Impact And Consequences Of Financial

Published Date: 02 Nov 2017

There is no broad consensus on the meaning of financial crime but it can be understood that it is any type of illegal activity that result in an economic loss. Financial crimes, sometimes defined to as "white collar" crimes, are nonviolent criminal acts committed to gain illegal monetary. According to the United Nation Office on Drug and Crime (UNODC) financial crime can be viewed as "any non-violent crime that results in a financial loss which includes computer crime and dishonest practices". Financial crime is a critical issue and it has likely devastating economic, security and social impact. It encourages drug dealers, terrorists, illegal arm dealer, corrupt public officials and others to operate and expand their criminal enterprises. According to Petter Gottschalk, (2010)," financial crime can be categorized in corruption, fraud, theft and manipulation. There are different types of financial crime. These types are as follows:

Money Laundering

According to Jeffrey Simser, (2006), money laundering can be defined as "a technique designed to make illicit acquisitive gains appear legitimate, usually by disguising the property’s illegal provenance." In other words, perpetrators are trying to cover-up the monetary sources obtained from illegal transactions so that it looks like it was acquired from legal sources. Commonly, according to (Schneider, 2004; Cassella, 2004), money laundering has been described as a cycle taking place in three different stages. Firstly, Placement, the stage at which illegal funds are introduced in the financial system mainly deposited in a bank account. Layering is where the property is moved around from bank to bank and its ownership and source is covered-up in order to keep it away from its illicit source and the final stage at which the property is put back into the legitimate economy.

Embezzlement

According to Williams (2006), embezzlement can be defined as the dishonest appropriation to personal use or benefit of property or money authorized by someone else. The actor first comes into possession of the property with the permission of the owner. Embezzlement can often happens between trusted friends or even relatives, but also takes place in simple businesses as well. Conscientious examination of financial records by the owner can help disclose forms of embezzlement, such as unaccounted funds, duplicated checks, or accounting errors.

Credit card fraud

Pickett and Pickett (2002) suggested that credit card fraud is the use of stolen credit card details to get access to the goods or services in the name of the cardholder. Sometimes a brand new credit card is falsified using known details. Cards can be stolen or details obtained from files that are not properly safe.

Securities and investment fraud

Securities fraud is a type of financial crime that is involved in illegal manipulation of values of financial market. It includes insider trading, preferential rates, and misrepresentation of value. The types of misrepresentation implicated in this crime include providing false information and giving bad advice. Insider trading occurs when a person reveals information about an investment then makes use of this the information to buy or sell shares with a company. Preferential rates and misrepresentation both implicate increasing or decreasing the value of stocks in order to manipulate the market.

Investment Property is the Property sold as a certified investment with high returns. The victim is influenced to buy investment property with a property management firm that will deal all the loan documents. The victim is reassured and is told that he or she has only to be the buyer and borrower. Then the victim finds that the property was increased in value, no loan payments have ever been done.

Identity theft and Phishing

Laundon and Laudon (2010) defines identity theft as a crime in which a pretender gets personal information, such as name, address, date of birth, driver’s license numbers, or credit card, account information, account login information , to pretend to be someone else.

According to Higgins et al., (2008), identity theft is the illegal use of another’s personal identifying information. It implicates financial or other personal information stolen with the intention of to be someone else.

Phishing is defined as the technology or social engineering used to attract victims to reveal their personal information such as account information, login IDs, passwords, and other confirmable information that can then be exploited for illicit use, including identity theft. Phishing usually often committed through mass emails and spoofed websites.

Counterfeiting

Counterfeiting is a pernicious crime as it depreciates the monetary system. Counterfeiting implicates the use of fake money, such as manufacturing falsely bills and coins with a more valuable version. Therefore, counterfeiting can break up the flow of inflation and deflation by adding more falsely money into a controlled system and also threaten global security, as these activities are sometimes committed by terrorists and other dangerous criminals to finance their activities or disguise their profits (Interpol, 2009).

