“The Global Fight against Money Laundering and
Financing of Terrorism: Are we doing enough?”
Inaugural Oxford Criminology Post-Graduate
Student Conference, Friday 20 November 2009
Abstract
The wave of terrorist attacks and the expansion of criminal organizations during recent decades have
further focused worldwide attention on the money laundering (ML) phenomenon.
Aware of the connection between criminal and terrorist groups and ML techniques, international
organizations such as the United Nations, the Council of Europe and the Organization of American
States, have developed an international anti-ML legal regime integrated by a preventive (banking
regulations and administrative law) and a punitive approach (the international crime of ML).
The main purposes of my research are: (i) to understand the general principles, causes and effects of
the ML phenomenon; (ii) to design a new and uniform definition of the international crime of money
laundering, and, (iii) to suggest the inclusion of this uniform definition of the offence under the
jurisdiction of the International Criminal Court (ICC). These aims intend to structure a more effective
fight against ML operations.
Taking an international and comparative perspective, the research argues that the definition of the
international crime of ML as drafted in the international conventions is inadequate in dealing with ML
operations because it is not uniformly applied in every country. Based on that conclusion, the research
will intend to design a future international convention with a uniform definition of this global offence.
In order to design a uniform definition of the international crime of ML we need to reach the
necessary consensus throughout the key elements that are part of the definition of this global offence.
This consensus should also analyse the inclusion of a uniform definition of the international crime of
ML under the jurisdiction of the International Criminal Court (ICC).
If we do not reach the necessary consensus, both criminal organizations and terrorist groups could
continue finding the gap in order to persist in doing their ‘dirty’ activities.
Agenda
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What is Money Laundering (ML)?.
What is Financing of Terrorism (FT)?
Why are some countries or territories more attractive than others for ML
operations?
International anti-ML regime (‘hard law’ and ‘soft law’ instruments).
Social values protected by the international Anti-ML regime.
Two suggestions: (i) harmonize as much as possible the AML preventive
system, (ii) structure a uniform definition of the international crime of ML.
Legal definition of the ‘international crime of ML’ as drafted in the
international conventions.
Towards a new international convention with a uniform definition of the
‘international crime of ML’.
Cost - benefit analysis on drafting a uniform definition of the international
crime of ML.
Why include a uniform definition of this international crime under the
jurisdiction of the ICC?
Cost – benefit analysis of this last suggestion.
Conclusions.
1) What is Money Laundering (ML)?
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FATF: ‘Process whereby criminals attempt to disguise and legitimate
their ill-gotten gains of crime’. Simpler: making money coming from a
criminal source A, look like it comes from a legitimate source B.
Why criminals choose ML?: (i) commission “predicate offence”, (ii)
accumulation significant amount of “dirty” money, (iii) First dilemma:
transfer or not “dirty money” to a ML process, (iv) Second dilemma:
self-laundering or not.
Main aims of process of ML: (i) concealment process: separate and
disguise criminal origin of assets by giving it an apparently legitimate
source, (ii) cleaning process: enjoy ill-gotten assets by purchasing
luxury assets in the legal economy.
Main aims of ‘reverse ML’ or ‘dirtying process’: (i) concealment
process: separate and disguise legal origin of assets; (ii) dirtying
process: enjoy legal assets by purchasing assets in the ‘informal’ or
‘parallel’ economy (e.g., some investments of criminal groups could be
purchased in the ‘informal’ economy).
2) What is Financing of Terrorism (FT)
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FT: ‘Financial support, in any form, of terrorism or of those who
encourage, plan, or engage in terrorism’ (P. Scholl, IMF/WB, 2006).
Difference b/ ML and FT in the origin of the source: ML derives always
from illegal activities, FT can use ‘dirty’ and/or ‘clean’ money.
Accumulation of significant amount of ‘dirty’ assets – the concealment
and cleaning process of ‘ML’.
Accumulation of significant amounts of ‘clean’ money – the concealment
and dirtying process of ‘money-dirtying’.
Conclusion: ML is one of the four economic channels that criminals and
terrorist groups use to finance their activities. The other three economic
channels are: (i) the process of money-dirtying, (ii) profits that never leave
the ‘legal’ economy, and (iii) profits that never leave the ‘informal’ or
‘illegal’ economy.
3) Why are some territories more attractive than others for ML
operations?
