Ever Dirtier Money

Ever Dirtier Money
by Howard Youngerwood

The September 11th outrages in the USA spawned many horrific stories, but especially worrying were the dramatic allegations of terrorists operating from Afghan caves, and, via a sophisticated world-wide communications web, controlling vast funds dedicated to furthering terrorism. One response has been the introduction of emergency anti-terror legislation to enable suspect accounts to be frozen without evidence or any court order. But, in addition, the attacks have provoked profound discussion as to how far the law should extend in the general fight to attack criminal gains and to prevent criminals enjoying the fruits of their labour. In particular, how far does the individual citizen bear responsibility for the fight against crime.

The general principle is that, whilst we cannot commit acts which obstruct justice, we are under no legal duty to assist the law enforcement agencies in the prevention or detection of crime. Criminal liability should be predicated on some moral culpability - real involvement or at least personal knowledge of, and assistance in, criminal activity. However, this principle has been eroded so far as the problem of money laundering is concerned. There can be no doubt that we are speaking of massive sums of money- current estimates are as high as $300 billion worldwide. Criminals "launder" money in order to leave no paper trail as to the origins of their wealth. Money laundering has been described as the "support service" allowing criminals to enjoy the fruits of their crimes. Methods of laundering have become increasingly sophisticated but essentially involve three independent stages - a) placement- the physical placement of bulk cash proceeds such as the purchase of foreign currency; b) layering - separating the proceeds of criminal activity from their origins through layers of complex financial transactions; and c) integration-providing an apparently legitimate explanation for the illegal proceeds. Whilst there have been unfortunate instances of dishonest solicitors being involved in the second "layering" stage, a major problem has arisen in the final "integration" stage where naïve professionals have been used to unwittingly assist criminals to launder funds.

It is in response to the increasing use of professional institutions by criminals that the law has found it necessary to impose increasing obligations on those institutions in the fight against crime. Thus, financial institutions and professional firms conducting relevant financial business are presently obliged to obtain satisfactory identification of their customers and to have systems to prevent money laundering emanating from drugs and terrorist crimes. Further, such bodies must report their suspicions of money laundering to the authorities. But current legislative proposals, backed by European Directive, will have the dramatic effect of expanding the range of businesses subject to controls to cover accountants, lawyers, auditors, estate agents, dealers in high value goods, transporters of funds plus casino operators and bureaux be change, and will impose obligations on them to report suspicions of money laundering emanating from all criminal activities and not just drugs or terrorist crimes. The most controversial proposal is to extend the present criminal liability of anyone concerned in an arrangement which he knows or suspects will assist another to launder criminal property, to include persons having reasonable grounds for such suspicion So, we are now moving to punishment for negligence with the attendant risk that honest but careless people will become criminals .

Which brings us back to responsibility. When we read a recent damning report that London has become one of the major money laundering capitals of the world, pervaded by a culture of secrecy and wilful blindness to irregularities, we must at the very least ask ourselves afresh whether we can and should do more in the fight against crime. And if, notwithstanding all the warnings and information now available to us, we still do nothing, is it really wrong to impose criminal liability for our failures? I have always understood Jewish law to recognise the extent to which the criminal can add to his original offence by taking advantage of his fellow man. It is perhaps now time for the fellow man to accept responsibility on the basis of the verse in Deuteronomy , "And you should do that which is right and good". In today's world none of us can afford to be passive or merely negligent.

MONEY LAUNDERING - LEGISLATIVE SOURCES

A Criminal Justice Act 1993, ss. 29-32 amends Criminal Justice Act 1998 by inserting ss 93A-D. s93A CJA 1998 creates offence of assisting another to retain the benefit of criminal conduct.

B European Directive 91/308 on the Prevention of the Use of the Financial System for the Purpose of Money Laundering. This Directive implemented in the UK by:-

C Money Laundering Regulations 1993.
The Directive and Regulations impose obligations on firms carrying out relevant financial business to have systems in place to prevent money laundering; to obtain evidence of the identity of customers; and to report suspicions of money laundering.

D Terrorism Act 2000, s 18(1) -creates offence of entering into or becoming concerned in an arrangement which facilitates the retention or control of terrorist property.

E European Union draft Directive- present proposals to amend the 1991 Directive above to expand the range of businesses subject to money laundering controls.

F Financial Services and Markets Act 2000 - in force from 1 December 2001 - Financial Services Authority to take over responsibility for monitoring compliance by financial institutions with money laundering obligations.

G Proceeds of Crime Bill 2001- currently before Parliament - proposals for a new regime to cover all crimes; new compulsory disclosure orders; negligence-based test for failure to report suspicious transactions.