Mail Fraud

Mail fraud usually known as Internet sales or online auction fraud is where the criminal agrees to buy a product available for sale on the Internet and tells the seller that he or she will be receiving an official check but when the check arrives, the amount is more than the agreed-upon selling price. The seller is then directed to deposit the check and refund the overpayment. Therefore the seller is at a loss in terms of merchandising and the refunding.

Bank Fraud

This is criminal acts committed in connection with bankruptcy or liquidation proceedings. A person filing for bankruptcy or a business that has gone into liquidation can hide assets after proceedings have been initiated, thereby preventing creditors from collecting their claims. However, most of the criminal acts are typically committed before bankruptcy/liquidation proceedings are initiated, e.g. the debtor has failed to keep accounts or has unlawfully

withdrawn money from the business (Økokrim, 2008).

Bribery and corruption

Corruption

This is the use of entrusted powers for private gain. This is the most common crime in the public service and takes many forms. For instance, a public official asking for or accepting bribe before carrying out any activity or asking for gratification after rendering a service; a public official diverting the ownership of government property. Other forms of corrupt activities include embezzlement, nepotism, bribery/kickbacks, extortion, illicit enrichment, questionable links between government agencies and private business etc. The perpetration of corruption in the public service is facilitated through the use of money, valuable goods or gifts, favours, promises etc.

The incidence of corruption is primarily a function of greed facilitated on the strength of the incentives, range and scale of opportunities, availability of means and the risks of punishment.

Corruption is propelled by bad governance where controls are weak and decision-making is opaque, arbitrary and lacking in accountability.

Bribery

This is the offering, giving, receiving, or soliciting of something of value for the purpose of influencing the action of an official in the discharge of his or her public or legal duties. A bribe can consist of immediate cash or of personal favors, a promise of later payment, or anything else the recipient views as valuable

THEORIES ON FINANCIAL CRIME: WHAT ARE THE FACTORS INFLUENCING FINANCIAL CRIME?

A theory is a forecasting or justification of a fact. According to Petter Gottschalk, (2010), the body of research of financial crime is divided into three branches:

Behavioral theories

According to Hansen (2009), distinction can be made between economic, business, and elite crimes. Participants employed in reputed financial institutions commit most of such crimes. Employees for their own benefits instead of for the business benefits, commit occupational or greatest crime. Hansen (2009) suggested that people commit crime because of low self-control. Duffield and Grabsky (2001) describe some of the key motivational and psychological factors that lead to financial crime. They stated that fraud can be explained by three factors:

1) An increased in motivated criminals,

2) The availability of suitable funds, and

3) The absence of security.

As Nettler noticed the intensity of desire and the perception of opportunity are personality variables. The balance between desire and opportunity moves. Temptation to steal fluctuates with individual temperament and situation (Nettler 1974, p.75).Motivation is, therefore, a combination of an individual’s personality and the opportunity which they get. Fraud is mainly committed by motivated and determined organized participants for the only reason; financial benefits

Greed

Fraud is executed by motivated groups of organized actors determined only for financial profit. According to the Drugs and Crime Prevention Committee of Victoria, an increase in recent years of organized criminals in illicit and suspicious activity implicate mostly external attacks on banks, superannuation funds and business. Duffield & Grabosky (2001) noted that greed lies at the heart of much dishonest activity in the society.

Emerging Trends in ones lifestyle

People are convinced to have recourse to financial crime due to the changes in financial condition that exceed their control. Unfortunately some are capitulated to commit illicit act to maintain a good standard of living.

Financial Strain

Financial strain caused by gambling problem is an area of concern (Duffield & Grabosky 2001). The cost of suspicious drugs contributes also to financial stress on individuals who take part in them therefore they are tempted to commit crime in order to get money. According to the Drug and Crime Prevention of Victoria, relationship or marital breakdowns causes, both financial and emotional stress which can represent a sudden decrease in the standard of living of an indvidual together with a feeling of powerlessness and resentment, ones can have recourse to financial crime in order to earn a good living.

