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The Money Laundering Conundrum: Know Ghana’s legal nuances and perspective

By Jennifer Kim Essel

Introduction

Money laundering known in latin “pecuniam lavare” simplistically is the process of disguising, masking, masquerading and concealing the source and/or true nature of money obtained through illegal means.

The Black’s Law Dictionary, Ninth Edition [2004] defines money laundering as the act of transferring illegally obtained money through legitimate people and/or accounts so that its original source cannot be traced.

The Anti-Money Laundering Act, Act 798 as amended by Amendment Act, 2014 (Act 874) states that “a person commits an offence of money laundering if the person knows and/or ought to have known that property is and/or forms part of the proceeds of an unlawful activity and the person; converts, conceals, disguises or transfers the property; conceals or disguises the unlawful origin, disposition, movement or ownership of rights with respect to the property; or acquires, uses or takes possession of the property” . There are several ways that money laundering occur. One example is the use of shell (inactive or dormant) companies established as typical companies on paper, but they do not have any assets and/or perform any real business activities. However, such companies would appear like legitimate business to outsiders in order to delude and/or avoid any suspicion.

Generally, the modus operandus of money laundering is summarized into three (3); namely:

1 Placement which is the first step that involves the introduction of illegal cash into a financial or any other economic system.

2. Layering is the process of separating the “tainted” funds from their source, often by using anonymous shell companies to conceal, camouflage or disguise the illegal source of the money, funds or cash.

3. Integration is the process whereby the “tainted” money is returned to the criminal from legitimate-looking source to appear as though genuine. This practically involves acquiring wealth generated from the transactions of illicit funds.

Some of these steps may be skipped, depending upon the circumstances. For instance, non-cash proceeds that are already in a financial or any other economic system would not need to be placed and for that matter would not be amenable to the first stage.

The cardinal objective of money laundering is to make it arduous if not impracticable to identify and/or trace the original party to an illegal transaction, known as the launderer. Subsequently, the funds or money ultimately return back to the launderer as “clean or legitimate” money devoid of any illegal trace or taint.

The effects of money laundering

According to McDowell, Senior Policy Advisor, and Gary Novis, Program Analyst, both of U.S. Department of State, state that; “money laundering has a corrosive effect on a country’s economy, government, and social well-being”. (The Consequences of Money Laundering and Financial Crime, Bureau of International Narcotics and Law Enforcement Affairs, U.S Department of State, An Electronic Journal Vol. 6 No. 2, May 2001) .As per the two (2) U.S. Department of State officials, the effects of money laundering largely include but not limited to;

(a) Undermining legitimate private sector – money launderers often use companies or businesses to mingle the proceeds of illegal activity with legitimate funds in order to conceal ill-gotten gains. Furthermore, companies involved in money laundering have competitive advantage in that they are able to offer their products at low price because of the cheap source of funds vis-à-vis the legitimate businesses which borrow at high cost.

(b) Economic loss, distortion and instability – money laundering unleash a lot of money into circulation in any economy. The concomitant effect of such additional inflows in the economy has proven to have the potential to weaken the value of any currency due to excess money supply. Additionally, there is also the danger of devaluation of currency due to excess liquidity in the economy.

(c) Loss of revenue – money laundering generally, diminishes government tax revenue because it makes it seemingly difficult to mobilize tax. This loss of revenue generally results in higher tax rates than would normally be the case if the untaxed proceeds of crime were legitimate.

(d) Undermining the integrity of financial markets – financial institutions that rely on proceeds of crime have challenges managing assets, liabilities and operations because such proceeds often evanesce without notice. Money laundering has solely been ascribed for the collapse of many financial institutions such as banks in many jurisdictions.

(e) National reputation risk – money laundering has the risk to tarnish a nation’s reputation and its financial institutions. Ghana faced this reputation risk when the European Commission on 13th February 2019, presented a list of 23 countries, including Ghana, which allegedly had strategic deficiencies in their ani-money laundering and counter-terrorist financing frameworks. As defined under the EC’s Fourth and Fifth Anti-Money Laundering Directives, the EU has to establish a list of high-risk third countries, to make sure the EU financial system is equipped to prevent money laundering and terrorist financing risks emanating from third countries.

