Money laundering. An assessment of soft law as a technique for repressive and preventive anti-money laundering control
| Published date | 03 October 2016 |
| DOI | https://doi.org/10.1108/JMLC-07-2015-0029 |
| Pages | 346-375 |
| Date | 03 October 2016 |
| Author | Emmanuel Ebikake |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
Money laundering
An assessment of soft law as a technique
for repressive and preventive anti-money
laundering control
Emmanuel Ebikake
Department of Law, University of Buckingham, Buckingham, UK
Abstract
Purpose – The purpose of this paper is to provide an assessment of soft law as a technique for
repressive and preventive anti-money laundering control (hereinafter AMLC).
Design/methodology/approach – This article focuses heavily on understanding the nature of
international anti-money laundering (AML) law-making process. The approach towards this question is
interdisciplinary and looks at the treaty and non-treaty AML obligations through a prism of two theoretical
lenses (legal positivism and liberal/legal process theory) to explain the role of soft law in the area.
Findings – Current international effort to combat money laundering (ML) is fragmented (as evident in
the enormous variety of law-making processes), despite the role of soft law. Part of the problem is the
divergent nature of domestic criminal legislation, which is reected in the choice of predicate crime and
a lack of procedural rule to identify and enforce the law at the state level. To address the limit of current
efforts, the paper will propose a uniform codication of AML law directed by a more representative
body or commission of experts offering means of restating, clarifying and revising the law
authoritatively and systematically.
Research limitations/implications – The research is focused mainly on the theoretical issues
relating to the subject of ML and less on any empirical case study.
Practical implications – The paper will focus on the role of soft law as a technique for repressive and
preventive AMLC. Based on current analyses of the role of soft law as an alternative to hard law or as
a complement to hard law (leading to greater cooperation), it attempts to outline the possible advantages
and disadvantages that soft law could have in the context of AMLC. For example, the use of soft law
promotes harmonisation of international AML standards through the Financial Action Task Force,
while the role of the FATF remains unclear in international law. This is important for the purpose of
responsibility, as the law on state responsibility clearly states when a State is responsible, in the event
of a breach, and the consequence in international law.
Social implications – The implication of the paper is that it contributes to the on-going debate about
the increasingly role of soft law-making in international law.
Originality/value – The research perspective to the study of ML is theoretical and focuses on the
nature of the law.
Keywords International AML initiatives , Treaty AML obligations, Non-treaty AML obligations,
Soft Law, International AML law-making process
Paper type Research paper
1. Introduction
The aim of this article is to provide an assessment of soft law as a technique for
repressive and preventive anti-money laundering control (hereinafter AMLC). The term
repressive and preventive AMLC refers to the importance of an international response to
money laundering (hereinafter ML), which centres on formal treaty obligations on state
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JMLC
19,4
346
Journalof Money Laundering
Control
Vol.19 No. 4, 2016
pp.346-375
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-07-2015-0029
parties to criminalise and conscate the proceeds of crime in their national law, followed
by an informal non-treaty response to prevent it, through the regulation of nancial and
non-nancial institutions. The use of the term “repressive” in the context of this article
means to subdue or suppress criminal ML activities by the use of penal legislation.
However, before elaborating the precise research questions, it is necessary to introduce
the signicance of having an international response to ML, challenges with such an
undertaking and the concept of soft law.
The term ML describes graphically the process by which dirty money, money
obtained through crime, is cleansed so that it is, or at least appears to be, legitimate
money with no taint of its criminal origin (Booth and Bastable, 2011). ML as a legal
concept and legislation to combat ML are barely 25 years old, but most states in the
world now have legislation that criminalises ML and facilitates the recovery of the
proceeds of crime. Criminal law has traditionally been the sovereign preserve of
individual states, and the rapid global development of anti-money laundering (AML)
law and standards has been a remarkable response.
Large-scale ML schemes invariably contain cross-border elements. Because ML is an
international problem, international co-operation is a critical necessity in the ght
against it. A number of initiatives have been established for dealing with the problem at
the international level. International organisations, such as the United Nations[1]orthe
Bank for International Settlements (Basel Committee, 2001)[2], took some initial steps at
the end of the 1980s to address the problem. Following the creation of the Financial
Action Task Force (hereinafter FATF)[3] in 1989, regional groupings – the European
Union, Council of Europe[4] and Organisation of American States[5], to name just a few –
established AML standards for their member states. The Caribbean[6], Asia[7],
Europe[8] and southern Africa[9] have created regional AML task force-like
organisations, and similar groupings are planned for western Africa and Latin America
in the coming years.
The foregoing international AML initiatives (as would later be seen) are founded on
two legal techniques: an initial formal treaty-based criminal/repressive technique,
followed by an informal preventive response – on nancial institutions and designated
non-nancial businesses. The repressive and preventive AMLC is now referred to as the
twin-track approach (Buranaruangote, 2003;Stessens, 2008) to AMLC. The emphasis is
on the criminal/repressive formal obligations and the preventive informal initiatives.
Thus, with the advent of globalisation and the transformation in the structure of
international law and politics, there is a demand for new governance structure to handle
global challenges – like ML. The inter-state, consent-based international law, and as a
consequence its legitimateness, is increasingly challenged by this new international
landscape. Especially, its general principles like the differentiation between
international and domestic affairs, the principles of sovereignty and sovereign equality
and the certainty of hard law are called in question, as they are not applicable to the
newly emerged actors, which consequently often act within a sphere of legal uncertainty
(Wilke, 2008).
The article argues that the traditional approach to the international law theory of a
system of rule can no longer be sustained nor captured by the subtlety of the processes
by which contemporary international law is created[10]. The traditional link between
state consent and legal obligation has largely been replaced by non-consensual
norm-making. Treaty mechanisms, for example, are including more “soft” obligations,
347
Assessment of
soft law
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