Power

Duffield and Grabosky (2001) noted the desire some people have for power over others and over situations. In other words, the feeling of power over individual appears to be a determined force to perform illicit act by taking advantage on weak people.

Misunderstandings

Poor communication can arise some form of dishonesty. According to Neville (2000), complaints have been made each year in Victoria against solicitors for misappropriation of assets or income that concern poor communication between practitioners and their clients. Practitioners may be found guilty for not following the standard of conduct.

Organizational theories

A financial crime often takes place in form of an organized crime. According to Petter Gottschalk (2010), criminal organization acts as a monopolistic firm, and the theory of monopoly is used to estimate organized crimes. In organized crime, Shvarts (2001) suggests that rational choice theory can explain the rise of the Russian Mafia that is because of low income and financial difficulties allied with an exploiting police force; they had any choice to have recourse to crime to afford their standard of living. Rational choice theory states that people commit crimes after acknowledging the punishment for the crimes, as well as the rewards of completing these acts successfully. Examples of this theory include the bank teller who is experiencing personal financial difficulty and decides to loot funds from the bank in order to increase his standard of living (Lyman and Potter, 2007).

Gross (1978) argued in his classical article on the theory of organizational crime that studies of crime, and delinquency have a strong theoretical base. He gave two important theoretical relationships. Firstly, the internal structure and setting of organizations is that in order for the goals to be achieved, the organization will be forced to violate the rules and regulation set in the business. Secondly, the perpetrators will associate with the upward mobility of the organization and likely willing and able to commit crime for the business to attain its goals and to prosper. Bruinsma and Bernasco (2004) used social network theory to explain the differences in social organization between criminal groups that is criminal organization have a network structure which is related to the legal and financial risks associated with the crimes

Managerial theories

According to Eisenhardt (1985), agency theory is involved with agreeing two problems that can occur in agency relationships. Firstly, the agency problem arises when the desires or goals of the principal and agent disaccord and it is fuzzy and costly for the principal to verify what the agent is doing. Secondly, is the problem of risk sharing that take place when the principal and agent have different risk preferences, goals and do not share profits which occur due to accessibility of new technology. Garoupa (2007) adapted agency theory to criminal organizations. He categorized the criminal firm as a family business with one principal and several agents. Alliance theory is concerned with partnership,often happens in criminal organizations, it reduce the risk of incompetent legal provision. Trust is an important factor in partnerships. Criminal organizations are often based on trust between its members.

Governmental Theories

Adverse government structures can also be a motivating factor to financial crime. An increased in economic activities together with a weak system in a country including weak government capacity and weak democracy, poor remuneration of public servants, lack of transparency in government institutions and weak rule of law has increased the opportunities for people to have recourse to economic and financial crime .

THE IMPACT OF FINANCIAL CRIME

As nowadays more markets are emerging and there is an increased in financial sector thus they become possible targets for financial abuse. Financial crime is a critical issue and it has likely devastating economic, security, and social impact. It encourages drug dealers, terrorists, illegal arms dealers, corrupt public officials, and others to operate and expand their criminal enterprises. Financial system abuse has negative impact on a country's macroeconomic performance which may cause welfare losses. Globalization and financial market in particular facilitates financial abuse. This section briefly reviews the impact of financial crime.

Economic impact

Trust is based on the continuation and development of financial markets. The performance of financial markets depends greatly on the assumptions that high professional, legal, and ethical standards are respected. Integrity which is the soundness, truthfulness honesty and the allegiance to standards and codes, is one of the most valued assets by investors and financial institutions. Financial crime abuse may implicate financial institutions’ and authority reputation, which may discourage investors’ consequently weakening the financial system. The connection between financial market integrity and financial stability is emphasized in the Basel Core Principles which address the prevention and declaration of financial system abuse.

