The Treaties, conventions on money laundering and corruption in Europe and globally - PowerPoint Presentation

Slide1

The Treaties, conventions on money laundering and corruption in Europe and globally

“Fight against organised crime and corruption: strengthening the prosecutors’ network”

March4th-7

th

2014, Skopje, Macedonia

Mona

Konecny

, Public Prosecution Office, Vienna, AustriaSlide2

General aspects of combatting money laundering

Criminological aspects of money laundering:

Necessity to hide gains from illegal activity

The more profitable an illegal activity, the more difficult to hide the money (e.g. drug trafficking, corruption, tax evasion, organised crime in general)

Money laundering is a problem of quantity

Tendency to include petty offences in the fight against money-laundering might reduce efficiency

Difficulty to prove money laundering in the ambit of a criminal investigation due to transnational aspects and major efforts of criminals to hide the provenience of the fundsSlide3

Money laundering and terror financing

Money laundering:

Hiding money of criminal provenience

Money is necessarily derived from criminal activity

Money is used either for financing new criminal activities or for non-criminal purposes (“income” from criminal activity etc.)

Terror financing:

Raising money for criminal/terrorist activity

Money can derive from illegal or legal activities (e.g. donations)

Money is used to finance terrorism, supporting members of the terrorist organisation is rather a side effect and not the aimSlide4

How to combat money laundering

Repressive approach:

Criminalisation of certain ways of conduct (e.g. money laundering, formation of a criminal organisation, terror financing)

Criminal activity in the ambit of a criminal organisation or within a terror organisation as an aggravating factor

Enlargement of the catalogue of predicate offences

Preventive approach:

Confiscation of laundered money

Advantage: not only possible from the money launderer or the offender, but from whoever takes advantage of the illegal activity

Greater possibility to shift the burden of proof

 in a rule of law system, an offender cannot be

forced

to prove his innocence, but the profiteer of illegal income can

be

obliged

to prove the lawful acquisitionSlide5

United Nations Conventions

Vienna Convention against illicit traffic in narcotic drugs and psychotropic substances (1988) (Vienna Convention)

:

First document on UN-level against money laundering

Predicate offences envisaged only those related to narcotics trade

However: “The international community, through the adoption of the convention, has expressed its universal

abhorrenceof

drug-related money laundering. However… there would seem to be little policy justification for the proscription of money laundering arising from

some

profit-generating criminal activities and not others… In any event drug trafficking may not remain … the most profitable form of

transborder

criminal activity.”Slide6

Vienna Convention

Definition of money laundering

:

Art 3 (1)(b):

Conversion or transfer

of property

knowing

that such property is derived from [predicate offence] for the purpose of

concealing or disguising

the

illicit origin

of the property or of any person who is involved in the commission ….

Concealment or disguise

of the true nature, source, location, disposition, movement, rights with respect, or ownership of property,

knowing

that such property is derived from [predicate offence]

This definition includes also petty offences (e.g. reselling single units of psychotropic substances) as predicate offences to money launderingSlide7

Vienna Convention

Two-fold approach

Repressive measures Confiscation of property

Repressive measures

Art. 3 commits the signatory states to make the offences listed a criminal offence and provide for adequate sanctions

Necessity to take into account aggravating factors such as involvement in a criminal organisationSlide8

Vienna Convention

Confiscation of property

Art

. 5 commits the signatory states to adopt adequate measures of confiscation of illegally acquired property

Art. 5. 2.: Enabling of authorities to identify, trace, freeze or seize

inter alia

property (note that convention puts seizure of property before the seizure of drugs)

Bank secrecy – a major problem in criminal investigation – may not hinder

confiscation

Proceeds intermingled with legally acquired property liable to confiscation up to the

assessed

value of the intermingled proceeds

Burden of proof

may be reversed from the prosecutor to the person who alleges the legal acquisition of the property!Slide9

United Nations Conventions

Palermo Convention against transnational organized crime (2000)

Money laundering one of key features of organised crime

Distinction between

primary

criminal activity and

secondary

criminal activity (e.g. money laundering)

Definition (Art. 6. 1. (a) is more or less equal to the Vienna Convention

Extension of predicate offences to money laundering, minimum requirements are

- participation in a criminal organisation (Art. 5)

