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The UN and Money Laundering

Leading the Way Towards a New International Financial Prosecution System



The process of globalization, together with the development of new technological tools and the decentralization of power within states, has opened up spaces for advanced forms of transnational cooperation. This phenomenon has led to an expansion of non-governmental and international organizations around the world. However, it has also led to unintended consequences, creating new spaces for the surge of transnational criminal organizations. A particular form of criminal activity that has expanded with the growth of transnational organized crime and the liberalization of financial markets is money laundering. This paper proposes that the United Nations should reform its current judicial composition and plug the legal gap in effectively pursuing international money laundering by establishing an international financial prosecution system. It suggests that a dedicated court should be created to prosecute crimes related to money laundering. The foundations of the court will be rooted in a money laundering statute that will introduce and define money laundering within the international criminal law system.

To cite this article:

Marco Quille (2023), The UN and Money Laundering: Leading the Way Towards a New International Financial Prosecution System, International Counter-Terrorism Review.


The UN and Money Laundering
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Introduction


Today’s world is subject to a series of changes that are redefining the boundaries of states and increasing opportunities for individuals to connect across the globe. Indeed, the process of globalization, together with the development of new technological tools and the decentralization of power within states, has opened up spaces for advanced forms of transnational cooperation. This phenomenon has led to an expansion of non-governmental and international organizations around the world. However, it has also led to unintended consequences, creating new spaces for the surge of transnational criminal organizations. These transnational criminal organizations have taken advantage of the absence of trade and travel barriers to boost their criminal activities across state borders and to strengthen their criminal networks [1]. A particular form of criminal activity that has expanded with the growth of transnational organized crime and the liberalization of financial markets is money laundering [2].

According to the International Money Laundering Information Network (IMoLIN), money laundering “is a process which disguises illegal profits without compromising the criminals who wish to benefit from the proceeds” [3]. Criminal activities may result in revenues that need to be concealed from law enforcement agencies. Considerable time and effort go into developing strategies that will allow criminals to safely use such revenues without raising unwanted suspicion. Implementing such strategies is generally referred to as money laundering. Money laundering comes in different forms. For example, sometimes criminal organizations use the knowledge and abilities of third-party money laundering specialists to help launder their criminal proceeds. In 2014, for example, El Paso lawyer Marco Antonio Delgado was convicted of conspiracy to launder nearly $600 million in illegal drug proceeds for the Milenio Drug Trafficking Organization [4]. Third parties are not always involved, however; in 2019, Caesar Hernandez Martinez, a member of the Sinaloa cartel, was found guilty of money laundering charges for managing an organization that smuggled US currency to Mexico and consolidating the cash at exchange houses that he operated [5].

Today, it’s estimated that money laundering amounts to 2-5% of the world’s gross domestic product and constitutes the world’s third largest industry [6]. There are growing concerns and international debate because the scale of the phenomenon represents a real economic threat to states both at a domestic and international level. Firstly, money laundering has a negative impact on the domestic economic development of states. Criminals establish legal businesses as mechanisms to launder their money and channel it into legitimate banks. They also offer services at a lower price compared to legitimate ones [7]. This is because whilst legitimate businesses operate to gain economic profit, criminals rely on their corporations to disguise their money as a licit source of capital [8]. As a result, fair market mechanisms are disrupted by distorting the natural flow of competition and undermining states’ economic growth [9]. Secondly, states that are affected by money laundering can be deprived of foreign investment opportunities if they are perceived as corrupt and financially risky [10]. As such, money laundering is a threat to the wealth of a state as well as its societal cohesion and social development.

Finally, money laundering also poses a threat to international security because international criminal organizations rely on money laundering activities to finance criminal operations, including terrorism [11]. Hence, the effective criminalization of money laundering could protect the economic interests of states as well as address serious threats of international terrorism by cutting off their source of funding [12]. These security arguments are fully articulated by the International Convention for the Suppression of the Financing of Terrorism [13].

