COURSE TITLE: CURRUPTION AND FINACIAL CRIMES COURSE CODE: CSS106

PART TIME LECTURE NOTES

History of Corruption
The history of corruption is as old as the world, because ancient civilizations have traces of widespread
‘illegality and corruption’. Thus, Lipset and Lenz (2000) noted that ‘’corruption has been ubiquitous in complex
societies from ancient Egypt, Israel, Rome, and Greece down to the present’’. Corruption is also believed to be
endemic in modern government and it is not peculiar to any continent, region, or ethnic group. Corruption is,
no doubt, one of the major challenges in almost all societies, as it goes with impoverishment, loss of lives,
societal instability and delayed development in most developing societies like Nigeria (Economic and Financial
Crimes Commission (EFCC), 2012). This does not, however, mean that the incidence and magnitude of corrupt
activities / financial crimes are the same in every society. Some countries are obviously more corrupt: yet
others have better plans in managing corrupt activities.
Corruption and Financial Crime in Nigeria
The concept of corruption and financial crime covers a very broad aspect of human endeavors such as
social, political and economy. The promises of early years of Nigeria independence had corrupt practices that
have driven many people below the poverty line. Financial crime in Nigerian context both in the public and
private sector is basically based on corruption. The nature and extent of corruption in Nigeria was fairly
limited before independent when public administration did not extend to all aspects of life. In the past, only
a handful of officials who were required to collect taxes and enforces law did misuse their direct powers
in the absence of written laws. However, with the dawn of independence and the emergence of welfare
states, the activities of government increased. The officials were assigned new and unfamiliar tasks. This
resulted in the emergence of new opportunities for corruption.
The report of the Political Bureau (PB,1987) recognized the existence Nigerian corruption in the following
words, “corruption has become a household word in the Nigeria society, it pervades all strata of the society
from the highest levels of political and business elites to the ordinary person in the village. In the light of
the above, it has become so bad that many people equate the name “Nigeria” with the word “corruption.
Presently, almost every discourse about Nigeria centers more on the high rate of corruption in our public life.
There is the very strong perception that corruption is institutionalized in Nigeria and it is not that officials
are corrupt but corruption is official. Government institutions had decayed to an unprecedented extent as
the country were being colonized by the powerful whose focus and vision is for self and group gain.
Apparently Nigeria is one of those countries with no better handle on corruption and financial crime, despite
its unending corruption commissions and all the noise made by every administration on the efforts to
transform the nation into a corrupt-free society. Many reforms and policies have been implemented and
proposed yet the issue of corruption and financial crime as regards proper accountability still persist in
Nigeria. Thus, making corruption the Nigeria's greatest enemy of development and good governance because
it is directly associated with the current economic decline, poverty expansion, reduction in life-expectancy,
mortality, deteriorated standard of living of the citizen’s and diminishing institutional values (Presidential
Adversary Committee Against Corruption (PACAC), 2015).
Type of Financial Crime
  Advance Fee Fraud (419),
 Money laundering,
 Internet fraud,
 Bank fraud,
 Insurance fraud,
 Telemarketing,
 Identity theft
 Credit card fraud,
 Contract scam,
 Counterfeiting,
 Embezzlement
 Bankruptcy fraud,
 Kickbacks/ Bribery,
 Mail fraud, etc.