Financial system abuse may have other negative macroeconomic consequences. Financial crime can implicate bank soundness with large fiscal liabilities, discourage foreign investment, and increase the unpredictability of capital flows and exchange rates. In times of very high capital flexibility, financial crime makes national tax collection and law enforcement more difficult. Financial system abuse and the various forms of financial crime which exist may also alter the allocation of resources and the distribution of wealth and can be costly to detect and prevent. Economic damage is also affected from the charges on the reputation of a country therefore such charges can affect the willingness of investors to do transaction in a country.The damage caused by financial crime may cause financial crises or attenuate confidence in financial system. The most microeconomic impact is felt in the pricate sector. Financial crime offenders use front companies which join the proceeds of illicit activity together with legitimate funds, to camouflage the illegal gains. These front companies have access to illicit funds, allowing them to finance their activities. In some cases, front companies are able to offer products at lower prices than that of the cost the manufacturer produce its products. Therefore front companies have a competitive advantage over legitimate firms and its is very difficule for the legitimate firms to compete with front companies. In that case, the criminal enterprise causes negative macroeconomic effect.

Financial institutions that depend on the interest of crime face difficulties in maintaining their assets, liabilities and operations. For example, large amount of money may be deposited at a financial institution but then disappear resulting in a liquidity problem and cause bank runs. Certainly it has been noticed that bank failures are mostly associated with criminal activities. Financial abuse may minimize government budgets consequently causing a loss of control of the economic policy. Its can affect currencies and interest rates as offenders reinvests their gains where their activities are not detected. Financial crime causes also monetary instability sues to inappropriate allocation of resources. In brief, financial crime may result in changes of money demand which are unexplainable and a rise in the capital flows, interest and exchange rates. Offenders are interested only in protecting their gains thus thay have a tendency to invest their money in activities that are not benefit to the economy. According to John McDowell and Gary Novis (2001), financial crime decreases government tax eventually causing harm to tax payers which in turn makes the collection of tax difficult.

Risks to Privatization Efforts

Money laundering is a threat to the efforts of many nations to put in place reforms into their economies through privatization. Criminal organizations have the financial wherewithal to outbid legitimate purchasers for formerly state-owned enterprises. Furthermore, while privatization initiatives are often economically beneficial, they can also serve as a vehicle to launder funds. In the past, criminals have been able to purchase marinas, resorts, casinos, and banks to hide their illicit proceeds and further their criminal activities.

Reputation Risk

Nations cannot afford to have their reputations and financial institutions tarnished by an association with money laundering, especially in today's global economy. Confidence in markets and in the signaling role of profits is eroded by money laundering and financial crimes such as the laundering of criminal proceeds, widespread financial fraud, insider trading of securities, and

embezzlement. The negative reputation that results from these activities diminishes legitimate global opportunities and sustainable growth while attracting international criminal organizations with undesirable reputations and short-term goals. This can result in diminished development and economic growth. Furthermore, once a country's financial reputation is damaged, reviving it is very difficult and requires significant government resources to rectify a problem that could be prevented with proper anti-money-laundering controls.

Social Costs

There are significant social costs and risks associated with money laundering. Money laundering is a process vital to making crime worthwhile. It allows drug traffickers, smugglers, and other criminals to expand their operations. This drives up the cost of government due to the need for increased law enforcement and health care expenditures (for example, for treatment of drug addicts) to combat the serious consequences that result. Among its other negative socioeconomic effects, money laundering transfers economic power from the market, government, and citizens to criminals. In short, it turns the old adage that crime doesn't pay on its head. Furthermore, the sheer magnitude of the economic power that accrues to criminals from money laundering has a corrupting effect on all elements of society. In extreme cases, it can lead to the virtual take-over of legitimate government.

Overall, money laundering presents the world community with a complex and dynamic challenge. Indeed, the global nature of money laundering requires global standards and international cooperation if we are to reduce the ability of criminals to launder their proceeds and carry out their criminal activities.

People are victims of economic crime; they lose their homes, business and most importantly their livelihoods. According to Richard Pratt (2005), economic criminals use the financial system both to commit the crime and to hide the proceeds that is in some cases economic crime can also discourage the capability of financial system to donate to the creation of wealth and at the same time generates economic opportunity. Participants of financial crime use mainly the financial system to control the gain of the financial system’s activities. They are enthusiasm to take part in businesses that have no economic aim but are intended to camouflage the connection between the crime and their money. This transaction creates profits which usually are not disclosed.

