Common Law Legal Systems Model Legislative Provisions on Money Laundering, Terrorism Financing, Preventive Measures and Proceeds of Crime

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Author(s):
Commonwealth Secretariat
31 Aug 2016
Pages:
208
ISBN:
9781848599444 (PDF)
http://dx.doi.org/10.14217/9781848599444-en

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Corruption undermines the rule of law, good governance, and sustainable growth and development. Most countries have prohibited all forms of corruption, yet corruption persists due largely to a lack of appropriate strategies and structures to inhibit it. Such strategies include effective and comprehensive legal frameworks to prevent, punish and take the profit out of corruption.

The Common Law Legal Systems Model Legislative Provisions aims to enable Commonwealth countries to evaluate measures that can be incorporated into domestic law to prevent, detect, and effectively sanction money laundering and terrorism financing and to recover the proceeds of crime.

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  • Preface

    These model legislative provisions relating to money laundering, terrorism financing, proceeds of crime, civil forfeiture and sanctions are the outcome of a collaboration between the Commonwealth Secretariat, the International Monetary Fund (IMF) and the United Nations Office on Drugs and Crime (UNODC).

  • List of abbreviations
  • Preliminary

    An Act to Criminalise Money Laundering and Terrorism Financing, to Establish Preventive Measures to Combat Money Laundering and Terrorism Financing, and to Recover the Proceeds of Crime, Instrumentalities and Terrorist Property

  • Preventive Measures

    Part II sets out preventive measures to be applied by financial institutions and designated non-financial businesses and professions (DNFBPs) to combat money laundering and terrorism financing. There is reference in the text to ‘this Act’ as it is envisaged that Part II could be adopted as a separate act or together with other parts of the model legislative provisions. Drafting authorities should review the use of the term in the provisions.

  • Financial Intelligence Unit

    Sections 31–35 are basic provisions to establish an FIU that will serve as a national centre for the receipt and analysis of suspicious transaction reports and other information relevant to money laundering, associated predicate offences and terrorism financing and generated as a result of the preventive measures obligations that Part II provides for financial businesses and DNFBPs, and for disseminating the results of that analysis.

  • Money Laundering and Terrorism Financing Offences

    FATF Recommendation 3 provides for the criminalisation of money laundering, consistent with the Vienna and Palermo Conventions. In essence, money laundering is defined as the conversion, transfer, concealment, disguising, acquisition, possession or use of proceeds of crime. The term ‘proceeds of crime’ as set out under Section 3 covers any property or funds derived from or obtained as a result of or in connection with an ‘offence’. Funds or assets are ‘proceeds of crime’ and thus fall under the scope of the money laundering provision only if they are proceeds of an ‘offence’. To define the scope of the money laundering offence, drafting authorities must thus choose an approach to defining the term ‘offence’. Variants 1 (a), 2 (a) and 3 (a) below provide a number of alternatives for drafting authorities to consider. Variant 1 covers all offences under domestic law, variant 2 covers only those offence with a particular serious sanction and variant 3 covers only offences specifically listed in a schedule.

  • Conviction-based Confiscation, Benefit Recovery and Extended Benefit Recovery Orders

    This part implements FATF Recommendation 4 and the associated interpretive notes. The model comprises three sets of provisions on this issue: (1) provisions that are mandatory to comply with basic international standards (reference will be made to the relevant FATF standard in the drafting notes), which will be noted below; (2) additional provisions that are recommended for an effective and comprehensive asset recovery regime but that are not required under the FATF standard; and (3) provisions that are optional and reflect best practice.

  • Civil Forfeiture

    This part relates to the making and enforcement of orders with respect to property that is proved to be property arising out of unlawful conduct. These forfeiture orders are civil in nature; therefore, they are applied for in the civil courts, and they are available even if there is no prosecution or conviction or, indeed, if, following a criminal trial, the defendant is acquitted.

  • Investigative Orders

    This part contains provisions relating to ancillary orders, which will assist in the investigation of asset recovery cases, whether in the criminal or civil context. Chronologically, the first in many investigations will be the customer information order, followed by the monitoring order, the production order and, finally, the search and seizure order. Not all orders may be necessary, or indeed appropriate, in every case.

  • Cross-border Transportation of Currency and Bearer Negotiable Instruments
  • Cash Forfeiture

    This part is optional, represents good practice in the United kingdom and can be a very valuable tool in the arsenal of authorised officers. These provisions introduce a new power for authorised officers to seize cash discovered during investigations or at the point of import or export, provided the cash is reasonably suspected of being derived from or intended to be used in criminal activity, or the instrumentalities of such activity.

  • Unexplained Wealth Orders

    These provisions are based upon the unexplained wealth provisions enacted by the Australian Commonwealth (Proceeds of Crime Act 2002), Western Australia (Criminal Property Confiscation Act 2000), Northern Territory (Criminal Property Forfeiture Act 2002), New South Wales (Criminal Assets Recovery Act 1990) and South Australia (Serious and Organised Crime (Unexplained Wealth) Act 2009). They are included here for completeness, and some states may find them useful. However, they are not an essential part of the asset recovery arsenal and are optional.

  • Asset Management

    Effective proactive asset management is critical to the success of any forfeiture legislation, criminal or civil. If assets are allowed to dissipate or disappear, the forfeiture programme will be undermined. In jurisdictions that have provided for this role to be carried out by traditional court-appointed receivers, it has proven to be very costly in terms of net recoveries and has occasionally led to enforcement authorities having to pay monies to the receiver out of taxpayer funds, because the assets recovered have proven to be insufficient to cover the cost of the receiver. Accordingly, this part seeks to identify a role for an employee within the enforcement authority whose responsibility will be to manage, and if necessary realise, property subject to court orders. Drafters will wish to consider whether they can legislate for property managers in a discrete way as is suggested in these model legislative provisions so that the role of the property manager is not different whether the order appointing him or her is made in criminal, civil or cash forfeiture regimes.

  • Recovered Assets Fund
  • Sanctions

    These model provisions do not attempt to provide a single model for the implementation of the UN Al-Qaida and 1988 sanctions regimes. Instead they provide guidance on key requirements that UN Member States may wish to consider when designing their national framework for implementing the two UN sanctions regimes. They do not purport to override national authorities.

  • Criminal Assets Recovery Committee
  • Model Decree on the Financial Intelligence Unit
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