Prevention Of Money Laundering: A Global Panorama

Various international organizations and multilateral agencies have given their respective description to the term 'Money Laundering'. The essence is same but on a comparative reading there are some variations. The global police watchdog "INTERPOL" (International Police) defines it as "any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources"1; the United Nations Office on Drugs and Crime ('UNODC')2 identifies 'Money Laundering' as "the method by which criminals disguise the illegal origins of their wealth and protect their asset bases, so as to avoid the suspicion of law enforcement agencies and prevent leaving a trail of incriminating evidence". Albeit, number of initiatives were taken by some major international organisations to prevent money laundering, the creation of Financial Action Task Force on Money Laundering ('FATF') in 1989, brought about the much needed dedicated organisation guiding the member countries3 in curbing this menace of money laundering. FATF an inter-governmental body established to set standards and promote effective implementation for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system defines 'Money Laundering' as the "processing of criminal proceeds to disguise its illegal origin, thereby enabling the criminal to enjoy the profits without jeopardizing the source".

The global community, for the first time identified money-laundering as an international crime in the year 1988 when the United Nation adopted the United Nations Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances ('Vienna Convention'). The Convention was signed by 171 countries of the world and further implemented by 168 of them, however the aspect of money laundering was dealt in the light of drug trafficking as the Preamble of the Convention itself suggests that "illicit traffic generates large financial profits and wealth enabling transnational criminal organizations to penetrate, contaminate and corrupt the structures of government, legitimate commercial and financial business, and society at all its levels" and affirms that the international community is henceforth "determined to deprive persons engaged in illicit traffic of the proceeds of their criminal activities and thereby eliminate their main incentive for so doing".

In the year 1989, the Financial Action Task Force was convened in Paris by the Heads of States of seven major industrialized countries4 and the President of the European Community under French Presidency with the aim to fight against money laundering, which by then had become an important concern for the developed and developing countries of the world. In April 1990, the Task force issued a report with a comprehensive programme of Forty Recommendations for improving national legal systems, enhancing the role of the financial sector and intensifying cooperation in the fight against money laundering. The said report was endorsed by the Finance ministers or other competent ministers of all FATF members in May 1990. Since then, the FATF has been the apex "policy-making body" working to generate the necessary political will to bring about national legislative and regulatory reforms against money laundering. The Recommendations have also been revised further in 1996, 2001, 2003 and in 2012 to ensure an updated and relevant policy guide for the member states.5

The link between laundered money and terrorism funding was realized by the world soon after 9/11 incident on the World Trade Center in the United States. Underlining the same, the United Nations Security Council comprising the most developed economies of the world adopted Resolution No. 1373 for the prevention and the suppression of the financing of terrorist acts, the criminalization of terrorism-related activities and the provision of assistance to carry out those acts, the denial of funding and safe-haven to terrorists and the exchange of information to prevent the commission of terrorist acts. The General Assembly then adopted the International Convention for the Suppression of the Financing of Terrorism which came into force in April, 2002 to take measures to protect their financial systems from being misused by persons planning or engaged in terrorist activities.

The following years witnessed the UN Conventions, against Transnational Organized Crime and against Corruption in September 2003 and December 2005 respectively. The Conventions widened the scope of money laundering offence by covering the proceeds of all serious crimes in addition to the proceeds of illicit drug trafficking. The countries were sought to create a comprehensive domestic supervisory and regulatory regime for banks and non-bank financial institutions, including natural and legal persons, as well as any entities particularly susceptible to being involved in a money laundering scheme.

The Conventions also for the first time ever called for the establishment of financial intelligence units.

A number of initiatives were taken at the international level to tackle money laundering which inter alia includes the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988; European Union Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime; Organization for Economic Cooperation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; United Nations Convention against Corruption.

European Union Convention

The European Union ('EU') defines Money Laundering as the process by which criminal proceeds are 'cleaned' so that their illegal origins are hidden. It is underlined that the offence of money laundering has direct connection with organized crimes generating huge profits in cash, such as trafficking in drugs, weapons and human beings as well as fraud.

The European Parliament and the Council of the European Union, responding to the concerns in the field of money laundering adopted Council Directive6 for the prevention of the use of the...