SESSIONS 11 and 12. Money laundering and corruption

MONEY LAUNDERING AND CORRUPTION

Overview

• Sessions 11 and 12 focus on the interrelation between money laundering and corruption, detailing legal frameworks and various countries' approaches.

MONEY LAUNDERING

Definition

• Money Laundering: Activities and procedures that introduce money obtained from illicit activities into the legal economy to conceal its origin.

• The illicit origin remains even if the activity took place in another state.

Phases of Money Laundering

1. Placement

   • Physical disposition of cash from illicit activities.

   • Most vulnerable phase.

   • Common methods include:

     • Using accounts or safety deposit boxes

     • Currency exchanges

     • Cross-border movements.

2. Layering

   • Concealment of the illicit origin of money.

   • More complex, involves multiple operations (e.g., shell companies, international tax havens, banking secrecy).

3. Integration

   • Reinvesting benefits under the facade of legality.

   • Techniques include:

     • Simulated payments

     • Real estate investment

     • Gambling

     • False accounting.

FIGHT AGAINST MONEY LAUNDERING

Preventive System

• Protects the financial system and collaborates with judicial authorities to curtail laundering activities.

Criminal System

• Focuses on depriving criminal enterprises of profitability through legal measures.

INTERNATIONAL BODIES

• Key Organizations: United Nations, Financial Action Task Force (FATF), International Monetary Fund, World Bank, Egmont Group.

MAJOR INTERNATIONAL INSTRUMENTS

1. 1988 Vienna Convention Against Illicit Traffic in Narcotic Drugs

2. 1990 FATF Recommendations (updated in 1996, 2003 and 2012)

3. 1990 Convention on Laundering, Search, Seizure, and Confiscation

4. 2000 Strasbourg Convention on Transnational Organized Crime

5. 2000 Palermo Convention.

COMMON PRINCIPLES OF INTERNATIONAL STANDARDS

• Define punishable conduct

• Regulatory systems must:

  • Ignore bank secrecy

  • Criminalize recklessness

  • Allow circumstantial evidence

• Emphasize international cooperation in information exchange and asset seizure with a focus on Financial Intelligence Units (FIUs) and Suspicious Transaction Reporting (STR).

FATF

Role and Membership

• Sets standards and promotes effective approaches to combat money laundering and terrorist financing.

• Composed of 37 member countries and 9 regional bodies, conducts mutual evaluations.

FATF RECOMMENDATIONS

• Total of 40 recommendations revised to cover:

  • Policies and coordination

  • Money laundering and confiscation

  • Terrorist financing

  • Preventive measures

  • Transparency

  • International cooperation.

MONEY LAUNDERING: CRIMINAL TYPE

Material Elements

• Involves predicate offenses, autonomy, intentionality, and self-laundering.

Predicate Offences

• Includes various serious crimes such as terrorism, human trafficking, drug offenses, corruption, and fraud.

Intent and Knowledge

• May infer intent from objective circumstances indicating unusual wealth or connections to illicit activities.

CRIMINAL LIABILITY

Characteristics

• Autonomy allows prosecution without existing predicate offense conviction.

• Sanctions should be effective and proportionate, including liability for legal persons.

INTERNATIONAL COOPERATION

Mechanisms

• Judicial Assistance: Ratifying key conventions to enable identification and seizure of assets, and avoid bank secrecy.

• Extradition: Establish swift processes for extraditing those accused of money laundering.

EUROPEAN UNION AML PACKAGE

• Includes various directives refining existing regulations related to anti-money laundering measures.

CORRUPTION

Definition

• The abuse of official power for private gain, leading to illegitimate advantages.

Elements of Corruption

• Involves misusing public (or private) power to achieve unauthorized benefits.

INTERNATIONAL INITIATIVES

• Includes conventions from the United Nations and the Organization of American States aimed at combating corruption globally.

UNCAC Overview

• Established to prevent and combat corruption through effective legal frameworks and international cooperation.

UNCAC Provisions

• Covers offenses such as bribery, embezzlement, influence peddling, and illicit enrichment.

OECD Standards

• Framework addressing bribery in international business transactions and advocating compliance programs for corporations.

ANTI-BRIBERY LAWS

U.S. and U.K. Legislative Frameworks

• FCPA: Prohibits bribery of foreign officials to gain business advantage.

• UK Bribery Act: Criminalizes active and passive bribery, extends liability to organizations engaging in corruption.

Penalties for Violations

• Range from fines to imprisonment, depending on the seriousness of the offense and involvement, including corporate penalties.

CONCLUSION

• Both money laundering and corruption pose significant threats to economic integrity; thus, robust international frameworks and cooperation are essential for effective combat against these crimes.