NIGERIANS with ‘unexplained wealth’ could be forced to forfeit their assets when the ‘lifestyle audit’ planned by the federal government comes into force. The lifestyle audit is to be targeted at individuals who live above their known means of livelihood.
An aide to President Muhammadu Buhari Lauretta Onochie recently revealed plans by the Independent Corrupt Practices and Other Related Offences Commission (ICPC) to commence the implementation of the lifestyle audit in the country.
In a tweet on her Twitter handle, @Laurestar, on March 21, Onochie disclosed that anybody could be called upon to explain the source (s)of their wealth.
“Lifestyle audit is now legal in Nigeria. Those who flaunt lifestyles they cannot afford, can now be investigated by any of the anti-graft agencies to produce evidence of the sources of their wealth. You can now be called upon to explain how you acquired certain properties.”
Although the presidential aide did not provide many details on the lifestyle audit, checks by The ICIR show that the initiative, which marks a new approach in the age-long campaign against corruption in the country, will involve the forfeiture of assets by persons with unexplained sources of wealth.
The lifestyle audit will also serve as a means of revenue generation for the government as individuals possessing hitherto undeclared and undocumented wealth could be made to pay taxes on their assets.
Research by The ICIR into how the lifestyle audit works in different countries shows that, beyond being utilised as a means of fighting corruption, it also serves as a revenue-generating mechanism for government through asset forfeiture and taxation.
Countries which have notable lifestyle audit mechanisms include South Africa and the United Kingdom.
- The South African revenue service has been subjecting private individuals to lifestyle audit since 2007
Section 46(1) of the Tax Administration Act (TAA) empowered the South African Revenue Service (SARS) to compel individuals to submit relevant materials for the lifestyle audit.
According to a report by Business Insider, lifestyle audits had been a part of the South African lexicon for several years.
The South African Revenue Service (SARS) implements the lifestyle audit using it mostly to target and identify individuals who are not paying adequate taxes to the government. But beyond taxation, the policy is also aimed at identifying and prosecuting corrupt persons. SARS encourages members of the public to report anyone living beyond their apparent means. South Africans are advised to report any individual “displaying unusually high lifestyle patterns for a person with similar forms of known income.”
Lifestyle audit in South Africa is targeted at both the public and private sectors, with the main objective being to establish whether an individual is living above their means, and if that lifestyle is funded by fraud or corruption.
In South Africa, reporting institutions such as banks, the Deeds Office and vehicle registration authorities are required to submit information on individuals whenever such is requested by the revenue service. The revenue service may also identify an increase in reported assets that are not reflected in income. Individuals who flaunt their wealth in public or on the social media may inadvertently flag themselves for a lifestyle audit.
In 2019, SARS hinted that religious leaders might be ideal candidates for lifestyle audits.
- SARS lifestyle audit questionnaire asks suspects to provide information on all their assets
Individuals who are subjected to lifestyle audit in South Africa are asked to fill out a ‘lifestyle questionnaire’ and the revenue service will crosscheck the answers provided in the questionnaire against the evidence obtained using alternate sources.
Subjects of lifestyle audit cannot decline the requirement, as a court has ruled that the revenue service has a right to enforce the completion of the questionnaire. A typical lifestyle audit questionnaire issued by SARS compels individuals to provide information on incomes, investments and assets. The questionnaire is used to establish a taxpayer’s living expenses, which will play a central role in the “capital reconciliation’ of a taxpayer’s affairs.
If, during the course of the audit, the individual is unable to prove source of funds or income, SARS may tax those assets as ‘undisclosed income.’
In a recent speech, South Africa’s finance minister Tito Mboweni warned that individuals with wealth and complex financial arrangements would be subjected to lifestyle audit in April 2021. According to Mboweni, the revenue service would establish a unit that would be dedicated to subjecting wealthy individuals to lifestyle audit in order to recover unremitted taxes that should accrue to the government.
- In the UK, the Unexplained Wealth Order targets persons with unclear sources of income
In the United Kingdom (UK), the lifestyle audit is implemented through a legislation known as ‘Unexplained Wealth Orders‘ (UWO), which came into force in January 2018 to help authorities identify and seize property suspected to have been bought with laundered criminal funds, especially from foreign sources.
