflicts of Interest and Solutions,” and published in This Day of 8.25.06, he lamented that accounting officers in all ministries, departments and agencies still engage in hasty awards of contracts in December every year. He continued that these public officials ensure that before the books were ruled at the end of the year, all money voted for their ministries and agencies were spent without regard to accountability and transparency. The AGF then implored public officers to imbibe the values of personal discipline, honesty and efficiency in the management of public funds and other resource while assuring them that measures aimed at effectively addressing the deficit of integrity among accounting officers in the public service were being put in place.

In his contribution, Mallam Nuhu Ribadu, Chairman of the EFCC, appealed to Nigerian leaders to stop siphoning the resources of the country abroad, lamenting the situation in the past when leaders accumulated houses in choice districts in London. Ribadu then informed the seminar that the commission had returned over $150 million to foreign countries and individuals who had fallen victims of shady deals by Nigerians. He pleaded with the media and the international community for more support and understanding in order that the fight against corruption would be a success. “Nigeria is no longer a ‘safe haven’ for looters of public funds,” he stated, “and the scam money was returned to demonstrate the unwavering commitment of the country to its anti-graft crusade. This gesture should be reciprocated by the foreign nations,” he concluded.

As part of its crusade against corruption, the EFCC recently uncovered a new wave in financial crimes. In an article published in the Daily Independent of September 9, 2006, and written by Kingsley Omonobi, the new trend in financial crimes has been extended to the Capital Market by fraudsters leading to loss of hundreds of millions of naira. Mallam Nuhu Ribadu, Chairman of the EFCC, in a paper titled “Financial Crimes and National Security: Challenges and Prospects,” said, “Financial crimes have been discovered to affect every facet of the Nigerian economy. However, its most damaging effect recently is easily felt in the capital market transactions, because Nigeria is one of the emerging markets.” “Basically,” he continued, “fraud in the capital market erodes investors’ confidence since it is a system that thrives on integrity. Capital market transactions are conducted largely on trust as the instruments transacted upon are intangible creations, legal concepts, rights, and privileges.” The fraudulent activities that engenders financial crimes in the capital market include: breach of trust, non-perfection of mandate, sales of clients stock without authorization, forgery and cloning of share certificates, market manipulation, insider trading, market rigging, misstatement in prospectus and other documents, falsification of issue and clients accounts, non-remittance of issue proceeds, and money laundering through stock market.

The challenges over the years for the regulators, such as the Security and Exchange Commission (SEC), and the Nigerian Stock Exchange (NSE), Ribadu observed, had been directed primarily at ridding the market of all forms of malpractices, touting, and underhand dealings by dishonest operators. In order to sanitize the system, the SEC has introduced measures that are being enforced in collaboration with the appropriate security agencies. These measures include registration, monitoring, and investigation of abuses. One vital proactive measure embarked upon by the SEC is the partnership of the Enforcement Department with the EFCC to rid the market of swindlers. This singular act, he maintained, has restored confidence in the market as can be seen by the level of subscription to most offers. Remarking that, “the partnership between the SEC and EFCC brings the enormous criminal investigative powers which the commission possess to bear on the market,” Ribadu said, “it is hoped that this would provide an investor friendly business environment and result in an increase in foreign direct investment.”

On corruption, Ribadu said, without doubt, corruption has the negative effects of undermining the values of democracy and morality and retarding socio-economic and political development. Corruption, he continued, poses serious problems for both national and the international legal systems. Corruption in the area of global finance can no longer be considered as somebody else’s problem and the business of no one in particular. Consequently, some of the most common forms of corruption are treasury looting, over-invoicing of contracts, illegal and unauthorized deductions of revenue allocation, mis-appropriation of public funds, non-execution of projects in the budget, bribery, extortion, favoritism, nepotism, and conflict of interest. On bank fraud, Ribadu said, “it is instructive to note that the banking industry is an important catalyst for a vibrant and sustainable economy, and once its integrity is undermined, the entire fabric of the economic system becomes unsustainable … What constitutes fraud or malpractice in banking practice has to do with some elements of deception, misrepresentation, and intent to obtain some unjustifiable advantage. Such act is generally perceived as professionally unethical, legally unjust, and morally wrong.”

