Towards the effective ASEAN mutual legal assistance in combating money laundering

Author:Chat Le Nguyen
Position:School of Law, University of Canterbury, Christchurch, New Zealand

Purpose – The purpose of this paper is to discuss the issue of mutual legal assistance (MLA) within the Association of Southeast Asian Nations (ASEAN) in combating money laundering. Design/methodology/approach – This paper first examines the scenario of money laundering (ML) in Southeast Asia and the ASEAN's response. It then discusses the legal framework and practice of regional... (see full summary)

1 Introduction

In recent decades, a number of factors, such as the globalisation of financial markets and the internationalization of organised crime, have facilitated transnational money laundering (ML) ( Lilley, 2006, pp. 20, 23 ). ML tends to be pushed into countries and regions that lack the expertise, resources, capacity and legal framework to effectively fight ML. Southeast Asia is one the most attractive regional destinations for money launderers.

ASEAN, since very early, has acknowledged the diverse nature of transnational crime beyond illegal trafficking of drugs, and taken note with concern of its expansion into Southeast Asia ( Pushpanathan, 1999, p. 1 ). The growing problem of transnational crime has been perceived as a great threat to state security and regional stability which attracts political attention at the highest diplomatic level. Towards the prosperous and peaceful ASEAN Community in 2015, ASEAN has called for the intensification of cooperation among member states and with extra-regional bodies in the war on transnational crime. In October 2011, the ASEAN Ministerial Meeting on Transnational Crime (AMMTC) determined the priority to the fight against eight types of transnational crime: counter-terrorism, trafficking in persons, illicit drug trafficking, ML, sea piracy, arms smuggling, international economic crime, and cyber crime ( ASEAN, 2011 ). In light of the increasingly transnational nature of ML activities, the effective regional and international cooperation in preventing and combating ML is essential. An important pillar of cooperation is MLA.

The Treaty on MLA in criminal matters, signed among like-minded ASEAN member countries in 2004, is a crucial step for ASEAN cooperation in response to transnational crime in general, and to ML in particular. In practice, however, a number of obstacles have precluded ASEAN states in their effort to process MLA. This paper focuses on a preliminary examination of both achievements and obstacles in the regional MLA for AML. In addition, the important role of police in MLA will be figured out.

2 ML risk in Southeast Asia and the ASEAN's response
2. 1 ML risk in Southeast Asia

Southeast Asia is seen as one of the regions experiencing the greatest increase in ML risk. This region consists of countries with diverse geographical, economical, cultural, political and legal background which have created several unique factors in favour of ML development.

Insurgent groups, ethnic armies and organized crimes have long utilized the Southeast Asia to acquire and transfer funds to accomplish their purposes ( Croissant and Barlow, 2007, p. 135 ). The region has been recognized as source of funding and infrastructure for a number of terror groups that often associate with ML. In addition, the traditional serious transnational organized crime in the region, such as illicit drugs trafficking, trafficking in persons, smuggling and small arms trade have generated enormous illegal proceeds which needs to be laundered.

Five ASEAN countries (Cambodia, Laos, Myanmar and Thailand) and China is recognized as one of the world's major locations for production of heroin and amphetamine-type stimulants (ATS) ( UNODC, 2008, p. 70 ). The main illicit drug produced in Southeast Asia is opium. One of the largest opium-producing countries is Myanmar ( UNODC, 2011, p. 41 ). Illicit drug trafficking involves the immense production of opium and heroin in the golden triangle which is smuggled to final destinations within Asia or to Europe ( UNODC, 2011, p. 42 ).

Southeast Asia is known as a significant source of trafficked persons, and is both an origin and destination region ( UNODC, 2009 ). Each year, thousands of women and girls who suffer from severe poverty and a lack of job opportunity fall into the hands of intra-regional human traffickers. They may be trafficked to supply for the sex industries in Thailand, Malaysia, Indonesia or the Philippines ( Cotter, 2009, pp. 497-8 ), for illegal marriage or for forced labour.

Besides the traditional mentioned-above transnational crime, in recent decades, transnational financial crime (e.g. ML, fraudulent bankruptcy, corruption and bribery of public officials) have become a remarkable threat in Southeast Asia. This is one of negative aspects of economic boom in Asia in the early 1990s. China and Southeast Asia has become an area of tremendous economic expansion that may be the negative aspects of increased fraud and ML ( Rodier, 2007 ). Southeast Asia, undoubtedly, has become a very active region in the international financial market. Singapore has become one of the international financial centers of the world with easily accessible formal and informal financial services that may be exploited by money launderers to transfer illegal funds in or out of the region.

Other transitional countries (e.g. Vietnam and Myanmar) which are undergoing economic reform desire as much hard currency as possible. They have adopted and changed their policies and legislation with the aim of attracting more overseas investment, facilitating business operations, and integrating with the global economy. Foreign cash investment is “welcome” and may be “not questioned”. In fact, they have become the friendly attractive business environment and destinations of foreign investment. This changing, however, has been utilized by transnational financial crime. Corruption is rampant in many ASEAN member states, especially in Myanmar, Cambodia, Laos, Philippines and Vietnam1. National financial sectors which lack regulatory controls and legal provisions against ML are vulnerable to abuse by criminals, especially by ML offenders. The relatively lax laws, weak regulatory financial system and a cash-based economy, such as in Cambodia, Laos, Myanmar and Vietnam serve to increase the vulnerability to ML. Illegal funds may be laundered in form of direct and indirect foreign investment, international trade-based ML, or through offshore front companies established in these countries ( He, 2010, pp. 22-25 ).

Another factor is that some ASEAN countries (e.g. the Philippines, Vietnam, Indonesia, and Thailand) are among the world top recipients of remittances. In 2010, the Philippines and Vietnam are on the top ten recipients of officially recorded remittances among developing countries with about $21.3 billion (the world's fourth biggest) and $7.2 billion (the world's tenth biggest), respectively ( WB, 2011, p. 21 ). Additionally, these countries have thriving underground remittance systems which may be used as one of the most popular typologies of ML ( Carroll, 2005 ). This factor has contributed significantly to ML risk in the region.

2. 2 ASEAN's response to ML

In recognizing the potential detrimental effects of transnational crime, ASEAN countries have taken concerted efforts to combat such crime since the early 1970s. The ASEAN declaration on transnational crime signed by the ASEAN Minister of Interior/Home Affairs in 1997, the “ASEAN Plan of Action to Combat Transnational Crime” adopted by AMMTC in 1999 and numerous ASEAN ministerial meeting have shown a high political commitment among ASEAN countries in the fight against transnational crime. ASEAN's initial effort was focused on illicit drug trafficking. ASEAN, now, has strengthened cooperation to suppress other transnational crime including ML. Almost all of the ASEAN states have become Parties to the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the 1988 UN Drug Convention), United Nations Convention against Transnational Organised Crime (UNTOC), United Nations Convention against Corruption (UNCAC) (Table I), which include the key articles about criminalization of ML, measures to combat ML, and the cooperation in AML2.

All states have their own legal frameworks concerning AML, however many of them are inadequate to comply with international standards (Table I). The developing countries in region often lack of human and financial resources in terms of countering ML, such as the scarcity of qualified personnel and cohesive structures in AML, so they cannot implement fully international standards. Additionally, the rapid diffusion of AML policies and the adoption of international standards concerning AML among several developing countries with little in common have been much more coercive-based, due to the strong demand by developed countries and international...

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