THE IMPACT OF COUNTERFEITING

The costs

Costs to the right holder

Industry world-wide loses billions of dollars every year to counterfeiters. These costs impact on

victim countries in a number of different ways. First of all, industries which find themselves in direct competition with counterfeiters suffer a direct loss in sales. Indeed, some markets are even dominated by counterfeiters, creating barriers of entry for the producers of the genuine product. Some would argue that the buyers of the fakes would not have bought the genuine item but that is a very narrow argument and can only apply to a small segment of luxury goods. Many counterfeit products today are of higher quality and compete directly with the genuine items. In addition, consumers who are deceived into believing that they bought a genuine article when it was in fact a fake, blame the manufacturer of the genuine product when it fails, creating a loss of goodwill. Even cheaper and obvious copies that are bought in good faith represent a serious threat to the company that wants its brands associated with quality and exclusivity. Thirdly, beside direct losses of sales and goodwill, one should not forget the expenditure involved in protecting and enforcing intellectual property rights. The right owner becomes involved in costly investigations and litigation when combating counterfeiters and may also have to spend further sums on product protection. The budget for anti-counterfeiting is rarely well defined within an organisation, but spans across several departments such as marketing, human resources, product development and legal departments.

Costs to countries where counterfeiting takes place

Such countries suffer both tangible and intangible losses. First, foreign producers of reputable products become reluctant to manufacture their products in countries where counterfeiting is rife as they cannot rely on the enforcement of their intellectual property rights. Hence, such countries not only lose direct foreign investment but also miss out on foreign know-how. Second, if many products from such countries, including genuine ones, gain a reputation of being of poor quality, this will cause export losses which in turn implies both job losses and loss of foreign exchange. It could be argued that the counterfeiting industry creates jobs but these jobs are often poorly paid, often involve substandard working conditions and sometimes use child labour. Third, the foundation for new business development in a country is the existence of a legal system to protect the rights of the entrepreneur and to promote fair competition. The prevalence of counterfeiters in a market discourages inventiveness in that country since it deters honest producers from investing resources in new products and market development. A further direct loss for the government of countries that become havens for counterfeiters, are tax losses, since the counterfeits are normally sold through clandestine channels and counterfeiters are not generally keen to pay tax on their ill-gotten gains. Fiscal losses are increasingly shown to justify action by enforcement officials.

Costs to countries where counterfeits are sold

Countries promoting tougher enforcement of intellectual property rights in the world have a strong case for doing so. The economic costs of counterfeiting for such "victim" countries include job losses, missed sales opportunities and lost tax revenues. In the long run counterfeiting discourages investment in product development since a company will not get all the benefit from its investment. The governments of countries where counterfeits are sold will also have to expend increasing amounts of money in funding police and other investigation and enforcement operations. Furthermore, the judicial authorities, including the courts and prison service, need to spend additional time and money in sentencing and dealing with counterfeiters.

Social costs

Ultimately, it is the consumer who pays the cost of unfair competition. Although many consumers believe they are getting a bargain when they buy counterfeits, the actual value of the

product is normally much lower. Hence, they end up paying an excessive price for an inferior product. The inferior quality of many counterfeits, particularly those relating to health and safety, have had disastrous effects. It is no longer rare to find counterfeit parts in aircraft and other vehicles causing death and injuries, or counterfeit pharmaceuticals in hospitals. Workers in factories where counterfeits are produced are frequently exploited. They often work in a poor working environment and are repeatedly exposed to health and safety risks. In addition, they are generally poorly paid. Counterfeiting has attracted both organised and petty criminals who have not only derived huge profits from this trade but have also used it, both as a means to invest the proceeds of crime and to finance other crimes.

REGULATION OF FINANCIAL CRIME IN THE WORLD

The following are major government efforts stated by the Government of Nigeria, aimed at combating financial crime and assured transparency, accountability, efficiency and effectiveness in governance and management of our resources.

