E/CN.7/1997/PC/CRP.6
    15 August 1997
    ORIGINAL: ENGLISH

    COMMISSION ON NARCOTIC DRUGS ACTING AS
    PREPARATORY BODY FOR THE SPECIAL SESSION
    OF THE GENERAL ASSEMBLY DEVOTED TO THE
    FIGHT AGAINST THE ILLICIT PRODUCTION,
    SALE, DEMAND, TRAFFIC AND DISTRIBUTION
    OF NARCOTIC DRUGS AND PSYCHOTROPIC
    SUBSTANCES AND RELATED ACTIVITIES

    Second informal open-ended inter-sessional meeting

    Vienna, 7-9 October 1997 

    COUNTERING MONEY-LAUNDERING

    CONTENTS

    INTRODUCTION       1-9

    I.    DEFINITIONS        10-11

    II.   OFFENCES AND SANCTIONS        12-15

    III.  CONFISCATION       16-32

    IV.  INTERNATIONAL COOPERATION        33-36

    V.   SHARING OR CONTRIBUTING CONFISCATED PROCEEDS        37

    VI.  OTHER PROVISIONS       38

    VII. CONCLUSION       39-46

    Annexes

    I.    Summary of anti-money-laundering measures at the international level
    II.   Proposed anti-money-laundering measures, membership of relevant international bodies and support for specific recommendations


     INTRODUCTION

    1.  The provisions of the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 19881 relating to the proceeds of crime may be seen as a framework for the international response to the problem of money-laundering. In the present paper, the main subject areas covered by the relevant provisions of the 1988 Convention are considered, and within that context, the more detailed measures advocated and the action taken by other international or regional bodies to give effect to the provisions of the Convention are reviewed. In that connection, the Commission on Narcotic Drugs, in its resolution 5 (XXXIX) of 24 April 1996, urged States, inter alia, to broaden their anti-money-laundering measures.

    2.  The United Nations has taken significant action, beyond the 1988 Convention, to give effect to its provisions and to further international efforts against money-laundering. In addition to a number of General Assembly resolutions aimed at the development of preventive measures and of more effective cooperation between Member States, the Economic and Social Council has adopted resolutions supporting comprehensive research and assistance programmes (resolution 1993/30) and promoting the criminalization of money-laundering (resolution 1994/13), as recommended by the Commission on Crime Prevention and Criminal Justice.

    3.  The United Nations sponsored the International Conference on Preventing and Controlling Money-Laundering and the Use of the Proceeds of Crime: A Global Approach, held at Courmayeur, Italy, from 18 to 20 June 1994. The recommendations of the Conference stressed the need for measures aimed at: criminalization of money-laundering, based on the recognition that it is not just a drug-related phenomenon; limitation of bank secrecy; customer identification; reporting of suspicious transactions; improved regulation of financial operations; asset forfeiture; and international cooperation to combat money-laundering (E/CONF.88/7).

    4.  Moreover, the General Assembly, in its resolution 49/159, approved the Naples Political Declaration and Global Action Plan against Organized Transnational Crime, adopted by the World Ministerial Conference on Organized Transnational Crime, held at Naples, Italy, from 21 to 23 November 1994. Section F of the Global Action Plan specifically addresses the prevention and control of money-laundering and control of the proceeds of crime, focusing on the following measures: criminalizing money-laundering; adopting preventive measures such as ensuring a clear identification of corporate ownership and high ethical standards in both public administration and the private sector; confiscation and seizure of illicit proceeds; freezing and forfeiture of assets and sharing of forfeited assets; limiting financial secrecy; and reporting of suspicious transactions. The Global Action Plan also stresses the need for international bodies to join their efforts to reinforce common regulatory strategies, drawing attention to the importance of the United Nations role in, inter alia, treaty development and technical assistance to Member States (A/49/748).

    5.  It is not the purpose of the present paper to examine the legislation of individual countries or to evaluate their performance in the fight against money-laundering. The focus is rather on identifying measures that have been put forward to give effect to the provisions of the 1988 Convention relating to the proceeds of crime, and that appear to have attracted broad support in the international community. Such support is exemplified by the accession of individual countries to a convention (such as the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime2), or by membership of an organization that has put forward its own set of measures (such as the Financial Action Task Force (FATF) established by the heads of State or Government of seven major industrialized countries and the President of the Commission of the European Communities) or of an organization (such as the Commonwealth) that has endorsed the measures of another organization. A further indication of the acceptance of measures is provided by those countries which have embraced particular measures and, in some cases, enacted them into their legislation. A State-by-State examination of such countries is, however, beyond the scope of the present paper.

