The basis of money laundering arise from the intention of persons involved in illicit businesses or crimes or government officials with proceeds from corruption who want monies obtained from these illegal sources to appear legal by placing such monies in a legal business so that its illegitimate source will not be detected by financial institutions or law enforcement agencies.
Generally, money laundering is the concealment of the origins of illegally obtained wealth by making such monies appears to have been derived from a legitimate source. It is the process of transforming the proceeds of crime and corruption into ostensibly legitimate assets.
Money laundering involves 3 steps; first, it involves putting illegal monies into the financial system by some legal means (placement); second, it involves carrying out complex transactions to camouflage the illegal sources of the cash (layering); and third, acquiring wealth generated from the transaction of the illicit monies (integration).
What are the Laws Regulating Money Laundering in Nigeria?
(a) The Money Laundering (Prohibition) Act, 2011
The Act makes comprehensive provisions to prohibit the laundering of proceeds of crime and provides appropriate penalties. The Act provides that no person or corporate body shall make or accept cash payment of a sum exceeding N500, 000 or its equivalent in case of an individual and N2, 000,000 in case of corporate bodies, unless the transaction is done through a financial institution.
Section 2(1) of the Act states that a transfer to or from a foreign country of funds or security exceeding the sum of $10,000 or its equivalent shall be reported to the Central Bank of Nigeria.
An important provision in the Act designed to facilitate the detection of money laundering is Section 6(1) of the Act. The provision provides that when a customer requests a financial institution to carry out a transaction, whether or not it relates to the laundering of the proceeds of crime, the financial institution must seek information as to the origin and the destination of the funds, the aim of the transaction and the identity of the beneficiary.
(b) Economic and Financial Crimes Commission Act
The Economic and Financial Crimes Commission Act establishes the Economic and Financial Crimes Commission ("EFCC") with a mandate to act as the financial intelligence unit in Nigeria and charged with the responsibility of coordinating various institutions involved in the laundering and enforcement of all laws dealing with economic and financial crimes in Nigeria.
(c) Corrupt Practices and other Related Offences Act
Corrupt Practices and other Related Offences Act establish the Independent Corrupt Practices Commission to investigate and prosecute offenders upon receipt of report of commission of offence or its attempt. The agency also investigates systems and practices of public bodies where it facilitates fraud and advice public bodies of practices in their systems for the purpose of reducing incidence of corruption and other related offences.
(d) Central Banks of Nigeria (Anti-Money Laundering and Combating the Financing of Terrorism in Banks and other Financial Institutions in Nigeria) Regulations, 2013.
The Regulations provides that financial institution shall adopt policies to show its commitment against Anti-Money Laundering and prevent transactions which aid criminal activities and money laundering. The financial institution shall put in place internal records to deter criminals from using its facilities for money laundering.
Financial institutions shall conduct due diligence on all business relationship and obtain information of the purpose and nature of business of their potential customers. The financial institution shall undertake customer due diligence above $ 1, 000 or its equivalent in other currencies, wire transfers including cross-border and domestic transfers or payment by debit cards and report suspicious transaction to appropriate law enforcement agencies. Financial institution shall take reasonable steps to know the beneficial owner of an account.
Nigerian cases on money laundering
In Nigeria, politically exposed persons appear to be the main target of money laundering charges. It was reported that the EFCC had on February 8, 2017, arraigned Dele Belgore (SAN) and Prof. Abubakar Suleiman, a former Minister of National Planning, for allegedly collecting N450m out the $115m allegedly given out by a former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, to compromise the 2015 general elections.
Again, the Federal Government is prosecuting immediate past governor of Niger State, Babangida Aliyu, alongside the 2015 governorship candidate of the People's Democratic Party (PDP), Umar Nasko, on an eight-count charge of money laundering before the Federal High Court in Abuja. Furthermore, the EFCC is prosecuting a former Chief of Air Staff, Adesola Amosu alongside two other officers of the Air Force for stealing and laundering about N323 million from the accounts of the Nigerian Air Force.
Indeed, the Nigerian Money Laundering Act is very much in operation though there have not been a reported case particularly related to sports betting.
What is Sports Betting?
Generally, sports betting involve punters predicting the outcome of matches and getting their bets to correspond with the stakes. If the predictions are correct, the bets are rewarded with stipulated winning. Sports betting can be described as the activity of predicting results in sports, and placing a wager on the outcome. It is a form of gambling that entails placing a wager on the outcome of a sporting event. The primary intent of sports betting is to win additional money.
Prevalence of Sports Betting in Nigeria
The business of sports betting in Nigeria is thriving. Accordingly, more Nigerian betting sites are appearing on the internet with many of them also having physical offices across the country. Few years ago, gambling was generally abhorred. But today, over 60 million Nigerians between the ages of 18 and 40 spend as much as N1.8 billion Naira daily on gambling according to an investigation carried out by News Agency of Nigeria.
Sports betting recorded its first entry into the Nigerian market in 2007 when Nairabet first established its sports betting website and introduced Nigerians into how they should not only enjoy watching European League football matches but also make money out it.
Sports betting online have become very easy because there are so many internet users in Nigeria today. There is no doubt that many Nigerians have a fanatic love for European football leagues which make it possible for the betting companies to take advantage of an already hungry market. This is why, even though most Nigerians go into betting for the monetary rewards, a sizeable number of punters bet just for the fun and excitement that goes with it.