In the UK, the UWO places the burden on the individual, rather than the government, to prove how they have accumulated their wealth and to raise evidence to verify the sources of the wealth. A UWO can be issued by the high court when an individual is reasonably suspected of involvement or connected to a person involved in serious crime. It obliges the individual to explain how property was obtained. The major question raised is, are there reasonable grounds to suspect that the individual’s lawfully obtained income would be insufficient to fund the purchase of a property?
If the individual is unable to prove that a property was purchased through legitimate means, the asset would be deemed recoverable and recovery proceedings will be instigated, and an interim freezing order may be brought to prevent the respondent from disposing of the assets. Also, a criminal investigation may be launched into the nature of the ownership of the asset.
If the respondent is found to have knowingly made a false or misleading statement, a criminal conviction could be instituted with a corresponding sentence of two years imprisonment, a fine, or both.
- Instances where lifestyle audit was applied in the UK
In one of the most celebrated cases of application of the lifestyle audit or UWO in the UK, a businessman and gangster Mansoor Mahmood Hussain was forced to forfeit assets valued at about £10 million to the government after he failed to prove the source of the property. Hussain was targeted with the UWO after his social media accounts showed him living a luxury lifestyle involving high-performance cars, executive jets, super yachts and appearance at VIP events.
After he was charged under the UWO, Hussain eventually agreed to a settlement which saw him handing over 45 properties to the government. He was left with four small properties that are still mortgaged, and cash in a bank account that was not part of the original investigation.
In another case of lifestyle audit in the UK, wife of a jailed banker Zamira Hajiyeva was investigated under the UWO after it was discovered that she spent a whopping sum of £16 million at Harrods, a supermarket chain. The Court of Appeal in February 2020 halted Hajiyeva’s attempt to stop the UWO from being implemented against her, and instead, ordered her to prove the source of her wealth. A further appeal by Hajiyeva against the UWO was rejected by the Supreme Court in December 2020 and she might now lose her £12m London home – and a separate golf course – if she can’t explain her riches.
Earlier in November 2018, 49 items of jewellery worth more than £400,000 were seized from Hajiyeva by the National Crime Agency as part of investigations into the case.
In another instance, property worth £3.2 million belonging to a Northern Ireland woman suspected to be linked to paramilitary groups was frozen as part of an investigation by the National Crime Agency in July 2019.
Also, three London homes worth more than £80 million were frozen in May 2019 through the application of the UWO. The National Crime Agency asked the suspect – a politically exposed person who is not a citizen of the UK – to explain the source of their wealth, failing which the high court would be asked to order a seizure of the properties.
In February 2018, a government official disclosed that Russian oligarchs suspected of corruption would be asked to explain their luxury lifestyles in the UK under the UWO law. The UK government also said suspicious assets worth more than £50,000 could be seized.
- ICPC says there is legal backing for lifestyle audit in Nigeria
Onochie had suggested that Nigeria’s lifestyle audit would mirror the UK’s UWO when she tweeted, “I have always looked forward to Nigeria having a policy similar to UK’s Unexplained Wealth. We do now. It is called Lifestyle Audit. Beautiful name!”
She added that “there’s no need having a fit if you have nothing to hide.” Although she did not provide details, she noted that the ICPC had gone all the way to the Supreme Court to secure the implementation of the lifestyle audit in the country.
The ICIR contacted the ICPC for more details on the lifestyle audit
Spokesperson of the agency Azuka Ogugua did not specify when the lifestyle audit would commence. “Please anytime we say we are doing something we will let you know when it is starting, even now we are doing it. We don’t need to reveal it. When it is time the media will be the first to know,” Ogugua said in response to our correspondent’s enquiries. She added, “The chairman said he’s doing something you ask when is it taking off? It is not a campaign. Just give us time. When we do it it will be shown, Nigerians will see it. It will not be hidden.”
But she noted that the lifestyle audit was backed by existing legal provisions.
“We have several legal instruments, like the Code of Conduct, which says you should be able to justify whatever you have. You should be able to say this is the source of your income. We might be thinking what you have is not justifiable not knowing that you have a rich uncle somewhere that died and left wealth for you,” the ICPC spokesperson said.
