Comparison of Foreign Money Laundering Statutes: United Kingdom

United Kingdom Money Laundering Statutes

Drug Trafficking Offences Act of 1986[1] (DTOA) This act, which has mostly been repealed, did allow for the confiscation and seizuire of properties in connections with drug trafficking crimes.

Criminal Justice Acto of 1988[2][3]Among other things this act makes it a crime for a financial institution to allow the withdrawal of funds by a person is known or suspected to be engaging in criminal activity without the written consent of a constable. This crime can be punishable with up to 14 years in prison

Crimainal Justice Act of 1993[4] This declared activities criminal which relate to the laundering of proceeds of criminal conduct(non-drug). This act institutes the obligation to a report persons suspected of money laundering activities.

Drug Trafficking Act 1994[5][6] This act replaced The Drug trafficking Offences Act of 1986(see above). This law updated and strengthened money laundering provisions of the previous act.
Comparison

In comparing the money laundering statutes of the Untied States, Canada and the United Kingdom several similarities are apparent. Many of the statutes were set into law initiated by anti-drug policy. The United States Bank Secrecy Act being a partial exception to this. It would also appear that the anti-drug related legislation coincided along a similar timeline that could be a result of these countries with close economic and political ties.

In addition, the Canadian legislation would seem to mimic the United States legislation to include the establishment of an organization, FinTrac, similar in nature and utility to FinCen of the US. Along a similar vein both countries have cash transaction reporting mechanism established for activity over $10,000. However, the Canadian version has not kept pace with the additional tools given their American counterparts regarding Geographical Targeting of smaller transactions.

Other common threads in the various legislation would include the initiation of forfeiture laws first related to drug trafficking and later to non-drug offences and most notably money laundering activities. Another commonality can be found in the various requirements of financial institutions to report suspicious activity at penalty of criminal prosecution.
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[1] The Drug Trafficking Offences Act 1986 and the Criminal Justice Act 1988, found at http://members.ozemail.com.au/~themis/churchill/321.htm , 31 May 2001.
[2] Criminal Justice Act of 1988 , c. 33, found at Criminal Justice Act of 1988
[3] Suspicion of Money Laundering: What About My Human Rights?, Friedman, Paul., Baker and McKenzie, March 2001 found at http://www.bakerinfo.com/Publications/Documents/1585_tx.htm
[4] Crimainal Justice Act of 1993, c. 36, found at http://www.hmso.gov.uk/acts/acts1993/Ukpga_19930036_en_1.htm
[5] Drug Trafficking Act 1994, 1994 c. 37 , found at http://www.hmso.gov.uk/acts/acts1994/Ukpga_19940037_en_1.htm
[6] Drug Trafficking Act 1994 , 1994 c. 37,Continued found at http://www.hmso.gov.uk/acts/acts1994/Ukpga_19940037_en_6.htm

Comparison of Foreign Money Laundering Statutes: Canada

Canada Money Laundering Statutes

Proceeds of Crime Act (Bill C-61) 1989[1][2] This act criminalized money laundering. This act allowed for the seizuire of property or profit resulting from drug or non-drug related crimes. Similar to the BSA act of the US and subsequent amendments this act required the filing of cash transaction reports for amounts of $10,000 or more.

Seized Property Management Act 1993[3] This act created a mechanism for sharing seized assets amongst the provinces as opposed to the seized items defaulting to the federal government.


Proceeds of Crime Money Laundering Act (Bill C-22)[4] This act replaced the earlier C-61 PCMLA. It created the Financial Transactions and Reports Analysis Center of Canada (FinTrac) to receive transaction reports and analyze international financial movements through cross border currency reporting requirements. Some of the goals of this new act included the following:
· Provide vital tools for law enforcement
· Strike a balance between privacy rights and law enforcement needs
· Minimize compliance costs for financial intermediaries
· Contribute to international efforts to combat money laundering
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[1]CANADIAN MONEY LAUNDERING LAWS AND PROGRAMS, Enforcement Efforts to Deter Money-Laundering found at http://www.crimes-of-persuasion.com/Criminals/law_efforts.htm
[2] Proceeds of Crime Act (Bill C-61) 1989, Proceeds of Crime Unit, found at http://cpinet.org/pservices/Solgen/backgrounder/Pcu-bkg5.htm
[3] Seized Property Management Act 1993, Proceeds of Crime Unit, found at http://cpinet.org/pservices/Solgen/backgrounder/Pcu-bkg5.htm
[4] Proceeds of Crime Money Laundering Act (Bill C-22) Finance CanadaProceeds of Crime (Money Laundering) Regulations - Consultation Paper: 1, 31 May 2001, found at http://www.fin.gc.ca/Monlaun/monlaun1_e.html