- corruption (Art. 8)

- obstruction of justice (Art. 23)Slide10

Palermo Convention

Combatting money laundering under the Palermo Convention

regulatory and supervisory regime of the financial sector in order to identify suspicious transactions

- customer identification

- record-keeping and reporting

international cooperation

Measures should not impede movement of legitimate capital

States should use international guidelines (soft law)

 FATFSlide11

Council of Europe

Convention on laundering, search , seizure and confiscation of the proceeds from crime 1990

Four principles underpin this Convention

Congruence with other international initiatives

Co-operation and exchange of information between law enforcement agencies of different countries

Minimisation of profit incentive

Flexibility to make the Convention compatible with different legal systems and respect for different legal systems an law enforcement methods

 Focus on law enforcement once the laundering has

occuredSlide12

Council of Europe

Definition of money laundering similar to the Vienna Convention, BUT

Leaves the signatory states a broad discretion in defining predicate offences

Focus on confiscation

Confiscation of proceeds or property or

correspondent value

Investigative and provisional measures

Bank secrecy shall not hinder Parties from action

On the other hand effective legal remedies

Special emphasis on international co-operation and assistance

 main focus of the Convention  transnational co-operation to fight transnational crimeSlide13

Council of Europe

Convention on laundering, search , seizure and confiscation of the proceeds from crime

and on the financing of terrorism 2005

Terror financing is not identical to money laundering, therefore a new Convention was agreed on to include also the phenomenon of Terror financing

Definition of terror financing drawn from the UN Convention for the Suppression of the Financing of Terrorism 1999

Greater emphasis on monitoring bank accountsSlide14

Council of Europe Convention 2005

Definition of money laundering – developments to the 1990 Convention

Profit-making is no longer a prerequisite

Predicate offences are set out in an appendix instead of left to the discretion of the Parties with the possibility to make a caveat

Negligent money laundering may constitute an offence (Art. 9 (3)) – but no obligation for the Parties

A conviction for a predicate offence shall not be a prerequisite for a conviction for money laundering nor shall there be a necessity to establish the exact nature of the predicate offence

Establishment of Corporate liabilitySlide15

European Union

1

st

anti-money-laundering directive (91/308/EEC)

Amendment of the

1

st

anti-money-laundering directive

(2001/97/EC)

3

rd

anti-money-laundering directive (2005/60/EC) – currently in force

Several framework decisions, joint actions, regulations

on

money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds from

crime

Confiscation of Crime-Related Proceeds, Instrumentalities and

Property

cooperation between financial intelligence units of the Member States in respect of exchanging informationSlide16

3rd

AML-directive

Main aspects

No provision of criminal law on money laundering

Art. 1. 1. obliges member states only to “prohibit” money laundering

Member States – however – are bound by the

CoE

conventions, the 3

rd

AML-directive has to be seen in that light

Member States may not express a caveat to the

CoE

conventions (Art. 1 (1)(b) joint action on money laundering;

Art. 1 (1)(b)

framework

decision

on money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds from

crime)

Definition corresponds more or less to the pre-mentioned Conventions, with the possibility to apply it to a broad range of predicate offences (also the offence of “negligent money laundering” is not foreseenSlide17

3rd

AML-directive

Aims of the directive

Primary aim: Secondary aim:

Stability and reputation of the Fight against money laundering and financial system organised crime

The reason for this ranking of values is to be found in the complex distribution of competences between the EU and its Member States (competence for criminal law only if necessary for the functioning of the Common Market)Slide18

3rd

AML-directive

Stability and reputation of

the financial system:

Liberalization of the free movement of capitals and payments

Not restricted to EU Member states, includes also third countries

May not be restricted, unless justified and proportional

Criminal activities take advantage of the basic European freedoms, especially of the free movement of capitals

Applies basically to financial operators and related businesses

Customer due diligence (“Know your customer”)

Simplified or enhanced, depending on the customer

Reporting obligations including a prohibition of disclosure

Record keeping and statistical data

Directive requires adequate sanctions, but not necessarily a criminal sanction

Member States shall ensure that money laundering is prohibited

This is a consequence of the competences of the EU and the addressees being financial operators

 administrative sanctions more ample

and adequate