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Professor Bolaji Owasanoye, SAN, the Coordinating Director of the Proceeds of Crime Management and Illicit Financial Flows Coordination Directorate at the Federal Inland Revenue Service (FIRS), spoke on why FIRS organised the National Conference on Illicit Financial Flows (IFFs), which held on 22-23 July 2025, in Abuja. Owasanoye, the immediate past Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), addressed the dangers IFFs pose to economic development and efforts that must be made to address the menace. 

Q: The FIRS has just successfully hosted a national conference on illicit financial flows. What impact was the conference intended to have on the activities of FIRS and by extension Nigeria’s economy?
 
A: It is envisaged that the conference will have significant impact on Nigeria's economic development. This is because tax revenue is the surest source of income for government’s programmes and the nation’s economic development. Illicit financial flows (IFFs) significantly affect tax revenue and if people don't understand how, they will not appreciate the effect on the ability of the tax authority to meet statutory mandate, which is to collect revenue for the government. 

Basically, there are three sources through which a country loses money that it ought to have for its development aspiration. One is by commercial transactions, another is by corruption, and the third is by criminal transactions. People focus more only on corruption and criminal transactions, which jointly account for slightly above 30% of the losses. Commercial transactions account for over 60% of revenue losses.
 
Within the framework of such commercial transactions, the biggest losses are tax revenues. The operations of these corporations have commercial transactions that appear legitimate on their face value, but in actual fact they are being used to move money and reduce taxable profit. What the tax authority looks out for, apart from specifics like Value Added Tax (VAT), stamp duties, and PAYE, is to tax profits of corporations and businesses. If you succeed in significantly reducing your profit by engaging in anomalous practices, you have reduced the collectible revenues of the tax authority. 

So, the conference was designed to bring attention to these issues – how they happen and the various agencies that must work together and collaborate to make sure that we reduce very significantly, in our own interest, revenue losses to IFFs.
 
Q: There is a lot of opacity around illicit financial flows – the activities that underline them, the flows, and the transfers. How big is this challenge?
 
A: That's one of the reasons for the conference. We wanted to call attention to the kinds of things that lead to outflows. I will give some examples. If, for instance, a company wanting to import phones succeeds in falsifying the invoices to reduce the amount of duty it will pay to the government, it has already stolen some money, which the government would have been entitled to as part of the profits of the company. As another example in the context of the government’s efforts to encourage the diversification of our exports base now, you export 1,000 tubers of yam but put 500 tubers in the invoice. Such an entity would only bring in the income for 500 tubers and keep the rest offshore, thereby reducing funds to be repatriated to boost Nigeria's foreign exchange earnings. 

These are some of the things that are happening within the commercial sector, particularly when companies do inter-corporation transactions. Let us say that three companies are part of the same conglomerate. One subsidiary produces plastics, another one produces bottle tops, the third subsidiary produces water, and they do business among yourselves. The law says that they will trade among themselves at what we call ‘arm's length’. Fairly, each entity will protect itself. But the law ignores the reality that somebody owns the three companies. So, if they want to move money and the business is being operated in different countries – with one country having more potential than the others – they will move it from that place that has potential, to the one that doesn't have, or pretend that the latter is the headquarters – the home country – of the companies. 

Let’s assume the economic activities create environmental problems. If the country that bears the impact of this is denied the tax revenue due to it, how would it be able to address the environmental issue? 

You raised a very important issue by asking how big a problem is this? This is one of the reasons why we need to dig deeper into this. The African Union, in 2015, set up a committee headed by former president of South Africa, Thabo Mbeki, to look at this very issue because it was realised that African countries, especially countries with extractive resources (virtually every African country, especially Nigeria), are losing a lot of revenues, estimated to be about $80 billion per annum. The report flagged that a significant portion of that was being lost by Nigeria. 

