United Kingdom Laws on Money Laundering

 

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 11^th 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.