A Critique Of The Court Of Appeal Judgement In FRN V Chief Mike Ozekhome (SAN)

This article by Mayowa Owolabi, seeks to review
the state of our Laws (statutory and case law) and the applicable
rules of professional conduct as it relates to acceptance of
briefs, and the obligation to ascertain that funds charged and
received as professional fees by Lawyers in Nigeria, are not
derived from unlawful activities, in comparison to global trends
and what conforms with international best practice.

Background

In a recent Judgement which was delivered by the Court of Appeal
on the 14th of May, 2021in a case constituted as App No:
CA/L/174/19-FEDERAL REPUBLIC OF NIGERIA v CHIEF MIKE OZEKHOME
(SAN); the Court upheld the Ruling of the Federal High Court which
held that an earlier exparte order of the Federal High Court which
froze the account of the Respondent to the appeal was improperly
procured, and was therefore, rightfully discharged.

A review of the facts surrounding the procurement of the
aforementioned order and the subsequent vacation of it, clearly
indicates that the rationale for the decision of the Court of
Appeal accords with logic. The Court of Appeal held that the
Appellant (as Applicants at the Court below), had suppressed
material facts in the exparte application with which it procured
the order freezing the account of the Respondent.

However, on page 27 of the judgement, the Court proceeded to
make a significant pronouncement on the absence of an obligation on
Nigerian Legal Practitioners to ascertain that professional fees
paid for services rendered, are not derived from unlawful
activities or a criminal enterprise. The Court specifically held as
follows:

The learned counsel to the Appellant had argued that the
Respondent ought to have known that the source of money paid to him
as professional fees, was from an illicit act or “proceeds of
unlawful activities. No doubt a Legal Practitioner is entitled to
his fees for professional services rendered, and such fees cannot
be rightly labeled as proceeds of crime. Further, it is not a
requirement of the law that a legal practitioner would go into
inquiry before receiving his fees from his client, to find the
source of the fund from which he would be paid”.

The critique is of particular interest, considering that the
client in question in the case under review was a serving executive
Governor of a State in Nigeria, and therefore, was a “Politically
Exposed Person”.

The general perception is that, a Lawyer is an honest person
with impeccable character. In the preface to the book, “Ministering
Justice”, the authors (Olasupo Shasore SAN & Akeem Olajide Bello),
described the practice of law as a profession, as a call to public
service. Law works at the pleasure of society and therefore, should
work for society. Invariably, this trickles down and is reflected
in the high and lofty ethical standards which Lawyers are expected
to maintain at all times, as key stakeholders in the administration
of Justice within Society. In describing this necessary attribute
of a Lawyer and his duty to Society, the Hon.

Justice Pat-Acholunu J.C.A (as he then was) in Kotoye v Saraki
(1995) 6 N.W.L.R (Pt.402) 504 at 508 stated as follows:
“In a free society (which we claim to belong), it is the duty of
Lawyers to show enviable leadership, by the way they conduct their
cases with courage and elegance. They must realise that being
officers in the temple of justice, it behoves of them to seek the
supreme welfare of promotion of justice, the growth of
jurisprudence…“.

Issues connected to Lawyers remuneration and professional fees,
are stipulated in Rules 48 to 54 of the Rules of Professional
Conduct 2007. There is no provision in the Rules, that require a
Lawyer to ascertain the source of funds provided to pay his fees by
a prospective client. Therefore, the Court of Appeal’s
pronouncement in the Chief Mike Ozekhome, SAN case would appear
unimpeachable based on the applicable regulations.

