Academic urges caution in implementing lifestyle audit in AML and CFT fight   


 …says focus should be on suspicious transactions

Following increasing calls to implement active lifestyle audits as an added layer in the Anti-Money Laundering (AML), Counter Terrorist Financing (CTF) and tax evasion fight, a senior lecturer of finance at the University of Ghana Business School (UGBS) – Dr. Elikplimi Agbloyor, has cautioned against the hasty introduction of such a measure, arguing that the structures required to successfully implement it are currently feeble.

A lifestyle audit refers to comparison of the living standards of an individual with said individual’s known source of income, in a bid to reveal inconsistencies or otherwise unexplained wealth. It is oftentimes extended to include spousal income, if any, as well as declared assets of the family and related personal expenditure of such individual.

Speaking in an interview with the B&FT, Dr. Agbloyor argued that while lifestyle audits might be advantageous in principle, there is a possibility that it could be applied selectively – resulting in discriminatory profiling, political witch-hunting as well as serving as a disincentive for private businesses and property owning individuals.

“Given our history as a country and the importance of protecting property rights, and given that our democracy is not well matured, I would hesitate in recommending a full lifestyle audit. In that case, it is blind as we would not be sceptical solely because an individual drives a nice car or lives in a nice house,” he said.

He further explained that with a more robust AML and CFT regime, activities of individuals which warrant suspicion would invariably raise red flags upon which duly mandated anti-graft agencies can act. This, according to him, will ensure that their actions are as dispassionate and objective as possible.

“Some of the transactions that the individual will be involved in will in any case raise red flags, and based on those red flags the law enforcement agencies can then speak to the person,” he added.

Burden of proof

Dr. Agbloyor also argued that the dynamics of lifestyle auditing ultimately shifts the burden of proof from the accusing agent to the accused; a move which he believes is a deviation from normalcy and one that can be summarily abused.

“The burden of proof should lie with the prosecution, not the accused; and that is a well-established legal tradition. If the burden shifts to the accused to prove innocence, it could become problematic,” he said.

The jury appears to still be out on the effectiveness of lifestyle audits, as various countries have applied it with varying degrees of success. The Canada Revenue Agency (CRA) is noted to have applied it, particularly in its CA$1.7trillion (US$1.33 trillion) real estate market which was becoming a haven for money laundering. Closer to home, Kenya, Zimbabwe and more recently South Africa and Nigeria have implemented various forms of lifestyle audits, particularly targetted at, but not limited to, public servants.

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