You are on page 1of 7

CHAPTER 3 23

Commitments to control drug


trafficking and laundering of
its proceeds

3.1 Ratification of international agreements


A total of 168 states have ratified the UN Convention against Illicit Traffic
in Narcotic Drugs and Psychotropic Substances (1988), otherwise known
as the Vienna Convention. At the time of writing, every state party had
criminalised the possession, production and trafficking in the narcotics
stipulated in the Convention. All the countries reviewed have complied
with the commitment to ratify the Vienna Convention.
One should point out that these countries comprise a mixture of
jurisdictions, the laws of which are based on either common law or civil
law. The dichotomy is attributable to colonial history: countries with an
English colonial history (Kenya, Ghana, Nigeria, South Africa and
Uganda) have retained a common law heritage, while those colonised by
France (Algeria and Senegal) inherited and maintained a civil law
tradition. The distinction is important in considering the implications of
ratifying international instruments for domestic law. Legal systems of civil
law countries incorporate the provisions of the Convention upon
ratification, without requiring domesticating internal legislation. The
provisions of the Convention are therefore part of the law of Algeria and
Senegal in the absence of domestication. Although it was never part of the
British Empire, Ethiopia requires domestication of international
Conventions through the enactment of local statutes before they can
become effective locally.
24 AFRICAN COMMITMENTS TO COMBATING ORGANISED CRIME AND TERRORISM

3.2 Domestic legislation


Implementation of the Vienna Convention involves establishing and
maintaining functional co-operation against local as well as transnational
drug trafficking. As a prelude to this, the Convention envisages the
upgrading of anti-narcotics law, to take account of the contemporary state
of knowledge of trafficking trends. The Convention encapsulates measures
against drug trafficking, including provisions against money laundering
and the diversion of precursor chemicals. Its key articles pertain to the
detection, seizure and confiscation of proceeds of drug trafficking.
The AU Plan of Action for Drug Control in Africa, 2002–2006, amplifies
this thrust. In Key Area 3, states commit themselves to reform and
harmonise drug laws, taking into account organised crime, money
laundering, and developments in electronic transmission and
communication.
The Convention prescribes international co-operation in criminal cases,
through, for instance, the extradition of drug traffickers, controlled
deliveries and transfer of proceedings. The Convention also prescribes
certain substantive criminal law provisions. The focus of this work is on
procedural principles rather than the content of substantive criminal law.
In this regard it is significant that there is considerable overlap in the
content and reach of the provisions of both relating to tracing, freezing and
confiscation of proceeds.
The reviewed countries have been particularly responsive in the
enactment of legislation against trafficking in narcotics. By the middle of
the 1990s almost every country had adopted measures to trace and seize
proceeds of drug trafficking.
In Nigeria and South Africa, where the problem seems at its most
acute, a combination of dedicated anti-trafficking statutes and general
statutes are in place. Decree 48 of 1989 in Nigeria specifically relates to
drug trafficking. It is complemented by the Money Laundering Decree of
1995, and the Economic and Financial Crimes Commission Act of 2002.
Both statutes take account of the links between drug trafficking, organised
crime and money laundering. The powers of the Commission will be
discussed below.
CHAPTER 3 25

South Africa achieves the same outcome by combining the Drugs and
Drug Trafficking Act of 1992 with the Prevention of Organised Crime Act
1998 (POCA). A key achievement of the POCA was to extend the offence of
money laundering beyond the sphere of drug trafficking to other organised
crime situations. The Act also established an Asset Forfeiture Unit to
activate the seizure provisions. In 2001, South Africa created a further
structure, the Financial Intelligence Centre (FIC), to enhance the tracing
of proceeds of organised crime in general. The Centre was the creation of
the Financial Intelligence Centre Act (2001).
Country positions are summarised in Table 1 below. Reference to the
penal code, as in the case of Algeria, denotes the law that regulates
criminal justice procedures.