The MLA & CBN Case

It is instructive to note that a comparison of the applicable
rules in Nigeria with other climes, particularly the United Kingdom
and the United States of America, clearly indicates that we may be
lagging behind in the progressive efforts being made globally,
towards ensuring that Lawyers are not utilised for money laundering
schemes. It is also unhelpful that the most significant legislation
on Money Laundering in Nigeria (Money Laundering Prohibition Act,
2001(“MLA”), which specifically listed Legal Practitioners in the
definition of “designated non-financial institutions” has since
been judicially determined to be inapplicable to Lawyers. This
position was affirmed by the Court of Appeal in the case of CENTRAL
BANK OF NIGERIA v REGISTERED TRUSTEES OF THE NIGERIAN BAR
ASSOCIATION CA/A/202/2015 (Unreported) Judgement delivered on the
14th of June, 2015, where the Court upheld the decision of the
Federal High Court which held that Legal Practitioners are excluded
from the definition of designated non-financial institutions as
contained in the MLA, and therefore, not required to register with
the Special Control Unit Against Money Laundering (SCUML).

In urging the Court to nullify the provisions of Sections 5 and
25 of the MLA, the Nigerian Bar Association “NBA” (as Plaintiff at
the Federal High Court and Respondent at the Court of Appeal),
contended that the inclusion of Legal Practitioners in the
definition section of the MLA makes the law incongruent, in
conflict and repugnant to the provisions of the existing law
regulating the practice of law in Nigeria, especially as it relates
to accountability and professional obligations to clients under the
Legal Practitioners Act of 1976.

In order to fully understand and underpin the real issue in
controversy in the afore-mentioned case of CENTRAL BANK OF NIGERIA
v REGISTERED TRUSTEES OF THE NIGERIAN BAR ASSOCIATION (Supra), it
is pertinent to summarise the import of the classification of a
Legal Practitioner as a non-designated financial institution. By
virtue of the provision of Section 5 of the MLA, all non-designated
financial institutions are required (amongst others) to keep a
record of all cash transactions involving a sum exceeding US$
1,000, and are periodically required to submit a report of such
transactions to the Ministry of Trade and Commerce. A designated
non-financial institution that fails to comply with the provisions
of the law, is liable to be convicted and exposed to the
possibility of the suspension or revocation of his/her licence.

In pushing its contentions against the inapplicability of
Section 5 of the MLA to Legal Practitioners, the NBA placed heavy
reliance on the import of the provisions of Section 192 of the
Evidence Act, 2011 which protects privileged communications between
Lawyers and Clients.

On the other hand, the CBN (as Respondent at the Federal High
Court and Appellant at the Court of Appeal) argued that, Section
192 of the Evidence Act does not address the mischief which
Sections 5 and 25 of the MLA seek to address and curtail. Whilst,
Section 192 of the Evidence Act provides an exception to the rule
of confidentiality, when a client has committed a crime, Section 5
of the MLA merely creates an obligation of record keeping and
active reporting of a certain threshold of cash transactions
relating to their clients. In the former, the commission of a crime
or illegality by the client is envisaged, while in the latter, the
purpose is to identify the source, volume and movement of money
with the overall objective of Preventing or Detecting funding of
drug trafficking, terrorism and other illegal activities, which the
Legal Practitioner may knowingly or unknowingly be an accessory
to.

As indicated, the Court of Appeal eventually ruled in favour of
the NBA, by holding that the provisions of Sections 5 and 25 of the
MLA, insofar as they purport to apply to Legal Practitioners are
invalid, null and void. The jury is still out on how an appeal to
the Supreme Court would have turned out; as it appears no appeal
was filed against the decision.

The State of Affairs in the United Kingdom

Comparatively, between 2002 and 2020, a series of legislation
was passed in the United Kingdom, as part of measures to tackle
money laundering. One of such legislation is the Proceeds of Crime
Act, 2002. Based on this Statute, all professionals are mandatorily
required to file what is termed a “Suspicious Activity Report” on
any suspicious activities observed during the course of engagement
with clients, to the National Crime Agency.

The legislation was provocative because it required Solicitors
to become whistle-blowers, whilst equally gagging them from
disclosing to their clients that they had turned undercover
informants. It was a legislation that stayed despite the wide
spread shock which was expressed at its passing, because the
Solicitors Regulatory Authority already had a basic code of conduct
that deemed integrity as the most important requirement in the code
of conduct. The underlying reason for the legislation at the
relevant time, was that the United Kingdom was seen as a high risk
jurisdiction for money laundering with law firms and Solicitors
seen as an attractive conduit, because of the position of trust
they hold. Failure to file a pre-emptive SAR (Suspicious Activity
Report), could expose a Lawyer to Criminal Prosecution under the
Proceeds of Crime Act.

