The expansion of
the anti-money laundering efforts in the Western
Hemisphere to include serious crimes rather than just drug
trafficking brings this group current with practice in the rest of the world.
The consideration of a multilateral evaluation mechanism, the exchange of
information, training, and even a convention are all efforts to strengthen
compliance and indicate broader political agreement and acceptance of the
purposes of anti-money laundering.
The ongoing
assessment, (Zagaris, 1997) the establishment of financial intelligence units (FIUs),
and the typologies exercise are small steps towards cooperation in hemispheric
anti-money laundering enforcement. Meaningful and effective cooperation,
harmonization of laws and standards, and effective establishment of an
anti-money laundering regime must await the establishment of a proper network.
A solid legal infrastructure with funding for professionals is needed for
intensive and daily work on compliance with conventions and resolutions,
harmonization of laws, collaboration on common approaches to mechanisms and
technology, and common approaches to operational problems. At present, the
governments and international organizations in the Western
Hemisphere are searching for ways to develop ad hoc solutions to
individual criminal problems, such as anti-money laundering.
On the
international front, anti-money laundering provisions multiplied at a
comparable pace. Great
Britain, for instance, enacted a counterpart
to the American Money Laundering Control Act with the 1986 passage of the Drug
Trafficking Offences Act. (Barbot, 1995; Weeling and Todd, 1996) The 1986 Act
provides immunity from suit for breach of the implied banking secrecy contract
if a person discloses to a police officer "a suspicion or belief that any
funds or investments are derived from or used in connection with drug
trafficking or any matter on which such a suspicion or belief is based."
While the Drug Trafficking Offenses Act, and its successor, the Drug
Trafficking Act, contained a defense against disclosure rather than an
affirmative duty to disclose, (Helleiner, 1999) this latter obligation was not
far behind. In fact, just three years later, Parliament enacted the Prevention
of Terrorism Act of 1989, which imposed just such a duty upon any person who is
"concerned in an arrangement whereby the retention or control ... of
terrorist funds is facilitated."
In England,
as in the United States,
more stringent anti-money laundering statutes and regulations soon followed. (Walker, 1996) Shortly
after the United States
and Great Britain
launched their first targeted strikes specifically against money laundering,
the United Nations joined the fight against dirty money. (Quillen, 1991) The
Vienna Convention of 1988, " recognizing the links between illicit traffic
and other related organized criminal activities which undermine the legitimate
economies and threaten the stability, security and sovereignty of States,"
enjoined its signatories to criminalize the act of money laundering and to
adopt measures to enable the identification, tracing, freezing, seizing and
confiscation of illicitly derived proceeds. The Vienna Convention of 1988 was
important not only in that it was the first multi-national recognition of the
seriousness of the money laundering problem, but because it marked the first
major step in affording to law enforcement officials the same international
reach formerly available to drug smugglers and organized crime rings, whose
complex laundering schemes regularly involved cross-border funds transfers that
made their transactions more difficult to trace.
Crime Prevention: International Level
Multilateral
organizations have set the framework for anti-money laundering standards,
mechanisms, and institutions. The United Nations pioneered the 1988 Vienna
Convention Against the Trafficking in Illegal Narcotic and Psychotropic
Substances, which contains the requirements to criminalize money laundering and
immobilize the assets of persons involved in illegal narcotics trafficking. (Gilmore,
1999)
In 1989, the G-7
Economic Summit Group established the Financial Action Task Force (FATF), which
operates out of the Office of Economic Cooperation and Development (OECD)
headquarters in Paris.
(Gilmore, 1999) FATF has issued a set of forty recommendations (Forty
Recommendations) that concern legal requirements, financial and banking
controls, and external affairs. FATF operates through a Caribbean FATF (CFATF)
and is in the process of establishing a similar group in Asia.
It issues an annual report that provides an overview of progress and problems
in international anti-money laundering.
The G-10 Basle
Group of Central Banks has actively provided guidelines for central bank
supervisors and regulatory controls. As mentioned below, on September 23, 1997, the Basle Group
issued guidelines on supervision. Regionally, the Council of Europe's 1991
Convention on Laundering, Search, Seizure and Confiscation of Assets has become
the major international convention that obligates signatory governments to
cooperate against anti-money laundering from all serious crimes.
The European Union,
as a signatory to the 1988 Vienna Drug Convention and due to its own actions to
combat financial crimes against the Communities, issued a 1991 Anti-Money
Laundering Directive that it is poised to strengthen. As mentioned below, it is
now in the process of an initiative against cybercrimes. An important regional
organization in the anti-money laundering has been the Inter-American Drug
Abuse Control Commission (CICAD). At its meeting on November 4-7, 1997, CICAD anti-money
laundering experts recommended an ongoing assessment of compliance with
standards and the creation of national financial intelligence units (FIUs).
National governments and international organizations are striving to create
mechanisms to monitor regularly compliance with international standards.
Because the recent FATF annual reports and topologies provide cutting-edge
discussions of the status of money laundering trends, they are discussed next.