Nigeria itself has a responsibility, which is one of the things that the FIRS is doing with the creation of a Proceeds of Crime Management and Illicit Financial Flows Coordination Directorate (POCM-IFF), to take a closer look at these issues. Of course, before the creation of the POCM-IFF unit, other steps were being taken to mitigate this issue. FIRS has been representing Nigeria in the OECD’s Base Erosion and Profit Shifting (BEPS) Inclusive Framework. FIRS has issued regulations to deal with transfer pricing. The Service is also liaising with other agencies on the subject. But still, we have not been able to come up with accurate data to close the knowledge gap as to the exact amount that we are losing. 

So, part of what we discussed at the conference was the need for collaboration: bringing together those agencies that have one role or the other to play. This is to ensure we reduce the losses. The other significant thing to say is that this will also build the capacity of FIRS tax officers who are in the field and who will become better informed about what to look for in such transactions.
 
Q: It’s good you mentioned the issue of inaccurate data because people have alleged that those who are at the vanguard of this campaign against illicit financial flows do not have the data. They give estimates and approximations. We may not really appreciate the extent of the impact of IFFs if we don't have accurate data on the issue. Can we?

A: One of the things the conference discussed is the need for us to work together to get the data. From the little that I have said, you would have noticed that many agencies of government are involved. For example, if we don’t get data from the Nigeria Customs Service, it will be difficult to close the knowledge gap. The government has approved the National Single Window (NSW) project, which is domiciled in the FIRS. This is one of the measures being taken to try and mitigate illicit financial flows. 
 
Q: There are existing legal frameworks such as the Money Laundering (Prohibition) Act 2022 and the law against terrorism financing. Are these laws not effective in tackling IFFs?
 
A: These laws are relevant, but they do not solve all the problems. They do not close all the gaps. For example, the Money Laundering Act alone does not stop transfer pricing. Transfer pricing, for example, happens from aggressive tax avoidance and aggressive tax planning by companies. A company that is determined to undermine the ability of the tax authority to collect revenue will plan its affairs in the most aggressive manner to exploit every loophole. Aggressive tax avoidance equals tax evasion, virtually because your intention is to do everything and anything to make sure that the government does not get this revenue from you. 

Moreover, we don't have laws that specifically criminalise and prohibit falsification of trade records. Where such actions are discovered, they could lead to an intensive tax audit. FIRS is listed as one of the relevant organisations (ROs) under the Proceeds of Crime (Recovery and Management) Act 2022. But people will say FIRS is a tax authority, what's its business with proceeds of crime? But FIRS is actually a law enforcement agency. The new Tax Administration Act, Chapter 4, I think it is, creates a whole range of offences and one of the Sections, 139, maybe, gives FIRS officers power to prosecute offences created by the Act. 

When you are given prosecuting powers of the Attorney General as the Chief Law Officer of the State, you become a law enforcement agency. And once you choose to prosecute someone for a crime, all the constitutional safeguards for criminal justice administration will kick in. That means you can have alleged offenders arrested. They can be denied liberty, their property, and other assets if they lose the case. 

Because the FIRS is trying to build trust and get the cooperation of citizens, it has chosen to use its civil remedies rather than its enforcement powers. So, if you are found not to have declared your tax, that is a beach of the law. But FIRS will give you an assessment and ask you to pay. The Service is trying to build a customer-centric approach. But it doesn't mean FIRS cannot bite. The staff of FIRS must not suffer an identity crisis by not knowing that it is a law enforcement agency. When we factor the fact that FIRS has asset recovery powers, the extent of its enforcement role and the repercussion of engaging in illicit financial flows may be better understood.
  
Q: The media play a critical role in this, especially when we consider what a German investigative journalist did with the Panama Papers. What’s your view on partnering with the media and international frameworks against IFFs? 
 
A: This is a good question. When I was at ICPC, journalists were partners in this project. They were involved in the conversation. I'm here at FIRS calling attention to the same issue. But the first thing is that charity should start from home. Right now, a good number of FIRS staff don't even know anything about IFFs and how they happen through trade-based money laundering:  an entity has accumulated money and is looking for a way to take it out. It, therefore, creates a fictitious sale transaction between related entities and moves the money. 

Journalists are very critical to this conversation. I absolutely agree that they are important partners. 

