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1.1 The Study’s Background

Money laundering is a serious threat to individuals, businesses, financial systems, markets, and governments because it affects and destructs the economic development of a country (both developed and developing), with developing countries such as Nigeria losing billions of dollars each year to money launderers.

Many international and regional governments have begun to recognize that money laundering has become a continual major threat to the global economy, financial system development, and global community.

The concealment of the source, origin, existence, location, and disposition of money and/or property gained unlawfully or from criminal activities such as embezzlement, drug trafficking, prostitution, 419, corruption, and large-scale crime is referred to as “money laundering.”

Nobody knows where this money laundering originated, but there are several theories, including that it began several thousand years ago with Chinese merchants, as well as mafia ownership of laundries in the United States, where they needed to prove their genuine source of funds because they earned their money through extortion, gambling, and bottle liquor.

Money laundering is thought to be the third most serious crime by some academic experts, with an estimated 60 percent to 70 percent of occurrences worldwide due to the rise of organized crime such as financial terrorism, tax evasion, and others.

Most of our financial institutions today fail to recognize that the phenomenon “fraud” appears to be more dangerous when compared to other types of problems, such as armed robbery attacks, which only affect the institution for a short period of time and may have no long-term impact on their operations.

However, any serious fraud perpetrated in an institution not only undermines or rattles its financial stability, but can also significantly damage the institution’s reputation, resulting in investor loss of confidence.

According to the US Treasury Department, “money laundering” is the act of making illegally obtained proceeds (i.e. dirty money) appear legal (clean), and it consists of three steps: placement, layering, and integration. This is one of the reasons why numerous regulatory and governmental agencies offer estimates for the amount of money laundered each year, either globally or inside the national economy. The International Monetary Fund estimated in 1996 that money laundering accounted for two to five percent of the worldwide economy.

Furthermore, according to Osisoma (2009), money laundering is a second-order financial crime that stems from an underlying criminal behavior known as a predicate offense. It creates proceeds that, when laundered, result in money laundering offenses. Money laundering, in other words, is a transnational crime.

According to Summers (2000), the observable fact of money laundering is a characteristic of organized crime, with researchers and academics estimating that money laundering generates approximately US$100 billion, while British Intelligence estimates that the total amount laundered annually is approximately US$500 billion.

While organizations operating in the same country must typically follow the same AML laws and regulations, Nigerian accounting firms all arrange their AML efforts significantly differently. As a result, most financial institutions worldwide, as well as many non-financial organizations, are mandated to identify and report suspicious transactions to the country’s financial intelligence section.

Furthermore, the International Monetary Fund working paper concludes that money laundering has an impact on financial behavior and macroeconomic performance in a variety of ways, including policy errors caused by measurement errors in national account statistics, volatility in exchange and interest rates caused by unanticipated cross-border transfers of funds, the threat of monetary instability caused by unsound asset structures, the effect of tax collection and public expenditure allocation d

According to John and Gary (2001), the use of money laundering and currency manipulation can hurt currencies and interest rates, particularly in developing economies such as Nigeria.

For example, a developing country like Nigeria relies on the acquisition of other currencies to fulfill international responsibilities while meeting local requirements, thereby introducing money laundering into the system. Profit is not only a motivator for investing the proceeds of economic crimes in any business, but it is also convenient for money launderers to move funds around as the circumstances requires.

Accounting firms and professionals are deeply implicated in any country’s global financial crisis due to their inability to carry out financial transactions with due diligence, transparency, and nonconformity/compliance with stated accounting guidelines and regulation, which in turn creates opportunities for criminal and fraudulent activities such as money laundering, tax evasion, and others.

The magnitude of this financial crime (money laundering) necessitates a reassessment of all areas of business and economic activity, including accounting guidelines and standards. Although the observable fact of money laundering has garnered increased attention from every country in the world, it remains a source of contention in criminal terminology.

In anticipation of the phrase “money laundering,” which has almost been discussed and documented over the last seven (decades), it is extraordinary that this subject has been given in research studies, despite the fact that organized crime has been given fewer research studies and has been a part of society for a long time.

The reason for financial crime, such as money laundering, is usually formed around some risk factor, which includes the incentive (or pressure), opportunity, and rationale around the financial criminals; without a question, money laundering has tarnished accounting companies’ image.

This proposal will also include a literature research to better understand money laundering theories as well as the roles and duties of accounting firms in combatting the problem.

This study will also provide an overview of international and national regulations and legislative frameworks in place in Nigeria to prevent and identify money laundering.

It would also provide a logical strategy to dealing with financial crime such as money laundering in Nigeria’s financial and non-financial sectors.

1.2 Problem Description

The role of accounting companies in money laundering is difficult to quantify, but it is apparent that such behavior harms both a country’s financial and economic sectors.

Financial institutions, which are crucial to economic progress, lower overall economic productivity.

As a result of money laundering, the country’s economic growth and development have slowed.

Globally, and in Nigeria today, the UNODC report that (2010) two trends characterized money laundering in recent years, the first of which is the increasing involvement of professionals (Accountants), and the second of which is that Accounting firms are used not only to conceal the origin of the source of proceeds, but also to manage subsequent asset and/or other legitimate business globally, and as a result of this tackling money laundering and the accountability of legal institutions whethe

Money laundering poses a threat to the continued existence of a corporate organization due to the lack of a concrete internal auditing procedure, non-compliance with relevant accounting standards due to accountant negligence, insufficient book-keeping/accounting procedures that give rise to unhealthy meddling (presentation of distorting or misleading financial statements), despite the fact that money laundering has become a potential threat to the continued operation.