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Characteristics or variables that facilitate certain stages of the ML process
(placement – conversion – reinvestment in the legal economy):
Governments that implement fiscal strategies trying to attract foreign
investments no matter what their origins are.
Countries with adequate anti-ML norms, but with low capacity to enforce
these laws: When states are weak, but act as if they were strong passing out laws and
regulations purporting to regulate without the will or capacity to enforce the law, they
inevitable create spaces between reality and legality that can be explored by criminals, terrorists
and, therefore, launderers (Bagley, ‘Globalization and Latin American and Caribbean Crime’,
2005).
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Corruption: launderers can bribe state officials in exchange of impunity.
Social, economic and political conflicts.
Geographical special characteristics - Vulnerable and open borders.
Countries with high rates of ‘informal’ or ‘underground’ economy.
Countries with inadequate anti-ML norms: the main problem is in the
international anti-ML regime, because it is not uniformly applied.
4) International anti-ML regime (‘hard law’ and ‘soft
law’ instruments)
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Hard Law: international conventions and EC Directives
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1980s: UN Vienna Convention (adopted 1988, entered into force 1990).
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1990s: EU “Strasbourg Convention” (1990, entered into force 1993) and UN “Palermo
Convention” (2000, entered into force Sept. 2003).
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After 11 Sept 2001 - 2002: (i) UN Convention Against Financing of Terrorism (1999, entered into
force April 2002), (ii) UNSC Resolution 1373 (adopted 28 Sept. 2001 – Chapter VII of UN
Charter), (iii) Inter-American Convention against Terrorism (2002, entered into force Oct. 2003).
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2003: UN Convention against Corruption (2003, entered into force 2005).
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2005: EU Convention against ML and FT (2005, entered into force June 2008).
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Soft Law: International recommendations and Resolutions
5) Social values protected by the international anti-ML
regime.
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Undermine ‘criminal organizations’ and ‘terrorist groups’: profits
is “the life blood” of any criminal enterprise. One of the main
objectives of both ‘criminal organization’ and ‘terrorist groups’ is
to accrue profits and accumulate wealth and power.
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Protect socio-economic global regime: ML affects, principally,
‘fair competition’.
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Moral reasons: ‘Nobody can improve their condition through
their own offence’ (Ulpiano Digest, 50, 17, 134). Or Simpler
‘crime should not pay’.
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Protect the ‘administration of justice’: the process of ML is an
obstruction on the investigation of the ‘predicate offence’.
6) A suggestion: harmonize as much as possible financial
anti-ML norms and structure a uniform definition of the
international crime of ML
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Countries could have ‘adequate’ or ‘inadequate’ anti-ML norms
(both preventive and punitive norms):
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IF country A ‘adequate’ and B ‘adequate’ = 3 stages of ML are harder in both
countries.
If country A ‘adequate’ and B ‘inadequate’ = ML is easier in country “B”, but
also in country “A”. Criminals “clean” money in country “B” and then they
submit money already “cleaned” in country “A”. So, we need a uniform antiML regime.
If country A ‘inadequate’ and B ‘inadequate’ = the criminal incentive in
committing both the crime of ML and the “predicate offence” are higher in
country A and country B.
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7) Legal definition of the ‘international crime of ML’ as
drafted in the international conventions.
The international crime of ML is defined as follows:
(a) The conversion or transfer of property,
Variant 1: by any person who knows or should have known
Variant 2: by any person who knows or suspects
Variant 3: by any person who knows, should have known or suspects that
such property is the proceeds of crime, for the purpose of concealing or
disguising the illicit origin of such property or of assisting any person who
is involved in the commission of the predicate offence to evade the
consequences of his or her actions.
(b) The concealment or disguise of the true nature, source, location,
disposition movement or ownership of or rights with respect to property,
Variant 1: by any person who knows or should have known
Variant 2: by any person who knows, should have known or suspects that
such property is the proceeds of crime.
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7) Legal definition of the ‘international crime of ML’ as
drafted in the international conventions (Cont.).
(c) The acquisition, possession or use of property,
Variant 1: by any person who knows or should have known
Variant 2: by any person who knows or suspects
Variant 3: by any person who knows, should have known or suspects [option:
at the time of receipt] that such property is the proceeds of crime.
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The variable regarding the criminalization of ‘self laundering’ conducts:
Variant 1: the offence of ML shall also apply to persons who have committed
the predicate offence.
