This post has been contributed by Ralitsa Stancheva, an LLB Graduate, based on their dissertation: “Is money laundering overcriminalised? A look at the examples of English and German Law.”
In the late 1990s, money laundering constituted between 2% and 5% of the global GDP. In the late 2000s, it was even considered the third largest business in the world after the international oil trade and foreign exchange. In its essence, it is the hiding of the proceeds of any form of illegal activity from legitimate government control by creating a gloss of lawful appearance. This allows the seemingly clean funds to enter the financial system.
The contemporary international approach to combatting money laundering relies on a broadly defined range of predicate offences. The proceed of such offences are treated as the basis of subsequent laundering activities. This is known as the ‘all crimes’ approach and it is often said to lead to overcriminalisation.
At the level of domestic law, the Proceeds of Crime Act 2002 (POCA) and the German Criminal Code (Strafgesetzbuch, StGB) present strong examples of how countries with large, interconnected financial sectors guard against the risk of being instrumentalised for laundering illicit funds. Both ss 327 – 329 of the POCA and article 261 of the StGB incorporate the ‘all crimes’ approach to protect the public interest in preserving the rule of law and countering crime and corruption.
From an UK perspective, this is especially important since money laundering has not been recognised as an offence under common law (R v Saik). The superior courts have pointed that modern, extraterritorial approach is required for adequately responding to cross-border criminality that impacts ‘victims in the UK’ (Regina v Rogers and others, Smith No 4).
Despite their promising premise, these new frameworks have not led to an effective reduction of the crime of money laundering. Comparing the cost of administering them against the actual results achieved by law enforcement agencies, therefore, remains important. It helps quantify the successful implementation of the POCA and the StGB in terms of indictments, convictions, and penalty orders. This type of measurements is imbedded in the benchmark recommendations introduced by the Financial Action Task Force (FATF).
The cost-benefit analysis also indicates whether legislative purposes are realised at a justifiable cost. The return on investing taxpayers’ money into the administration of a well-functioning criminal justice system is no less important that the laws and procedures that create the crime of money laundering.
Enforcement is, ultimately, the true hallmark of success. Anti-money laundering legislation would otherwise simply facilitate what Gilmour and Hicks (2023) see as ‘legislating our way out of a social problem’. On this premise, POCA and the StGB create systems relying on a broad-brush approach to the proceeds of predicate offences.
The broad scope of action under the two regimes has yet to produce convincing performance indicators. In both jurisdictions, the amount of recovered criminal assets remains much smaller than what criminal networks are estimated to keep possession of. This means that, in practice, such illicit proceeds are successfully retained and even re-invested in the international financial system.
The new criminalisation regimes under the POCA and the StGB may simply need to be given more time to demonstrate their preventive power. Their catch-all legal premises are not a governmental attempt to overpunish individual money launderers. What they aim instead is to counter a crime that is chameleonic in nature and has until recently flourished in the legislative grey zones in jurisdictions with world-leading financial sectors. The key lies in the gradual calibration through judicial decisions and constant dialogue between legislature and law enforcement.
References
Nicholas Gilmour and Tristan Hicks, The War on Dirty Money (Bristol University Press 2023)