The Fragility of the Current Anti-Money Laundering Global Regime


Due to the risks associated with money laundering, the international community has increasingly focused its efforts on establishing an anti-money laundering regime with countermeasures [14]. The regime is made up of several conventions and principles. The United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances is the leading anti-money laundering treaty, binding 160 states around the world [15]. Established in 1988 as the first interstate effort to control the traffic of narcotic and psychotropic drugs, the convention includes important provisions to counter money laundering activities from illicit trafficking [16]. Another convention that contributes to the establishment of an international system against money laundering is the United Nations Convention Against Transnational Organized Crime (UNTOC), which advocates for specific responses to the prosecution of money laundering within nations [17, 18]. Together both conventions represent the cornerstones of the UN’s Global Programme Against Money Laundering (GPAML), a research and assistance project within the United Nations Office for Drug Control and Crime Prevention (ODCCP) which comprises the United Nations International Drug Control Programme (UNDCP) and the Centre For International Crime Prevention (CICP) [19]. The program’s goal is to increase the effectiveness of international action against money laundering by offering comprehensive technical expertise to requesting member states [20].

Despite the proliferation of international treaties and countermeasures, the effectiveness of the international system is challenged by the fact that these treaties only represent a consensus between states without the teeth to effectively pursue and prosecute criminals. In fact, both the UNTOC and the Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances lack the required binding jurisdiction to effectively criminalize money laundering within national borders and their application is dependent on their ratification by states [21]. This became dramatically clear when Iran refused to ratify the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances [22].

Moreover, the current anti-money laundering global regime lacks an international judicial enforcement mechanism. The two judicial arms of the UN, namely the International Court of Justice (ICJ) and the International Criminal Court (ICC), are inadequate to make money laundering illegal within the international prosecution system. Consequently, the lack of an international jurisdiction means money laundering is largely subject to the jurisdiction of individual states [23]. Whilst treaties can achieve international standards with regards to anti-money laundering controls, states have the liberty to interpret the recommendations according to their own interests and translate them into domestic jurisdiction that best fits their purposes [24]. The result is an uneven global governance as some states adopt more severe sanctions than others [25]. Essentially, the disparities in the criminalization of money laundering have led to a mechanism of so-called forum shopping by criminal organizations who focus their activities on states with leaner or weaker regulations, thereby further exploiting the financial system [26]. The transnational character of money laundering also limits the prosecution capacity of states as they can only prosecute activities that fall within their national jurisdiction [27]. Ultimately, such differences are a serious obstacle for the cross-border judicial cooperation necessary to counter this phenomenon [28].

The Way Forward to Address International Money Laundering


This paper proposes that the UN should reform its current judicial composition and plug the legal gap in effectively pursuing international money laundering by establishing an international financial prosecution system. It suggests that a dedicated court should be created to prosecute crimes related to money laundering. The foundations of the court will be rooted in a money laundering statute that will introduce and define money laundering within the international criminal law system. The statute will include legal provisions such as regulatory measures to prosecute individuals involved in money laundering and penalize financial institutions that enable such activities. By codifying a competent international money laundering statute, the court will lay out a universal definition of money laundering that will increase judicial cooperation between states [29]. This paper does not advocate for the reform of the two already established international courts due to their limited jurisdiction and because of the difficulties in merging two very different courts that were designed for different objectives. The ICJ, for example, can only adjudicate issues in which the parties to the claim are states [30]. Consequently, the ICJ would be unable to prosecute individuals engaged in international money laundering [31]. The ICC, unlike the ICJ, does have the legal authority to prosecute individuals but its jurisdiction is limited to specific criminal activities that fall within the category of crimes against humanity [32]. More importantly, both courts would prove ineffective in prosecuting financial institutions, which completely escape their mandates.

