Comparing AML legislation of the UK, Switzerland and Germany
| Published date | 08 August 2008 |
| Pages | 234-250 |
| DOI | https://doi.org/10.1108/13685200810889380 |
| Date | 08 August 2008 |
| Author | Sabrina Fiona Preller |
| Subject Matter | Accounting & finance |
Comparing AML legislation
of the UK, Switzerland
and Germany
Sabrina Fiona Preller
University of Teeside, Middlesbrough, UK and
Munich, Germany
Abstract
Purpose – The purpose of this paper is to compare, contrast and evaluate the anti-money laundering
(AML) legislation practised by the UK, Switzerland and Germany.
Design/methodology/approach – To facilitate the evaluation process, AML legislations and
regulations of all three countries are compared based on four different aspects, i.e. criminal law, the
reporting stage, the collation stage and the investigation stage.
Findings – Although specific differences and similarities between the three AML regimes are
highlighted, based on the current literature, it is rather difficult to reach a valid conclusion regarding
their effectiveness and efficiency.
Originality/value – A wide range of literature, in the original languages, was analyzed during the
compilation of this paper.
Keywords United Kingdom,Switzerland, Germany, Money laundering, Laws and legislation
Paper type General review
1. Introduction
Money laundering can generally be defined as the process of converting or transferring
criminal proceeds with the intention of disguising their illicit origin (UN, 2000: Art.
3(a)(i)). The extent of the problem becomes clear, considering that, in 1996, the
International Monetary Fund (IMF) estimated the money laundering business at around
2-5 per cent of the world’s gross domestic product (Camdessus, 1998), which amounts to
up to US$1.5 trillion (Financial Action Task Force – FATF, 2007). Moreover, it is
claimed that the money laundering business is the third biggest industry world wide
following “the international oil trade and foreign exchange” (Leong, 2007). However, it
should be borne in mind that similar to other types of serious crime, it is merely
impossible to make accurate estimations concerning the exact size of the money
laundering industry. Nevertheless, the importance of combating money laundering on
an international level can hardly be denied. Hence, the FATF, created The Forty
Recommendations to combat money laundering in 1990, which were amended several
times in the last decade. Judging by the name, these recommendations are not legally
binding but do “set minimum standards” (FATF, 2003, p. 3) for countries to implement
specific anti-money laundering (AML) measures into domestic law. But, FATF
acknowledges that it is impossible to fully harmonize AML regimes across the globe,
due to the different nature of countries’ financial and legal systems (FATF, 2003, p. 3).
Thus, AML legislations may differ from country to country. The present essay discusses
and evaluates the advantages and disadvantages of AML legislation regarding three
European countries, namely the UK, Switzerland and Germany. In order to effectively
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
JMLC
11,3
234
Journal of Money Laundering Control
Vol. 11 No. 3, 2008
pp. 234-250
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685200810889380
compare the AML legislation of different countries, it appears reasonable to divide AML
regulations into different stages, namely into the reporting, the collation and the
investigation stage. Furthermore, it also may be valuable to look at whether or not the
definitions and sentences of money laundering offences differ from country to country.
2. AML legislation in the UK
The legal framework,on which the UK AML regime is based,consists of the Proceeds of
Crime Act – PoCA, 2002, the Money Laundering Regulations – MLRs (2003)[1] and
relevant guidelines of “government and industry advisory bodies,” which have to be
approved by the treasury (Lander, 2006, p. 11). The seventh part of PoCA[2] sets out the
criminallaw in relation to money laundering in theUK. As laid down in section 340(11)(a)
PoCA money laundering is defined as an act set out in sections 327 (concealingcriminal
property), 328 (entering into money laundering arrangements) and 329 PoCA (acquiring,
using or possessing criminal property). Additionally, money laundering includes the
“attempt, conspiracy or incitement”of committing an offence under sections327, 328 and
“aiding, abetting, counselling or procuring the commission” of such offences into the
money laundering definition. However, it should be pointed out that there are various
defencesrelated to the three principaloffences set outin sections 327, 328 and 329 PoCA[3].
However, if noneof the defences apply, the threeprincipal money laundering offencesare
to be prosecutedwith a maximum sentenceof 14 years imprisonmentand/or a fine (PoCA,
2002, s. 334(1)(b)). Therefore, considering the severe punishment, the three principal
money laundering offences can be categorised as serious crimes in the UK.
PoCA also plays an important role in the reporting stage as it also criminalises the
failure of reporting suspicious money laundering activity by the regulated sector
s. 331(2))[4] and by nominated officers outside the regulated sector (PoCA, 2002, s. 332).
However, the failure to report is only to be criminalised if the alleged person knew or
had reasonable grounds for knowing that another person is involved in money
laundering (PoCA, 2002, s. 330(2), s. 331(2))[5]. Furthermore, to be liable for conviction
the alleged person must have been able to identify the alleged money launderer or the
“whereabouts ...of the laundered property” (PoCA, 2002, s. 330(3A), 331(3A), 332( 3A)).
These criminal offences are punishable with a maximum penalty of five years
imprisonment and/or a fine (PoCA, 2002, s. 334(2)(b)). Thus, the obligation of having to
report suspicious money laundering activity lies primarily with businesses in the
regulated sector, which are defined in schedule 9 to PoCA[6]. But, it should be
acknowledged that there are also defences linked to the offences under sections 330,
331 and 332 PoCA[7]. It also should be pointed out that, although sections 330(5), 331(5)
and 332(5) PoCA detail that the only content that needs to be disclosed is the identity of
the alleged money launderer, the whereabouts of the laundered property and
information regarding the suspicion, the Serious and Organised Crime Agency (SOCA,
2007a.) actually extends this to include also “individual transactions with counterparty
account details” as well as “associated subject[s],”, i.e. persons or companies and their
addresses. In order to ensure the effectiveness of the reporting system, the MLRs, 2003
extend the obligations of businesses in the regulated sector. For instance, nominated
officers have to be allocated (MLRs, 2003, s. 7), the principle of Know Your Customer
(KYC) needs to be introduced (MLRs, 2003, s. 4), records need to be maintained
Comparing
AML legislation
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