    6.  Anti-money-laundering measures or approaches to the issue that appear to form the basis of a broad international consensus are outlined in the conclusion to facilitate the deliberations of the Commission on recommendations that it may wish to submit for consideration or action by the General Assembly.

    7.  The measures reviewed, hereinafter referred to as the proposed measures, are drawn from the following sources:

    (a) Statement of Principles on Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering of the Basel Committee on Banking Regulations and Supervisory Practices of December 1988, referred to as the Basel Statement;

    (b) The 40 recommendations on money-laundering of the Financial Action Task Force of February 1990, as revised in June 1996, referred to as the FATF recommendations;

    (c) The 19 recommendations of the Caribbean Financial Action Task Force (CFATF) of June 1990, referred to as the CFATF Recommendations;

    (d) The Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, opened for signature on 8 November 1990, referred to as the Strasbourg Convention;

    (e) The Council of the European Communities (CEC) directive of 10 June 1991 on prevention of the use of the financial system for the purpose of money-laundering (91/308/EEC), referred to as the CEC directive;

    (f) The Model Regulations of 15 June 1992 Concerning Laundering Offences Connected to Illicit Drug Trafficking and Related Offences of the Inter-American Drug Abuse Control Commission (CICAD) of the Organization of American States, referred to as the CICAD regulations.

    8.  A table summarizing the various proposed measures is presented in annex I and the membership of each of the above-mentioned organizations and parties to the relevant instruments in annex II of the present paper, which also indicates other organizations that have endorsed certain of the proposed measures set out in those instruments.

    9.  A review of the provisions of the 1988 Convention relating to the proceeds of crime and the proposed measures to implement those provisions is presented below.


     I. DEFINITIONS

    A. Terms of the 1988 Convention

    10.  The 1988 Convention contains, in article 1, four relevant definitions, of confiscation, freezing or seizure, proceeds and property, which are set out below. A fifth term, controlled delivery, is defined only in relation to drugs. However, since controlled delivery of criminal proceeds is a law enforcement technique employed by a number of countries, it is also mentioned here. The definitions are as follows:

    (a) Confiscation (article 1, paragraph f), "which includes forfeiture where applicable, means the permanent deprivation of property by order of a court or other competent authority";

    (b) Controlled delivery (article 1, paragraph g) "means the technique of allowing illicit or suspect consignments of narcotic drugs, psychotropic substances, substances in table I and table II annexed to this Convention, or substances substituted for them, to pass out of, through or into the territory of one or more countries, with the knowledge and under the supervision of their competent authorities, with a view to identifying persons involved in the commission of offences established in accordance with article 3, paragraph 1 of the Convention";

    (c) Freezing or seizure (article 1, paragraph l) "means temporarily prohibiting the transfer, conversion, disposition or movement of property or temporarily assuming custody or control of property on the basis of an order issued by a court or a competent authority";

    (d) Proceeds (article 1, paragraph p) "means any property derived from or obtained, directly or indirectly, through the commission of an offence established in accordance with article 3, paragraph 1";

    (e) Property (article 1, paragraph q) "means assets of every kind, whether corporeal or incorporeal, movable or immovable, tangible or intangible, and legal documents or instruments evidencing title to, or interest in, such assets".

    B. Proposed measures

    11.  Definitions of the above-mentioned terms, where they are specifically employed in the proposed measures referred to, are substantially the same as those given in the 1988 Convention. However, the concept of controlled delivery is referred to in only one of the proposed measures. The definition of confiscation contained in the Convention has been generally followed, and some of the proposed measures explicitly refer to or endorse the Convention (the CEC directive, the CICAD regulations and the FATF recommendations). Instead of confiscation, one proposed measure uses the term forfeiture, which is encompassed in the Convention definition of confiscation. One organization reinforces the principle that confiscation should apply to assets both directly and indirectly obtained from criminal conduct, as well as providing for value confiscation and fines in lieu of confiscation.


    II. OFFENCES AND SANCTIONS

    A. Terms of the 1988 Convention

    12.  Although the term laundering is not used in the Convention, the activity which constitutes it is defined, and required to be made a criminal offence, by article 3, paragraph 1, subparagraphs (b)(i) and (b)(ii) respectively worded as follows:

    (a) "The conversion or transfer of property, knowing that such property is derived from any offence or offences established in accordance with subparagraph (a) of this paragraph, or from an act of participation in such offence or offences, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an offence or offences to evade the legal consequences of his actions";

    (b) "The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from an offence or offences established in accordance with subparagraph (a) of this paragraph or from an act of participation in such an offence or offences".