Budget and Fiscal Transparency

In Nigeria, the budget formulation process, presentation, consultation, implementation and monitoring is being done with clear rules, roles and responsibilities.

Beginning with the 2004 budget, a Fiscal Strategy Paper laying out the broad directions and priorities of the budget is first discussed with the Executive and then the Legislature. It is then shared with stakeholders to catalyze public debates on the policy objectives, macroeconomic framework and the parameters on which the budget is based. Following the crafting and passage of the Budget, the public is provided with full information on the past, current and projected fiscal activity of government and the presentation is done in a way that facilitates independent analysis and enhances demands for accountability.

Similarly, government from January 2004 periodically publishes statutory allocations to all the three tiers of government (Federal, State and Local) as well as monthly and quarterly warrants showing allocations to Federal Ministries and Agencies for recurrent and capital costs.

Also, procedures for the execution and monitoring of approved expenditure have been harmonized and strengthened through the establishment of the Cash Management Committee headed by the Minister of Finance with membership drawn from the Budget Office, the Nigerian National Petroleum Corporation (NNPC), Federal Inland Revenue Service, Accountant-General’s office, Central Bank and the Procurement Regulatory Office. A plan of the running operational review of major government spending activities by the Ministry of Finance to ascertain operational and financial efficiency and effectiveness of major spending is also in place. These are all geared at promoting transparency and accountability and curbing corruption and fraud.

Public Service Reform

To ensure a corrupt free public service, government has strengthened the management of information system and public sector accounting capacity; introduced payroll computerization to curb incidents of ghost workers that caused inflated corruption-induced wage bills; monetized benefits to curb the abuse of open ended privileges and entitlements of public officials; introduced a contributory pension scheme to build confidence in the public work force of a more secure future and enhance productivity and curb economic security driven corruption.

Public Procurement Legislation / Policy and Administration

To ensure good use of financial resources and enhance competition, the government has introduced stringent and enforced guidelines for public contracting. Currently, the procedure for the award of contracts has been redesigned to conform to the standards of internationally competitive bid, with emphasis on openness, competition and value for money under the Due Process Regime- a reform effort that has already resulted in the savings of billions of naira in prevented overpricing of federal contracts. Through the Due Process certification process which is a mandatory requirement for all public treasury funded projects, we now cancel all contracts that are poorly packaged and non-compliant with internationally acceptable standards. Also, work on a bill for the establishment of a Federal Public Procurement Regulatory Agency has reached an advanced stage. The agency when established, will set out the process for contract awards, administration and redress/dispute resolution.

Extractive Industry Transparency Initiative

Nigeria has made advancements in transparency in the oil sector. It is among the first to participate in the Extractive Industries Transparency Initiative (EITI). The publication of the financial results of licensing rounds is one of Nigeria's principal commitments under the EITI. The government has also publicly announced its commitment to adhere to the Extractive Industry Transparency Initiative (EITI). Towards this end, a standing multi-stakeholders group of twenty- seven drawn from the private sector, civil society and public sector has been set up to implement transparency of revenue from oil, gas and solid minerals

Strengthening of Anti-Corruption Institutions

Cognizant of the importance of institutions that enforce anti-corruption laws to an effective anti-corruption/fraud strategy, the government has strengthened a number of the core institutions statutorily empowered to investigate, prosecute and sanction corruption and other related offences.

Our Independent Corrupt Practices and other related offences Commission (ICPC) is being strengthened through legislative amendment, technical and human capacity building and appropriate funding to enhance its capacity for the sanction of corrupt conduct.

The Code of Conduct Bureau is being strengthened to monitor effectively the asset declaration and ethical conduct of public officials, legislators and judges.

