International anti-money laundering laws: the problems with enforcement
| Date | 03 May 2016 |
| DOI | https://doi.org/10.1108/JMLC-06-2015-0025 |
| Pages | 130-147 |
| Published date | 03 May 2016 |
| Author | Selina Keesoony |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
International anti-money
laundering laws: the problems
with enforcement
Selina Keesoony
Department of Law,
Brunel University London, Uxbridge, UK
Abstract
Purpose – This paper aims to explore the underlying problem of tackling money laundering, namely,
the difculty of enforcing international laws and whether this is a problem which is too great to
overcome in practice.
Design/methodology/approach – A doctrinal approach is used to discuss international anti-money
laundering (AML) laws and question whether money laundering can be truly regarded as an
international crime. A comparative approach with case studies of corruption in nancial institutions
illustrates the problems which law enforcement might encounter. The advantages and disadvantages of
tackling money laundering will be highlighted to elucidate both the negative impacts of the crime and
the reasons why some states may not be tackling money laundering as forcefully as they could.
Findings – Uniformity of AML laws among different countries may deter criminals from laundering
money. The ratication of the Vienna Convention can help to facilitate uniformity of legal rules. States
need robust domestic laws to tackle money laundering. Money laundering is an international crime,
although not always a specic crime in international law. Moreover, it is generally advantageous to
consider money laundering to be a specic crime under international law.
Originality/value – The article questions the effectiveness of current AML laws by examining the
foundations of international law. Suggestions as to how uniformity can be achieved are given. A
comparative approach is also used to demonstrate the extent of the crime, weaknesses in companies’
regulatory regimes and how each State responds to money laundering. The comparison also reveals
State-specic issues which fuel money laundering. Moreover, the article explores the practical and legal
advantages and disadvantages of money laundering being considered a specic crime in international
law.
Keywords Enforcement, Anti-money laundering, International law
Paper type Research paper
Introduction
The criminal activity of money laundering can best be described as:
[…] a process by which the illicit source of assets obtained or generated by criminal activity is
concealed to obscure the link between the funds and the original criminal activity
(International Monetary Fund, 2014).
The process “create[s] a veil of legal cleanliness” (Mei Leong, 2007) to stealthily disguise
the character of the illicit money. Money laundering is typically a transnational
The author gratefully acknowledges the research funding given by Chartered Institute of
Taxation and thanks Professor Barry Rider OBE for his helpful comments on this article.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
JMLC
19,2
130
Journalof Money Laundering
Control
Vol.19 No. 2, 2016
pp.130-147
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-06-2015-0025
organised crime which involves “a number of different jurisdictions with differing legal
standards” (Rider et al., 2009). The transnational nature derives from the fact that
criminals tend to commit the predicate offence in one jurisdiction and then launder the
illicit proceeds through another to make the proceeds more difcult to trace. To
successfully reduce money laundering, the law must tackle each stage of the “laundering
process” (Rider et al., 2009), which include “identication, pursuit, seizure, and […]
conscat[ion] or forfeiture” (Rider et al., 2009).
effectively widens the offence of money laundering. Concealment includes disguising,
converting, transferring or removing criminal property from the UK[2]. The seriousness
of money laundering can be conveyed by the offences of failing to report a money
launderer where a person knows or suspects this to be true[3]. This provision imposes a
positive duty to report suspected money launderers and is most likely to affect those
employed within nancial services.
Although money laundering may not have identiable victims whom the laundering
of illicit funds affects directly, the effects of the offence are no less destructive than
street-level crime. Money laundering causes the unequal distribution of wealth, which
can have disastrous effects on a State’s economy and the well-being of its citizens.
Furthermore, the reputation of a State can drastically decline where it is perceived by the
rest of the world as being secretive and corrupt. The resulting consequences for the
economy are inevitably catastrophic, with foreign investors seeking to do business in
States with a reputation for having more stable and transparent nancial institutions,
whilst the corrupt countries lose out on valuable investment.
Background
Money laundering comprises of three basic stages; placement, layering and integration
(UNODC, 2014). Placement is a crucial stage for money launderers, as it is the rst stage
whereby the illicit funds are distanced from both the crime and the criminals (UNODC,
2014). Many criminals choose to deposit the funds into nancial institutions, wherein the
second stage of the money laundering process can follow seamlessly. Layering is used
by launderers to obscure the criminal trail in an attempt to further disassociate the funds
from its source. Complex, articial schemes are used to achieve disassociation, which
can involve the physical dispersing or smurng of the funds into various nancial
institutions globally (Rachagan and Kasipillai, 2013). Integration is the nal stage
whereby the launderer is reconciled with their laundered funds which are clothed in
legitimacy. Integration can subsequently lead to the nancing of further criminal
activities, for example the nancing of terrorism.
Durrieu explains that money laundering is viewed as the more attractive option when
dealing with illicit funds, as there is a lesser chance of being detected than if the money
were invested in the black economy (Durrieu, 2013). Another reason for money
laundering may be the desire to update large quantities of banknotes which are
gradually falling out of circulation. For example, the £50 note with Sir John Houblon
was ofcially replaced in 2014 with pictures of Matthew Boulton and James Watt and is
no longer in circulation (The Guardian, 2014a). Therefore, money laundering can
provide a means by which banknotes are updated in a cunning manner. Border control
at airports also inhibits the ow of illicit money by requiring passengers to declare their
131
Anti-money
laundering
laws
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