A significant achievement
of FATF during 1996-97 was the annual survey of money laundering methods and
countermeasures. The survey provides a global overview of trends and
techniques, especially the issue of money laundering through new payment
technologies, such as smart cards and banking through the Internet. (Schroth,
1996) FATF reviewed the issue of electronic fund transfers and examined ways to
improve the appropriate level of feedback that should be provided to reporting
financial institutions. (Bauer and Ullman, 2001) While drug trafficking remains
the single largest source of illegal proceeds, non-drug related crime is
increasingly important. (Scroth, 1996) The most noticeable trend is the
continuing increase in the use by money launderers of non-bank financial institutions
and of non-financial businesses relative to banking institutions. The trend
reflects the increased level of compliance by banks with anti-money laundering
measures. The survey noted, "Outside the banking sector, the use of
bureaux de change or money remittance businesses remains the most frequently
cited threat." (Gilmore, 1999)
FATF members have
continued to expand their money laundering laws, covering non-drug related
predicate offenses, improving confiscation laws, and expanding the application
of their laws in the financial sector in order to apply preventive measures to
non-bank financial institutions and non-financial businesses. (Gilmore, 1999)
FATF discussed money laundering threats that may be inherent in the new e-money
technologies, of which there are three categories: stored value cards,
Internet/network based systems, and hybrid systems. Important features of the
systems that will affect this threat are the value limits imposed on accounts
and transactions; the extent to which stored value cards become inoperable with
Internet-based systems; the possibility that stored value cards can transfer
value between individuals; the consistency of intermediaries in the new payment
systems; and the detail in which account and transaction records are kept. (Hernandez,
1993) Future issues include the need to review regulatory regimes, the
availability of adequate records, and "the difficulties in detecting and
in tracking or identifying unusual patterns of financial transactions." (Summers
and Reno, 2000)
Since the application of new technologies to electronic payment systems is
still in its infancy, law enforcement and regulators must continue to cooperate
with the private sector. (Levi, 1991) Then authorities may understand the
issues that must be considered and addressed as the market and technologies
mature.
As a result of
difficulties in tracing illicit funds routed through the international funds
transfer system, the Society for Worldwide Interbank Financial
Telecommunications (SWIFT) board "issued a broadcast to its members and
participating banks encouraging users to include full identifying information
for originators and beneficiaries in SWIFT field tags 50 (Ordering Customer)
and 59 (Beneficiary)." (Helleiner, 1999) Many countries have acted to
encourage compliance within their financial communities with the SWIFT
broadcast message.
To strengthen the
body of information on identifying the true originating parties in transfers,
SWIFT has devised a new optional format (MT103) for implementation after
November 1997. (Helleiner, 1999) The message format will have a new optional
message field for inputting all data "relating to the identification of
the sender and receiver (beneficiary) of the telegraphic transfer." Additionally,
"SWIFT has issued guidance to users of its current system to describe
where such information may appear in the MT 100 format." FATF has helped
SWIFT devise the new mechanism and is encouraging the use of the new message
format.
FATF recommends
that at least the recipient of a suspicious transactions report should
acknowledge receipt thereof. If the report is then subject to a fuller
investigation, the institution could be advised of either the agency that is
going to investigate the report or the name of a contact officer. If a case is
closed or completed, the sending institution should receive timely information
on the decision or result. Further cooperative exchange of information and
ideas is required for the partnership between units that receive suspicious
transaction reports, general law enforcement, and the financial sector to work
more effectively.
Because of
insufficient data, FATF has created an ad hoc group that "will consider
the available statistical information and other information concerning the
proceeds of crime and money laundering."(OOC, 1993) This ad hoc group will
also "define the parameters of a study on the magnitude of money
laundering and agree on a methodology and a timetable for the study."
Money laundering Laws after September 11
While the infamous Al Qaeda terrorists
were furtively hatching their schemes of destruction that depended upon
filtering money through the international financial system, policy-makers and
legislators were publicly hatching schemes to combat the filtering of money derived
from or used to support international illegal activity. Although the European
Union's (EU) new Directive on money-laundering was recently adopted in the
world-wide surge of counter-terrorism measures, it reflects legislative choices
made before the world could imagine the terror that would be executed by Al
Qaeda.
Nevertheless, trends have occurred due
to the terrorists attack on the 11th of September. The slightest central
trend is the contraction of financial regulations and the organization or
enhancement of obligatory regulatory and enforcement agencies. New laws in the
US which sums to broadening the command of the CIA and of the DOJ
extra-territorially, was to a certain extent xenophobically described as proposed
to make sure the banking system does not become a refuge for overseas fraudulent
leaders or other type of foreign structured criminals. Confidentiality and
bank privacy laws have been diluted.
Similarly, alliance with off shore
shell banks has been prohibited. Dealing with patrons of correspondent banks
was truncated. Banks were successfully altered into law enforcement agencies, accountable
to verify both the characteristics of their clients and the origin of their
funds. Cash transactions were to a certain extent proscribed. And the securities
and currency trading industry, insurance companies, and money transfer services
are introduced to developing inspection as an intermediary for laundered money.
Consequently, in excess of 150
countries guaranteed to lend a hand with the US in its struggle opposed to the bankroll
of terrorism - 81 of which (including the Bahamas, Argentina, Kuwait,
Indonesia, Pakistan, Switzerland, and the EU) in point of fact immobilized
assets of distrustful individuals, supposed charities, and leery firms, or approved
new anti money laundering laws and more stringent regulations. A listed EU instruction
would compel lawyers to divulge incriminating information about their clients'
money laundering actions. Pakistan
commenced a "loyalty scheme", awarding expatriates who have a
preference on official bank conduits to the much criticized Hawala, with extra
baggage allowance and special treatment in airports.
Still, a worldwide system is emerging,
established on the work of the OECD's FATF since 1989 and on the relevant UN
conventions. All nations are anticipated by the West, on pain of probable punishments,
to approve a homogeneous legal manifesto including reporting on dubious
transactions and freezing assets and to apply it to all types of financial mediators,
not only to banks.
