Diversification of Countermeasures and Strengthening Them

There is a legal diversification of the charges of criminalizing illicit flows of capital, which can encourage its repression. But the bottom line is that the means to combat them are effectively brought together: the opacity of transactions, their multiplication, and their speed contrast with the fragmentation of the supervisory authorities. They must reassemble circuits that materialize in seconds when their investigations involve long delays.

This raises the question of the diversification of internal legal instruments. Indeed, there are several legal avenues to apprehend money laundering. Beyond the specific offence of money laundering, the diversity of offences that are associated are covered by a right that tends to diversify itself. In itself, money laundering is a consequential offence that assumes a pre-constituted offence; the link between the financial flows constituting money laundering is the underlying offence to be demonstrated under the penal code.

The difficulty of establishing this link leads judicial authorities in many countries to go through another criminalization: that of not justifying resources or receiving. But despite the rise in the use of the legal standard, there are significantly more convictions for money laundering.

Money laundering is also a stand-alone offence. Its intentional element is not homogeneous to the intent of the underlying offence. The intention is related to the misappropriation of the financial or banking system to make lawful funds of criminal origin.

In addition, there are specific offences of money laundering, such as drug trafficking, customs laundering that is repressed by the customs code in several countries, etc. The launderer’s intention is to enjoy the illegally obtained wealth by giving them a legal appearance. Money laundering techniques are more or less sophisticated but constantly other judicial avenues are available in many Organisation for Economic

Co-Operation and Development (OECD) countries as alternatives (e.g., the illegal practice of the profession of bankers or the abuse of property social issues).

The directive contains a list of criteria that assume lower risks that are subject to leaner audit procedures. Some are inherent to customers and products, others to distribution channels, and others to geographical factors. While there are no longer any exemptions, some solutions lead to disconcerting presumptions.

For example, the risk is considered low if the client, whatever its nature, is a resident of another country, a third country that has effective anti-money laundering systems, or an identified third country credible sources (NGO type) as having a low level of corruption or criminal activity. In the case of sectors requiring enhanced vigilance obligations, it should be noted that private banking is included.

The country risk had been the subject of a globalist policy since a white list of countries with reassuring systems had to be drawn up by each state. The proposal for hannonizeable lists is very surprising: South Africa, Australia, Canada, the Russian Federation, Hong Kong, India, Mexico, Singapore, and Switzerland.

In the future, while a request for harmonization had been submitted by the institutions, they would be responsible for each of their lists. Suffice to say, on this point that the ambition that the public action is coordinated is swept away. Now, it’s easy to check the extreme diversity of bank appreciations, when you consider that some bankers confess be devoid of the means to draw up a list while others have at their disposal, a fairly extensive list, notably constituting it is true of countries where they do not do business.

The tightening of the applicable sanctions must be lifted. Punishable persons have their list extended to virtually anyone who has participated in the business relationship, directly or indirectly (back office). This option may seem excessive given the responsibilities of the back office and the hierarchical organization of the banks. However, it does not rule out a gradation of the sanctions and has a certain realism for it, given the complexity of the banking systems. The penalty can be as high as 10% of the turnover of the Individual Corporation and $15 million for individuals. Of course, in this area, practices matter even more than standards. However, there is a lack of coordinated mechanisms for monitoring practices.

Taking into account the size of the group is still not satisfactory. A definition of the group's policy will have to take place, while intra-group information exchanges will have to be promoted. Nevertheless, while it is recommended that international law be applied to all entities, the only consequence of a legal impossibility to respect its principles remains the disclosure of this impossibility to the authority of national control. The practice of supervisors does not encourage them to consider that they draw all the possible consequences. As for the exchanges within the group, it is recalled that they must comply with local laws that can protect the data, even if an exchange system based on clearances is mentioned. The risk-by-risk approach leaves a great place for subjectivity and opens up the prospects of a heteroclicity of legislation and practices within the OECD, but also within a given country.

For some countries, the need for regulatory upgrades and more determined intelligence and analysis is essential.

Indeed, the fight against money laundering requires legislative changes to ensure greater transparency of financial flows and to avoid promoting the activity of launderers through an inconsiderate supply of means.

