EFCC Directive To Commercial Banks To Investigate The Source Of Their Customers Income; Appropriateness Or Otherwise Of The Said Directive.

By Maduabuchi Ofoegbu

Recently, the Economic and financial crime commission (EFCC) had directed commercial banks to investigate the source of their customers income prior to opening of account. This according to the commission is to help fight and checkmate the level of financial fraud being perpetrated by criminal minded individuals who possibly cannot be at peace with anything that has to do with money.

The above directive from the commission has been generating dust from different public quarters and domain. Some persons through their social media handle opined that the said directive is demonic and illegal as the commission will not also investigate the source of customer’s poverty in the same vain. Others are of the view that the said directive is in line with global standard for good economic governance and administration especially following the incessant financial fraud being perpetrated in different quarters of the economy today.

While every Nigerian is entitled to his own opinion as provided in the Constitution of Nigeria, some of the pertinent questions to be asked in the light of the above directive are as follows;

1. Can commercial bank and other financial institutions legally investigate the source of their customer’s income?
2. Considering the sacred provisions of section 37 of the Constitution of Nigeria 2011 as amended, that provides for the right to private life and family which also include ones means of livelihood, will investigating and asking questions about customers source of income or wealth not be contrary to the letters of the constitution?
3. Is the above directive not inconsistent with relevant laws of the land?
4. Are commercial banks supposed to investigate the source of their customer’s wealth at any circumstance?
5. Can the bank in any way be liable if the said directive is not obeyed?
6. What then, is the way forward?

The Constitution is the highest law of the land. It is the numero uno. It is also the litmus test for determining the validity of every law. Its provisions are sacred. Section 37 of the Constitution provides for the right to private life and family. The rights in the said section extend to individual business and work life. In other words, the work life of individual is protected under the said law to the extent that it is indeed actually covered by the law and as such, another without justifiable reason cannot unilaterally question another on the source of his money or wealth. Be that as it may, is the above section 37 of the Constitution absolute in terms of its application? Isn’t it subject to qualification? No doubt, section 45 of the same Constitution has clearly set limit and boundaries to which the above section apply. For clarity, section 45 of the Constitution provides as follows;

Nothing in section 37, 38, 39, 40 and 41 of this constitution shall invalidate any law that is reasonably justified in a democratic society-

1. In the interest of justice, public safety, public order, public morality or public health; or
2. For the purpose of protecting the rights and freedom of other persons.

From the above provision, it is obvious that the right to privacy as it concern individual in all aspect of life may be derogated depending on the circumstances prevailing at the particular time in line with enacted laws of the land validly enacted.

In Nigeria, commercial banks and other financial institutions are regulated by Acts of the National Assembly, laws of various state, regulation from central bank of Nigeria, corporate affairs commission to mention but a few. They owe certain duties to their customers and the public at large. One of the common duties of commercial banks is to accept deposit from customers. Interestingly, some of the duties owed to customers are interwoven with duties and obligation affecting the general public at large. Put differently, a particular duty owed to Professor Nathaniel might be extended to affect the rights of Dr Bola who may not be a customer of the bank. As a result of this, laws are made to ensure that in the operation of the bank the polity is not over heated to the detriment of the other systems.

To check mate abuse, commercial banks are required to carry out some preliminary investigations over customers account and financial transactions. These requirements are creation of the law made through legislative enactments and judicial interpretations. They are all for the good governance and administration of the system.

Situations and circumstances where banks are required to carry out investigations over customers account and transactions.

1. Where customers deposit does not tally with the figures stated during account opening. During account opening, banks usually issue out some forms to be filled by the prospective customer. The forms contain a column which provide for the annual or monthly expected income of the customer. The essence is to check mate the possibility of financial fraud. This is also in line with the law of ‘NO YOUR CUSTOMER’ as contained in section 37(1) of the cybercrime (prohibition prevention ETC)Act 2015 which provides as follows;

“A financial institution shall (a) verify the identity of its customers carrying out electronic financial transactions by requiring the customers to present documents bearing their names, addresses, other relevant information before issuance of ATM cards, credit cards, debit cards and other related electronic devices; and apply the principle of know your customer in documentation of customers preceding execution of customers electronic transfers, payment, debit and issuance orders”.