Ghana is included in the blacklist together with the following countries; Bahamas, Botswana, Democratic People’s Republic of Korea, Ethiopia, Iran, Pakistan, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, Yemen, Afghanistan, American Samoa, Guam, Iraq, Libya, Nigeria, Panama, Puerto Rico, Samoa, Saudi Arabia and US Virgin Islands.

The Government of Ghana through the Ministry of Finance and Economic Planning has vehemently refuted and described the blacklist as regrettable because the methodology used was flawed as there was no communications with Ghana concerning the shortcomings that needed improvement.

The Anti-Money Laundering Law

The offence of money laundering is largely regulated by the Anti-Money Laundering Act, Act 798 as amended by Amendment Act, 2014 (Act 874).

A person who aids and abets the commission of money laundering also commits an offence if the person knows or ought to have known that another person has obtained proceeds from an unlawful activity and enters into an agreement with that other person or engages in a transaction where; the retention or the control by or on behalf of that other person of the proceeds from unlawful activity is facilitated; or the proceeds from that unlawful activity are used to make funds available to acquire property on behalf of that other person.

The Act defines an unlawful activity as a conduct which constitutes a serious offence, financing of terrorism, financing of the proliferation of weapons of mass destruction or other transnational organized crime or contravention of a law regarding any of these matters which occurs in this country or elsewhere.

The said Act and amendment established the Financial Intelligence Centre (FIC) with the the under listed objects to; assist in the identification of proceeds of unlawful activity, assist in the combat of, money laundering activities, financing of terrorism, financing of the proliferation of weapons of mass destruction and any other transnational organized crime. The FIC is also mandated to make information available to investigating authorities, intelligence agencies and revenue agencies to facilitate the administration and enforcement of the laws of the Republic of Ghana.

The Anti-money laundering Act requires that a person or an accountable institution that knows or reasonably suspects that a property is a terrorist property, the proceeds of money laundering, for financing of proliferation of weapons of mass destruction, intended for any other serious offence shall submit a suspicious transaction report to FIC within TWENTY-FOUR (24) HOURS after the knowledge or suspicions was formed. An accountable institution is an entity and/or persons which have been listed in Schedule 1 of the Act, to include but not limited to the following; banks, non-bank financial institutions, currency exchange companies, auctioneers, lawyers, trustees, executors, those involved in remittance of currency, dealers in motor vehicles, buying and selling real estates and agents, religious bodies, non-governmental organizations, operators of game and betting, dealers in metals and precious metals, insurance business and business promoters, just to mention a few. The FIC requires Accountable Institutions to establish a single business relationship and/or conclude a single transaction with a client once such institution has conducted a risks management and compliance checks known as due diligence to establish the identity of the client.

The Act provides protection for accountable institution or its directors, officials or employees who in good faith submit a report to the FIC on money laundering, terrorism financing or financing any other serious weapons or provide information in accordance with the law shall not be held liable in criminal, civil, disciplinary or administrative proceedings for breach of banking or any professional secrecy or contract.

The Court’s Jurisdiction over Money Laundering Offences

Section 46 of Act 749 clothes the Circuit Court and High Court with the jurisdiction to try an offence under money laundering offences. In a trial for an offence under this Act, the accused person may be presumed to have unlawfully obtained pecuniary resources or property in the absence of evidence to the contrary if the accused person, is in possession of pecuniary resources or a property for which the accused cannot account and which is disproportionate to the accused person's known sources of income, or had at the time of the alleged offence obtained access to personal pecuniary resources or property for which the accused cannot satisfactorily account for.

According to the Court of Appeal speaking through His Lordship Dzamefe J.A. in The Republic vs. John Cobbina & Another (2018) 127 GMJ said that money laundering being a criminal offence, the onus is on the prosecution to establish the guilt of an accused person beyond reasonable doubt. The accused is not under any obligation to prove his or her innocence. The proof beyond reasonable doubt is the highest burden of proof in criminal case which is placed on the prosecution because an accused is generally presumed to be innocent until proven guilty. The term beyond reasonable doubt connotes that the prosecution must lead evidence to establish a particular point to a moral certainty and that it is beyond dispute that any reasonable alternative is possible.