The Economic and Financial Crimes Commission (EFCC) which was established to enforce economic crimes laws is also being strengthened. Its establishment is one of the radical steps by the present government to combat corruption/fraud headlong. The EFCC which has been actively involved in the campaign against corruption and the promotion of transparency and accountability in government has recorded monumental achievements within the few years of its operations. The Commission has made over 5,000 arrests; secured over 150 convictions; confiscated, seized and returned to government coffers and victims of these crimes amounts worth over US$5billion. Since its establishment, there has been a monumental improvement in the way government businesses are done.

Fighting economic and financial crimes calls for unwavering commitment and the institution of measures to stay one step ahead of the criminal. In the light of the fact that crimes are dynamic and criminals are increasingly becoming sophisticated, government agencies with oversight functions over public institutions must be creative as well as make concerted efforts to put in place appropriate measures to ensure professionalism, ethics as well as close all the loop-holes which criminals could exploit.

Specifically, the following measures could be considered:

Internal controls – there is the urgent need to strengthen internal controls, policies and operations in public service. Laxness and the easing of internal controls have been the start of many internal crime cases. Internal controls are necessary to check the criminals within and block loopholes that may be taken advantage of.

Staff vetting – Government institutions should embark on comprehensive and continuous staff vetting to ensure that only those who are competent and with integrity are engaged.

Staff training and development- regular training for employees on professionalism and ethical issues including staff duties with respect to ensuring safety of government properties etc

Delineation of accounting functions- for instance, there should be a clear delineation of all finance related responsibilities. The responsibility to authorize transactions, the responsibility for collecting or paying cash and the responsibility to maintain accountability records must be separated within all government institutions.

Accountability and transparency – public institutions should maintain a strict accountability procedures related to all government businesses and especially in the movement or flow of cash.

Periodic auditing – books of all public institutions should be regularly audited and reconciled. Regular audits should be occasionally backed up by an unscheduled and unannounced audit.

Proper security of unused cheques – accounts departments of all public institutions should always lock up unused cheques and account for them numerically in a register to limit unauthorized access to them.

Effective reward system – relevant government authorities should institute an effective reward system to serve as an incentive to well deserving staff and deterrent to staff members that err from ethical and professional standards. An atmosphere of permissiveness breeds the potential for internal corruption.

Records preservation culture – all public institutions should be encouraged to improve on their culture of records preservation for the purpose of audit trail and also to meet regulatory requirement.

Improving Public Sector Management - this entails a meritocracy public service with monetized and adequate remuneration; enhanced transparency and accountability in budget management; enhanced transparency and accountability in revenue generating agencies like the customs and tax revenue services.

Institutional reforms – E.g. judicial reform to speed up prosecution process etc.

Strengthening of existing anti-graft agencies (ICPC and EFCC) to position them for the challenges associated with the management of financial and economic crimes in Nigeria.

Strict enforcement of assets declaration

FinCEN

FinCEN is a bureau of the U.S. Department of the Treasury. FinCEN's mission is to enhance the integrity of financial systems by facilitating the detection and deterrence of financial crime.It receives and maintains financial transactions data, analyses and disseminates that data for law enforcement purposes

The duties fulfilled by FinCEN are:

Issues and interprets regulations authorized by statute;

Supports and enforces compliance with those regulations;

Supports, coordinates, and analyzes data regarding compliance examination functions delegated to other Federal regulators;

Manages the collection, processing, storage, dissemination, and protection of data filed under FinCEN's reporting requirements;

Maintains a government-wide access service to FinCEN's data, and networks users with overlapping interests;

Supports law enforcement investigations and prosecutions;

Synthesizes data to recommend internal and external allocation of resources to areas of greatest financial crime risk;

Shares information and coordinates with foreign financial intelligence unit (FIU) counterparts on AML/CFT efforts; and

Conducts analysis to support policymakers; law enforcement, regulatory, and intelligence agencies; FIUs; and the financial industry.

FinCEN serves as the FIU for the United States and is one of more than 100 FIUs making up the Egmont Group, an international entity focused on information sharing and cooperation among FIUs. An FIU is a central, national agency responsible for receiving (and, as permitted, requesting), analyzing, and disseminating to the competent authorities disclosures of financial information:

concerning suspected proceeds of crime and potential financing of terrorism or

Required by national legislation or regulation in order to combat money laundering and terrorism financing.