The EFCC Act of 2004

Nigeria changed in March 2004 when President Olusegun Obasanjo signed into law the Money Laundering Prohibition Act (MLPA), or more aptly, the EFCC Act of 2004. In the words of Abimbola Adeseyoju, a company executive in Lagos, writing an article on September 8, 2006 in The Guardian entitled “Gatekeepers as Money Launderers,” “the Nigerian judicial system is corrupt and Lanke Odogiyon and his co-travelers are part of the problem, and he cannot offer any sincere and honest evaluation of the activities of the EFCC.” Adeseyoju also observed that the Nigerian public must be told that whatever means and methods employed by those in EFCC, the inspiration is derived from the Financial Action Task Force (FATF), which is the global anti-money laundering and counter-terrorism financial regulator. He then quoted Dave Landrum, a certified anti-money laundering (AML) specialist and consultant to the U.S. government who said: “Corruption is far more dangerous than drug trafficking or other crimes because when it goes unpunished, the public loses confidence in the legal system and those who enforce the law.” “Nigeria today,” concludes Adeseyoju, “is rated to be one of the most corrupt nations on earth. No aspect of our lives is spared, from the Executive, Legislative, to the Judiciary branches of government to education, health, social infrastructure, our present, our future, name it, everything has been corrupted and the NBA and Lanke Odogiyon wants us to proceed with civility … Is Nigeria civilized? Are we living like human beings? Odogiyon should know that through the acquiescence of the majority, in the face of blatant corruption and embezzlement by the minority, this country has been turned into a big jungle.” Lawyers, bankers, accountants, auditors, external accountants, tax advisors, notaries and all other independent legal professionals are referred to as the gatekeepers in AML glossary, and it is mostly through them that the proceeds of criminal and illegal activities are converted into financial and acceptable forms.

Before the creation of the EFCC, and by extension, the appointment of Mallam Nuhu Ribadu as its chairman, the Nigerian polity stank of graft and corruption, which was brazenly perpetrated by public officials, elected and un-elected leaders at all levels of government (federal, state, and local), as well as professionals, and business people. As can be expected, the banking industry was the main target of these fraudsters and the Nigerian treasury was wantonly looted by these powerful and influential men and women with reckless abandon. The EFCC, as an institution created at the outset to fight corruption, gave many Nigerians the impression that it was the presidency’s instrument of hounding political opponents of the PDP (Nigeria’s ruling party) and of the federal government. But, as the law of unintended consequences has shown, through its actions of going after the elite class in a steady manner and of curbing their reckless disregard for the law of the land, the EFCC is now seen as a credible agency that would succeed in reducing, if not eliminating economic and financial crimes.

Section 7, among other provisions in the 2004 Act, vests special and far-reaching powers in the Commission. Section 13 charges the General Assets and Investigation Unit of the Commission “with responsibility for the arrest and apprehension of economic and financial crimes perpetrators.” Section 35 requires that “an arrested suspect must be charged to court within 24 hours where there is a court of competent jurisdiction within a radius of 40 kilometers, or 48 hours in any other case. The powers vested in the EFCC, by implication, does not allow it to maltreat any arrested suspects in any shape or form, as this will be contrary to Section 4 of the Criminal Procedures Code Act of Nigeria.

In an editorial by The Guardian on September 10, 2006, entitled “NBA Annual Conference; Matters Arising,” the paper inquired why Mr. Lanke Odogiyon, the outgoing president of the Nigerian Bar Association (NBA) demanded the removal of Mr. Nuhu Ribadu, Chairman of EFCC, and Mr. Nasir El-Rufai, Minister of the Federal Capital Territory (FCT), both of whom he described as the “new face of government’s disobedience for court orders, injunctions, and judgments with absolute contempt and disregard.” In response, Chief Gani Fawehinmi, SAN, not only chided Odogiyon for his request as being unfair, but also stated that the attacks on EFCC were, “to say the least, most irresponsible, grossly thoughtless, obviously unreasonable and undoubtedly lacking in legal and factual substance.” In his opinion, Fawehinmi said the EFCC had “moved against the rich and powerful, the influential and the well-connected, the highly placed, the 419 crooks, the money-launderers … in their (EFCC) determined efforts to rid Nigeria of corrupt practices in the governance of their country…”