Other similar legislation which Solicitors practicing in the
United Kingdom are required to understand and adhere to include:
(1) The Money Laundering and Terrorist Financing (Amendment)
Regulations 2019, and (2) Terrorism Act 2000. The SRA has
consistently encouraged law firms as part of their KYC obligations,
to ensure that they understand the source of their client’s wealth
and funding before facilitating any transaction or accepting
instructions. UK law firms are required to scrutinise transactions
undertaken throughout the course of the relationship with a client,
including the source of the funds, to ensure that the transactions
are consistent with the relevant person’s knowledge of the
customer, the customer’s business and risk profile (Regulation 28
(S11(a) of the Money Laundering Regulations 2017).

In spite of the foregoing, the SRA is of the view that, the
current checks being made by most of the firms in the UK are not
enough. Mark Boyle, who is the policy lead on anti-money laundering
for the SRA, in addressing the SRA’s annual compliance conference
which held in December 2020, advised law firms to prioritise the
training of their staff, as they are “arguably the only line of
defence against being used for money laundering”. He also indicated
that the SRA is likely to request for further information and
scrutiny, about measures being put in place to combat risk.

Bottom Line

The current state of laws and the regulations which relate to
the practice of law in Nigeria, clearly indicate that we are not at
par with the applicable regulations in the United Kingdom. The
recent pronouncement of the Court of Appeal in the Chief Mike
Ozekhome, SAN case is discomforting, and unduly exposes
international transactions emanating from Nigeria to additional
scrutiny, as it presupposes that there are no applicable internal
mechanisms which ensure that Nigerian Lawyers are not unwittingly
utilised for money laundering schemes. Potentially, international
financial institutions would hold the view that Nigeria should
remain, or be re-introduced on the list of high risk Countries.

This article by Mayowa Owolabi, seeks to review
the state of our Laws (statutory and case law) and the applicable
rules of professional conduct as it relates to acceptance of
briefs, and the obligation to ascertain that funds charged and
received as professional fees by Lawyers in Nigeria, are not
derived from unlawful activities, in comparison to global trends
and what conforms with international best practice.

Background

In a recent Judgement which was delivered by the Court of Appeal
on the 14th of May, 2021in a case constituted as App No:
CA/L/174/19-FEDERAL REPUBLIC OF NIGERIA v CHIEF MIKE OZEKHOME
(SAN); the Court upheld the Ruling of the Federal High Court which
held that an earlier exparte order of the Federal High Court which
froze the account of the Respondent to the appeal was improperly
procured, and was therefore, rightfully discharged.

A review of the facts surrounding the procurement of the
aforementioned order and the subsequent vacation of it, clearly
indicates that the rationale for the decision of the Court of
Appeal accords with logic. The Court of Appeal held that the
Appellant (as Applicants at the Court below), had suppressed
material facts in the exparte application with which it procured
the order freezing the account of the Respondent.

However, on page 27 of the judgement, the Court proceeded to
make a significant pronouncement on the absence of an obligation on
Nigerian Legal Practitioners to ascertain that professional fees
paid for services rendered, are not derived from unlawful
activities or a criminal enterprise. The Court specifically held as
follows:

The learned counsel to the Appellant had argued that the
Respondent ought to have known that the source of money paid to him
as professional fees, was from an illicit act or “proceeds of
unlawful activities. No doubt a Legal Practitioner is entitled to
his fees for professional services rendered, and such fees cannot
be rightly labeled as proceeds of crime. Further, it is not a
requirement of the law that a legal practitioner would go into
inquiry before receiving his fees from his client, to find the
source of the fund from which he would be paid”.

The critique is of particular interest, considering that the
client in question in the case under review was a serving executive
Governor of a State in Nigeria, and therefore, was a “Politically
Exposed Person”.