The International Financial Prosecution System


A new financial prosecution system should be recognized as a neutral judicial organ by the community of states [33]. This means that the disposition of the court should be impartial and non-hierarchical. Therefore, the structure of the court would be similar to other established international courts. The court would be comprised of 15 judges – representing the 15 members of the Security Council – elected by the UN Security Council and the General Assembly for a 3-year renewable term. Moreover, the judges would be of different nationalities and would represent the major legal traditions in the world. Expertise is of paramount importance to tackle crimes involving intricate mechanisms such as money laundering [34]. To ensure legitimate and unbiased international criminal procedures, judges of the court would be required to follow a training program to acquire expertise on the issue of complex money laundering offenses. An existing institution that could potentially provide knowledge, advice, and skills to the judges of the court is the Panel of Recognized International Market Experts (PRIME) [35]. The panel has experience collaborating with international courts, such as the Permanent Court of Arbitration, and could set up a dedicated liaison and training program for an anti-money laundering court [36]. PRIME is considered the most well-informed international organization on crimes related to money laundering [37]. It was created to educate and train judges on how to act in accordance with domestic and international organizations [38]. Hence, following such a program will ensure that the judges acquire the necessary expertise to effectively adjudicate international money laundering cases.

The Strategy of the Court


What makes money laundering difficult to monitor is the fact that it is deeply ingrained into the legal international banking system [39]. The openness and transparency of banking practices also differ between states but, generally, banks are required to guarantee the confidentiality of their clients’ transactions. Hence, a law enforcement mechanism presided over by the court, would have to be intrusive in national banking practices which could be met with resistance from both states and the private sector [40]. To effectively tackle it, the statute of the international financial prosecution system must prevent money laundering from penetrating the legitimate financial channels of states [41]. One of the regulatory components of the statute would require international banks to closely monitor the international transactions of their clients that are suspected of being involved in international money laundering. Every year, the Financial Action Task Force (FATF) publishes a blacklist of countries that are uncooperative in the fight against international money laundering [42]. Hence, individuals engaged in international transactions involving countries included in the FATF blacklist should be closely monitored by their respective banks. By establishing a regulatory provision targeting financial institutions, domestic prosecutors will be able to institute legal proceedings against a financial institution that does not comply with the international provisions of the court. Under this regulatory component, financial institutions would be held accountable for not preventing money laundering and a system of fines could be considered [43].

From Legislation to Enforcement


Forcing banks to assess the legitimacy of their clients’ international transactions under a legal provision will increase the competency of an international anti-money laundering regime. Once the data of interest is collected, the banks would be required to share the information to domestic financial intelligence units. Under the statute of the financial prosecution system, each member of the UN would have to comply with the UN Convention Against Corruption which recommends the establishment of domestic financial intelligence units [44]. These units would act as a central organization for investigating information associated with money laundering by fostering better communication between financial institutions and police jurisdiction. Furthermore, the financial intelligence units would act as cross-border channels of information to enhance transnational cooperation between states. Many states refuse to share information about financial transactions with other states [45]. The confidentiality afforded to domestic information represents a major obstacle to the type of cross-border information sharing that is crucial to monitoring the transnational crime of money laundering. By requiring member states to establish financial intelligence units directly mandated to cooperate across borders, the statute of the court would increase international information exchanges regarding money laundering and consequently enhance the development of an effective international prosecution system. The international financial court would cooperate with established international bodies to foster and systematize a coordinated communication channel between the financial intelligence units of states. Both the International Monetary Fund (IMF) and the World Bank (WB) could act as partners of such an international court since they both represent important international platforms for financial information sharing [46]. In addition, both international institutions promote anti-money laundering policies and exercise data surveillance over their members’ financial exchanges [47]. A further potential international institution with which the financial court should cooperate is the Egmont Group which has been operating since 1995 as the biggest international network of financial intelligence units [48].

The ability of the international court to impose binding international law would ensure that the surveillance reports and correspondent recommendations of the IMF, WB, and Egmont Group would be effectively followed by states. Once the critical data is shared and collected between the financial intelligence units, it would be shared within the police jurisdictions of states and their national prosecution system where criminal proceedings would be initiated.

Conclusion


Money laundering is considered an “over the horizon” crime as it encompasses individuals, financial institutions, and even governments. The successful establishment of an international financial prosecution system with the authority of implementing binding international law would no doubt face many challenges. The only effective way to tackle money laundering is by establishing an international court with a broad mandate and with the authority to implement binding international law in order to effectively prosecute criminal institutions and individuals. However, according to Andrew Guzman’s so-called Frankenstein narrative, as described in “International Organizations and the Frankenstein Problem,” states are reluctant to establish institutions with expansive mandates [49]. They are also reluctant to give these institutions the power to create binding international law as they fear that the institution may act against their interests [50].