The essence of the above is to enable the bank to be conscious of the amount coming into the customer’s account at any given time as to possibly raise questions where the amount is outrageously above what the customer filled as his expected income. Accordingly, the bank is required to ask necessary question where the money flowing into the customer’s account is far above what the customer filled during the account opening stage as failure to investigate might not go well with the bank.

2. Where the amount flowing into the customer’s account is such that a person of such capacity and status could not reasonably have. During account creation, customers are meant to state their standing either in their career or occupation which could mean same thing. Based on the standing of a customer, a particular amount could reasonably be expected to flow into the said account irrespective of the type of account. An undergraduate who opened a student account or even, a normal savings account with twenty thousand naira only for 80 million naira to flow into the account and subsequent, millions and billions runs into the account should be called for questioning. It is not an issue of God buttering some ones bread. Money follows capacity. A bank that closes its eye to transactions of this nature should be prepared for eventualities that may follow.
3. Past antecedent of a customer’s account; where a customer whose account has been receiving a particular amount or range of money for a reasonable length of time suddenly explodes and start receiving an amount outrageously different from the past, there is a legal duty on the bank to call the customer for some polite questioning. This is so because for an account that has been receiving not less than 25 thousand naira for more than 6 years to start receiving 100 million naira at a stretch shows that something has happened somewhere for which a reasonable man should ask question in the absence of any explanation given by the customer.

Question

Who is a reasonable man in the light of the above circumstance?

In OILSERV LTD V L.A.IBEANU &COMPANY (NIG)LTD &ANOR(2007) LPELR-5149(CA) The court of Appeal described a reasonable man as a fair minded man, rational in thought and orientation. He is a man endowed with reason. It includes the ordinary person seen on our streets, whose means of transport is the popular okada or mammy waggon. It also includes the affluent, highly literate or otherwise, the ordinary worker in kano native city living on his ”tuwo” or the plain woman in okrika dress including the ones selling pants and shoes in the market. See again, UBN LTD V OREDEIN (1992)6NWLR (PT247).P355.

4. Where the customer is unable to provide sound and straight forward answers to minor questions put forward to him or her during deposit of large sum where the customer is deposing same for the first time. Sometime in 2015, I was in a commercial bank for some transaction and a little boy walked in with big polythene black nylon leather filled with money. All of us at the counter were amazed not because of the money but looking at the height and stature of the boy. Upon minor questioning by the bank cashier, the little boy who gave his age to be 18 could not give sound answer to the question put forward to him. It is circumstance of this nature that should put the bank on its toes to do a proper investigation of its customer to rebut at least every element of doubt and be at the safer side.
5. Where a petition has been submitted against the customer of a bank to the knowledge of the bank for financial fraud. On this, the bank must be wary to investigate every deposit of such customer no matter how small it appears.
6. Where a customer has been convicted for financial fraud to the knowledge of the bank. In such case, the bank must take time to accept deposit from such a customer. It is immaterial that the customer might have repented and become born again, filled with the holy ghost with evidence of speaking in tongues. An ex-convict remains an ex-convict and anyone dealing with him, does that on his own peril. It is advised at this point that all banks should create a space in the account opening form to enable customers indicate whether they have been convicted for any financial related offence before. It is immaterial whether customers will open up to say the truth. Also, commercial banks should require customers to depose to an affidavit in court to the effect that they have or have not been convicted for any financial fraud before.
7. Where the bank suspect that the amount involved in a transaction relates to the laundering of drug money, it shall require identification of a customer notwithstanding that the amount involved in the transaction is less than #500. 000. See section 5(6) and (7) of the Money Laundering Act.
8. When a transaction, whether or not it relates to the laundering of drug money, is surrounded by conditions of unusual or unjustified complexity; and appears to have no economic justification or lawful objective. The bank at this point is meant to investigate further. See section 6(1) b and c of the Money laundering Act.