The general perception is that, a Lawyer is an honest person
with impeccable character. In the preface to the book, “Ministering
Justice”, the authors (Olasupo Shasore SAN & Akeem Olajide Bello),
described the practice of law as a profession, as a call to public
service. Law works at the pleasure of society and therefore, should
work for society. Invariably, this trickles down and is reflected
in the high and lofty ethical standards which Lawyers are expected
to maintain at all times, as key stakeholders in the administration
of Justice within Society. In describing this necessary attribute
of a Lawyer and his duty to Society, the Hon.

Justice Pat-Acholunu J.C.A (as he then was) in Kotoye v Saraki
(1995) 6 N.W.L.R (Pt.402) 504 at 508 stated as follows:
“In a free society (which we claim to belong), it is the duty of
Lawyers to show enviable leadership, by the way they conduct their
cases with courage and elegance. They must realise that being
officers in the temple of justice, it behoves of them to seek the
supreme welfare of promotion of justice, the growth of
jurisprudence…“.

Issues connected to Lawyers remuneration and professional fees,
are stipulated in Rules 48 to 54 of the Rules of Professional
Conduct 2007. There is no provision in the Rules, that require a
Lawyer to ascertain the source of funds provided to pay his fees by
a prospective client. Therefore, the Court of Appeal’s
pronouncement in the Chief Mike Ozekhome, SAN case would appear
unimpeachable based on the applicable regulations.

The MLA & CBN Case

It is instructive to note that a comparison of the applicable
rules in Nigeria with other climes, particularly the United Kingdom
and the United States of America, clearly indicates that we may be
lagging behind in the progressive efforts being made globally,
towards ensuring that Lawyers are not utilised for money laundering
schemes. It is also unhelpful that the most significant legislation
on Money Laundering in Nigeria (Money Laundering Prohibition Act,
2001(“MLA”), which specifically listed Legal Practitioners in the
definition of “designated non-financial institutions” has since
been judicially determined to be inapplicable to Lawyers. This
position was affirmed by the Court of Appeal in the case of CENTRAL
BANK OF NIGERIA v REGISTERED TRUSTEES OF THE NIGERIAN BAR
ASSOCIATION CA/A/202/2015 (Unreported) Judgement delivered on the
14th of June, 2015, where the Court upheld the decision of the
Federal High Court which held that Legal Practitioners are excluded
from the definition of designated non-financial institutions as
contained in the MLA, and therefore, not required to register with
the Special Control Unit Against Money Laundering (SCUML).

In urging the Court to nullify the provisions of Sections 5 and
25 of the MLA, the Nigerian Bar Association “NBA” (as Plaintiff at
the Federal High Court and Respondent at the Court of Appeal),
contended that the inclusion of Legal Practitioners in the
definition section of the MLA makes the law incongruent, in
conflict and repugnant to the provisions of the existing law
regulating the practice of law in Nigeria, especially as it relates
to accountability and professional obligations to clients under the
Legal Practitioners Act of 1976.

In order to fully understand and underpin the real issue in
controversy in the afore-mentioned case of CENTRAL BANK OF NIGERIA
v REGISTERED TRUSTEES OF THE NIGERIAN BAR ASSOCIATION (Supra), it
is pertinent to summarise the import of the classification of a
Legal Practitioner as a non-designated financial institution. By
virtue of the provision of Section 5 of the MLA, all non-designated
financial institutions are required (amongst others) to keep a
record of all cash transactions involving a sum exceeding US$
1,000, and are periodically required to submit a report of such
transactions to the Ministry of Trade and Commerce. A designated
non-financial institution that fails to comply with the provisions
of the law, is liable to be convicted and exposed to the
possibility of the suspension or revocation of his/her licence.

In pushing its contentions against the inapplicability of
Section 5 of the MLA to Legal Practitioners, the NBA placed heavy
reliance on the import of the provisions of Section 192 of the
Evidence Act, 2011 which protects privileged communications between
Lawyers and Clients.