By applying Guzman’s narrative, we could argue that the future establishment of an international court on money laundering with an expansive mandate and the authority to create binding international law is encumbered by domestic and international political considerations rather than legal ones, as is the case for many international jurisdictions. States may express discontent with the establishment of the international financial prosecution system for fear of criminalizing their own behavior. Hence, it is likely that if a new international court against money laundering were to be established, the new court would have a narrow mandate and non-binding power. The result is that while the court would set the standards of international law, it would ultimately be in the hands of states to choose how to interpret those standards.


However, the creation of a new international financial prosecution system would bring clarity on how the international standards on money laundering are to be incorporated domestically, strengthening the impact of anti-money laundering initiatives. In fact, by setting up international norms and adjudicating cases of international money laundering, the court would instigate a platform of information and guidance to facilitate the translation of the anticipated anti-money laundering regulations locally and would provide a boost for national courts by socializing them to anti-money laundering practices [51]. Furthermore, by establishing an international anti-money laundering ethos that promotes the expansion of anti-money laundering regulations, the court would promote a global legal culture that would reshape the attitudes of states towards money laundering. An important element of operationalization would also include investigative journalists and civil society organizations that could usefully be heard by the court. This line of reasoning is aligned with constructivist arguments which state that norms and principles of international institutions become deeply ingrained within a state’s behavior. Hence, under the international statute of the court, a harmonization of the different local jurisdictions would occur, facilitating the prosecution of money laundering by law enforcement agencies.

 

Marco Quille is a MA Candidate at the Graduate Institute Geneva. He has worked as an intern for the United Nations Liaison Office for Peace and Security (UNLOPS). Marco Quille holds a bachelor’s degree in social sciences from Utrecht University. He speaks Italian, English, French, and Spanish.

 

Endnotes

  1. Sandhu, H. (2000), "The Global Detection and Deterrence of Money Laundering", Journal of Money Laundering Control, Vol. 3 No. 4, p. 337

  2. Arnone, M. and Borlini, L. (2010), "International anti‐money laundering programs", Journal of Money Laundering Control, Vol. 13 No. 3, p.227

  3. Agt. (n.d.). Imolin. Retrieved from http://www.imolin.org/.Published by the United Nations Department of Public Information DPI/2010 - December 1998

  4. GAO (2021), “ Trafficking and Money Laundering: Strategies Used by Criminal Groups and Terrorists and Federal Efforts to Combat Them”,p.26.

  5. Ibid,p.15

  6. Arnone, M. and Borlini, L. (2010), "International anti‐money laundering programs", Journal of Money Laundering Control, Vol. 13 No. 3, pp. 234

  7. Anderson, Michael, International Money Laundering: The Need for ICC Investigative and Adjudicative Jurisdiction (February 7, 2013). Virginia Journal of International Law.6

  8. Ibid,p.6

  9. Keesoony, S. (2016), "International anti-money laundering laws: the problems with enforcement", Journal of Money Laundering Control, Vol. 19 No. 2, p146

  10. Ibid,p.131

  11. Anderson, Michael, International Money Laundering: The Need for ICC Investigative and Adjudicative Jurisdiction (February 7, 2013). Virginia Journal of International Law,p.2

  12. Keesoony, S. (2016), "International anti-money laundering laws: the problems with enforcement", Journal of Money Laundering Control, Vol. 19 No. 2, pp. 137

  13. Mugarura, N. (2013). An appraisal of United Nations and other money laundering and financing of terrorism counter‐measures. Journal of Money Laundering Control, 16(3), 250

  14. Sandhu, H. (2000), "The Global Detection and Deterrence of Money Laundering", Journal of Money Laundering Control, Vol. 3 No. 4, pp. 336

  15. Sandhu, H. (2000), "The Global Detection and Deterrence of Money Laundering", Journal of Money Laundering Control, Vol. 3 No. 4, pp. 338.

