The Global Fight against The Global Fight against Money Laundering and Money Laundering and Financing of Terrorism: Financing of Terrorism: Are we doing enough?Are we doing enough?

Twenty Seventh International Twenty Seventh International Symposium Economic Crime, Symposium Economic Crime,

Cambridge UniversityCambridge University

Tuesday, 1th September 2009 Tuesday, 1th September 2009 (Workshop 3 – 17:30-18:30)(Workshop 3 – 17:30-18:30)

AbstractAbstract The aims of my dissertation are: (i) to understand the general The aims of my dissertation are: (i) to understand the general

principles, causes and effects of the ML phenomenon, (ii) critically principles, causes and effects of the ML phenomenon, (ii) critically discuss the suitability of the global anti-ML legal framework, (iii) discuss the suitability of the global anti-ML legal framework, (iii) explore legal problems that may arise in implementing the explore legal problems that may arise in implementing the international crime of ML at the national level, as well as to suggest international crime of ML at the national level, as well as to suggest how these legal problems can be solved.how these legal problems can be solved.

Taking a Taking a multi-disciplinarymulti-disciplinary and and comparativecomparative perspective the perspective the research argues that the definition of the international crime of ML as research argues that the definition of the international crime of ML as drafted in the international conventions is inadequate in dealing with drafted in the international conventions is inadequate in dealing with ML, because it is not uniformly applied in every country. Based on ML, because it is not uniformly applied in every country. Based on that conclusion, the dissertation proposes a that conclusion, the dissertation proposes a newnew and and uniformuniform definition of the universal crime of ML. True unification of the definition of the universal crime of ML. True unification of the international offence, in my opinion, can only be realized by the international offence, in my opinion, can only be realized by the adoption of a uniform act, elaborated in an international convention, adoption of a uniform act, elaborated in an international convention, that generates a that generates a reconciliationreconciliation of the different criminal and of the different criminal and economic theories of criminal and economic law, at the international economic theories of criminal and economic law, at the international and national levels.and national levels.

Problems / Research Questions.Problems / Research Questions. Part I: Extra-legal factors.Part I: Extra-legal factors.- Why do criminals choose ML?Why do criminals choose ML?- Why are some countries more attractive than others as a destination Why are some countries more attractive than others as a destination

of “dirty” money? The Argentine example.of “dirty” money? The Argentine example.- Which is the relation between Money Laundering (“ML”) and Which is the relation between Money Laundering (“ML”) and

Financing of Terrorism (“FT”)?.Financing of Terrorism (“FT”)?.

Part II: Critical analysis of the international anti-ML legal Part II: Critical analysis of the international anti-ML legal regime.regime.

- Question: Whether the supranational anti-ML regime that have been Question: Whether the supranational anti-ML regime that have been put in place to curb ML can indeed make an effective contribution to put in place to curb ML can indeed make an effective contribution to reach this goal. reach this goal.

- Potential solution to this problem: Create Potential solution to this problem: Create an harmonizedan harmonized international regime against ML to avoid “shopping around the international regime against ML to avoid “shopping around the world”.world”.

Part III: A vertical comparative analysis (international level vs Part III: A vertical comparative analysis (international level vs domestic level).domestic level).

- Potential solution to the problem: create a Potential solution to the problem: create a uniformuniform definition of the definition of the international crime of ML, to avoid “shopping around the world” and international crime of ML, to avoid “shopping around the world” and difficulties on the requests of information and extradition between difficulties on the requests of information and extradition between each country of the world (principle of “dual criminality”.each country of the world (principle of “dual criminality”.

Relation between Money Laundering and Relation between Money Laundering and Financing of TerrorismFinancing of Terrorism

Conclusion 1: ML is one (1) of the four (4) Conclusion 1: ML is one (1) of the four (4) economic channels that terrorist groups economic channels that terrorist groups can use to finance their activities.can use to finance their activities.

Conclusion 2: considering that “ML” and Conclusion 2: considering that “ML” and “MD” are concealment processes, “MD” are concealment processes, terrorist groups probable will not commit terrorist groups probable will not commit an attach in the same jurisdiction where an attach in the same jurisdiction where they practise ML or MD activities. Their they practise ML or MD activities. Their main purpose is to conceal the movement main purpose is to conceal the movement of their assets. of their assets.

Cost/Benefit analysis of MLCost/Benefit analysis of ML

First Dilemma: submit or not submit First Dilemma: submit or not submit the assets for a ML process. Cost-the assets for a ML process. Cost-benefit analysis based on benefit analysis based on significantsignificant amount of collected assets and the amount of collected assets and the characteristics of the jurisdiction characteristics of the jurisdiction where the criminal is allocated.where the criminal is allocated.

