The Importance of Parallel Proceedings to Money Laundering

Pages173-175
Published date01 April 1999
DOIhttps://doi.org/10.1108/eb027228
Date01 April 1999
Subject MatterAccounting & finance
Journal of Money Laundering Control Vol. 3 No. 2
PARALLEL PROCEEDINGS OVERVIEW
The Importance of Parallel Proceedings
to Money Laundering
Money laundering is a crime.1 However, to date, it has
been poorly prosecuted for a number of reasons such as
the higher standard of proof that is required as well as
procedural protection that the criminal law correctly
bestows. These, in combination make it extremely
dif-
ficult for the prosecuting authorities to bring a success-
ful prosecution. Moreover, since the criminal law is
only effective as a deterrent when a sentence is
imposed, it has been rendered ineffective.
However, like many topics in the law, the criminal
law is not the only means of addressing the problems
that money laundering poses. Regulatory and civil
law are both used to varying extents to combat
money laundering. In the future, under the Financial
Services and Markets Bill, it will be an offence to
fail to implement adequate anti-money laundering
procedures.2 In addition, the civil law presently
allows claims for knowing assistance, knowing
receipt as well as disgorgement. This plethora of
proceedings can, and usually will, occur at the same
time shortly after allegations of money laundering
arise.
This will result in the phenomenon of parallel
proceedings. Parallel proceedings are where the
same parties are subject to different types of pro-
ceedings at the same or similar time, where the
issues and facts of the different proceedings involve
the same event.
This approach to financial regulation is only in its
embryonic stage in the UK. However, in the US, it
is frequently the primary weapon deployed in attack-
ing crimes such as money laundering in a financial
regulatory context. This is illustrated by the relatively
simple approach of the Financial Services Authority
under the Financial Services and Markets Bill3 and
the Securities Exchange Commission and its vast
powers these vast powers and the method in which
they are applied is explained extremely well by New-
kirk and Brandriss,4 who provide a viewpoint from
within the SEC.
Parallel proceedings bring a large number of pro-
blems, of which the most pervasive is the different
standards of proof and methods of investigation
between the different proceedings. This results in
great repetition of work, especially with respect to
disclosure. Numerous sets of proceedings have been
considered wasteful and inefficient with respect to
time and resources.5 In addition, the scope for litiga-
tion before the substantive matter is considered in the
courts is greatly enlarged as applications for stays and
bars on disclosure will arise. It has been suggested that
criminal and regulatory proceedings should
be merged, resulting in a 'super-proceeding' that
would dispense regulatory and criminal justice
simultaneously.6 However, this would greatly affect
the purpose, function and effectiveness of each of
the proceedings. Some commentators have suggested
that the purpose of the criminal law is to apportion
blame, while regulatory law is concerned with
public protection. It is, naturally, extremely difficult
to reconcile both sets of purposes, even if, sub-
stantively, the lines are becoming blurred between
the different types of proceedings. Examples of this
would be the ability to obtain disgorgement under
the criminal law,7 the ability to obtain civil punitive
damages8 and the use of criminal and civil remedies
within the regulatory sphere.9 The largest difficulty
with this approach would be the change to the
regulatory proceedings. Regulation is primarily con-
cerned with public protection.10 In the financial
arena, this means that changes must be able to be
made rapidly. This would be hampered under the
Lord Chancellor's proposals, since the criminal law
aspect would take too long for an effective regulatory
investigation to be carried out.
The civil and regulatory law may be more suited
to combating money laundering for the reasons
touched upon above: namely, that disclosure rules
are more favourable to the
plaintiff.
An example
would be the privilege against self-incrimination
that is correctly embedded in the criminal law but
has been essentially eliminated in the civil
law11
and
is normally abrogated by statute when the powers
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