On the other hand, the CBN (as Respondent at the Federal High
Court and Appellant at the Court of Appeal) argued that, Section
192 of the Evidence Act does not address the mischief which
Sections 5 and 25 of the MLA seek to address and curtail. Whilst,
Section 192 of the Evidence Act provides an exception to the rule
of confidentiality, when a client has committed a crime, Section 5
of the MLA merely creates an obligation of record keeping and
active reporting of a certain threshold of cash transactions
relating to their clients. In the former, the commission of a crime
or illegality by the client is envisaged, while in the latter, the
purpose is to identify the source, volume and movement of money
with the overall objective of Preventing or Detecting funding of
drug trafficking, terrorism and other illegal activities, which the
Legal Practitioner may knowingly or unknowingly be an accessory
to.

As indicated, the Court of Appeal eventually ruled in favour of
the NBA, by holding that the provisions of Sections 5 and 25 of the
MLA, insofar as they purport to apply to Legal Practitioners are
invalid, null and void. The jury is still out on how an appeal to
the Supreme Court would have turned out; as it appears no appeal
was filed against the decision.

The State of Affairs in the United Kingdom

Comparatively, between 2002 and 2020, a series of legislation
was passed in the United Kingdom, as part of measures to tackle
money laundering. One of such legislation is the Proceeds of Crime
Act, 2002. Based on this Statute, all professionals are mandatorily
required to file what is termed a “Suspicious Activity Report” on
any suspicious activities observed during the course of engagement
with clients, to the National Crime Agency.

The legislation was provocative because it required Solicitors
to become whistle-blowers, whilst equally gagging them from
disclosing to their clients that they had turned undercover
informants. It was a legislation that stayed despite the wide
spread shock which was expressed at its passing, because the
Solicitors Regulatory Authority already had a basic code of conduct
that deemed integrity as the most important requirement in the code
of conduct. The underlying reason for the legislation at the
relevant time, was that the United Kingdom was seen as a high risk
jurisdiction for money laundering with law firms and Solicitors
seen as an attractive conduit, because of the position of trust
they hold. Failure to file a pre-emptive SAR (Suspicious Activity
Report), could expose a Lawyer to Criminal Prosecution under the
Proceeds of Crime Act.

Other similar legislation which Solicitors practicing in the
United Kingdom are required to understand and adhere to include:
(1) The Money Laundering and Terrorist Financing (Amendment)
Regulations 2019, and (2) Terrorism Act 2000. The SRA has
consistently encouraged law firms as part of their KYC obligations,
to ensure that they understand the source of their client’s wealth
and funding before facilitating any transaction or accepting
instructions. UK law firms are required to scrutinise transactions
undertaken throughout the course of the relationship with a client,
including the source of the funds, to ensure that the transactions
are consistent with the relevant person’s knowledge of the
customer, the customer’s business and risk profile (Regulation 28
(S11(a) of the Money Laundering Regulations 2017).

In spite of the foregoing, the SRA is of the view that, the
current checks being made by most of the firms in the UK are not
enough. Mark Boyle, who is the policy lead on anti-money laundering
for the SRA, in addressing the SRA’s annual compliance conference
which held in December 2020, advised law firms to prioritise the
training of their staff, as they are “arguably the only line of
defence against being used for money laundering”. He also indicated
that the SRA is likely to request for further information and
scrutiny, about measures being put in place to combat risk.

Bottom Line

The current state of laws and the regulations which relate to
the practice of law in Nigeria, clearly indicate that we are not at
par with the applicable regulations in the United Kingdom. The
recent pronouncement of the Court of Appeal in the Chief Mike
Ozekhome, SAN case is discomforting, and unduly exposes
international transactions emanating from Nigeria to additional
scrutiny, as it presupposes that there are no applicable internal
mechanisms which ensure that Nigerian Lawyers are not unwittingly
utilised for money laundering schemes. Potentially, international
financial institutions would hold the view that Nigeria should
remain, or be re-introduced on the list of high risk Countries.