Comparison Foreign Money Laundering Statutes: United States

United States Money Laundering Statutes

The appropriate legal codes relating to money laundering include Title 18 U.S.C. 1956[1] and
Title 18 U.S.C.1957[2].

The Bank Secrecy Act of 1970(BSA)[3] This act is considered to be one of the initial legislative measures against money laundering in the US. Primarily targeted at tax fraud related activities, this act was also designed to create a paper trail for large currency transactions (Currency Transaction Report). Noncompliance could result in criminal and civil penalties.

The Money Laundering Control Act of 1986(MLCA)[4] This act officially made money laundering a crime.
It created three offenses for:

1. Knowingly helping launder money from criminal activity.
2. Knowingly engaging (including by being willfully blind) in a transaction of more than $10,000 that involves property from criminal activity.
3. Structuring transactions to avoid Bank Secrecy Act (BSA) reporting.
   

The Anti-Drug Abuse Act of 1988[5] This act allowed law enforcement the authority to seize assets that were involved in attempts to launder money or commit currency/banking crimes. It also required stict reporting rules for cash purchases of financial instruments, authorized the Treasury to require financial institutions to submit Geographically targeted reports (sometimes referred to as GTO’s Geographically Targeted Operations of the Treasury), directed the Treasury to negotiate international information sharing agreements, and increased the criminal sancitons for tax evasion relating to money laundering crimes.

Section 2532 of the Crime Control Act of 1990[6] First, this act gave the Office of the Comptroller of the Currency (OCC) the authority to request assistance of a foreign banking authority in conducting and investigation, examination or enforcement action. Second, this gave the OCC the power to accommodate similar request in the reverse. The purpose of these exchanges is to allow the investigating body the opportunity to determine if a person has, is or will violate any banking or currency transaction laws or regulations.

Section 206 of The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991[7] This act allows the OCC to disclose to foreign bank regulators or supervisory authorities information that the OCC may discover.

The Housing and Community Development Act of 1992(Annunzio-Wylie Anti-Money Laundering Act)[8] In addition to allowing regulators to close or seize institutions found guilty of money laundering activities. It also permitted the treasury to require financial institutions and their employees to report suspicious transactions relevant to possible violation of law or regulation. Plus it required financial institutions to adopt anti-money laundering programs.

Money Laundering Suppression Act of 1994[9] This act aimed to reduce and consolidate destination of Currency Transaction reports and it required certain “money transmitting businesses” to register with the Treasury.
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[1] United States Code ,TITLE 18 - CRIMES AND CRIMINAL PROCEDURE , PART I – CRIMES, CHAPTER 95 - RACKETEERING

[2] United States Code ,TITLE 18 - CRIMES AND CRIMINAL PROCEDURE , PART I – CRIMES, CHAPTER 95 - RACKETEERING , Sec. 1957. Engaging in monetary transactions in property derived from specified unlawful activity., found at http://www4.law.cornell.edu/uscode/18/1957.html
[3] The Bank Secrecy Act of 1970, Comptroller of the Currency Administrator of National Banks found at http://www.occ.treas.gov/launder/bsao.htm
[4] The Money Laundering Control Act of 1986, Comptroller of the Currency Administrator of National Banks found at http://www.occ.treas.gov/launder/mlca.htm
[5] The Anti-Drug Abuse Act of 1988, Comptroller of the Currency Administrator of National Banks found at http://www.occ.treas.gov/launder/adaa.htm
[6] Section 2532 of the Crime Control Act of 1990, Comptroller of the Currency Administrator of National Banks found at http://www.occ.treas.gov/launder/sotc.htm
[7] Section 206 of The Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991, Comptroller of the Currency Administrator of National Banks found at http://www.occ.treas.gov/launder/sotf.htm
[8] The Housing and Community Development Act of 1992, Comptroller of the Currency Administrator of National Banks found at http://www.occ.treas.gov/launder/hacd.htm
[9] Money Laundering: United States' Policy Decisions, Bitkower, Amy., 31 May 2001, found at http://members.aol.com/AJBRJJ/decide.html