Effect of Corruption and Financial Crime in Nigeria

Corruption being a broad concept of which financial crime it just a part had severe damaging consequences
on Nigeria, including decreased Foreign Direct Investment in the country and denting of Nigeria’s image. The
situation has several negative consequences to the economic growth of the country Its effect on good
governance is a particular and growing concern to the international community and to many citizens.
Moreover, from economic perspective, financial crimes burden the private and public sectors in the following
ways
 It deters foreign and domestic investment.
 It brings about poor public fund accountability
 It drains money from the required development projects
 It delays sustainable development i.e. basic infrastructures and necessary amenities
 It affects the quality and quantity of expected sustainable development.
 It undermines the value of society and breads cynicism or distrust among citizen.
 Corruption often affect most poor who are unable to pay bribes and thus may be denied of
 essential services.
 It destroys or tarnishes the country image among the league of nations
 It causes impoverishment, loss of lives, societal instability
The challenge of public accountability has become a cog in the wheel of national development. Huge amount of
money which would have accelerated national development has gone down the drain as a result of poor public
accountability. Since the inception of democratic regime, there has been a lot of challenges facing the
government on its pursuit of rapid development which many of it can be largely attributed to poor public
accountability. This canker worm that is eating and milking government treasury has necessitated the
formation of different agencies to tackle, this ugly syndrome. These agencies include, EFCC, ICPC etc.
EFCC and The Menace of Financial Crime
The menace of these numerous financial crimes and the recognition of the magnitude and gravity of the
situation led to the establishment of the Economic and Financial Crime Commission (EFCC) to tackle the problem
of economic and financial crimes in Nigeria. The nation Nigeria has been adjudged corrupt and unsafe for
foreign investment as it was said to have unleashed on the world the ‘’419 bug’’. Foreign nations have now
tagged Nigeria a -financial terrorist nation- on account of the volume of economic and financial crimes that
emanate from Nigeria. It was in these circumstances that the Financial Task Force of the United Nations
Convention against Transnational Organized Crime threatened to impose counter measures on Nigeria in 2001
if she did not update her laws and take steps to check the perpetration of economic and financial crimes.
It is for this reason and the international dimension, which these crimes had assumed that the promulgation
of the EFCC Act 2002 become inevitable.
The EFCC as an anti-corrupt graft agency has been in operation for twenty (20) years now, the EFCC has
succeeded in investigating, inviting, apprehending and interrogating some former public offices hold both in
previous and present administration who fail to give account of their unspent fund allocated to their
various ministries. Some funds recovered by the EFCC from the loot of corrupt politicians and public office
holders is more or less a thing thrown to mockery. The problem of corruption and financial crime has been a
major cog in the wheel of our national development. However, the issue of accountability, which is an
offshoot of the inherent corruption and financial in the Nigeria society is still manifesting and evolving.
ACHIEVEMENT OF EFCC IN NIGERIA
Since the establishment of EFCC in 2003, the commission has been able to investigate, apprehend arraign
and expose some public office holders and politicians before the court for public hearing. Some of it
achievement includes: -
 EFCC has probed the activities of several banks to discovered looted funds as the CBN petition and
complained of malpractices in the banking industry
 Several Nigerians who owned, managed or were directors of these corrupt banks have been
arrested, interrogated or investigated for using the banks as if they are private estates.
 EFCC has also arrested, interrogated or investigated some public of holders for money laundering,
thief, bribery, diversion and contract scams.
  EFCC had arrested, interrogated or investigated some youth involving in internet
fraud showcases.
 EFCC has also investigated some governors for offences ranging from money laundering to fraud
since foreign security counterparts confirmed they raced properties, businesses and millions of
pounds and dollars to foreign accounts with their proxies.
Challenges of the EFCC in Nigeria
The establishment of EFCC in 2003, no-doubt gave the citizenry and society much to be desired in the
effectiveness and efficiency of the commission in relation to combating financial crimes. However, despite
the enabling statutory and legal authority given, the commission has gone through different challenges
preventing them from carrying out their primary duty effectively. This has made Nigerian citizenry to
expressed a conflicting view about the possibility and effectiveness of the EFCC in checkmating or controlling
economic and financial crimes in Nigeria. Their challenges ranges from material to human and external
 Political intervention: - The government most time intervene or mediate in the operational procedure

 Delay Judicial proceeding: - The judiciary process in both delaying and denying the commission
speedy and swift proceeding of arraigned suspect.

 Corruption among the personnel: - How do we explain the fact that most personnel involve is bribe
taking from suspects as well as conniving with them to escape before carrying out their statutory
functions.

 Inadequate man-power: - The commission needs to recruit more personnel for effective functioning.

 Bureaucratic processes and procedure: - The Personnel cannot use their discretion but must await
order and instruction from above to carry out any investigation on suspect

 Paucity of modern and sophisticated equipment: - The few ones which are available are obsolete,
crying for replacement and yet have none in sight for them to hope on.

 Inappropriate orientation and retraining process for staff: - The training of personnel promotes
effective performance but regrettably, there is little or none presently and whether any exist, it is
very poor as the men are not thoroughly exposed to modern equipment

 Poor remuneration: - The salary of an average civil servant is nothing compared to that of the
politicians and executive involving in financial corruption

 Inadequate welfare: - Inadequate welfare and other motivation from the government and any other
quarter would lead to apathy, indifferences and unwillingness to put in one’s best in the service to
the nation.