What are the Laws on Sports Betting in Nigeria?
The realization of a holistic legal framework for online sports betting in Nigeria is at the early and formative stages of growth as such, online sports betting is regulated at the State level with the issuance of licenses to multiple operators with each betting sites defining their own rules and regulations.
National Lottery Act, 2005 is the law regulating general lottery business in Nigeria. Section 57 of the Act defined 'Lottery' as "any game, scheme, arrangement, system, plan, promotional competition or device for the distribution of prizes by lot or chance or as a result of the exercise of skill and chance or based on the outcome or sporting event..." The Act establishes the National Lottery Regulatory Commission ("the Commission"). The National Lottery Regulatory Commission regulates any and all lotteries or betting relating to sports.
Consequently, the Governing Board of the Commission at the meeting held on the 11th March 2015, approved and directed for the immediate implementation of the Sports Lottery (Betting) Category and its applicable Terms and Conditions in line with Section 57 of the Act. The Commission further stated that any company presently carrying out any form of sports lottery (Betting) activity in Nigeria was invited to regularize its operations with the Commission in the interest of the growth of the lottery industry in Nigeria.
The Commission also invited all prospective sports lottery (betting) operators intending to carry out any form of Sports lottery activity in Nigeria, to submit application(s) for the processing and issuance of a Sports Lottery Permit (SLP) to enable them operate the business of sports lottery on a national platform. Furthermore, any company operating any form of sports lottery (betting) in Nigeria without SLP is doing so illegally and will be subject to such penalties as contained in the National Lottery Act.
How Does Money Laundering Manifest in Sports Betting?
The world over, organized crime syndicates are utilizing the sports betting market to launder money gained through the proceeds of criminal activities. Betting shops remain one of the safest places to gamble and consequently receives millions of naira; as such this business may become interesting to money launders. Money obtained from illegal sources may use it to place a wager and if they win, the money comes back to the owner, legal.
Money launders may have an agreement with a sport betting company to deliberately lose a bet and the betting company would retain the money used in placing the wager at an agreed commission. To avoid suspicion, the sport betting company would hold unto the monies used in placing the bet and spend it through proxies in accordance with the directions of the money launders.
In the same vein, upon fixing a sport event, a money launderer may divide his illegally obtained money among many people to place a wager. The proceeds from such wager come back to the launderer undetected. What makes it easy for sports betting to be used as a means of money laundering especially under Nigeria's unregulated regime is the fact that all transactions in an online betting is unaccounted for. The punters cannot be traced for verification.
Furthermore, a person may launder money through a sport betting operator because it is difficult for financial institutions and law enforcement agencies to determine whether the money transferred to the bank account of a sport betting operator is for payment of winnings on genuine bets or not.
The online sports betting operations are in essence the functional equivalent of wholly unregulated offshore banks. The punters are in the virtual world, virtually anonymous. For these reason, online sports betting operation are vulnerable to be used by money launderers.
How can Money Laundering be prevented in Sports Betting?
The principal Act in Nigeria which prohibits money laundering and related activities did not envisage money laundering in the sports betting industry, and thereby did not make any provision in that regard. This has indeed created a lacuna. If nothing is done, money launders will see sports betting industry as a convenient way to launder money. It can however be minimized if the following actions are taken:
- The Money Laundering (Prohibition) Act, 2011 should be amended to include prohibition of money laundering in sports betting. There should be a provision as to the particular amount a person can wager for a particular sport, and if any wager is in excess of that sum, the sport betting operator must report same to the Commission.
- Sports betting regulations should be enacted. The regulation should provide for the licensing of all sports betting operators before the commencement of business. A sport betting company should be mandated to disclose every suspicious bet to the National Lottery Regulatory Commission just as financial institutions are required to disclose suspicious transactions under the Anti-Money Laundering and Terrorism Regulations to Central Bank of Nigeria.
- The sport betting operators should submit a monthly review of all wagers made by the public to the Commission. The Commission should monitor the betting pattern of sport betting companies to ensure that sport betting is not used as a vehicle for fraud and money laundering. By this, the operators will become responsible and make sure that unaccounted funds do not pass through their system.
- Large bets should be placed through the bank accounts of punters and not in cash. This will allow financial institutions, the Commission and law enforcement agencies to trace and investigate the source of suspicious huge bets for purpose of detecting fraud or money laundering.
- Financial institutions should be proactive in ensuring necessary disclosures under the Money Laundering Act and the Anti-Money Laundering and Terrorism Regulations. They must confirm that monies paid to sport betting operators' bank accounts are for payment for genuine bets only. Suspicious transaction should be reported to relevant law enforcement agencies.
- There should be collaboration between States and a workable system between them to checkmate fraud and money laundering in order to improve the confidence of punters in the industry.
- Lastly, the Lottery Commission should be more than a mere administrative regulator of sport betting. The Commission's regulations must be designed to curtail the access money launders may have in the sports betting industry. The Commission should mandate a task force to monitor the activities of sports operators and put in place a process to detect fraud and money laundering across border and within Nigeria.
There is no gainsaying the fact that sports' betting is a business which has come to stay In Nigeria. It therefore behooves the regulators to provide an enabling environment to ensure that money launders do not take the advantage of the unregulated sports betting industry. Measures should be put in place to reduce the possibility of money launders using sports betting to legalize their illegitimate wealth.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.