OECD Attacks on Harmful Tax Competition and Tax Havens

OECD Attacks on Harmful Tax Competition and Tax Havens

Issues

Over recent years the OECD and member countries have been taking aim at Tax Havens and areas that engage in harmful tax competition. To understand what the OECD is concerned about it is first necessary to understand what is considered harmful tax competition and a tax haven. Mr. Jeffrey Owens, Head of Fiscal Affairs for the OECD, in his article titled Harmful Tax Practices[1] states, “The main factors for being a tax haven are a) no or only nominal effective tax rates; b) lack of effective exchange of information; c) lack of transparency; and d) absence of a requirement of substantial activities.” Mr. Owens goes on to identify the factors of a harmful preferential tax regime as having the following, “a) no or low effective tax rates; b) ‘ring fencing’ of regimes; c) lack of transparency; and d) lack of effective exchange of information.”

In 1998 the OECD Harmful Tax Competition report created a forum on Harmful Tax Practices. It set guidelines for dealing with harmful or preferential tax regimes in OECD member countries. The report adopted a series of recommendations(40 Recommendations) to fight these harmful practices. Also, due to the geographic mobility of financial and other service related industries, the OECD is focusing on these areas to insure that tax havens and harmful regimes do not engage in a race to the bottom to attract this growing sector of the worlds economy.

In a different article titled Curbing Harmful Tax Practices[2] by Jeffrey Owens, he identifies several issues that spurred on this report and subsequent OECD action. The first issue concerns the rapid spread of harmful tax regimes. He elaborates the problem with this thread stems from the purpose of this spread. According to Mr. Owens the purpose of the spread occurs due to, “predatory policies whose main purpose is to siphon off part of another country’s tax base.”

Another important issue regards convincing business and political groups within each country that a increasing tax competition is not necessarily beneficial. The OECD argues that in simplistic terms the taxpayer might consider tax competition a good choice since conceivably tax rates will decrease. In actuality this competition increases compliance costs, thus reducing tax savings. Instead of tax revenues moving to the government, substantial portions are diverted to the service industries for work that might be unnecessary given a less complex tax code.

Furthermore, increased complexity and compliance costs usually result in an increase in tax evasion and reduced tax revenue collections, which beget a whole host of other problems for governments and society. Abhijit Ghosh, Senior Tax Manager at PricewaterhouseCoopers Services Pte Ltd, in the article No Country Wins in Harmful Tax Competition[3], puts it this way in a discussion on tax competition, “It may also result in economic inefficiencies. For example, if an organization makes an investment in a country only because of certain tax incentives offered by that country, the resources are neither used in the best possible location nor in the most efficient way from an economic standpoint.”

Of course it may appear easy for the OECD backed by the G-8 to complain about tax competition. Opponents claim that the OECD is attempting to make it less attractive for investors to operate in smaller less developed nations that might offer these tax incentives. The issue often focuses around the argument that multinationals are taking advantage of smaller nations as opposed to the idea that larger nations are making it more difficult for these smaller nations to compete for the business of multinationals. Plus, many small nations that the OECD considers tax havens or engaged in harmful preferential tax regimes rely a great deal on the business generated from these multinationals. If this source of income is diverted back to G-8 or OECD countries, these G-8 countries may find themselves supporting through financial aid and incentives these same small countries that are financially weaker and less stable politically. A report by Mike Godfrey of Tax-News.com, refers to the concept of ‘Fiscal Colonialism’. He states in an article titled Is The US Treasury Department Poised To Distance Itself From OECD Blacklist?, “they(OECD) will not find it so easy to continue with international policies designed to protect the tax base in rich countries through a program of what has been called 'fiscal colonialism' aimed at discomfiting the offshore tax havens.”[4]