    13.  In short, the conversion, transfer, concealment or disguise of proceeds of drug offences is itself an offence. Further, by article 3, paragraph 1, subparagraph (c)(i), acquisition, possession and use of such proceeds are offences. The establishment of such offences is subject to the constitutional principles and basic concepts of the legal system of the State concerned, as are the offences of inciting or inducing to commit, conspiracy to commit and aiding and abetting and counselling the commission of any of the offences set out in the Convention (pursuant to article 3, paragraph 1, subparagraphs (c)(iii) and (c)(iv)). Knowledge, intent or purpose required as an element of the above-mentioned offences may be inferred from objective factual circumstances (pursuant to article 3, paragraph 3).

    B. Proposed measures

    14.  Certain of the proposed measures provide that States should ratify and implement fully the 1988 Convention, which implicitly carries with it the creation of offences in the terms set out above. Others specifically set out the offences, employing the terms used in the 1988 Convention. The knowledge standard, where referred to, is generally the same as that recommended by the 1988 Convention, and in one case, States are urged not to allow differing knowledge requirements to act as a barrier to mutual legal assistance. One instrument further leaves it open to parties to eliminate the possibility of convicting a person for laundering the proceeds of his or her own offence.

    15.  Certain aggravating factors are noted in the 1988 Convention, article 3, paragraph (5)(e), which provides for courts and competent authorities to take into account, as a factor making the commission of offences particularly serious, "the fact that the offender holds a public office and that the offence is connected with the office in question". Two of the sets of proposed measures make reference to enhanced punishment of offences relating to the proceeds of crime where an offender is the holder of a public office.


     III. CONFISCATION

    16.  It is on the subjects of confiscation, provisional measures and financial records that the 1988 Convention is most brief and general in its terms, giving scope for more detailed enactments by individual states. The attention of Member States is therefore particularly drawn to the measures outlined below, which could further the achievement of the broad aims enunciated by the Convention.

    A. Terms of the 1988 Convention

    17.  Article 5 reads as follows:

    (a) In paragraph 1(a): "Each Party shall adopt such measures as may be necessary to enable confiscation of ... proceeds derived from offences established in accordance with article 3, paragraph 1, or property the value of which corresponds to that of such proceeds";

    (b) In paragraph 2: "Each Party shall also adopt such measures as may be necessary to enable its competent authorities to identify, trace, and freeze or seize proceeds, property, instrumentalities or any other things referred to in paragraph 1 of this article, for the purpose of eventual confiscation";

    (c) In paragraph 3: "In order to carry out the measures referred to in this article, each Party shall empower its courts or other competent authorities to order that bank, financial or commercial records be made available or be seized. A Party shall not decline to act under the provisions of this paragraph on the ground of bank secrecy."

    B. Proposed measures

    18.  Specific steps designed to give effect to the above-mentioned provisions of the 1988 Convention have been described in considerable detail in the proposed measures. The action required to enable confiscation, including identification, tracing, freezing and seizure of proceeds, figures prominently in most of the proposed measures reviewed in the present study. Closely linked to the proposals are specific provisions relating to the availability of bank and financial records, notwithstanding bank secrecy. In section F of the Global Action Plan against Organized Transnational Crime, States are urged to adopt legislation and regulations to give effect to many of the proposed measures, in order to promote effective money-laundering control and international cooperation. The measures may be conveniently grouped under the following major headings: financial secrecy; customer identification; record-keeping; reporting of transactions; protection from liability for reporting; requirement not to inform client of an investigation; anti-money-laundering programmes for financial institutions; cross-border currency movements; businesses to which measures are applicable; criminal control of financial institutions; shell corporations; and corporate criminal liability

    1. Financial secrecy

    19.  In the proposed measures, it is emphasized that the secrecy laws governing financial institutions should not be an impediment to, or be conceived in such a way as to inhibit implementation of, effective anti-money-laundering measures or related international cooperation. Financial institutions should cooperate fully with law enforcement authorities in cases involving money-laundering, and States should not decline to give mutual assistance on grounds of bank secrecy. One measure would prohibit the invoking of attorney-client privilege solely because a lawyer is acting as a financial adviser or a nominee.