  16. Veng Mei Leong, A. (2007), "Chasing dirty money: domestic and international measures against money laundering", Journal of Money Laundering Control, Vol. 10 No. 2, p.145

  17. Ibid,p.146

  18. Ibid,p.146

  19. Anderson, Michael, International Money Laundering: The Need for ICC Investigative and Adjudicative Jurisdiction (February 7, 2013). Virginia Journal of International Law, Forthcoming,p.7

  20. Susannah.maio. (n.d.). United Nations Office on Drugs and Crime. Retrieved 5, 2019, from https://www.unodc.org/unodc/en/money-laundering/technical-assistance.html.

  21. Mugarura, N. (2011). The global anti‐money laundering court as a judicial and institutional imperative. Journal of Money Laundering Control, 14(1),p.63

  22. Mugarura, N. (2013). An appraisal of United Nations and other money laundering and financing of terrorism counter‐measures. Journal of Money Laundering Control, 16(3),253

  23. Mugarura, N. (2013). An appraisal of United Nations and other money laundering and financing of terrorism counter‐measures. Journal of Money Laundering Control, 16(3),p. 254

  24. Ibid,p. 254

  25. Arnone, M., & Borlini, L. (2010). International anti‐money laundering programs. Journal of Money Laundering Control, 13(3),p.228

  26. Ibid,p. 228

  27. Anderson, Michael, International Money Laundering: The Need for ICC Investigative and Adjudicative Jurisdiction (February 7, 2013). Virginia Journal of International Law, Forthcoming,p.3

  28. Ibid,p.23

  29. Anderson, Michael, International Money Laundering: The Need for ICC Investigative and Adjudicative Jurisdiction (February 7, 2013). Virginia Journal of International Law, Forthcoming,p.3

  30. Ibid,p.23

  31. Ibid,p.2

  32. Ibid,p.9

  33. Mugarura, N. (2011), "The global anti‐money laundering court as a judicial and institutional imperative", Journal of Money Laundering Control, Vol. 14 No. 1, p.67

  34. Ibid,p. 61

  35. List of experts. Retrieved 5, 2019, from https://primefinancedisputes.org/page/list-of-experts.

  36. Ibid.

  37. Anderson, Michael, International Money Laundering: The Need for ICC Investigative and Adjudicative Jurisdiction (February 7, 2013). Virginia Journal of International Law, p.22

  38. Ibid,p.22

  39. Mugarura, N. (2011). The global anti‐money laundering court as a judicial and institutional imperative. Journal of Money Laundering Control, 14(1), 63

  40. Keesoony, S. (2016), "International anti-money laundering laws: the problems with enforcement", Journal of Money Laundering Control, Vol. 19 No. 2, pp. 145

  41. Sandhu, H. (2000), "The Global Detection and Deterrence of Money Laundering", Journal of Money Laundering Control, Vol. 3 No. 4, pp. 340

  42. Veng Mei Leong, A. (2007). Chasing dirty money: domestic and international measures against money laundering. Journal of Money Laundering Control, 10(2), 149

  43. Anderson, Michael, International Money Laundering: The Need for ICC Investigative and Adjudicative Jurisdiction (February 7, 2013). Virginia Journal of International Law,p.13

  44. Keesoony, S. (2016). International anti-money laundering laws: the problems with enforcement. Journal of Money Laundering Control, 19(2), 136

  45. Sandhu, H. S. (2000). The Global Detection and Deterrence of Money Laundering. Journal of Money Laundering Control, 3(4), 341

  46. Veng Mei Leong, A. (2007). Chasing dirty money: domestic and international measures against money laundering. Journal of Money Laundering Control, 10(2), 149

  47. Ibid,p.149

  48. Sandhu, H. S. (2000). The Global Detection and Deterrence of Money Laundering. Journal of Money Laundering Control, 3(4), 339

  49. Guzman, Andrew T., Doctor Frankenstein's International Organizations (March 2, 2012), p.27

  50. Ibid,p.27

  51. Mugarura, N. (2011). The global anti‐money laundering court as a judicial and institutional imperative. Journal of Money Laundering Control, 14(1), 63


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