Economic crime and the rule of law (Part 1)
Being a non-lawyer, I feel quite intimidated addressing an audience heavily dominated by lawyers and high-powered judges. Among the Bakongo, it is said that “you do not teach the paths of the forest to an old gorilla”. As most of you probably know, my background is in banking and the economics and politics of development. However, it so happens that I have an abiding interest in jurisprudence and legal theory; fascinated by thinkers as wide apart as St. Augustine of Hippo Regis, Aquinas, Ibn Rushd, al-Farabi, Hugo Grotius, H. L. A. Hart and Ronald Dworkin. So, I guess I could lay some legitimate claim to being able to talk intelligibly on the subject of economic crime and the rule of law.
The nineteenth century French novelist Honoré de Balzac famously quipped that, “behind every great fortune there is a crime”. Economic crime is the existential nightmare of our era. According to the World Bank, corruption, fraud and bribery cost more than US$1.26 trillion annually for developing countries alone. According to the High Level Panel on Illicit Financial Flows set up by the African Union and chaired by former South African President Thabo Mbeki, over the last 50 years, Africa has lost in excess of US$1 trillion from illicit outward financial flows.
Indeed, my former colleagues at the African Development Bank have estimated that an average of US$100 billion of capital flight leaves our continent every year; a figure far in excess of what Africa actually receives by way of foreign investment, remittances from our Diaspora and Official Development Assistance (ODA). According to some sources, Africans hold total assets of between US$700 – US$800 billion stashed away in foreign bank vaults. It is suspected that about US$200 billion of those funds belong to Nigerians.
The picture is even more unsettling for our country Nigeria. It is estimated that since the 1970s, we earned a staggering US$1 trillion from oil exports. However, due to corruption, over US$400 billion has been frittered away. The 1994 Okigbo panel on the Reorganisation and Reform of the CBN revealed that a whopping US$12 billion could not be properly accounted for by the erstwhile military administration of General Ibrahim Babangida. I can tell you that US$12 billion was a lot of money then. It is a lot of money now.
And according to the London-based Royal Institute of International Affairs – Chatham House – Nigerians, in collusion with foreign shadowy characters, have engaged in the plundering of our oil resources at a monthly average of US1 billion during the years 2007-2014. It is no surprise why Nigerians today are poorer than they were in 1970; when the country was emerging from a tragic civil war.
Seasoned chefs would tell us that there is simply no clean way of making sausages. Fighting corruption is a messy business. It may sometimes appear to undermine the rule of law and human rights. I guess the recent arrests of senior judges have made many of you rightly anxious about the clumsy methods that have been deployed by anti-corruption agencies. There are indeed some major issues that should concern every citizen, not just lawyers and judges. I believe that we do not need to deploy intimidating armed state security forces to arrest a judge. And I do not think government should disregard court orders. We must also never politicise the arrest and prosecution of corrupt officials. There must be no sacred cows.
So, what is the rule of law and why is it important in the fight against economic crime?
The philosopher Aristotle famously remarked that in a state governed by law, “God and reason alone rule”. By contrast, “passion perverts the minds of rulers, even if they are the best of men”. In the Age of Absolutism, Louis XIV of France could boldly declare that, “l’état c’est moi!” in the absolutist state, government and the law were embodied in the person of the monarch. The solemn declaration embodied in Magna Carta 1215 enshrined the principle of government based on the rule of laws rather than the rule of arbitrary power. These principles became codified in the English Bill of Rights 1689.
Lord Denning, a favourite of law students throughout the Commonwealth — perhaps the greatest English judge of the last 100 years — declared Magna Carta to be “the greatest constitutional document of all times – the foundation of the freedom of the individual against the arbitrary authority of the despot”
The late Harvard political philosopher John Rawls underlined the main underpinnings of the rule of law. First, according to him, there can be no offence without a law (Nullum crimen sine lege). Law must be known and expressly promulgated and its rules clearly defined. Second, law must be of universal application – it cannot be applied to some and not to others. Thirdly, the law must be in conformity with the precepts of natural justice. Fourth, laws must be addressed to rational minds and must be in accord with rational reason. Fifth, the courts must be able to apply them impartially as well as effectively. Sixth, law cannot be inconsistent with other laws and must aim to serve the common good. And lastly, law must ultimately aim to promote and protect the liberties of the individual. Even when a law restricts liberties, it should be for the ultimate purpose of further enhancing human liberties. In his words, “liberty can be restricted only for the sake of liberty itself”.
The International Commission of Jurists, in their 1955 Declaration at Athens, reaffirmed, that, inter alia: (1) The state is subject to the law; (2) Governments should respect the rights of the individual under the Rule of Law and provide effective means for their enforcement; (3) Judges should be guided by Rule of Law, protect and enforce it without fear or favour and resist any encroachments by governments or political parties on their independence as judges; (4) Lawyers of the world should preserve the independence of their profession, assert the rights of the individual under the Rule of Law and insist that every accused is accorded a fair trial.
