The Control of Money Laundering - A Bridge Too Far?

• Author: Barry Rider
• Profession: Director, Institute of Advanced Legal Studies
• Pages: 156-178

LEGAL ISSUES IN OFFSHORE FINANCIAL SERVICES

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The Control of Money Laundering - A Bridge Too Far?

Barry A K Rider

Director, Institute of Advanced Legal Studies

THE ACQUISITION OF AND CONTROL OVER WEALTH is the motivation

for most serious crimes involving premeditation. This is all the more so when

the criminal activity resembles an enterprise which inevitably requires capital

to operate and with which to lubricate its aspirations. Money, or rather

wealth, in its disposable form, is therefore not only the goal of criminal

enterprises, but the life blood of the enterprise. Therefore until the profits of

crime are taken away from subversive and criminal factions, we stand little

chance of effectively discouraging criminal and abusive conduct which produces

great wealth or, through its profits, allows power and prestige to be acquired.

As soon as the state devises methods for the tracing and seizure of such funds,

there is an obvious and compelling incentive for the criminal to hide the

source of his ill-gotten gains - in other words to engage in money laundering.

Like most social, let alone economic, evils, money laundering is nothing

new. It is as old as is the need to hide one’s wealth from prying eyes and

jealous hands, and concern about the uses and misuses of hidden money is not

just an issue in our century. Of course, the modern money launderer will no

doubt adopt rather more sophisticated techniques than the gem carriers of

India or the Knights Templar, but his objectives and essential modus operandi

will be the same. The objectives will be to obscure the source and, thus, the

nature of the wealth in question and the modus operandi will inevitably involve

resort to transactions, real or imagined, which will be designed to confuse the

onlooker and confound the inquirer.

It is not surprising that those who are tasked to follow the wealth in

question whether for the purpose of taxation, restitution or confiscature, will

require the assistance of those who knowingly or otherwise facilitate the

processes of laundering. Therefore, in recent years an increasing burden has

been placed on those who handle other peoples’ money and wealth to record

transactions and even in some measure inquire into the provenance of funds

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The Control of Money Laundering - A Bridge Too Far?

and even the nature and integrity of a specific transfer. The legal and

administrative burdens that have been cast upon bankers and other

intermediaries are onerous and may well involve serious legal and other

liabilities for non or deficient compliance. The growth of this particular form

of ‘facilitator’ liability, has to be viewed in the wider context of policing

objectionable financial transactions, whether such are merely designed to

obscure the source of wealth or are fraudulent and abusive in themselves.

Why Launder?

The reasons why an individual, not to mention an organisation, would wish

to hide the source of money, or transmit it in a manner which obscures its

ownership or character are legion. While a great deal of attention has been

given to the vast profits that are being generated by the illicit trade in narcotics,

it is dangerously misconceived to assume that the processes involved in money

laundering cannot be, and are not, deployed just as effectively to wash and

covertly transfer funds produced by other types of crime, or even activities

which would not be generally considered criminal, but to which a certain

amount of opprobrium might attach. There are pressing needs for ‘secret

money’ not only in the underworld of organised and syndicated crime, but to

service intelligence and security networks and to facilitate if not ‘ordinary’

commercial and banking transactions, at least activities which are not

necessarily abusive. There are needs for ‘unaccountable funds’ in many

situations and the processes which are involved in washing money can and

are efficiently employed to create hidden reserves or secret money, and are

then utilised to service and transmit such according to the requirements of

those who desire them.

It must also be remembered that the purposes for which money is required,

will also influence, if not dictate, the transactions which are used to hide its

true character and the way in which it is permitted to move. For example,

those involved in facilitating the flow of capital from developing nations, in

violation of currency and fiscal controls, may be able to operate with impunity

and no embarrassment in other jurisdictions - especially those receiving the

money in question. Therefore, there will be little need to ensure that the

money surfaces covertly and there will be no requirement that the money

should appear to have a legitimate origin. Indeed, when the money is escaping

from a country which is seeking to expropriate wealth, whether pursuant to a

programme of so called ‘indiginisation’ or otherwise, those involved in such

financial operations may even be held, by those whom they service and those

outside the country in question, in high esteem. Furthermore, it must also be

remembered that although an economic embargo may well be considered an