    2. Customer identification

    20.  As entailed by the rule commonly known as the "know-your-client" rule, the practice of customer identification encompasses measures to clearly identify clients, both individual and corporate, who undertake financial transactions, including those acting through nominees or other third parties.

    21.  Measures put forward include barring the keeping of anonymous accounts or accounts in fictitious names by financial institutions and requiring institutions to identify all clients on the basis of an official or other reliable identifying document and to keep a record thereof. Similar measures should be taken to verify the legal existence of bodies corporate and other legal entities and the authority of persons purporting to act on their behalf. That includes obtaining information about the true identity of any party on whose behalf transactions are undertaken, including domiciliary companies (those that conduct no business in the jurisdiction in which they are registered).

    22.  Some measures also call for identification to be obtained in single transactions exceeding a given cash amount (or where the total of apparently linked transactions exceeds that amount), or even in single transactions below such an amount wherever there is a suspicion of money-laundering.

    3. Record-keeping

    23.  Broadly similar measures on record-keeping have been recommended. In general, financial institutions are to maintain, for a minimum of five years, all records on client identification and records on transactions sufficient to permit reconstruction of the latter (including amounts and types of currency), so as to provide, if necessary, evidence for criminal prosecutions. Such records are to be available to competent authorities in the context of relevant criminal prosecutions and investigations. Some measures explicitly call for sanctions against financial institutions that fail to comply.

    4. Reporting of transactions

    24.  Issues relating to the reporting of transactions involve, first, the types of transactions that are to be reported (suspicious ones and those above a certain cash value) and, secondly, whether reporting is mandatory or voluntary. Mandatory reporting of all suspicious transactions and large cash transactions is an element in many of the proposed measures. In one case, a specific rule is provided, requiring the reporting of multiple cash transactions that, when added together, exceed the reporting threshold for cash transactions for a given period of time. Financial institutions are also urged to give special attention to transactions likely related to money-laundering and to inform authorities of facts that might be an indication thereof. Some measures place the inspectors of financial institutions under a similar duty to report.

    5. Protection from liability for reporting

    25.  Protection from liability for reporting is a corollary of the duty to report, otherwise the duty would be rendered ineffective. A general protection against civil and criminal liability is granted to financial institutions and their personnel when disclosing in good faith their suspicions to the competent authorities, ideally regardless of whether any illegal activity was ultimately found as a result of the disclosure.

    6. Requirement not to inform a client of an investigation

    26.  There is broad agreement on the requirement not to inform a client of an investigation. One formulation of the rule would require financial institutions to prohibit their personnel from warning their customers when information relating to them is being reported to the competent authorities. Another adds the very useful requirement that there should be no disclosure that an investigation is being carried out.

    7. Anti-money-laundering programmes for financial institutions

    27.  Various measures have been designed to meet the need for information and education to enable employees of financial institutions to recognize and combat money-laundering. The institutions are to develop anti-money-laundering programmes, including internal policies and procedures, designation of compliance officers, screening of potential employees, ongoing employee training and an audit function to test the system. The adequacy of such programmes can be ensured by government supervisory authorities. The authorities can also serve as sources of advice and expertise, including the provision to financial institutions of guidelines relating to suspicious transactions, as well as the ongoing communication of information regarding current developments in and techniques of money-laundering.

    8. Cross-border currency movements

    28.  Some of the proposed measures urge States to consider ways of detecting or monitoring the physical trans-border movement of substantial amounts of cash (and, in one case, bearer negotiable instruments), while ensuring protection of privacy and the free flow of capital. To that end, a computerized system might be set up for reporting large international currency transactions to a central authority. Adequate border procedures to detect illegal currency shipments are also advocated.

    9. Businesses to which measures are applicable

    29.  The provisions of all the international instruments referred to above would apply to banks, most also being extended to a variety of non-bank financial institutions. In some of the instruments, Governments are urged to consider extending the applicable measures to non-financial businesses that may be engaged in financial activities (such as deposit-taking, lending, cashing cheques, money transfers, foreign exchange transactions, securities and insurance operations, various other financial services, as well as casino operations). Consideration is also given to the reporting of other business transactions, such as those involving travel and the sale of jewelry, real estate, automobiles and aircraft. One suggestion is to extend applicable measures, as the need arises, to other professions and categories of undertakings found to engage in activities particularly likely to be used for money-laundering purposes.