Table 1
COUNTRY Do measures to trace and freeze Does the law permit confiscation of
drug proceeds/instrumentalities exist? drug proceeds and instrumentalities?
Algeria Yes, in terms of the Penal Code Yes
Ethiopia Yes Yes
Ghana Yes, Narcotic Drugs Law (1990) Yes
Kenya Yes, Narcotic Drugs Act (1994) Yes, Narcotic Drugs Act (1994)
Nigeria Yes, Decree 48/1989 Yes, in terms of Decree; Money
Laundering Decree (1995); and
Economic & Financial Crimes
Commission Act (2002)
Senegal Yes, Code des Drogues (1997) Yes
South Africa Yes, Drugs & Drug Trafficking Act Yes, Drugs & Drug Trafficking
(1992) Act (1992); Preventionof Organised
Crime Act (1998)
Uganda Yes, National Drug Policy and Yes
Authority Statute (1993)

The degree of nominal compliance suggests that the Convention was


declaratory of a pre-existing state of affairs. However, full compliance
depends on adoption of detailed provisions of the Vienna Convention and
the AU Plan of Action.

3.3 Measures to trace, freeze and seize proceeds


In addition to the provisions set out above, full compliance requires the
26 AFRICAN COMMITMENTS TO COMBATING ORGANISED CRIME AND TERRORISM

introduction of measures to allow access to financial information on


proceeds of drug trafficking. In this regard, there is an overlap between
commitments on drug trafficking and commitments on corruption. In
recent years, counter-terrorism international law has also paid particular
attention to this aspect.
Banking secrecy refers to the protection by a bank of information on the
personal property of its clients. Such information is usually about assets
and investments held by the bank, and it is concealed from anyone not
authorised by the beneficiary to gain access it, including the state.
Banking, financial or commercial records often constitute an integral
component of systems to combat the laundering of proceeds of most
economic crime. Organised criminal syndicates occasionally have to use
the legitimate (legal) institutions of the economy to conceal proceeds of
their activities and to make profitable investments. The acceptance of this
premise has several broad implications for the direction and content of
norm-formulation: first, that money laundering should be criminalised;
second, that the range of predicate offences for money laundering should
be conceived widely; third, that impediments to detection of money
laundering should be removed; and finally that there should be structures
to facilitate transnational co-operation in combating money laundering.
The criteria for reviewing the performance of the selected countries is
based on these implications. In Table 3, the first two, namely
criminalisation of money laundering and the scope of the predicate
offences for money laundering, have been separated from the others.
The context in which banking secrecy is invoked is discussed later. An
interesting issue is whether it can be lifted selectively. Can the law be
structured in such a way as to permit secrecy to be lifted only to allow
access to information relating to one form of criminal activity, but not
others? In addition, one may ask how broadly access to the revealed
information extends if such secrecy is lifted. For instance, is access thereby
given to the public?
From the outset, it should be acknowledged that absolute banking
secrecy does not exist. The bank in whose custody the information is
always has access to it. In most countries of the world, the courts can,
within their area of jurisdiction, order the disclosure of records held by
banking institutions, particularly where there is a higher private or public
CHAPTER 3 27

interest, as in the case of a prosecution. In addition, third parties generally,


who are able to establish a rational, so-called “jurisdictional” foundation,
are entitled to access such records. The discussion in this section reverts to
the issue of banking secrecy, as a corner-stone of legislation against the
proceeds of crime. The discussion goes beyond the issue of banking secrecy,
to related aspects of client profiling and non-state detection-of-crime
proceeds infrastructure.
The concern of the Vienna Convention and the AU Plan of Action for
Drug Control in Africa is with access to banking information beyond these
parameters. What is envisaged includes unsolicited access, for instance
disclosure of banking information by the bank on its own iniative.
Contemporary anti-money laundering law refers to disclosures of this
nature as suspicious transaction reporting. The question to be asked is
whether the law in a given country obliges financial institutions to grant
unsolicited access to information about their clients to third parties.
In drug-related cases, an uneven legislative terrain is evident in the
reviewed countries. The law permits access to financial records in Algeria,
Ethiopia, Nigeria and South Africa. No access is available in Ghana,
Kenya, Senegal and Uganda. The toughest position is adopted in Nigeria,
where the police or the Economic and Financial Crimes Commission have
concurrent powers of access. The penal code in Ethiopia was updated to
facilitate access. The FIC in South Africa is not dedicated to narcotics
trafficking as such, but it is the central institution to which financial
information that could be indicative of such trafficking is directed by a
range of accountable institutions. The FIC is required to refer reports and
information on which they are based to law enforcement agencies. The FIC
is a member of the Egmont Group of financial intelligence units.22 It may
also co-operate with cognate institutions located in other countries to
share experience on trends. It is not clear to what extent the FIC is in a
position to pass on financial intelligence relating to specific cases to foreign
financial intelligence units.
The third column of Table 2 highlights the extent to which access is
allowed, where applicable.

