Preventing Tax Evasion through Money‐Laundering Legislation
| Pages | 304-308 |
| Date | 01 February 2000 |
| DOI | https://doi.org/10.1108/eb027243 |
| Published date | 01 February 2000 |
| Author | Peter Burrell |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 3 No. 4
Preventing Tax Evasion through
Money-Laundering Legislation
Peter Burrell
In 1998 there was significant controversy about
whether the UK money-laundering legislation
applied to the laundering of the proceeds of both
domestic and foreign tax evasion. Despite the issue
receiving widespread publicity at that time, in
particular in the Guardian, the topic still attracts
controversy today, particularly if it is suggested that
the existing legislation applies to foreign tax evasion.
There are a number of arguments used by the
opponents to any suggestion that foreign tax evasion
is caught in this way, the principal one of which
appears to be that, as a matter of public policy, the
English courts will not provide assistance to a
foreign state in the collection of its taxes. For the
reasons given below, the author does not believe
that on closer examination that rule of public policy
is applicable.
BACKGROUND
The relevant Act is the Criminal Justice Act 1988 (as
amended in 1993) ('the Act'). There has not been any
recent development in terms of money-laundering
legislation in the UK since the Act came into force
on 1st April, 1994. The UK, unlike a large number
of jurisdictions, has enacted all-crimes money-
laundering legislation. The rationale for the Act
was to implement the then existing EC directive,
which particularly focused on money laundering of
the proceeds of drug-related crime and terrorist
activities. The UK went further than required by
the EC directive in implementing 'all-crimes'
money-laundering legislation. The legislative back-
ground therefore does not assist in determining
whether foreign and domestic tax evasion is caught.
However, when considering the rule of public
policy referred to above, it is instructive to have
regard to the current political approach to combating
money laundering, both by this country and inter-
nationally. Set out below are a few relevant quotes
which give a useful insight.
In 1995, the Chancellor said:
'we must recognise that money laundering is
associated with all types of crime from fraud to
extortion, arms smuggling to kidnapping. It is
quite artificial to draw a distinction between
drug-related crimes and other crimes. In Britain
we have responded to the shifting threat by passing
legislation to cover the proceeds of all indictable
offences. There is no moral difference between
drug trafficking and other serious offences as the
risks from both are great and this applies as much
to fiscal offences as any other crime. All crimes
should mean all crimes. Who is the victim is irrele-
vant. Tax crimes make the law-abiding citizen
suffer. It is they who make up the shortfall
caused by those who cheat.'
During 1998 it became clear that the international
community would cooperate to combat foreign tax
evasion. Recognising the damaging effect in an
ever-increasing international market, the OECD
stated:
'Money laundering authorities should be com-
mitted to the greatest extent possible to pass
information to their tax authorities to support
the investigation of tax-related crime. Such infor-
mation should be communicated to other juris-
dictions in ways which would allow its use by
the tax authorities.'
The importance to money launderers of using 'tax
problems' as a smoke-screen for the laundering of
the proceeds of other crimes must also not be over-
looked. For example, in 1997 the Economic Secretary
to the Treasury said:
'there are private banks, brokers, accountants and
other financial advisers who are comfortable
providing services which help to obscure the
relationship between the money and the man, but
only if it is presented as just a little problem with
tax. They do not put their advisers in an awkward
position by declaring the nature of their trade.'
There would therefore be a significant risk to
the integrity of both financial advisers and other
Journal of Money Laundering Control
Vol. 3,
No.
4,
2000.
pp.
304-308
© Henry Stewart Publications
ISSN 1358-5201
Page 304
To continue reading
Request your trial