    10. Criminal control of financial institutions

    30.  Measures have been proposed to guard against control or acquisition by criminals or their confederates of a significant participation in financial institutions. Such measures could include the licensing of all banks, including foreign banks and their representatives, whether or not they take deposits or otherwise do business in the country concerned (so-called offshore shell banks). More severe sanctions might be prescribed for financial institutions or their personnel participating in money-laundering, including suspension or revocation of their operating licenses. Relevant provisions are often contained in the general banking laws of a State, and therefore might not be the object of special consideration in money-laundering legislation.

    11. Shell corporations

    31.  Shell corporations, which do not generate profits from actual business undertakings, but exist as facilities through which criminal funds can be banked and transferred, have for some time been recognized as a risk area for money-laundering. One recommendation is that States should take notice of the potential for abuse of shell corporations by money launderers, and should consider whether additional measures are required to prevent their unlawful use. The problem of shell corporations clearly goes well beyond the domain of illicit drug trafficking, extending to general international criminal activity.

    12. Corporate criminal liability

    32.  The notion of extending criminal liability to corporations, in addition to individuals, is referred to in a number of the measures studied. One provides that the fact that a person subject to a confiscation order is a legal person should not be invoked by a party as an obstacle to affording international cooperation in the area of confiscation.


    IV. INTERNATIONAL COOPERATION

    A. Terms of the 1988 Convention

    33.  The United Nations, as reflected in the Naples Political Declaration, has consistently emphasized the need for a comprehensive, international approach to enable the world community to achieve successful dealing with the problem of the proceeds of crime. Article 5, paragraph 4, of the 1988 Convention provides procedures for cooperation between States parties in enforcing confiscation orders and in identifying, tracing, seizing or freezing proceeds for the purpose of eventual confiscation. In particular, States may wish to consider the provisions of article 5, paragraph 4, subparagraph (f) which are designed to facilitate, and could serve as a basis for, bilateral cooperation. Subparagraph (f) provides that where a party elects to make the taking of such bilateral measures as those referred to in paragraph 4, subparagraphs (a) and (b), "conditional on the existence of a relevant treaty, that Party shall consider this Convention as the necessary and sufficient treaty basis". Cooperation in the field of investigations, prosecutions and related matters is dealt with in a separate paper before the Commission (E/CN.7/1997/PC/CRP.5).

    34.  The international community has consistently recognized the importance of capacity-building in Member States and of supporting their efforts to that end. In that connection, the work carried out by the United Nations within the framework of the Global Programme against Money-Laundering jointly managed by the United Nations International Drug Control Programme (UNDCP) and the Crime Prevention and Criminal Justice Division of the Secretariat, has been designed to provide such support. Assistance could take the form of training in judicial matters, law enforcement and the financial sector; the establishment of financial intelligence units; legal assistance in drafting legislation; and providing information and research reports on money-laundering. Even in the initial implementation phase, the Global Programme against Money-Laundering should make an important contribution to capacity-building at the institutional level.

    B. Proposed measures

    35.  Some of the proposed measures deal extensively with international cooperation in cases involving the proceeds of crime, including action such as: encouraging States to enter into bilateral and multilateral agreements and arrangements to promote mutual assistance; promoting ratification of relevant international conventions, such as the 1998 Convention and the Strasbourg Convention; and ensuring that States have authority to take expeditious action on requests to identify, seize, freeze and confiscate proceeds. In one instance, it is urged that confiscation and provisional measures be obtainable at the request of a foreign State, where relevant property is located in the requested State, notwithstanding that neither the owner of the property, nor the alleged offender, have ever been present in the requested State.

    36.  One set of proposed measures contains extensive and detailed provisions to promote cooperation and mutual assistance in confiscation and related matters, notably including the following:

    (a) A party would be required to take provisional measures, or measures aimed at confiscation, upon request from another party;

    (b) A requesting party would be granted a hearing before a provisional measure is lifted;

    (c) Requested parties would be bound by the facts as found in the decision of the requesting party;

    (d) Each party would be called upon to designate a central authority to receive and transmit requests for assistance;

    (e) Documents transmitted in furtherance of international cooperation would be exempt from all legalization formalities;

    (f) Requested parties would be required to give reasons for any refusal or postponement of action;

    (g) There would be a duty to give prompt feedback as to the status of requests and any results thereof;

    (h) Parties would be permitted to demand confidentiality regarding the subject of requests and to limit the use of the information transmitted.