The EFCC Confronts Corruption Head on

The EFCC, as at September 2006, revealed that its fight against corruption has yielded results, as no fewer than 1,000 corrupt Nigerians have been prosecuted in two years. In a This Day article of 9.10.06, Mr. Nuhu Ribadu made the announcement when he delivered a paper entitled: “Corruption: Myth or Reality,” at the convocation of the Federal Polytechnic, Bauchi. Ribadu further said that the commission had also ensured the conviction of 82 persons for corrupt practices. On the recovery of ill-gotten assets by Nigerians, Ribadu said more than five billion dollars and more than N500 billion had been recovered from fraudulent persons and others. Specifically, the chairman said: ‘We have recovered more than N200 million from the failed banks, N30 billion as unpaid custom duties, and $242 million from the celebrated Brazilian bank scam.”

Overall, said Ribadu, “EFCC has brought vibe and focus to the whole fight in the last three years; also, the federal government is committed to building a sanitized and corrupt-free society and that efforts had been intensified to investigate the activities of politicians. Accordingly, we have intensified our investigation of politicians, business moguls and those aspiring to sensitive public offices,” he concluded. To ensure transparency in its activities, the EFCC has constituted a standing group of 27 members drawn from the private sector, civil society and public sector to implement transparency issues on revenue from oil, gas, and solid materials. To say that the EFCC is moving at break-neck speed is an understatement. There is an urgency to ‘sanitize’ the Nigerian polity, and by extension the society, as nothing seems to be working. Corrupt practices has not only permeated the fabric of society, governance is being undermined at all levels through the nefarious activities of corrupt leaders. And, without agencies such as EFCC, NAFDAC, FCDA, under their unrelenting leaders, Nigeria as a corporate entity might as well be put under receivership.

EFCC Activities Goes to the United Nations

In an extensive interview with The Guardian, after his recent trip to New York to give a speech at the 59^th yearly Non-Governmental Organizations (NGOs) conference of the United Nations, Mr. Nuhu Ribadu, chairman of EFCC, declared that his agency was committed to stopping corrupt politicians from participating in the forthcoming general elections. “For what we are doing to succeed, we won’t allow those who stole money to come and compromise the process, because by fighting corruption, you are likely going to eliminate such people,” he observed. On democratic development, “Chances are that we will get proper democracy when money-bags will not be able to hijack the process,” said Ribadu, adding that the international community should regard those who steal public funds and deposit them in western banks as terrorists. Furthermore, Ribadu said: “We want a situation where a corrupt leader in Africa is treated like Osama Bin Laden. Let there be no safe haven for corrupt leaders, since 80 percent of corruption proceeds from Africa goes to the West, and that it is only if the world supports Nigeria’s anti-corruption crusade that we can change the situation at home.”

On the need for good governance in Africa, Ribadu said that the U.N. should adopt a convention against corruption and for the international community to not only make corruption history, but also make poverty a thing of the past, as stated in the Millennium Goals. He then queried: “Why not make corruption history in Africa? Adding: “That way, poverty will become history. No matter the level of international assistance, no difference would be made with corruption in place. We have investigated charities going into Nigeria, even funds from the UN, so much money is being sent, but the moment it gets there, people will go and bury the money.”

Obasanjo Administration Takes Credit for the Fight Against Corruption and Graft

In an article entitled “Nigeria Records Giant Stride Against Graft,” and published in the Daily Sun of September 9, 2006, Tony Amadi, the writer, said the OBJ Administration was loudly trumpeting the de-listing of Nigeria in June 2006 from the non-cooperative countries and territories (NCCT) by the Financial Action Task Force (FATF), as marking a watershed in the fight against money laundering in Nigeria. “The event,” said Amadi, “could be also be seen as another count in the feather-studded cap of Mr. President as he and his financial crime fighters launched into the biggest offensive against the deadly cancer of money laundering in the final lap of his administration.” In terms of making progress in the war against corruption and in its recognition of the work done so far to fight money laundering, Amadi reported that this decision recognizes the progress that Nigeria has made in implementing anti-money laundering reforms, including establishment of a financial intelligence unit and progress made on investigations, prosecutions, and convictions. In addition, Nigeria has taken steps at the highest levels of government to fight corruption. The FATF will continue to monitor the situation in Nigeria over the next year. To further buttress the unintended consequences phenomenon, the Ministry of Commerce, through its Special Control Unit Against Money Laundering in the Domestic Trade Department, have embarked on a program to track down suspicious cash transactions and enforce compliance of laws already passed by the National Assembly (NASS).