Nigeria is very active in many international frameworks. Indeed, Nigeria leads by example, making its voice heard in the UN. Nigeria moved a number of motions and resolutions at the United Nations General Assembly (UNGA) and was part of the debate towards introducing a multilateral tax treaty. I was also a member of the UN panel that made very serious recommendations about the issue of illicit financial flows, which was adopted by the UNGA in 2021. This has led to further discussions on a multilateral tax treaty. FIRS is representing Nigeria in the discussions, with Matthew Gbonjubola, a coordinating director at FIRS, a member of the committee. 

We are making a case that if the world does not deal with illicit financial flows and revenue losses by developing countries, we will forever be looking forward to development assistance or borrowing, despite our abundant natural resources. Nigeria has been very active in the discussions by the AU, too. Our economy is big and dominant in the West African subregion. 

I was at some international meeting about two years ago where Nigeria was commended for taking action towards taxing digital transactions. Many countries are still looking for how they will get around issues to which we are already implementing effective solutions. But Nigeria did not immediately adopt the OECD recommendations on taxing digital transactions because we had to consider what best serves our national interest and that was what guided our action. 
 
Q: You admitted earlier that there is no legislation that specifically addresses the issue of IFFs.  Would you want the National Assembly to look in that direction?
 
A: I will advise that we take one step at a time. It is something that the FIRS should drive. We need to first build a core of enlightened people within the Service. But ultimately, we will need an amendment to some of our laws.
 
Q: What are you doing to tackle those who are transacting business with illegally earned money within the country?
 
A: We have enough laws to deal with that – money laundering. We just need the political will to enforce the laws. When we implement these laws effectively, we will begin to see the practical gaps they may have. But those laws are not fully implemented yet. 

Around the world, certain professionals, including accountants, auditors, lawyers, real estate developers, bankers, etc., have been flagged as facilitators of money laundering and capital flight. These are professionals that crooks and criminals use to launder money. So, each of the professional bodies concerned is expected to take measures. The Money Laundering Act of 2022 created the Special Control Unit against Money Laundering (SCUML) and bound professional bodies, including lawyers. Lawyers plead attorney-client privilege. But if you tell me – as a lawyer – that you are a criminal, I have a responsibility. So, the guidelines help lawyers to profile their clients so that they don't get us into trouble.

When this framework was first introduced in 2011, the legal profession resisted it and even went to court, and they won. I was one of the few voices that asked questions, "Look, the other examples that we are citing of countries with fidelity who self-regulate, do we have the culture of those countries? Do we have the standard of those countries for self-regulation? How robust is our self-regulating mechanism? How many people have we brought to book? Do we have the right framework?” This led to the 2022 amendment, which now specifically targets and mentions lawyers. Again, the Nigerian Bar Association (NBA) challenged it in court. But, in fairness to the NBA, it has created a new framework within our rules of professional conduct to guide lawyers and set up a team to assist lawyers to comply. So, there has been a significant improvement.
 
But it is a wrong message when a prominent body like the NBA put up such resistance. The professional bodies for accountants and auditors deal with their own members’ issues expeditiously. Once they flag you, they get rid of you once you are a channel for money laundering. 

The existing legal framework already provides measures to deal with those who facilitate capital flight. If you are going out of Nigeria, for example, and you have more than the equivalent of US$10,000.00 on you, without declaring it, it is illegal, even if it is your legitimate fund. You earned it legally, but you are trying to transfer it illegally. The money will be seized, and you can be prosecuted and sent to jail upon conviction. 
 
Q: But what of those who move it with their ATM cards?
 
A: That's not illegal. Cash-based transactions are what have a propensity for crime. Once you are doing cash, it means you don't want the source to be traced. But if it's from your card, it shows where it comes from, where it is going, for what purpose, and it is easily traceable. People who deal in drugs will not pay with a card. They want cash, and when they collect the cash, the first concern is how to quickly turn it into clean money. They look for a way to put it in a business that is legitimate on the surface. Once you have a large volume of cash like that, your major concern is how to quickly use it for business and clean it up in the process. That's why it is called money laundering, like you launder clothes.