    V. SHARING OR CONTRIBUTING CONFISCATED PROCEEDS

    37.  The 1988 Convention, article 5, paragraph 5 (b), provides that parties may give special consideration to concluding agreements on contributing all or part of the value of confiscated proceeds "to intergovernmental bodies specializing in the fight against illicit traffic in and abuse of narcotic drugs", and to sharing such proceeds with other parties. Two of the proposed measures refer to the matter, one directly citing the wording of the Convention and the other identifying the sharing of confiscated assets as part of the process of coordinating seizure and confiscation proceedings.


     VI. OTHER PROVISIONS

    A. Third party rights with respect to seized or confiscated property

    38.  The 1988 Convention, article 5, paragraph 8, provides that confiscation and related measures should "not to be construed as prejudicing the rights of bona fide third parties". A similar restriction is embodied in at least three of the proposed measures, two of which set out detailed provisions for the protection of third-party rights in seized property, including the safeguarding of such rights in the course of international cooperation with regard to provisional measures and confiscation.


    VII. CONCLUSION

    39.  There appears to be little controversy about the need for international cooperation in matters of confiscation, and indeed the 1988 Convention already contains detailed provisions in that regard. The Global Programme against Money-Laundering contains specific training and institution-building objectives to enhance the capacity of States to implement the Convention.

    40.  In general, the Convention definitions of confiscation, freezing or seizure, proceeds and property are employed without alteration in most of the proposed measures, although the technique of controlled delivery of proceeds is referred to in only one of them. There is broad agreement on the framing of the laundering offence, in accordance with the 1988 Convention (including the offences of acquisition and possession), and on the importance of criminalizing attempts to commit such an offence, conspiracies and other forms of participation in such an offence.

    41.  Somewhat less consideration has been given to the sharing of confiscated proceeds (pursuant to the 1988 Convention, article 5, paragraph 5, subparagraph (b)(ii)), although in fact many States are beginning to do so in practice through legislation and bilateral agreements. Nor has the concept of reversing the onus of proof regarding the lawful origin of alleged proceeds (pursuant to article 5, paragraph 7) as yet found its way into a general set of countermeasures. It is hoped that a forthcoming paper by the International Scientific and Professional Advisory Council, produced under the auspices of the Global Programme against Money-Laundering, will enhance interest in that concept.

    42.  Some of the proposed measures merely suggest actions or approaches to give effect to the provisions of the 1988 Convention. Others go further and in many cases provide detailed language suitable for inclusion in national legislation.

    43.  The proposed measures break new ground in forging the means by which provisional measures and confiscation, as called for in general terms in the 1988 Convention, article 5, paragraph 1-3, could be made a reality. Of particular relevance are the 12 categories discussed in chapter III above, which detail what is required to prevent and detect money-laundering and to permit seizure and confiscation of proceeds, viewed as legal tools for use by law enforcement, prosecutors and the financial sector in the fight against money-laundering. Many of the proposed measures mark a significant departure from traditional approaches to criminal law, involving a comparatively invasive approach, particularly in the traditionally confidential area of banking and financial relationships. They impose a duty to be alert to criminal behaviour, to report it, and to keep records that will serve to prove it later on.

    44.  With the possible exception of measures relating to shell corporations, and perhaps to corporate criminal liability, the categories are becoming a widely accepted basis for legislation designed to detect, intercept and prevent the use of the proceeds of crime. Knowing the client, recording and reporting transactions and, where necessary, lifting bank secrecy are all core principles within the sets of measures reviewed. Widening the coverage of businesses beyond banks to include financial activities generally and protecting from liability those who in good faith report questionable financial activity are also crucial concerns.

    45.  In summary, the general principles set forth below might be said to have gained substantial international acceptance as appropriate means for detecting, preventing the use of, seizing and confiscating the proceeds of crime. All are expressed as detailed measures in one or more of the instruments referred to above, the relevant specific provisions of which are indicated in the table contained in annex I to the present paper.

    46.  The following general principles appear to enjoy a broad measure of international support in the fight against money-laundering:

    (a) Financial institutions should apply the "know-your-client" rule, using reliable documents of identity and banning anonymous accounts;

    (b) Detailed records of financial transactions should be kept for a minimum of five years in order to assist later investigations and prosecutions relating to money-laundering and the proceeds of crime, all such records being made available to investigators and courts according to the law;

    (c) There should be mandatory reporting of suspicious transactions, including protection from liability for those so reporting. Clients should not be advised that they are the subject of investigation;

    (d) Banks and financial and credit institutions (and possibly other cash dealers as well as professions) should be subject to the above-mentioned record-keeping and reporting requirements, and should maintain training programmes for their employees to enable them to meet their obligations under the law;

    (e) The desirability of more closely monitoring and controlling the cross-border movement of currency should be considered.