Several proposals are made, including those relating to the establishment of a global regulator of life insurance contracts. On the other hand, measures such as the withdrawal of large denominations from the cash flow would make life difficult for fraudsters.

The scope of the desirable can be defined from a goal of upgrading the standards of transparency, whether they concern the registration of trusts, a detailed description of the economic activities of financial intermediaries, in tax havens strengthening the investigative powers of financial supervisors. But these measures would not be far-reaching if they were not supported by an effort to take action by supervisors.

In relation to the action of administrative services against international tax evasion, there is a need for greater coordination of intelligence. The fragmentation of services is an obstacle to an effective fight against capital evasion. The specialization of services can sustain it.

In this regard, an overly rigid conception of their competences by the departments of the various ministries of economy and finance can block the flow of information between these veiy services but also between them and other services whose investigative means are more suited to a more efficient action. We must not lose sight of the fact that organized crime carries multiple offences that require administrative coordination that requires overcoming the divide between the “tax” and the rest. Moreover, lessons must be learned from the development of organized crime and the sophistication of borderless fraud, particularly for financial fraud.

In this context, intelligence activity becomes paramount. The methods of control cannot be ignored by traditional parts controls or even on-the-spot controls in their ordinary sense. The sophistication of financial circuits, their movements beyond the control systems through the use of pacifiers vectors (whether they owe this property to the border effect, to technical characteristics or to structuring) called for expanding the scope covered by these systems.

Better structuring of foreign intelligence research in financial matters needs to take place. But simpler measures to ensure that controllers are more readable to taxpayers' activities are also needed. In this regard, the territoriality of corporate taxation should not impede very wide access to corporate accounting documents, including those corresponding to their external affairs.

Moreover, the exploitation of information is becoming crucial in a data-rich world. First of all, it means avoiding as much information loss as possible, which in particular involves coordinating structures that may seem excessively compartmentalized, but also having the means to identify the data more meaningful.

It is important in this regard to take stock of the informational challenges faced by regulars and other supervisors. Thus, we believe that both the collection potential and the data expertise potential should be upgraded. They are consistent with the terms of the Reference on State Services and the fight against international tax evasion, reflecting a form of consensus on the perception of progress follow. The economic analysis resources must also contribute to this policy, which requires a large-scale statistical effort.

It is necessary to be able to access more precise images of financial organizations of financial or non-financial groups and to access the true economic and fiscal significance of their operations. In this respect, it is unfortunate that the project which consists in creating an international statistical database on the question is not yet operational. Monetary authorities should also be encouraged to supplement their information not only to meet their financial prudential missions but also to better understand the economic substrate of contemporary financial facts.

In particular, the question arises of the completeness of the data used to carry out the control of financial consortia and multinational groups. Consolidated control results in a focus on large balance sheet masses when knowledge of flows is now a primary condition for prudential and compliance controls. Thus, legislative and regulatory obstacles that may impede the fine knowledge of financial transactions, particularly when they involve related entities located in countries with very rigid bank secrecy or without a legislation ensuring the availability of reliable information, must be lifted so that current projects on the automatic exchange of tax information are not defused.

The HSBC case, which has been the subject of particular developments, has shown that action against major international crime that does not have all the levers compatible with legality could appear private efficiency. This case also highlights the need for progress toward an orderly diversification of sources of information, which other cases have also illustrated. It is here the whole question of the loyalty of the evidence that is at issue but also that of the protection of whistleblowers, the status of repentant, and the protection of the sources of the journals. The first problem seems to be being resolved from a strict legal point of view, thanks to the texts provided for in the national laws against tax evasion. The relationship between the intelligence service’s sources of infoimation and action against clandestine financial channels and the latter remains to be organized much better than today.

Also, the issue of remuneration of sources is modestly removed by the regulator; it should be approached on a pragmatic basis and respect for certain principles. Some countries have done so and this is not a secondary consideration in a world where national interests remain. Moreover, international cooperation may work satisfactorily and it is not excluded that certain information that has conducted to compensation may have been transmitted to many countries. Beyond that, it is the protection of informants that really counts.