In order to sensitize stakeholders to the necessity of sustaining the fight against corruption and money laundering, the FATF insisted that Nigeria should separate the Nigerian Financial Intelligence Unit from the EFCC as currently obtained. Accordingly, legislation is on the way in the NASS to accomplish this objective. The Special Control Unit has begun the crucial sensitization of stakeholders in the war that include hotels, casinos, supermarkets, jewelers, and car dealers as well as chartered accountants, auditors, tax consultants, and legal practitioners. They are to become a constant focus of the unit, since they constitute the designated Non-Financial Institutions (DNFI’s) who are a crucial element that will provide for the successful prosecution of any fight against money laundering. Consequently, the Ministry of Commerce will furnish the DNFI’s with appropriate forms to record currency transactions and produce suspicious transaction reports for onward transmission to the Nigerian Financial Intelligence Unit for further analysis and decision-making. “The result of these actions by all the agencies is that very soon people will start to realize how far government has triumphed in the fight against money laundering,” observes Amadi, “because hitherto, the media has focused generally on what it perceives as politically motivated cases of money laundering, and overlooking the deep penetration being dug in by the Ministry of Commerce and its special units against money laundering.” “What is happening is that there is a massive pre-occupation with the enforcement of the law against money laundering which the general public and particularly the DNFI’s are ignorant about, but a lot is being achieved in the process as a combination of financial crimes enforcement agencies are pretty busy getting their work done,” Amadi concludes.

Conclusion

The jury is still out on whether President Obasanjo and his administration has a moral and ethical claim to the success of the fight against corruption and graft, as presently carried out by the EFCC and other governmental agencies, or is it merely a classic case of unintended consequences, as the premise of this article do suggest. Well, whatever conclusion is reached by individual readers, and by extension, Nigerians, the future would be the judge as to whether the crusade against corruption and graft is on the right course, and consequently, an important catalyst for engendering a vibrant and sustainable economy. Also, there is doubt as to how Nigerians would realize the values of democracy and an increase in socio-economic and political development, even in the face of corruption and money laundering among those in the top echelons of government, former leaders, business moguls, and those operatives in the private sector. For the first time in the history of the country, the citizens are refocusing their belief in the Nigerian state. And, this is not by accident because the EFCC has managed, through its relentless crusade against graft and corruption, to focus the people’s attention on the need to police the actions of citizens no matter their position. I guess these gatekeepers at EFCC are giving credence to the dictum: no one is above the law, and no one should be below the law in an egalitarian society.

The premise of this article has been to analyze the unintended consequences that created the EFCC by the Obasanjo Administration, and to delineate whether it was truly meant to clean up the mess due to the un-abating corruption and graft in the society. As the agency forges ahead in its quest to carry out the mandate of ‘sanitizing’ the Nigerian polity, it is the hope of this writer that sanity will not only return to the country, but there will also be a warning sign to law breakers (especially in economic and financial crimes) that they should think twice before engaging in their nefarious activities. Hitherto, Nigeria has been labeled as “one of the most corrupt countries,” “a country where doing business is very difficult,” and worse still, “a country where security of life is not only lacking but absent.” These accolades, albeit negative, makes nonsense of whatever reforms have been undertaken by government so far to create an enabling environment for a developing country with a fledgling democracy like Nigeria. There is no gainsaying the fact that Nigeria is a country of many extremes, numerous ethnic nationalities, and disparate people. What is saddening, however, is that even though the country still boasts of being the “giant of Africa,” the one that produces the most crude oil in Africa, and home to the most religious people on the planet, yet its quality of life is a far cry from its reserves of mineral and human resources.