    Notes

    1Official Records of the United Nations Conference for the Adoption of a Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, Vienna, 25 November-20 December 1988, vol. I (United Nations publication, Sales No. E.94.XI.5).

    2Explanatory Report on the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (Strasbourg, Council of Europe, 1991).


    Annex I

    SUMMARY OF ANTI-MONEY-LAUNDERING MEASURES AT THE INTERNATIONAL LEVEL

    Table 1. Anti-money laundering provisions contained in articles 1 and 3 of the
    1988 Convention and relevant proposed measures of international bodies

    1988 Convention, article 1: definitions

    1988 Convention, article 3, paragraphs 1 and 5(e):
    offences and sanctions

    Proposed measures of international bodies

    Confiscation

    Controlled
    delivery

    Freezing and seizure

    Proceeds

    Property

    Laundering

    Acquisition
    and
    possession

    Attempts,
    conspiracies etc.

    Offences involving the use of a
    public office

    Basel Declaration
    (section)

    -

    -

    -

    -

    -

    -

    -

    -

    -

    FATF recommendations
    (number)

    -

    36

    -

    -

    -

    1

    1

    1

    -

    CFATF recom- mendations
    (number)

    8

    -

    -

    -

    -

    -

    -

    3

    5

    Strasbourg
    Convention
    (article and
    paragraph)

    1(d)

    -

    -

    1(a)

    1(b)

    6(1(a)-1 (b))

    6(1(c))

    6(1(d))

    -

    CEC directive
    (article)

    -

    -

    -

    -

    1

    1, 2

    1, 2

    1, 2

    -

    CICAD
    regulations
    (number and
    paragraph)

    1(2)

    -

    1(3)

    1(7)

    1(8)

    2

    2

    2

    Recommendation
    only

     

    Table 2. Anti-money-laundering provisions contained in article 5 of the 1988 Convention
    and relevant proposed measures of international bodies

    1988 Convention, article 5, paragraphs 1-3: confiscation, provisional measures, financial records

    1988 Convention, article 5, paragraphs 4,
    5(b) and 8

    Proposed measures of international bodies

    Finan-

    cial

    secrecy

    Customer
    identification

    Record-
    keeping

    Transaction
    reporting

    Liability for
    reporting

    Informing
    client

    Programmes
    for financial
    institutions

    Cross-
    border
    currency

    Businesses
    covered

    Control of
    financial
    institutions

    Shell
    corpo-
    rations

    Corporate
    criminal
    liability

    International
    cooperation:
    confiscation

    Contribution
    and sharing
    of proceeds

    Third-party
    rights

    Basel
    Declaration
    (section)

    -

    II

    V

    -

    -

    -

    V

    -

    -

    -

    -

    -

    -

    -

    -

    FATF recom-
    mendations
    (number)

    2

    10, 11

    12

    15

    16

    17

    19, 26, 31

    22, 23

    8, 9

    29

    25

    6

    34, 35, 38

    38, 39

    7

    CFATF recom-
    mendations
    (number and
    paragraph)

    6

    -

    13

    14

    -

    -

    11(2)

    12

    11, 14

    11(1)

    -

    -

    7

    -

    -

    Strasbourg
    Convention
    (article and
    paragraph)

    4(1)

    -

    -

    -

    -

    -

    -

    -

    -

    -

    -

    18(8(a))

    11-14, 23, 26, 30-33

    -

    5, 21, 22

    CEC directive
    (article)

    -

    3

    4, 6

    6, 10

    9

    8

    11

    -

    1, 12, 13

    -

    -

    -

    -

    -

    -

    CICAD
    regulations
    (number and
    paragraph)

    11(3), 12(9), 18(5), 19

    10

    10(4)-10(6), 11, 14

    12, 13

    13(4)

    11(1), 12(8), 13(3)

    15, 17(1(d))

    Recommen-
    dation only

    9, 16

    14

    -

    1(6)

    18

    7

    6

     


    Annex II

    PROPOSED ANTI-MONEY-LAUNDERING MEASURES, MEMBERSHIP OF RELEVANT
    INTERNATIONAL BODIES AND SUPPORT FOR SPECIFIC RECOMMENDATIONS

