Dirty Money - The Evolution of International Measures To Counter Money Laundering and The Financing of Terrorism
Dirty Money - The Evolution of International Measures To Counter Money Laundering and The Financing of Terrorism
Dirty Money - The Evolution of International Measures To Counter Money Laundering and The Financing of Terrorism
Introduction
Governmental interest in seeking to combat money laundering is, as we
have seen, of relatively recent origin. Similarly, the term itself has entered
the accepted vocabulary of diplomacy and legislative drafting only in the
course of the last fifteen years. Although the terminology may be relatively
recent, the concept is one of very long standing in relation to financially
motivated criminal conduct. As McClean has stated:
From the point of view of the criminal, it is no use making a large profit out of
criminal activity if that profit cannot be put to use. ... Putting the proceeds to use
is not as simple as it may sound. Although a proportion of the proceeds of crime
will be kept as capital for further criminal ventures, the sophisticated offender
will wish to use the rest for other purposes. ... If this is to be done without run-
ning an unacceptable risk of detection, the money which represents the proceeds
of the original crime must be “laundered”, put into a state in which it appears
to have an entirely respectable provenance.1
This is not to say that all criminals will have the need to resort to elaborate
schemes in order to create the perception of legitimacy of the source and
ownership of wealth and property. Small-time criminals will rarely do so. As
Evans has pointed out: “They deal in cash and avoid financial institutions as
much as possible. Their criminal associates and suppliers expect cash and they
pay cash for most living expenses.”2 Even in more significant ventures the
perception of the need to engage in laundering activity will differ widely from
country to country. Here the judgment of those involved as to the effective-
ness of the local criminal justice system and the associated level of risk of
detection and prosecution will be central considerations. For example, in juris-
dictions which have effectively embraced modern law enforcement strategies
in which the confiscation of the proceeds of crime is used both as a deterrent
and as a form of punishment, money laundering schemes are likely to be
resorted to with greater frequency than elsewhere. As has been pointed out:
As financial investigative and prosecutorial activity becomes more professional
and effective, the more resources the criminal organisation tends to devote to
lowering the risk of being traced and apprehended through the money trail and
the risk of losing the criminal proceeds. ... Increased sophistication in prevention
and control methods tends to be matched by increased sophistication in money
laundering activities, until one side or the other reaches the point of diminishing
returns.3
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Dirty money
In much the same way considerable variations exist, both between countries
and among sectors of criminality, as to the scope, complexity and sophisti-
cation of the money laundering schemes which are in fact resorted to. As
the National Crime Authority of Australia was to note in a December 1991
report:
Money laundering schemes uncovered so far are generally unsophisticated but
some of the very large cases involve the use of complex corporate structures and
trusts as part of the laundering process. Most money laundering activity is carried
out by the primary offender, not by “professional” launderers, although the use
of corrupt or complicit individuals is often crucial to the success of money laun-
dering schemes.4
On the other hand, organised crime and drug trafficking groups have created
diverse and sophisticated systems with a global reach in order to protect
and legitimise the vast profits which are generated by their activities. One
Colombian cocaine “kingpin”, Rodriguez Gacha, is reputed to have laun-
dered approximately US$130 million using eighty-two company and other
accounts in sixteen countries located in Central and South America, the
Caribbean, Asia and Europe. As a UN report has noted:
The basic characteristics of the laundering of the proceeds of crime, which to a
large extent also mark the operations of organised and transnational crime, are
its global nature, the flexibility and adaptability of its operations, the use of the
latest technological means and professional assistance, the ingenuity of the oper-
ators and the vast resources at their disposal. In addition, a characteristic that
should not be overlooked is the constant pursuit of profits and the expansion
into new areas of criminal activity.5
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Money laundering: an overview of the process
confront regulators and the law enforcement community arising from such
factors as differences in language and criminal justice systems. Finally,
cross-border strategies reflect a natural displacement of activity from juris-
dictions which have been active in addressing the issue, to countries and
territories which possess no or insufficient anti-money laundering mea-
sures. As Savona and De Feo have remarked, launderers are motivated by
the desire:
… to find and to take advantage of the weakest link in the global regulatory and
enforcement chain, by shifting transactions, communications or assets to the country
which has the weakest or most corruptible regulatory or police and prosecution
authorities, the most restrictive bank and professional secrecy, or extradition, or
asset seizure law, the most ineffective bank supervision, etc.9
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