Chamberlain Peterside, a New York-based financial advisor and political commentator, in his article in the nigeriaworld.com of 8.20.06, entitled “If Statistics Don’t Lie, Nigeria Might be the Most Under-Achieving Country on Earth,” said “Nigeria is easily the wealthiest country among long-suffering African nations, and that might sound quite exciting, except that on the flipside, its average quality of life pales in comparison to even other developing countries … It is absolutely ludicrous for Nigeria to constantly feel proud amongst a bunch of impoverished countries, when in reality it is performing far below expectation in the comity of nations.” As regards everyday problems in Nigeria, said Peterside, the superlative accolades mean nothing when contrasted with the country’s socio-economic and demographic indicators, such as life-expectancy of citizens, gross domestic product (GDP) and per capita income, human development index (HDI), infant mortality, maternal mortality ratio (or, death per 1,000 births), access to safe drinking water, daily caloric intake (or, number of gainfully employed people who can afford a balanced diet), consumption of electric energy per inhabitant, the percentage of tele-density (or, phone lines per citizen), and level of internet access in the country. As if the above-mentioned phenomena are not dire enough, the World Bank recently released a scathing survey that classified Nigeria as one of the most unfriendly business terrains.

And, to add to the misery of the OBJ Admin negative scorecard, a recent joint report by the Heritage Foundation and Wall Street Journal ranked Nigeria 146 out of 157 in the level of economic freedom (or, more aptly, an index of how freely economic endeavors thrive in a country). This writer feels a pain of regret for the ineptitude and carefree attitude of the OBJ Admin in the last 7 years for these qualitative yardsticks to engender such a dismal and backward opinion of Nigeria in the global community. “Nigeria might have $40 billion in external reserves, less than $5 billion in foreign debt, be home to the highest number of millionaires on the continent (legitimately or not), have 10 banks ranked among the top 1,000 globally, have the most number of doctorate degree holders, most number of universities, most modern capital city (Abuja), still all that doesn’t amount to a better life for the masses,” concludes Peterside. So, where do we go from here?

In conclusion, do we continue to encourage the EFCC in its activities of investigating and prosecuting corruption, graft, and money laundering, and, as such give them the courage to ‘do the right thing’ irrespective of who the personalities are. Conversely, how do we build a trust between the citizens and those in power who direct the affairs of the nation? According to Steve Nwabuzor, a political commentator from Michigan, “the trust must be hinged on transparency in all governmental dealings … Nigeria is undoubtedly undergoing a process of purification and it will take some time before trust can be established between government and the governed, as previous experience has shown that office holders zealously accumulate wealth at the expense of infrastructural development and security of life and property.”

The Obasanjo Administration is bugged down in its present political morass due to choices made by the PDP and its handlers who are individuals of questionable characters from the president, vice-president, and down to their special assistants. Many in Nigeria have concluded that this administration is not only inept and devoid of honor and integrity, but also that, in view of the recent exposes, allegations and rebuttals, what OBJ & Co. have done in the past 7 years are to amass wealth by stealing public funds, pursue personal goals and vendetta, forment trouble in the populace, and if it is possible, perpetuate its stay in government and then hold on to power forever.

If the EFCC is really an intended consequence of this administration, despite its political machinations, intrigues and antecedents which do not amount to much, then the serious work of rooting out vices in society such as poverty, unemployment, lack of food, poor education, lack of human and fiscal resources, lack of infrastructure, spate of robberies and assassinations, corruption and money laundering, should continue with full speed ahead. Also, the fight to create an enabling environment in Nigeria is all but urgent, and thus the strengthening of the fledgling democratic process cannot be compromised.

Lastly, the light being shed on the vices in society through the efforts of EFCC should illuminate the need for grassroots involvement that would lead to true participatory democracy. It should be remembered that since “all politics is local,” then all citizens’ efforts should be geared toward giving all the necessary moral support to enable change agents like Mallam Nuhu Ribadu and other like-minded activists to rescue Nigeria from the incessant leadership quagmire to which the country has been consigned for a long time.

Jay L. Adedeji, is a public policy consultant, and writes from New York, NY, USA.

Email: joladed@hotmail.com