Money Laundering Tip: If they don’t serve the time you haven’t done the crime

Added 03 Jul 2012

By Alex Marriage

This is the message that the EU’s current anti-money laundering rules send to those in a position to launder the proceeds of tax evasion. It is a crime to launder the proceeds of tax evasion if the tax evader you help, gets caught and goes to prison for more than a year, 11 months and its fine. For those considering whether or not tax evasion is a serious crime it is worth pointing out that Christian Aid found that even using a very conservative estimate, the money lost by developing countries to tax evasion by multinational companies was found to be equal to US$160 billion. If this US$160 billion was supplemented to developing countries budgets with allocation unchanged it would be enough to save the lives of 1000 children every day.

It is important that the Financial Action Task Force’s (FATF) recommendation that tax crimes be made a money laundering predicate offence is adopted worldwide. If you help handle the proceeds of one of the crimes listed as a predicate offence you yourself are committing money laundering. However, this will be much more effective if, in addition to being defined as serious crimes, tax crimes are interpreted to mean all tax evasion and not the more slippery, definition of tax fraud used by some secrecy jurisdictions to protect their parasitic business model.

Such professionals and industries who might deliberately or accidently handle criminal cash are known in EU/FATF speak as covered institutions, a list which includes bankers, lawyers, and accountants. However, important groups, such as nominees, are missing from the list.

It is clear that these professionals have confused motivations here between complying with the rules and getting new customers. Making all tax evasion a predicate offence would increase the chance of sanctions. Crucially this would help motivate professionals to look out for tell-tale signs of tax evasion and encourage them to reject suspicious clients and inform the authorities.

Naturally it is also important not only that adequate rules are in place but also that they are enforced. FATF the international anti-money laundering body, has stated enforcement by regulators and compliance by business must be improved to make their revised standards effective, civil society and the media must monitor the situation and make sure this happens.

The Financial Action Task Force standards are being adopted and transposed around the world. The EU held a consultation on how to interpret the FATF standards. Submissions were made by Task Force members Eurodad and Global Witness. Meanwhile 1000 CSOs signed a letter to the Commissioner Barnier calling for greater disclosure of beneficial ownership.