In the Republic vs. John Cobbina & Another matter mentioned above, the two (2) Appellants appealed against the judgment of a High Court that convicted and sentenced them to various terms of imprisonment for, inter alia, stealing, money laundering and falsification of accounts. According to the brief facts, J. Adom Co. Ltd, the complainant, which was engaged in haulage, construction and distribution of drinks, for sometime, realized that the revenue of the company had taken a persistent nosedive despite efforts to recapitalize same. Consequently, the company caused an audit to be conducted, which, disclosed several stealing scams involving John Cobbinah, the 1st Accused, who was the company’s Accountant. The investigations revealed that monies received by the 1st Accused from various banks on behalf of J. Adom Co. Ltd were deposited in his eight (8) personal bank accounts instead of the company’s account. In total an amount of about GHS 4,450,000.00 had been stolen by the 1st Accused which he used in acquiring several properties. The 2nd accused, the company’s Relationship Manager, who was supposed to collect monies and deposit into the company’s account at the bank rather deposited same in the 1st Accused’s personal account, was charged for aiding and abetting money laundering. At the conclusion of the trial, the two (2) Accused persons were convicted and sentenced to various terms of imprisonment. Having been dissatisfied with the judgment, the two (2) Accused persons filed an appeal at the Court of Appeal against their respective convictions and sentences. I would focus on the rehearing or appeal with regard to only money laundering because it is the fulcrum of this exposition.

Firstly, the Court of Appeal found that both the 1st accused and 2nd accused persons were jointly charged with the offences of conspiracy to commit the offence of money laundering. This means the two (2) accused persons conspired to launder money belonging to J. Adom Co. Ltd. His Lordship Dzamefe J.A stated that Section 1 (1) of Act 749 seeks to criminalize dealings with any property which the person charged knew or ought to have known forms part of the proceeds of an unlawful activity as spelt out in Section 1 (1) (a) (b) & (c) of Act 749 and not that the accused person obtained the property through criminal means or through an unlawful activity. The important issue is how the property in issue was acquired by the original owner. The prosecution could not show that J. Adom Co. Ltd had obtained the monies stolen by the 1st Accused through unlawful means. Therefore, this charge was not proven by the requisite standard which is beyond reasonable doubt and hence the 1st Accused was thereby acquitted and discharged. The 2nd Accused was also exonerated and acquitted on this count because the position of the law is that where conspiracy against another person fails and it is left with one person that person ought to be acquitted.

Secondly, the Court of Appeal found that the 2nd accused was charged for aiding and abetting money laundering activities contrary to Section 2 of Anti money Laundering Act 2008 (Act 749). The Trial Court held that the 2nd Accused should not have deposited the money in the personal accounts of the 1st Accused person since from the circumstances he ought to have known that the money was obtained from unlawful means. It is trite that a person who abets the commission of a serious offence shall be tried for the abetment of that offence. The Court of Appeal was of the opinion that the fact that the 2nd Accused person deposited monies belonging to Complainant into 1st Accused’s personal account was not conclusive that he knew nor aided the 1st Accused to steal money belonging to the Complainant. The 2nd Accused could not even be professionally negligent because he drew the attention of the CEO of the Complainant to the payment of the monies into the personal accounts of the 1st Accused. The Court of Appeal further stated that there was no evidence on record that the 2nd Accused knew 1st Accused stole Complainant’s money and for that matter helped 1st Accused to retain and control the proceeds on his behalf nor did he facilitate the proceeds on behalf of the 1st Accused to acquire any property on behalf of the 1st Accused. The 2nd Accused never engaged in any activity which made the funds obtained from the unlawful activity available to acquire property on behalf of the 1st Accused, he was therefore not guilty of the charge of aiding and abetting and accordingly acquitted and discharged.

The charge of money laundering is an offence that requires the person charged with the offence to have knowledge of the fact that the property is or forms part of the proceeds from an unlawful activity, and that the person converts, conceals, disguises or transfers that property or conceals or disguises the unlawful origin of that property or, acquires, uses or takes possession of that property. The Court summarized the main elements of money laundering to include but not limited to: that the person knows the property is or forms part of the proceeds from an unlawful activity or ought to have known from the circumstances of the case that the property is or forms part of the proceeds of an unlawful activity; and that the person converts, conceals, disguises or transfers the property or conceals or disguises the unlawful origin of the property or acquires or uses or takes possession of the property. It stands to reason that for a person to be guilty of money laundering, the prosecution must prove that the person knows or ought to have known that the property which is the subject matter of the crime is or forms part of the proceeds from an unlawful activity and that person converts, conceals, or disguises or transfers or conceals the unlawful origin of the property or acquisition and takes possession of same.