According to one definition, economic crimes “refer to illegal acts committed by an individual or a group of individuals to obtain a financial or professional advantage. In such crimes, the offender’s principal motive is economic gain”.
Economic crime covers set of offences ranging from bank frauds to tax evasion and money laundering to cybercrime, bribery, embezzlement, peddling of influence for private enrichment, fraud, tax Evasion, identity theft, human trafficking, drugs trafficking, insurance fraud, credit card, cybercrime, advance fee, trade offences, customs fraud, smuggling, exchange control violations, money laundering and currency counterfeiting.
Section 46 of the Economic and Financial Crimes Act 2004 defines an economic crime as, “the non-violent criminal and illicit activity committed with the objectives of earning wealth illegally either individually, or in a group… thereby violating existing legislation governing the economic activities of government and its administration”. Some of the offences listed include fraud, narcotic drugs trafficking, illegal arms dealing, illegal oil bunkering, tax evasion, theft of intellectual property, open market abuse, dumping of toxic wastes and prohibited goods, forex malpractices, currency counterfeiting, money laundering, embezzlement, bribery, looting and any form of corrupt malpractices.
Although some authorities would want to maintain a strict distinction between economic crime and corruption, I would prefer to use them interchangeably. To borrow the language of Venn diagram set theory in mathematics, economic crime should be viewed as a subset of corruption. As far as Nigerian law is concerned, in the case of Biobaku v Police, Bairamian, J. defined corruption as “the receiving or offering of some benefit as a reward or inducement to sway or deflect the receiver from honest and impartial discharge of his duties”. This is a rather limiting definition. Corruption is much more than bribery. It involves influence peddling and various stratagems that defeat the goals of public policy.
Economic crime is a major challenge for our country as it is for many parts of the developing world. It thrives best where controls are lax; in an eco-system in which institutional state capture by powerful groups encourages a politico-economic alliance between the state and the private sector in a manner that robs both government and society. The British political philosopher, Isaiah Berlin, put it down to what he termed “the crooked timber of humanity”.
The problem we have is not insufficiency of the laws, but, rather, that of implementation. Apart from the criminal and penal codes, there are at least seven major pieces of legislation against economic crime. Nigeria is also a signatory to several international treaties and conventions relating to prohibition of economic crime. These include the UN Convention Against Transnational Organised Crime; the UN Convention Against Corruption; the Financial Action Task Force Convention (FATF); UN Convention for the Suppression of the Traffic in Persons and of the Exploitation of the Prostitution of Others; and the Stolen Asset Recovery Initiative of the World Bank.
Globalisation and internationalisation have made corruption to thrive more than before. Linked to the preceding is the collapse of our age-old traditional values. In divided societies such as ours, corruption thrives because there is no shared sense of community and no commonly shared moral purpose. The paradigm of public choice theory in neoclassical economics provides yet another explanation for corruption. When a government official decides to engage in corrupt behaviour, it can be presumed to be predicated on the basis of rational calculations. He would have calculated that the returns from corrupt behaviour outweigh both the chances of being caught and costs of punishment if they were every caught. Corruption thrives where there is an absence of institutional controls. Failure to prosecute and sentence often means that corrupt behaviour is treated with not so much as a rap on the knuckles. In China grand corruption attracts capital punishment. It is treated as a violation of national security. In Nigeria, by contrast, no member of the elite has ever spent 10 years behind bar for corruption or abuse of power. Nobody has ever truly suffered disgrace for defrauding the state. And no one has ever been banned from holding public office because of bribery, fraud, corruption or other high crimes of state.
In our own context, I would say that the political economy of the rentier state has an inherent propensity to generate a market for corruption. Our oil dependent political economy has been based on collecting rent from multinational oil companies which is then shared out on a monthly basis between the three tiers of government according to an agreed formula. Much of the wealth from oil gave us the illusion of wealth which was not based on productivity or disciplined application. In addition, the Dutch disease syndrome was rampant.
There is also the reality of ‘path dependence’. According to an African wisdom saying, “a bad habit that lasts more than a year may turn into a custom”. Once a society is set on a given course, the collective mindset, culture, institutions and the orientation of dominant elites would tend to follow that trajectory, gathering a momentum of its own. This would seem to conform to Sir Isaac Newton’s first law of motion in physics which states: “In an initial reference frame, an object either remains at rest or continues to move at a constant velocity, unless acted upon by a net force.” Nobel laureate Douglass North has noted that path dependence is one of the most enduring features of economic history, in which the historical matrix of an economy and its institutional architecture constrain future choices while limiting the possibility for altering the existing trajectory.
(Being the Abridged Text of an Address Delivered at the End-of-Year Dinner of MIVE Legal Services (House of Justice) at Prestige Hotel, Kaduna, Tuesday 20 December 2016).
Obadiah Mailafia