History

• 1981 Gordon report potentially initiated attacks on offshore financial centers
• 1989 FATF formed to combat money laundering.
• 1990 FATF publishes 40 recommendations on money laundering.
• Nov 1997 EU outlines plan to fight harmful tax competition. This plan included a business taxation code of conduct, minimum withholding tax on capital income provisions, and an elimination on withholding taxes on interest and royalty payments between companies across internal EU borders. [5]
• April 1998 The OECD published Harmful Tax Competition: An emerging Global Issue, otherwise known as the “1998 report.”
• May 1998 The OECD endorsed the report Harmful Tax Competition: An emerging Global Issue.
  The Report created a Forum on Harmful Tax Practices,
  set forth Guidelines for Dealing with Harmful Preferential Regimes in Member Countries,
  adopted a series of Recommendations1 for combating harmful tax practices
• 7 May 1998 G-7 Outlines plan to attack harmful tax competition. Identifies four areas for attack 1) information sharing of tax information 2) Encourage the reporting of suspicious movements of assets to address money laundering concerns 3) design prototypes for standardized exchange of information 4) authorize law enforcement officials to utilize suspicion transaction reports.[6]
• 19 Nov 1998 Edwards Report published. States that British territories of Guernsey, Jersey and the Isle of Man with offshore financial centers were well regulated.[7]
• 19 June 2000 Six jurisdictions comprised of Bermuda, Cayman Islands, Cyprus, Malta, Mauritius, and San Marino made commitments ") to eliminate harmful tax practices by the end of 2005. These commitments were known as advance commitments and they covered the international standards for exchange of information, fair tax competition and transparency.
• 26 June 2000 The OECD issued a report titled, Towards Global Tax Co-operation, which identified a list of jurisdictions considered tax havens and OECD member countries with preferential regimes. This list is sometimes referred to as a ‘black list’ of 35 low tax or tax haven countries that would not agree to cooperate with the OECD.
• 18 October 2000 OECD issued a statement that 23 of the 35 blacklisted jurisdictions had offered some expression of a cooperative intent.[8]
• 10 January 2001 OECD created a joint working group comprised of representatives from OECD countries, Caricom, the Commonwealth, and the Pacific Island Forum. This group will work to find an acceptable political process for the countries involved make commitments on the principles of transparency, non-discrimination and exchange of information on tax matters.
• 7 February 2001 Panama refuses to sign commitment with OECD.[9]
• 19 February 2001 Caricom approves plan to deal with OECD pressures including seeking legal counsel to address concerns with WTO.[10]

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[1] Harmful Tax Practices. Jeffrey Owens, This article can be found on the web at www.oecd.org/daf/fa/harm_tax/harmtax.htm
[2] Curbing harmful tax practices. Jeffrey Owens. This article can be found on the web at www.oecd.org/publications/observer/215/e-owens.htm
[3] No Country Wins in Harmful Tax Competition. Abhijit Ghosh, Business Times found on the web at www.pwcglobal.com/extweb/ncinthenews.nsf/DocID/D85BBCE272CE73F28525688E00214E8F
[4] Is The US Treasury Department Poised To Distance Itself From OECD Blacklist?, Godrey, Mike. Tax-News.com26 Feb 2001; found at www.tax-news.com/asp/story/story.asp?storyname=2404
[5] Nations to Fight "Harmful" Tax Competition. PwC International Tax Group, 4 June 1998; found at www.pwcglobal.com/extweb/indissue.nsf/DocID/5568A3873608666385256708005477C7
[6] Nations to Fight "Harmful" Tax Competition. PwC International Tax Group, 4 June 1998; found at www.pwcglobal.com/extweb/indissue.nsf/DocID/5568A3873608666385256708005477C7
[7] Offshore Pitfalls. Roper, P & Ware, J, Butterworths 2000 found at Information Center - Memorandum - Tax Havens. , www.manageme.com/info/offshore/20000830_taxhavens.html
[8] New Coalition Strikes Back at OECD Tax Haven Campaign. Goulder, Robert., Tax Analysts, December 2, 2000 (2000 WTD 234-2) found at www.freedomandprosperity.org/Articles/articles.shtml
[9] No to blank check demanded by world powers: PANAMA WILL NOT SIGN COMMITMENT WITH OECD. Berrocal R., Rafael E., El Panamá América., 7 Feb 2001 found at http://www.freedomandprosperity.org/Articles/epa02-07-01/epa02-07-01.shtml
[10] CARICOM approves action plan for OECD'S campaign. 19 Feb 2001, found at http://www.freedomandprosperity.org/Articles/cana02-19-01/cana02-19-01.shtml