    A. Sources

    1. The sources of the proposed measures are as follows:

    (a) Statement of Principles on Prevention of Criminal Use of the Banking System for the Purpose of Money-Laundering of the Basel Committee on Banking Regulations and Supervisory Practices. The Committee comprises representatives of the central banks of the following States: Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, Netherlands, Sweden, Switzerland, United Kingdom of Great Britain and Northern Ireland and United States of America;

    (b) The 40 recommendations of the Financial Action Task Force on Money-Laundering comprising the following States and international bodies: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States, the European Commission and the Cooperation Council for the Arab States of the Gulf (see paragraph 2 below for details concerning support extended to the recommendations);

    (c) The 19 recommendations of the Caribbean Financial Action Task Force comprising the following States and territories: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Colombia, Costa Rica, Dominica, Dominican Republic, Grenada, Guyana, Jamaica, Montserrat, Netherlands Antilles, Panama, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Turks and Caicos Islands, Trinidad and Tobago and Venezuela;

    (d) The Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime. The following States are signatories to the Convention: Australia, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Liechtenstein, Lithuania, Luxembourg, Netherlands, Norway, Portugal, Republic of Moldova, Romania, San Marino, Slovenia, Spain, Sweden, Switzerland, Ukraine and United Kingdom;

    (e) Council of the European Communities directive on prevention of the use of the financial system for the purpose of money-laundering (91/308/EEC). The States implementing the directive are as follows: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden and United Kingdom.

    (f) The Model Regulations Concerning Laundering Offences Connected to Illicit Drug Trafficking and Related Offences of the Inter-American Drug Abuse Control Commission of the Organization of American States. The regulations were approved in 1992 by the General Assembly of the Organization of American States, of which the following States are members: Antigua and Barbuda, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, United States, Uruguay and Venezuela.

     

    B. Support for the 40 recommendations of the Financial Action Task Force on Money-Laundering

    2. Sources of support for the 40 FATF recommendations include the following:

    (a) CEC directive on money-laundering (for implementing States, see paragraph 1 (e) above);

    (b) The Caribbean Financial Action Task Force, which endorsed the original 40 recommendations of FATF, which were amended in 1996 (for CFATF members, see paragraph 1 (c) above);

    (c) The Commonwealth, of which the following States are members: Antigua and Barbuda, Australia, Bahamas, Bangladesh, Barbados, Belize, Botswana, Brunei Darussalam, Cameroon, Canada, Cyprus, Dominica, Gambia, Ghana, Grenada, Guyana, India, Jamaica, Kenya, Kiribati, Lesotho, Malawi, Malaysia, Maldives, Malta, Mauritius, Mozambique, Namibia, Nauru, New Zealand, Nigeria, Pakistan, Papua New Guinea, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Seychelles, Sierra Leone, Singapore, Solomon Islands, South Africa, Sri Lanka, Swaziland, Tonga, Trinidad and Tobago, Tuvalu, Uganda, United Kingdom, United Republic of Tanzania, Vanuatu, Western Samoa, Zambia and Zimbabwe. The following are other jurisdictions within the Commonwealth: Anguilla, Bermuda, British Antarctic Territory, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Cook Islands, Cyprus (Sovereign Base Areas), Falkland Islands (Malvinas), Gibraltar, Montserrat, Pitcairn Island, Saint Helena, Saint Helena Dependencies, South Georgia and the South Sandwich Islands and Turks and Caicos Islands;

    (d) The Offshore Group of Banking Supervisors, one of the conditions of membership of which is a clear commitment to the 40 recommendations of FATF. It comprises representatives of banking supervisory authorities of the following States and territories: Aruba, Bahamas, Bahrain, Barbados, Bermuda, Cayman Islands, Cyprus, Gibraltar, Guernsey, Isle of Man, Jersey, Lebanon, Malta, Mauritius, Netherlands Antilles, Panama, Singapore and Vanuatu;

    (e) The declaration signed at Riga in November 1996 by the Prime Ministers of Estonia, Latvia and Lithuania, committing their Governments to the fight against money-laundering. The preamble to the declaration states, inter alia, the following:

    "Intending to give full effect to the provisions of the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988, the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, 1990, and to implement anti-money-laundering measures based on the forty recommendations of the Financial Action Task Force on Money-Laundering;

    "Desiring, in order to improve and facilitate international cooperation, to harmonize anti-money-laundering measures with those already in force, in particular those embodied in the European Directive on Prevention of the Use of the Financial System for the Purpose of Money-Laundering, 1991..."