In addition to existing provisions on asset forfeiture in the EFCC, ICPC and other laws, the Asset Tracing, Recovery and Management Regulations came into force in October 2019 to replace the Proceeds of Crime Regulation, 2012. The Asset Tracing, Recovery and Management Regulations, which was issued by the attorney general of the federation (AGF), set out procedures for all law enforcement and anti-corruption agencies in the investigation of illegally acquired assets and proceeds of crime, the tracing and attachment of assets and proceeds of crime of persons under investigation, including the seizure and disposal of assets of crime that are subject to forfeiture as well as recovery of stolen assets that are outside Nigeria.
Under the regulations, the AGF’s office will conduct all forfeiture proceedings – both conviction and non-conviction based. An Asset Recovery and Management Unit also operates under the Office of the AGF. While the law exists, some experts say its implementation has been a major problem, stressing that the country has relied on EFCC and ICPC Acts to execute asset forfeitures.
In what appeared to be a setback for the federal government’s push to confiscate assets suspected to have been acquired through dubious means, a Lagos High Court, on March 4, 2021, set aside an interim order of forfeiture made against a former Senate president Bukola Saraki. The court had, in October 2019, granted the request of the EFCC to confiscate Saraki’s properties located at 17 and 17A MacDonald road, Ikoyi, Lagos.
Ruling on EFCC’s application for final forfeiture of the properties, the court held that the anti-graft agency failed to prove that the assets were proceeds of illegal activity under the corruption laws. According to the court, the onus was on the applicant, being the EFCC, to prove that the assets subject to forfeiture were proceeds of a criminal activity.
In an interview with The ICIR, a Senior Advocate of Nigeria (SAN) Rotimi Jacobs, who has been involved in the prosecution of corruption cases, noted that even as provisions of the EFCC and ICPC laws empowered the federal government to implement the lifestyle audit by investigating persons living above their means, it would have to be proven in court that property subject to forfeiture were acquired through criminal activities before individuals could be forced to forfeit their assets.
“You cannot just do the forfeiture of such assets, you have to dig deeper to see the source of the assets, whether it is legitimate or not. You have to prove,” Jacobs said, adding that the EFCC failed to obtain the final forfeiture of Saraki’s assets because “the people who went to the court thought it was automatic that when you file something you will get a result.”
“But you have to prove it, the law does not presume illegality, you have to prove it,” he stressed.
Jacobs further observed that while the EFCC and ICPC Acts allowed for the investigation of persons living above their known means of livelihood, the law did not criminalise living above one’s means, except in the case of civil servants, as prescribed in the Code of Conduct legislation.
- Lifestyle audit should start with political office holders
Meanwhile, some Nigerians, including members of civil society organisations, who spoke with The ICIR on the planned lifestyle audit, said it should start with political office holders.
Noting that there were legal and taxation justifications for the lifestyle audit, a lawyer and lead director at the Centre for Social Justice (CSJ) Eze Onyekpere said, “The lifestyle audit should start from the top political office holders. The people in the executive, Senate and House of Representatives should tell us how they got the money they are spending.”
In the same vein, executive director at Resource Centre for Human Rights and Civil Education (CHRICED) Ibrahim Zikirullahi, while noting that the lifestyle audit was a welcome idea, insisted that government had to set the tone for such an initiative to work.
“The point is that the government has to lead the way by example. Government officials living ostentatious lifestyles at the expense of tax payers have to be scrutinised and made to fall in line first,” Zikirullahi said.
- Whistle-blowers should be protected for lifestyle audit to work
Executive director at Parent-Child Intervention Centre Peggy Chukwuemeka told The ICIR that, to ensure the success of the lifestyle audit, the federal government should revisit the whistle-blowing policy. The policy is an anti-corruption programme that encourages people to voluntarily disclose information about fraud, bribery, looted government funds, financial misconduct, government assets and any other form of corruption or theft.
Chukwuemeka noted that people were no longer volunteering information about corruption to government because whistle-blowers were not protected.
“I do not think it (lifestyle audit) is realistic unless we revisit the whistle blowing policy because they are related. Who will blow the whistle? Are they protected? Look at what has happened to the whistle blowers, why are people no longer blowing whistle? We need to revisit the policy before the lifestyle audit can work,” she observed.
Chukwuemeka equally stressed that the lifestyle audit should start with political office holders.