Variant 2: The offence of ML shall not apply to persons who have committed
the predicate offence.
8) Towards a new international convention with a
uniform definition of the international crime of ML
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The mens rea element: with intent, admitting dolus directus and dolus eventualis (no
negligent) both on the ‘origin of the crime’ and the ‘ulterior intent’ to launder.
The predicate offence of ML: ‘all offences’ (including crime of tax evasion), but
only punishable if the value of the assets involved on the operation of ML is over an
specific economic value.
The criminalization of ‘self-laundering’: a ML offence that applies to the person
who committed the predicate offence.
The evidence that requires the term ‘proceeds of crime’ - What about ML as a
predicate offence of ML?
Abolition of the term ‘proceeds of crime’ – Why not criminalize also the ‘proceeds
of legal’ activities? I suggest a kind of fusion between the definition of the
international crimes of ML and FT as drafted in the international conventions.
The different actions of laundering (e.g., ‘conversion’, ‘transfer’, ‘concealing’,
‘disguise’). Why not include also ‘… in any other way’?
Punishment: fine and imprisonment? What economic value for the fine? (e.g., two to
ten times the amount of the ML operation). What maximum and minimum of
imprisonment (e.g., 4-8 years, 2-10 years).
9) Cost – Benefit analysis on stating a uniform
definition of the int. crime of ML
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Cost: reach a general consensus between several countries.
Benefit: (i) Better chances of detecting criminal groups when
they shop around the world trying to find the best legal
jurisdiction for laundering;
(ii) More efficient processes of request of information and
extradition (mutual legal assistance) between countries.
(iii) The sovereignty of the countries is respected - Each country
keeps the option to state the limits and extension of the
principle of ‘dual criminality’.
(iii) An easier and more effective fight against ML operations in
the world.
10) Why include a uniform definition of this crime
under the jurisdiction of the ICC?
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International versus national jurisdiction: (i) The duty of
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Social values protected by int. crime of ML: to defend the society as a whole
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bring ML perpetrators to
justice rests solely on national criminal justice systems. Without adequate domestic capacity to
discharge this duty, international anti-ML efforts almost certainly fall; (ii) some governments
could turn a blind eye to ML operations, arguing that ML makes revenue to their jurisdiction
(Takat, 2007); (iii) ML is a trans-border and mutable process, so the prevention and combat of
this process is difficult for national criminal justice systems.
from the expansion of criminal organizations. One purpose of this criminal groups is to accrue
profits and accumulate wealth and power. The accumulation of profits promotes the expansion
of criminal organizations, so they can continue threatening the global socio-economic and
democratic system (See, e.g., Preamble ‘Vienna Convention’ and Res. 55/25 adopting ‘Palermo
Convention’).
Main purpose of ICC: this Court has jurisdiction over ‘serious’ cases that ‘concern’ the
whole international community (Preamble of the ICC Stature). In particular, ‘when committed as
part of a plan or policy or as part of a large-scale commission of such crimes’. ML is a ‘serious’
crime that, according to international conventions, ‘concerns’ the whole international community
(Important: the predicate offence of ML could be ‘all offences’ but with a HIGH punishable
amount of values).
11) Cost-benefit analysis of this last suggestion.
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Cost: reach consensus among several countries not only in
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Benefits: (i) structure a more effective fight against ‘criminal
drafting a uniform definition of the international crime of ML
but also in including this uniform definition under the
jurisdiction of the ICC.
organizations’ that commits serious crimes of genocide, crimes
against humanity and war crimes; (ii) protect socio-economic
global regime; (iii) protect security and stability of States, (iv)
reduce the degree of ambiguity and vagueness of the definition
of the international crime of ML; (v) protect the correct
administrations of justice on the investigations that are under the
jurisdiction of the ICC’s prosecutor office, (vi) structure a more
effective fight against ML.
Conclusions
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ML is one of the four economic channels that criminal
organizations and terrorist groups use to finance their activities
and accumulate wealth and power.
In order to re-define the international crime of ML, we need to
find the necessary consensus through the key elements that are
part of the definition of the international crime of ML. This
general consensus should also analyze the inclusion of a uniform
definition of this global offence under the jurisdiction of the
International Criminal Court (ICC).
This general consensus should be reached by the adoption of a
future international convention that is signed and ratified by
several countries. In this way, they would all commit themselves
to include that uniform act in their internal legislation.