Money laundering has been a major concern for shareholders, regulatory authorities, and the general public, particularly in the financial sector, and this can be traced back to many financial institutions’ lack/inadequacy of credit administration as a result of their inability to properly appraise the loan granted, resulting in an increase in the volume of non-performing assets, putting any institution in precarious financial situations.

(2012) (Idowu and Obasan) Money laundering in Nigeria has worsened in recent years, obscuring the image of the country’s decent and hardworking people, as top management and opportunists ride on the backs of various accounting firms and banks to carry out their illegal acts, confident that the law in the country will protect them, to the detriment of decent people and hindering legitimate business.

This study tries to investigate the involvement of accounting companies in money laundering in Nigeria against this backdrop.

1.3 The Study’s Objective

The following are the study’s objectives:

Determine how accounting firms aid in the reduction and prevention of money laundering in Nigeria.
Remove the constraint that accounting firms face in money laundering in Nigeria.
Identify the economic impact of money laundering in Nigeria.
Examine the effectiveness of Nigeria’s anti-money laundering legislation and regulations in preventing money laundering.
1.4 Research Issue

To guide the investigation, the following research questions were posed.

Accounting firms aid in the reduction and prevention of money laundering in Nigeria?
What are the challenges that accounting firms face when it comes to money laundering in Nigeria?
What is the economic impact of money laundering in Nigeria?
The effectiveness of Nigeria’s anti-money laundering legislation and regulations in preventing money laundering?
1.5 Importance of the Research

As a result, criminal organizations are increasingly outsourcing the process of money laundering to accountants because the methods required to evade detection and violate the law are complex.

Money laundering has become a major concern for both individuals and corporations over the years. This is because the majority of stakeholders, retirees, customers, current employees, and so on, rely on both financial institutions and accounting firms for payment.

Thus, stemming the tide of money laundering will go a long way in alleviating the economic hardship being experienced by these categories of citizens, as well as reassuring stakeholders and raising their confidence level in the country’s financial and economic system.

This study will be very useful to the government, corporate individuals, financial and non-financial institutions since it will assist in determining the true income of each company and bank in order to pay the correct tax. It will also help to establish duties for all persons in the regulated sector to disclose pertinent money laundering information to authorities.

It will also assist in outlining numerous money laundering offenses and their penalties, as well as providing them with constructive insight into how to combat this horrible menace known as money laundering in the country.

It will also benefit the corporate world by assisting accountants and auditors at accounting firms in preventing, reducing, and detecting money laundering in the country.

It will also help investors and depositors understand the financial position of the institution they are investing in and whether it will be profitable or not, as well as all those in the regulated sector (statutory auditors, tax advisors, forensic accountants, external auditor/accountant9someone who provides accounting services to others) by providing them with fundamental legal rules relating to money laundering.

Finally, it will be of significant importance to schools and students because it will serve as a reference point for future researchers who wish to conduct additional research on the subject.

1.6. Study Restrictions

When conducting this investigation, we encountered various difficulties. These issues include.

Financial issues: The success of our study effort is dependent on the availability of funds, which hampered the researcher because the funds at his disposal were insufficient to carry out the research properly.

Time: This relates to the time-frame assigned for completing the study as well as other challenges; activities and engagements requiring me as a final year student to reduce my time-frame.
Data collecting issues: As a result of the research project, we were confronted with the issue of obtaining the required source of data on time.

1.7 Terms Definition

Accounting firms are specialist service providers headed by qualified accountants who serve both commercial and consumer clients. Accounting firms, like individuals, might choose to specialize in certain areas of accounting, such as business starts or liquidations.

2. Audit Accounting Firms: These firms audit companies, organizations, and small enterprises since annual audits are needed in most countries for businesses, and these firms are always contracted to execute such audits.

Money laundering is the practice of converting criminal gains into nominally legitimate money or other assets. Misuse of the financial system (including securities, digital currencies, credit cards, and traditional cash) is also involved, as is terrorism financing and evasion of international sanctions.

4. Adding Layers
This is a process in which the launderer converts or moves funds to a location that is far from their origin. Layers upon layers of transactions are formed here, shifting “dirty” funds between accounts or businesses, or buying and selling assets on a local and worldwide scale, until the original source of the money is untraceable.

Structuring: Also known as smurfing, this is a type of placement in which cash is broken down into smaller amounts of money in order to circumvent suspicion of money laundering and avoid anti-money laundering reporting requirements.

Forensic accounting is a branch of accounting in which accounting, auditing, and investigative abilities are utilized to aid courts in legal situations. Forensic accountants, sometimes known as forensic auditors, examine white collar crimes such as money laundering, embezzlement, fraud, and bankruptcy.

White-collar crime includes: In 1939, Edwin Sutherland defined it as “a crime done in the course of one’s occupation by a person of respectability and high social rank.”
It is a nonviolent financial crime undertaken for illegal monetary gain.

Fraud: a false or unlawful deceit intended to obtain financial or personal gain.

Specifically, it is an act or process of deception, omission, or perversion of truth in order to achieve an illegal or unfair benefit.
Corruption: This refers to illicit wrongdoing on the part of an authority or those in power. That is, it is a complicated social and economic phenomenon perpetrated by people in authority for personal gain.


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