 Uncooperative attitude of the most financial institutions who are either unwilling to give financial
details of suspected to the personnel. Interestingly, without the needed information and cooperation
 the commission cannot do much as expected.

Corruption and Financial Crime Theory

The primary goal of criminological discipline is to understand, explain and create valid/accurate theories of
crime causation and prevention. The paper adopts two theory namely: - Social Control Theory (SCT)
propounded by the American criminologists, Travis Hirsch (1961) and Rational Choice Theory (RCT), proposed by
Cornish and Clarke (1986/2001), to explain corruption and financial crime

Social Control Theory

The theory is an off-shoot of rational choice approach, which views “human behaviour as being guided by
hedonistic principle or pleasure-seeking” tendency. To him, criminal behaviour and results from failure of
individuals to bond with conventional social groups such as the family, school and other institutions role. As
indicated by Travis Hirsch no exceptional powers were important to clarify crime and criminality.

Corruption and financial crime behaviour is regularly the promptest wellspring of satisfaction or
compromised conflict resolution, and no unique inspiration is required to clarify such conduct. Human beings
generally are active, flexible organisms who will engage in a wide range of activities, unless the range is
limited by processes of socialization and social control. The mechanisms that reduce crime and disorder
include social ties and the degree to which people exercise social control in the society. These ties may build
inhabitants' ability to participate in social authority over people in the network, hence diminishing criminal
activities.

The Social Control Theory mechanism can either be formal or informal. Formal social control mechanisms
involve adequate information and prompt investigation to significantly and directly reduces criminality and
disorderliness. For instances the EFCC may be deployed with adequate personnel and mechanisms to
investigate and apprehend any corrupt and financial crime suspect with prompt and reliable information
from financial institution other reliable source such as whistle blower to curb such crime. However, in the
long run, the EFFC will be accountable to the people.

Formal social control includes the criminal justice system involving the EFCC, courts and prisons while informal
social control consists of mechanisms which are not based upon formal rules but are carried out by the
family, friends and member of the society on daily basis. Ogini, (2020) noted that lack of adequate control
mechanism make crime more like a tradition in Nigeria. Thus, the emergence and evolving nature of
corruption and financial crime could be seen as a result of poor control mechanism, since the society have
little control mechanism to fight such crime.

Rational Choice Theory

Rational Choice Theory (RCT), as proposed by Cornish and Clarke (1986/2001), assumes that people’s decisions
are motivated by the level of intelligence, class origin, family-upbringing etc. channeled towards a deliberate
commitment for a purposeful personal or group gain or achievement. Although such decisions may be either
based on limited or unlimited information made under pressure, insufficiently planned and/or attentively
and sufficiently planned. “Rational choice” involves actions or decisions made either for immediate gain or
long-term benfit in order to satisfy needs - money, status, and revenge – and, also, to avoid negative
consequences - shame, arrest, and prosecution.

Most criminals generally take decisions within limited time, resources, and available information from which
they expect such choice of actions to maximize their benefits/gains while minimizing their losses/costs
(Cornish and Clarke, 2001). Corruption/ financial crime are always based on personal or group interest for
expected rewards far greater than the likelihood of punishment or other cost for such actions (Clarke and
Cornish, 2001). Furthermore, financial crime committers are misguided by their personal or group-centredness;
thus, they mostly perceive that they would always make gains without being exposed or caught and/or they
are likely to have their way or serve minimal punishment if caught because of their influence through plea-
bargaining or other medium (Tunnell 1990/1992).

Hence, financial crime decisions are thoughtfully considered and taken for wealth and material
accumulations (Clarke and Cornish, 2001). In conclusion, apprehension and harsher or stiffer punishments
would reduce, if not curtail all corrupt practices –financial crime etc. According to Beccaria (1764/63) and
Bentham (1948), for corruption/financial crime to deter in any society, punishment must be proportional to
the level and degree of such crime in the society. The theory argues that the more serious or harmful the
crime committed the more severe the penalty should be to deter, as the knowledge of punishment would
serve as a social control mechanism against crime in any society ( Agnew, Piquero, and Cullen, 2009).