Flowing from the above, it is clear that commercial banks are required by law to investigate the source of their customer’s income where the need arises. Accordingly, the directive of EFCC to commercial banks is not totally out of place as it is backed up by relevant laws.

Liabilities of commercial and financial institution for failure to investigate the source of their customer income when and where necessary.

A law is a law because upon violation, there will be sanction. A law with no sanction will not be regarded as a good law. Where a bank or financial institution fails to investigate or ask necessary question with respect to a customer’s account when circumstances had presented itself, the bank risk rendering itself liable for criminal and civil suit respectively.

First, the bank can be prosecuted on a criminal charge under relevant law like the EFCC Act 2004. Section 14(1) of the EFCC Act provides that a person who being an officer of a bank or other financial institution or designation non-financial institution who fails or neglect to secure compliance with the provisions of the Act or fails to secure the authenticity of any statement submitted to it pursuant to the provisions of the Act, commits an offence and upon conviction, liable to imprisonment not exceeding 5 years or #500.000 naira as fine or both.  Similar provisions are provided in section 17 of the same Act. Also, section 17 (1) and(2) of the Money laundering Act provides that where an offence is committed by a corporate body under the Act and such offence was committed with or on the instigation or connivance of or attributable to any neglect on the part of the director, manager, secretary or other similar officer of the body corporate or anybody acting in such capacity shall be deemed to be guilty of an offence and liable to be proceeded against and punished accordingly. It also provide that the court may order that the body corporate be wound up and all it assets and property forfeited to the federal government.

From the above provisions of the law a bank that fails in its duty to ask necessary question and an offence is committed which indict the bank either by way of direct or indirect involvement through acts of negligence, the bank will be liable to be prosecuted.

Secondly, a bank that fails to carryout proper investigation when circumstances arise, will also render itself liable in damages to a third party for the tort of negligence instituted by the third party who had suffered damages. See the case of  LLOYDS BANK LTD V CHARTERD BANK OF INDIA, AUSTRALIA AND CHINA(1929)1KB 40. Where the court held among others that the defendant bank was negligent in not asking question on how a bank official was paying the cheques of his employer into a private bank account. Similarly, in  MIDLAND BANK V RECKITT (1933)AC The house of Lords held among others that the circumstance presented itself in such a way the defendant ought to know that the money does not belong to mr T the customer and that they were liable in negligence for not taking time to make proper inquiries to know that the cheques mr T paid into his account weren’t his own.

At this point, suffice is to say that banks and other financial institution are under an obligation to carry out investigation of the source of their customers income where situations arises. Just as it is said, security is every man business. A man, who is throwing stones in the market, may not know if the stones will land upon the head of his mother or father or any relative of his. Besides, the Nigerian police are even mandated by law to arrest and question anyone who appears to be living above his income. If not that things are falling apart and Nigeria becoming a lawless state (God have mercy), the directive of the Efcc shouldn’t have raised any dust for bit conforms with global standards.

In conclusion, while we hope and pray for a better Nigeria where laws will be obeyed by all, it is hereby submitted and I so submit that the directive issued to commercial banks by Efcc to investigate the source of their customers income, is eminently in line with laid down laws to the extent that such investigation will only be required where and when necessary using a reasonable man test. It is also for the benefit of the banks and members of the public.

In all, all banks are advised to be more vigilant and proactive in ensuring adequate compliance with relevant laws of the land

God bless Nigeria.

Stanley Maduabuchi Ofoegbu is a private legal practitioner based in Abuja who is not in any way, holding the brief of EFCC.

Contact; WhatsApp 08068515340, 08181689769. Email; ofoegbustanley722@gmail.com