As one of the world's leading FIUs, FinCEN exchanges financial information with FIU counterparts around the world in support of U.S. and foreign financial crime investigations.

The basic concept underlying FinCEN's core activities is "follow the money." The primary motive of criminals is financial gain, and they leave financial trails as they try to launder the proceeds of crimes or attempt to spend their ill-gotten profits. FinCEN partners with law enforcement at all levels of government and supports the nation's foreign policy and national security objectives. Law enforcement agencies successfully use similar techniques, including searching information collected by FinCEN from the financial industry, to investigate and hold accountable a broad range of criminals, including perpetrators of fraud, tax evaders, and narcotics traffickers. More recently, the techniques used to follow money trails also have been applied to investigating and disrupting terrorist groups, which often depend on financial and other support networks.

FINANCIAL REGULATION IN THE MAURITIUS

Supervisory Authorities

The Bank of Mauritius and Financial Services Commission are the two financial regulators of Mauritius and they ensure that their licensees comply with AML/CFT requirements. They have a duty, under the FIAMLA 2002, to pass on information relating to the possibility of money laundering or a suspicious transaction, to the FIU

The Bank of Mauritius (BOM) is the supervisory authority for banks, foreign exchange dealers and money changers. It issues guidelines for the fight against money laundering and terrorism financing Non compliance, through negligence, omission or a serious defect in implementation of the codes and guidelines or the requirements imposed in the FIAMLA 2002 and FIAML Regulations 2003, is subject to sanction by the BOM. A banking license may be amended or revoked under the Banking Act 2004 in the absence of a reasonable excuse for a transgression, and on the basis that business is being carried out in a way contrary to the interest of the public.

The Financial Services Commission (FSC) set up under the Financial Services Development Act (FSDA) 2001 regulates the non-bank financial services sector. The FSC issued Codes on the Prevention of Money Laundering and Terrorist Financing for three categories of businesses namely Management Companies, Investment Businesses and Insurance Entities. It is also empowered to take regulatory sanction against any financial institution for non compliance, through negligence or otherwise, with any requirement in the FIAMLA 2002 or FIAML Regulations 2003.

Mauritius adheres to international initiatives to combat Money Laundering and Financing of Terrorism. Various legislations were enacted and include:

The financial Intelligence and Anti-Money Laundering Act 2002

The prevention of corruption Act 2002

The prevention of Terrorism 2002

The Convention for the Suppression of the Financing of Terrorism Act 2003 provides for the International Convention for the Suppression of the Financing of Terrorism to have force of law in Mauritius.

Combating Money Laundering and Financing of Terrorism through effective exchange of information

The FSC has the power to exchange information with public sector agencies, international organisations, foreign supervisory institutions or law enforcement agencies.

In addition, several Memoranda of Understanding were signed between the FSC and regulatory bodies (including foreign supervisory bodies) to address the framework for mutual assistance and exchange of information. The main objectives of the MOUs are inter alia to:

consolidate supervision of cross-border operations of financial institutions;

define mechanisms to share information in accordance with international standards; and

Reinforce collaboration amongst institutions in the fight against crime, Money Laundering and Financing of Terrorism.

In particular, the FSC signed a Memorandum of Understanding (MOU) with the Financial Intelligent Unit (FIU) which describes the ways in which both institutions will cooperate in preventing Money Laundering and the Financing of Terrorism. The FSC, in compliance with Section 22 of the Financial Intelligence and Anti-Money Laundering Act 2002, forwards any information on the possibility of a money laundering offence or suspicious transaction to the FIU.

In addition, pursuant to the provisions of the Mutual Assistance in Criminal and Related Matters Act 2003, a foreign authority may, in relation to a serious offence, make a request to the Attorney General for assistance in any judicial proceedings carried in their jurisdiction state.

http://www.fbi.gov/stats-services/publications/financial-crimes-report-2010-2011