MONEY LAUNDERING LEGISLATION Part 3

(Primary legislation is of general public application and is not specifically aimed at financial institutions).

This legislation shows how money laundering has progressed over time. The first specific anti-money laundering legislation concentrated on the threat posed by drug traffickers, but later measures have focused on the particular problems posed to the UK by terrorist groups. Most recently, the scope of UK legislation has been considerably extended to cover laundering the proceeds of crime in general, as well as introducing new offences to bolster money laundering deterrence as a whole. It is important however, to realise the impact that international agreements have had on this process of drafting new money laundering laws. (see later)

As mentioned above, money laundering as an offence did not exist before the mid 1980's when specific legislation against the laundering of the proceeds of drug trafficking in the DTOA86 came into effect, but as Levi noted;

"…..the United Kingdom has moved from a situation in which customer confidentiality was de facto and, except following the institution of criminal proceedings, de jure sacrosanct to one in which there is a criminal liability for bankers who assist in disposing of what they suspect to be the proceeds of drugs trafficking or terrorism, [and] bankers can report with civil impunity transactions that they suspect to be the proceeds of fraud or robbery…"

UK primary legislation now covers the laundering of proceeds from drug trafficking, terrorism and general crime. However, the legislation has not been consolidated and important differences remain between treatment of these three types of proceeds.

Drug trafficking has had the greatest influence on the drafting of the offences into law. The huge profits made from drugs, it has been said, can be applied to the corruption of those in positions of authority in the community and then used to finance other crime, including fraud, robbery, counterfeiting, etc. Meanwhile, drug consumers are committing crimes such as theft, prostitution, housebreaking, inter alia, in order to pay for their addiction. This creates an underclass of drug abusers who, through their addictions and offending behaviour are a strain on the finite resources allocated to combat this problem.

The FATF (Financial Action Task Force) recognised that there was a problem with non-drug predicate crimes and because of the threat they constituted to society it was recognised that a change was needed to their original set of Recommendations. The FATF noted that "there has been overwhelming evidence in FATF countries and throughout the rest of the world that non-drug predicate offences constitute an important and growing source of illegal wealth entering legitimate financial channels. Indeed, in some countries non-drug related crime constitutes the predominant source of laundered proceeds". (see recommendation 4 of the 40 recommendations of the FATF)

In the UK, the problem of changing the law to recognise non-drug predicate crimes as leading on to money laundering has created the problem of what constitutes money laundering as there is no definition of the term in the primary legislation. There are definitions of the terms 'drug money laundering' and money laundering for the purposes of specific provisions of the DTOA and CJA88 and to combat the increasing use of the financial system to launder criminal profits money laundering needed to be defined in UK law.

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