4.1. An extension liability for money laundering to the predicate offence perpetrator: the adverse implications for the economy
Commission of a predicate offence
What should an attorney do when he defends the accused in a trial and takes a fee paid with proceeds from crime?
The same person launders the ill-gotten proceeds (self-laundering)
I. The perpetrator of the predicate offence is not held liable for laundering the proceeds
II. The perpetrator of the predicate offence is held liable for laundering the proceeds
Rationale: multiple punishments for a single criminal offence
Rationale: money laundering is a separate offence with its adverse implications for the economy
Adverse macroeconomic implications
Risks and damage to entities and professionals involuntarily involved in money laundering
Distortion of economic data
Misleading monetary data because money demand shifts from one country to another
High interest and exchange rate volatility
The income distribution effect (from high savers to low savers, from sound investments to risky)
Dominance of riskier but higher-yielding investments in the small business sector where tax evasion is prevalent
Erosion of confidence in markets by widespread insider trading, fraud and embezzlement
Difficulties in managing government economic policy
Legal transactions involving foreign participants become less desirable due to association with money laundering (the contamination effect)
The risks:
reputational
operational
legal
concentration risks
4.2. Dual criminality for offences committed internationally
1. The minimum standard. Predicate offences for money laundering should extend to conduct that occurred in another country, which constitutes an offence in that country, and which would have constituted a predicate offence had it occurred domestically (R. 3, IN).
Country Beta
Country Alpha
In Beta this conduct is a predicate offence for money laundering
In Alpha this conduct is not a predicate offence for money laundering
Proceeds from the crime are laundered in Alpha
An offence is committed
The money launderer will be prosecuted in Alpha
“Dual criminality” test requires the conduct to be a predicate offence both in the other country and domestically (in countries Alpha and Beta). It would allow for prosecution on ML charges in Alpha based upon the fact that in Beta such conduct is a predicate offence to money laundering.
2. A broader approach that countries may follow. Countries may provide that the only prerequisite is that the conduct would have constituted a predicate offence had it occurred domestically.
Country Alpha
Country Beta
In Beta this conduct is not a predicate offence for money laundering
In Alpha this conduct is a predicate offence for money laundering
Proceeds from the crime are laundered in Alpha
An offence is committed
The money launderer will be prosecuted in Beta
This approach would allow for prosecution where the proceeds were generated by conduct that was not a predicate offense in the country where the conduct was committed, but was an offense in the country where the proceeds were laundered.