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Money Laundering Offences

THE OFFENCES

There are now five basic money-laundering offences:

1/ assisting another to retain the benefit of crime;

2/ acquiring, possession and use of criminal proceeds;

3/ concealing or transferring proceeds to avoid prosecution or a confiscation order (also called Own Funds money laundering).

4/ failure to disclose knowledge or suspicion of money laundering;

5/ tipping off.

Assisting another to retain the benefit of crime.

Assistance occurs where a person is involved in an arrangement with another person, and knows or suspects that the other person is, or has been involved in, or has benefited from drug trafficking or criminal conduct if the arrangement helps the other person to retain or control proceeds directly or indirectly or enables the other person to use the proceeds or to invest them for his benefit. The legislation allows ‘disclosure to a constable’ which is normally to the FIU of the NCIS. This covers terrorist related activities as well. The penalty for commission of an offence under this section is imprisonment of up to six months, or a fine not exceeding the statutory maximum, or both, on summary conviction. On conviction on indictment, the penalty is imprisonment of up to 14 years, or a fine, or both.

Acquisition, possession or use of criminal proceeds.

Acquisition is the offence of use or possession of property which you know or have reasonable grounds to suspect to be the proceeds of drug trafficking or criminal conduct and have acquired at less than full value. The aim of the offence is to prevent criminal proceeds being passed on by criminals to be enjoyed by third parties. Here, the reference is to ‘property’, rather than to ‘funds or investments’ as in section 93A (‘property’ including money).

The penalty for commission of an offence under this section is the same as for assisting another to retain the benefit of crime.

Concealing or transferring proceeds to avoid prosecution or a confiscation order (also called Own Funds money laundering).

Concealing is disguising, removing or transferring proceeds (directly or indirectly) of drug trafficking or criminal conduct for the purpose of avoiding or helping someone else avoid prosecution. The offence is committed by a person who assisted in the offence if s/he knows or has reasonable grounds to suspect the nature of the property.

Concealing or disguising any property includes concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it. The penalty for commission of an offence under this section is exactly the same as for the assisting and acquisition offences.

Failure to disclose knowledge or suspicion of money laundering.

This offence only relates to drug trafficking and terrorism and not to proceeds of crime in general. A person is guilty of an offence if, as a result of something he learns in the course of his trade, profession or employment, he does not report a suspicion to a police or customs officer.

There is a question as to whether disclosure is a waiver of professional privilege or a breach of any express or implied duty of confidentiality owed to a customer or client. For example, legal privilege for solicitors. If there is a criminal transaction then disclosure to the police will not constitute a waiver of professional privilege nor will it give actionable grounds for a claim for breach of confidence.

The penalty for commission of an offence under this section is imprisonment of up to six months, or a fine not exceeding the statutory maximum, or both, on summary conviction. On conviction on indictment, the penalty is imprisonment of up to five years, or a fine, or both.

Tipping off.

The requirement to report suspicions is not much use if the suspected person is tipped off to the fact that s/he is under investigation. In order to preserve the integrity of an investigation, the offence of ‘tipping off’ occurs when information or any other matter which might prejudice the investigation is disclosed to the suspect of the investigation (or anyone else) by someone who knows or suspects (or, in the case of terrorism, has reasonable cause to suspect) that: a police investigation into money laundering has begun or is about to begin, or the police have been informed of suspicious activities, or a disclosure has been made to another employee under internal reporting procedures.

The penalty for tipping off is the same as for the failure to disclose offence.

TASK 2

Read the text “World banking system…”, give your appreciation of the material.

Write your answers on the following questions:

1. Is it easy or difficult in our country to conceal financial transactions from the "tax man"? Is there a strong "black" economy?

2. Are you familiar with the concept of "laundering" money – turning "dirty" money into "clean" funds?

World Banking System Is a "Money Launderers’ Dream"

It was the biggest money laundering investigation in US history. Undercover officers risking their lives had gathered evidence secretly over many months. The suspects were lured to Las Vegas for a conference on money laundering. Then the police struck, arresting 22 banking officials from Mexico's largest financial institution, plus 14 alleged members of Mexican & Colombian drug cartels & another 70 linked to them. Seizure warrants were issued to recover $122m from bank accounts in the US & Italy, to add to $35m seized so far. The operation so damaged confidence in Mexican banks that their shares fell collectively by 4% in panic selling. But as Operation Casablanca struck its blow in the Americas, officials of the United Nations Drug Control Programme in Vienna were editing the final version of a report - to be released soon - that puts the US triumph into a gloomy perspective.

It says that at least $200bn of drug money is laundered every year, but with the illegal international drug trade valued at $500bn, this is probably a conservative estimate. In a good year, up to $500m will be recovered through anti-money laundering measures - an annual success rate of about a quarter of 1% of laundered funds. Operation Casablanca, with $157m, will probably make the year a good one, but hardly vintage.

The report has been prepared by a group of experts for a special session of the UN General Assembly on drugs in New York. With the growth of the international drug trade, more ill gotten money is being laundered than ever, partly on the back of electronic banking & the increasing globalization & speed of operation of the international financial system.

Cashless transactions, electronic trading & computerized clearing mean that the report calls "megabyte money" can be moved anywhere with speed & ease. With 700,000 wire transfers worth $2,000bn every day, the report says it is "a reasonable guess that 0.05% to 0.1% contain laundered funds to a value of $300m". And even though half the total volume of transactions are bank-to-bank transfers of "aggregate funds" for settlement or loans, the report says the "complicity of corrupted bank employees" ensures these also contain laundered money. "This system is a money launderer's dream".

The one thing law enforcement officers have on their side is that criminals have to play by the rules of the system in order to use it. While it is impossible to spot transactions in progress once money is in the system, criminals have to risk

exposure in putting it there. UN officials want the process made riskier.

At present, criminals reduce their risk by operating through offshore financial havens with lax financial regulation & poor banking supervision. They also hide behind banking secrecy, & disguise the ownership of assets by setting up shell companies & offshore trusts in jurisdictions where no questions are asked about shareholders & beneficiaries. Many accounts & trusts are known as "walking" ones, where there is a standing instruction to move the accounts to another jurisdiction at the first sign of inquiry by the authorities.

UN officials accept that commercial confidentiality, legal tax avoidance & the easing of capital transfers at low or nil tax rates are legitimate reasons for bank secrecy & disguising corporate ownership, but they say the system is too lax in some places, allowing infiltration for illicit or nefarious purposes. "One of the most striking things about offshore financial centres is the enormous increase that has taken place in the number of banks", says the report. Banks can be set up with relative speed & ease & a minimum of due diligence investigation, so long as they meet a basic level of funds, which can vary between one jurisdiction & another.

Exporting bulk cash, usually in $100 bills & sometimes carried under diplomatic cover, is the favoured method of getting deposits to banks where ~.o questions will be asked. Casinos in offshore centres are a favourite for converting funds: cash is exchanged for gambling chips, the launderer plays for a while at the tables then exchanges the chips back again. Instead of a cheque, some casinos offer immediate electronic transfer of "winnings" to an offshore bank account.

TASK 3

Read the text ‘ Some Measures to Prevent …’ and express your point of view concerning the material. Compare it with the opinions of your classmates.