22 At the time of writing the Egmont Group had a membership of 31.


28 AFRICAN COMMITMENTS TO COMBATING ORGANISED CRIME AND TERRORISM

Table 2
COUNTRY Is there unsolicited access Who may access financial records?
to financial records?
Algeria In drug-related cases The police, all else require court order
Ethiopia In drug-related cases The police, all else require court order
Ghana No, although declarations by public N/A
officers required. These are of a
general nature.
Kenya No, although declarations by public N/A
officers required
Nigeria Yes, in drugs and serious economic Economic & Financial
investigations Crimes Commission; police
Senegal No N/A
South Africa Yes, in terms of Financial Financial Intelligence Centre; law
Intelligence Centre Act (2001) enforcement agencies on reference
by FIC
Uganda No N/A

Table 3
COUNTRY Is money laundering an offence? What predicate offences are recognised
If so, brief citation of the statute. for money laundering, if any?
Algeria Yes, but only for drug proceeds Drug trafficking. General bill under
consideration
Ethiopia No, except for proceeds of drug Drug trafficking. Money laundering bill
trafficking under consideration
Ghana No, except for proceeds of drug Only drug trafficking
trafficking
Kenya No, except for proceeds of drug Only drug trafficking. Bill being drafted
trafficking
Nigeria Yes, Money Laundering Act (1995); All non-violent illicit activities, including
Economic and Financial Crimes corruption, fraud, drug/arms/human
Commission Act (2002) trafficking, looting, oil bunkering, tax
evasion, counterfeiting currency,
intellectual piracy, and environmental
crime
Senegal No, except for proceeds of drug Only drug trafficking
trafficking
South Africa Yes, Prevention of Organised Crime Widely defined in POCA to include all
Act (1998); Financial Intelligence unlawful activity. Specific mention of
Centre Act (2001) racketeering and organised crime
Uganda Not generally Drug trafficking
CHAPTER 3 29

On the face of it, therefore, there is no generalised access to financial


information, and it cannot be said that there is substantial compliance
with the Convention. While the current arrangements provide for seizure
and confiscation of drug proceeds, the detection capacity is inadequately
supported.
Table 3 considers how the reviewed countries have responded to the
call to criminalise money laundering, whether as an offence arising from
drug trafficking, or as a general offence.

3.4 Conclusion
The general pattern that emerges is that all countries have criminalised
the laundering of proceeds of drug trafficking. In Algeria, Ethiopia, Ghana,
Kenya, Senegal and Uganda, money laundering is regarded as a derivative
offence contingent upon the proceeds originating from drug trafficking. In
only two countries, Nigeria and South Africa, is money laundering
considered to be an offence distinct from the predicate activities from
which the money is derived. The consequence is that, in these two
countries, it is easier to cast the net of criminal responsibility beyond
actual participants in drug trafficking, to beneficiaries downstream who
may be outside criminal business circles. This seems to be consistent with
the spirit of the Vienna Convention. Countries that have yet to criminalise
money laundering generally, therefore, fall short of the prescription of the
Convention. At the time of writing, bills to extend the money laundering
offence were under consideration in Algeria and Ethiopia. In Kenya the bill
has been under discussion for more than a year,23 while Uganda is also
considering similar legislation.

23 The latest occasion when the Bill came up for discussion was during the final weekend in
March 2004.