Criminals acquire property by or from their crimes. That is why they do it. It would be good if they could be stopped from enjoying the property and, if instead it was able to be acquired by the State and put to good use, building hospitals and schools or even paying for policing, prosecution, and prisons. It would be better yet if the additional policing effort that was involved could come at no cost to the taxpayer because it was subsumed into the general running expenses and corporate governance procedures of major financial institutions. It would be marvellous if one of the effects of stopping criminals enjoying the property they acquire would be to deter them or others from committing crimes. These simple considerations gave rise to money laundering law. They also gave rise to a crimeâmoney launderingâand a bureaucracyâthe Anti-Money Laundering (AML) industryâboth of which have grown rapidly and in unforeseen ways.
At a time of declining crime rates, the one crime whose continued increase is guaranteed is money laundering. From a small and relatively marginal role in the 1980s and early 1990s, the crime of laundering has become central to law enforcement and has loomed larger and larger in the public consciousness. Twenty years ago the number of actual prosecutions of alleged launderers was negligible.1 It is now significant.2 Incidences of the appearance of the expression âlaunderingâ in the media are multiplying.3 These changes have been accomplished without the articulation of any clear idea of what is wrong with laundering, why, if at all, it need be a crime, what the purpose is of AML, or whether there might be any negative aspects to its existence and enforcement. Regulatory activity has increased very substantially and can be expected to increase further.
After a low-key start to the policing of the laundering provisions, which concentrates upon drug money, the current enforcement programme seems committed to bringing all activity in the black or grey economies under the classification of money laundering. The outcome is that a huge amount of money (we do not know how much) is now being spent on a global surveillance and reporting system, and we do not know whether and to what extent the system works or not. This book will therefore document a series of events and decisions which, taken independently, could each be seen as rational responses to specific problems and as incremental adjustments to the focus of the law but which, when taken together, led to significant change in the law and to the current situation. Underlying the entire AML industry is the crime of money laundering, which, having been devised more to provide a trigger for the reporting machinery than to describe and condemn a particular category of harmful behaviour, is now being used, both as an independent charge and in conjunction with other offences, in a far wider range of cases than is appropriate.
What Does Laundering Look Like?
There seem to be two major, operative ideal-types of laundering. That promulgated by the Financial Action Task Force (FATF), the United Nations, Global Financial Integrity, the World Bank, the International Monetary Fund (IMF), the OECD and the EU emphasises the use of international money transfers within the financial system.4 On this account laundering is elaborate, sophisticated, glamorous, and vague. In contrast, consider the account of laundering famously given by Saul Goodman to Jesse Pinkman in Breaking Bad. 5 Saul explains to Jesse that he needs to invest in a nail salon in order to acquire a legitimate cover through which to run the profits of his drug dealing, upon which he would then pay tax, yielding a residue of âlawfulâ income. Although Saul appeals to accounts of the vulnerability of the criminal arising from his tax liability, the actual laundering device does not use bank accounts or the international movement of money to effect the laundering.6 The nail salon is concrete, quotidian, easily comprehensible, and difficult to regard as a global threat. It is tied to money laundering as an extension of drug dealing. We can only really speculate as to which of the two more accurately represents laundering activity at any given time in any given jurisdiction or worldwide. What we do know is that changes in the AML rĂ©gime will have the effect that more laundering will be categorised as international and that that will shape the way in which laundering is reported.
A Principle
The idea that a person should not benefit from his/her crime is a principle of English Law.7 It is entirely justified in ruling actions out on the basis of ex turpi causa,8 in allowing employers to recover bribes paid to its employees,9 in the interpretation of statutes,10 and in the cases covered by the law of confiscation of the proceeds of crime or of criminal memoirs,11 but it is not a binding, universal rule. The Forfeiture Act 1982, for example, permits people, under specified circumstances, to benefit from homicides for which they are responsible.12 A fortiori for lesser offences. Prisoners are paid for work done in prison, even after deductions under the Prisonersâ Earnings Act 1996.13 In fact, the general rule in English law is that the mere fact that property was acquired through illegal conduct does not of itself generate a right for the police to appropriate the money. In Gordon v Chief Commissioner of the Metropolitan Police,14 for example, income from illegal betting was held to belong to the bookmaker. In R (on the application of Best) v Chief Land Registrar 15 it was held that the fact that the trespassory occupation was also criminal did not operate to prevent the acquisition of property by adverse possession. That is, the existence of the principle against allowing people to profit from crime does not necessarily imply that the State has the right to take property from criminals that is the proceeds of crime. Something more is required.
Three major possible justifications have been ventured in Parliament and the courts for the powers to confiscate. They are:As to the first, in the debates on the Proceeds of Crime Act 2002 (POCA), Lord Falconer said, âThe proceeds of crime belong to the victim, where one is identifiable, and to society, where one cannot be identified.â17 This view gives results quite different from the limits developed in the history of the principle against allowing the criminal to benefit, and, if it is taken as anything other than a moral or metaphorical claim, it would render the POCA machinery redundant. As to priorities, it is...
(i)
proceeds of crime belong to the State, not to the criminal (the proprietary rationale);
(ii)
the State has a better claim to the property than the criminal (the priority rationale); and
(iii)
by taking the proceeds, the State will prevent the money being reinvested in criminal enterprises (the preventative rationale).16