Legal instruments to combat money laundering in the EU financial market
| Pages | 66-79 |
| DOI | https://doi.org/10.1108/13685200310809437 |
| Date | 01 January 2003 |
| Published date | 01 January 2003 |
| Author | Sideek Mohamed |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control Ð Vol. 6 No. 1
Legal Instruments to Combat Money Laundering in
the EU Financial Market
Sideek Mohamed
INTRODUCTION
A series of secondary legislation was adopted to
launch the single market in ®nancial services on 1st
January, 1993. Council Directive 88/361/EEC
1
,
which liberalised the free movement of capital
within the European Union (EU), was eective
from 1st July, 1990. Similar legislation was adopted
to liberalise the banking,
2
insurance
3
and investment
4
services, which are the traditional means for the
movement of capital within and between the
member states. In order to ensure that its open and
liberal ®nancial market is not abused by criminal ele-
ments, the EU also adopted certain preventative
measures such as the Council Directive 91/308/
EEC
5
on prevention of the use of the ®nancial
system for the purposes of money laundering.
The introduction of the Euro on 1st January, 1999
as the single currency of the majority of the EU
member states has contributed to deepen further the
process of integration of the single market in ®nancial
services. There are also certain risks associated with
the introduction of the Euro as the single currency
for a large number of countries that do not have
common rules to deal with ®nancial crimes such as
money laundering and tax evasion.
The Money Laundering Directive is not a good
enough legal instrument to deal with potential
abuse of the single currency within the EU ®nancial
market. There are also certain inherent limitations
in the directive, which is not designed to achieve its
objective eectively. In order to ensure that the
Euro is not exploited by criminal elements as a
vehicle for money laundering and to rectify the
shortcomings in the Money Laundering Directive,
the EU decided to amend and update the relevant
directive.
There are speci®c references to certain interna-
tional legal instruments in the Money Laundering
Directive. Some of the provisions are drawn from
these instruments. Apart from this directive, there
are also various other EU measures and initiatives
taken to deal with the problem of money laundering.
The aim of this article is to examine brie¯y the
relevant international legal instruments applicable to
money laundering, to highlight the shortcomings in
the Money Laundering Directive and to examine
critically the essential features in the amending direc-
tive including the other initiatives to combat money
laundering.
INTERNATIONAL LEGAL
INSTRUMENTS TO COMBAT MONEY
LAUNDERING
The relevance of the international legal instruments
to counter money laundering within the EU can be
viewed from dierent perspectives. The act of
money laundering is a serious crime, which can
involve complex covert activities well orchestrated
by a number of institutions and individuals based in
dierent countries. Since the process of money laun-
dering involves dierent stages, it is possible that one
of those stages could involve even a non-EU country.
The money generated by a criminal act in a third
country could be moved into the EU for laundering
purposes. Unlike Capital Directive 88/361/EEC,
Article 56 of the EC Treaty liberalised the free move-
ment of capital even towards third countries.
6
This
has facilitated greater opportunities for the free
movement of dirty money between the EU and
third countries. In such a scenario, the problem of
jurisdiction would inevitably arise, as the EU law
does not have extraterritorial application to deal
with this situation. In order to deal with the problem
of jurisdiction, it is necessary that the EU should
respect and adopt the international legal instruments
dealing with money laundering.
The Money Laundering Directive makes speci®c
reference to certain international legal instruments
on money laundering.
7
The directive declares that
money laundering should be tackled within the fra-
mework of international cooperation among judicial
and law enforcement authorities. It refers to the
Vienna Convention
8
and the Strasbourg Conven-
tion.
9
The directive further declares that Community
action should take particular account of the recom-
mendations adopted by the Financial Action Task
Force (FATF) on money laundering.
10
One of the
Page 66
Journalof Money Laundering Control
Vol.6, No. 1, 2002, pp. 66 ±79
#HenryStewart Publications
ISSN1368-5201
To continue reading
Request your trial