Abetment of money laundering relates to the act made by a person who knows or ought to have known that money has been obtained from unlawful activity and helps in the retention and control of the proceeds on behalf of that person or facilitates the proceeds to acquire property on behalf of that other person.

Penalty For Breach Of Money Laundering Law The Act 749 states that a person who contravenes Section 1, launders money, or Section 2, aids and abets the laundering of money, commits an offence and is liable on summary conviction to a fine of not more than five thousand (5,000) penalty units (equivalent to GHS 60,000.00) or to a term of imprisonment of not less than twelve months and not more than ten years or to both.

Any accountable institution, which fails to formulate and implement internal rules to verify the identity of persons they deal with, or provide training or appoint a compliance officer to observe compliance, commits an offence and is liable on summary conviction to a fine of not more than five hundred penalty units (equivalent GHS 6,000.00).

Freezing Of Assets Or Funds During Investigations

As part of the investigation process, the Anti-Money Laundering Act 2014, Act 749 (Amendment) makes provision for the FIC to freeze accounts for a period of one (1) year. This, Section 23A of the Act enjoins accountable institutions to mandatorily preserve the funds, other assets and instrumentalities of crime for a period of one year to facilitate investigations. In the exercise of this authority, Article 18 (1) of the 1992 Constitution must be taken into consideration. Article 18 (1) and (2) states that every person has the right to own property either alone or in association with others and no person shall interfere with the privacy of his home unless in accordance with law. The Supreme Court in recent times has made profound decisions in respect of this matter.

His Lordship Dotse JSC in The Republic vs. High Court (Financial Division 2) Ex Parte Kofi Appianin Ennin & Others (Financial Intelligence Centre Interested Party) on a matter of freezing assets during investigations held that; “as a matter of fact, when one further considers Article 11 of the Constitution 1992, then it is fair to conclude that this Anti Money Laundering Amendment Law, Act 874 is subject and subordinate to the Constitution. As a result, this Law cannot permit the deprivation of properties such as monies and other assets for indefinite periods of time without recourse to the constitutional guarantee’s of preservation of property rights in chapter five of the Constitution 1992 especially Articles 18 (1) and (2) of the Constitution 1992. It is therefore clear that, funds, assets etc. cannot continue to be frozen under Section 23A of Act 874 under any circumstances whatsoever beyond the one year period”. The Apex Court stated that the Trial Courts should not permit such institutions to violently breach the provisions of the law by unlawfully extending the period allowed to freeze assets under Section 23A of Act 874 beyond the statutory one (1) year guaranteed. This was the same position which was taken by His Eminence Justice Anin Yeboah JSC in the Republic v High Court, (Financial Division) Accra, Ex-parte Xenon Investment Co. Ltd., Financial Intelligence Centre, Suit No. CM/J5/46/2015 dated 22/3/2016.

The Supreme Court in the two (2) cases supra made highly noteworthy recommendations. Firstly, that Trial Courts should ensure that after lapse of an order, they make the appropriate unfreezing order for Accountable Institutions to be able to access their assets. This is because, failure to make such orders after lapse of the freezing order any subsequent retention of assets amount to an illegality.

Secondly, there is the need for reforms to enable investigative bodies to be able to apply to the Courts upon very good and solid reasons for extension of time for further freezing of accounts during investigations.

Conclusion

From all of the foregoing, the repercussions of money laundering to individuals, institutions and the nation as a whole is gigantic.Therefore, it is highly recommended that individuals and institutions who enter into business relationships involving the exchange and/or transfer of funds and/or assets must conduct painstaking due diligence to ascertain the source of funds and/or assets to avoid any predisposition to the offence of money laundering and/or aiding and abetting money laundering. The due diligence must involve knowing the third party or client by obtaining sufficient information on the intended transactions and verifying same through identification and certificates.

WE ALL HAVE A ROLE TO PLAY IN CHANGING THE GLOBAL PERCEPTION OF GHANA IN THE FIGHT AGAINST MONEY LAUNDERING AND TERRORIST FINANCING….

 

The Money Laundering Conundrum: Know Ghana’s legal nuances and perspective

 

 

 

Columnist: Limann A. Mohammed