Second Dilemma: self-laundering or Second Dilemma: self-laundering or not self-laundering.not self-laundering.

Causes and Effects of ML – Seven Causes and Effects of ML – Seven variablesvariables

(i)(i) Governments in need of investment.Governments in need of investment.

(ii)(ii) Countries with weak anti-ML enforcement systems: Countries with weak anti-ML enforcement systems: When states are weak, but act as if they were strong When states are weak, but act as if they were strong passing out laws and regulations purporting to regulate passing out laws and regulations purporting to regulate without the will or capacity to enforce the law, they without the will or capacity to enforce the law, they inevitable create spaces between reality and legality inevitable create spaces between reality and legality that can explored by criminals, terrorists and, that can explored by criminals, terrorists and, therefore, launderers (Bagley, “Globalization and Latin therefore, launderers (Bagley, “Globalization and Latin American and Caribbean Crime”, 2005). American and Caribbean Crime”, 2005).

(iii)(iii) High rates of corruption.High rates of corruption.

(iv)(iv) Social, economic and political conflicts. Social, economic and political conflicts.

(v)(v) Vulnerable and open borders.Vulnerable and open borders.

(vi)(vi) Countries with Countries with inadequateinadequate anti-ML norms. anti-ML norms.

(vii)(vii) Countries with high rates of informal economy.Countries with high rates of informal economy.

Part II: Harmonization or Part II: Harmonization or Unification of anti-ML norms?Unification of anti-ML norms?

Jurisdictions could have “adequate” or “inadequate” anti-ML Jurisdictions could have “adequate” or “inadequate” anti-ML normsnorms

IF A adequate IF A adequate andand B adequate = 3 stages of ML are harder in B adequate = 3 stages of ML are harder in both countries.both countries.

If A “adequate” If A “adequate” andand B “inadequate” = ML is easier in jurisdiction B “inadequate” = ML is easier in jurisdiction “B”, but also in jurisdiction “A”. Criminals “clean” money in “B”, but also in jurisdiction “A”. Criminals “clean” money in jurisdiction “B” and then they submit money already “cleaned” in jurisdiction “B” and then they submit money already “cleaned” in country “A”.country “A”.

If A “inadequate” If A “inadequate” andand B “inadequate” = the incentive/motivation B “inadequate” = the incentive/motivation in commission of “ML” and “predicate offence” are higher in both in commission of “ML” and “predicate offence” are higher in both jurisdictions. jurisdictions.

My potential conclusion: harmonization My potential conclusion: harmonization of preventive/regulatory anti-ML norms, of preventive/regulatory anti-ML norms, and unification of the definition of the and unification of the definition of the international crime of MLinternational crime of ML

Part III: Toward a uniform Part III: Toward a uniform definition of the international definition of the international

crime of MLcrime of ML I propose a new international convention that reconcile I propose a new international convention that reconcile

worldwide and universal social and legal “models of law” worldwide and universal social and legal “models of law” in order to succeed in the global fight against ML, that:in order to succeed in the global fight against ML, that:

Only criminalize intentional ML, admitting a broad Only criminalize intentional ML, admitting a broad definition (defining the term “suspicious” – definition (defining the term “suspicious” – dolus dolus eventualiseventualis).).

Refers to “all offences” as predicate offence (including Refers to “all offences” as predicate offence (including the crime of tax evasion but only punishable if the values the crime of tax evasion but only punishable if the values involved on the operation of ML are over a specific involved on the operation of ML are over a specific economic value (e.g.– USD 100,000). We need to reduce economic value (e.g.– USD 100,000). We need to reduce the “informal” economy as much as possible in order to the “informal” economy as much as possible in order to identify and arrest criminal groups.identify and arrest criminal groups.

Also penalize “self-laundering” behaviours. Also penalize “self-laundering” behaviours.

ConclusionsConclusions

In my point of view, anti-ML norms must In my point of view, anti-ML norms must be called upon to invent a flexible process be called upon to invent a flexible process of harmonization that leaves room for of harmonization that leaves room for believing we can find general consensus believing we can find general consensus on how to protect common values.on how to protect common values.

A uniform definition of the international A uniform definition of the international crime of ML is essential, among other crime of ML is essential, among other reasons, to enable to achieve easier and reasons, to enable to achieve easier and more efficient processes of extradition more efficient processes of extradition and cooperation between countries. and cooperation between countries.