BY: "Clayton Wilbern" cwilbern@edm.imag.net
Topic
Income
tax evasion was the downfall of Al Capone who made millions off the avails of
organized crime. Since his
imprisonment, criminals have discovered better means of hiding their assets. Money laundering is “to knowingly engage in
a financial transaction with the proceeds of some unlawful activity with the
intent of promoting or carrying on that unlawful activity or to conceal or
disguise the nature, location, source, ownership, or control of these proceeds”
(Abadinsky, 2003). The 1988 United
Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances provided a definition of money laundering that has been summarized
by Professor Beare. Beare (2003) states
money laundering usually involves:
-the conversion of illicit
cash to another asset, possibly involving the placement of the funds into a
financial institution.
-the concealment of the true
source of ownership of the illegally acquired proceeds, possibly through a
technique referred to as “layering” whereby a series of otherwise legitimate
transactions are carried out which due to the frequency, volume, or complexity
of the transactions create a paper trail that is hard or impossible to follow;
-the creation of the
perception of legitimacy of source and ownership. By this stage, funds may be integrated into the legitimate
economy so thoroughly as to be interchangeable with legitimate earnings.
Money laundering allows organized crime to flourish. The integrity of a country’s financial
system could be compromised by criminals that conduct such questionable
financial business. Crimes from drug
trafficking to terrorism can be the result of money laundering, therefore, it
cannot be ignored by law enforcement.
The terrorist events of 9/11 involved terrorist financing, which used
similar money laundering techniques known by law enforcement.
At
the international level, the Financial Action Task Force (FATF) made up of
numerous countries has composed 40 recommendations to combat money laundering
and terrorist financing. The FATF has
been striving throughout the years for establishing better means to curb money
laundering through various policy-making initiatives. Many countries have adopted these initiatives to varying
degrees. The main stimulus for these countries
seems to be peer pressure from the other countries to work together to fight
against money laundering. The events of
9/11 have compounded this peer pressure for countries such as Canada that have
been slow to implement the legislative initiatives.
The
FATF has identified lawyers and accountants as being an instrumental part of
the money laundering process. They have
been identified as ‘gatekeepers’ for the flow of money. Recommendation #16 by the FATF specifically
states, “Lawyers, notaries, other independent legal professionals and
accountants should be required to report suspicious transactions when, on
behalf of or for a client, they engage in a financial transaction in relation
to the activities described in Recommendation 12(d)” (Financial Action Task
Force, 2003). Some countries have
embraced this recommendation and have created legislation that requires lawyers
to report suspicious currency transactions.
Canada did the same, but the Supreme Court (Law Society of British
Columbia v. Canada Attorney General) struck the law. The challenge came at a time of unprecedented concern among the
legal profession at moves to force lawyers to report on their clients (Tromans,
2002).
Questions
How
does legislation balance the sanctity of lawyer/client privilege versus the
protection of society from lawyers who help orchestrate money laundering of
organized criminals? How can we ensure
that lawyers are not allowing money laundering/terrorist financing to
occur? Do we rely on their codes of
ethics that they swear to? Can
legislation be a viable option for these matters? Is legislation the answer or are there other alternatives? Does the Charter of Rights and Freedoms
prevail at all costs? What are other
countries doing in regards to lawyers and money laundering legislation and what
seem to be the best viable options? How
does law enforcement investigate lawyers who are suspected of orchestrating
money-laundering schemes?
Constructs
For
a number of countries, legislation appears to be guided by the Financial Action
Task Force recommendations. Therefore,
the FATF’s recommendations need to be examined and scrutinized, including the
excerpts. The legislation of other countries needs to be studied and how it
compares with Canadian legislation. For
instance, do other countries have their attorneys file cash transaction
reports? This is not the case in Canada
where the law society successfully forced the government to strike down such
impeding legislation. Canada’s eighty
thousand lawyers argued, successfully, that the requirements forced them to spy
on their clients by secretly reporting to an agency of the government
(Robinson, 2003).
For law enforcement, money
laundering investigations now stop as soon as they hit a lawyer’s office
(Robinson, 2003). If possible research
into actual police cases where lawyers are shown to have played a role in money
laundering should be considered. If
Canada is portrayed as a hub for money laundering/ terrorist financing, then
there needs to be examples should be uncovered.
I must completely examine
the Canadian Charter of Rights and Freedoms, specifically in regards to the
issues of lawyer/client privilege and its importance. According to case law (Law Society of British Columbia v. Canada
Attorney General, 2003) while remaining sensitive to the social and political
context of the impugned law and allowing for difficulties of proof inherent in
that context, the courts must nevertheless insist that before the state can
override constitutional rights, there be a reasoned demonstration of the good
which the law may achieve in relation to the seriousness of the infringement.
Significance
Money
laundering and terrorist financing are very serious crimes that need to be
dealt with by law enforcement. Because
criminals who commit money laundering rely on lawyers as gatekeepers to conduct
their illegal business, lawyers become a key component of the process. Lawyers like any other profession need
checks and balances to prevent illegal or immoral behavior. Some industrialized countries have responded
to the Financial Action Task Force recommendations and have made lawyers comply
with reporting suspicious currency transactions. Canada did initially implement such legislation but has
backtracked. Clearly, there is
considerable debate on this issue and little research to provide any
guidance. The Police feel lawyers
should comply as they are stopped at a lawyer’s trust account when doing
money-laundering investigations.
However, lawyers argue that solicitor/client privilege cannot be
compromised for any reason.
Summary
Money laundering is an
international social ill that is currently being addressed by the Financial
Action Task Force that has provided various recommendations. As ‘gatekeepers’ of money laundering,
lawyers are very much a part of the process.
In Canada, legislation has been developed to force lawyers to report
suspicious currency transactions, however, the law society had this quashed
arguing the law to violate constitutional rights. The debate continues across the globe as to whether such
legislation is appropriate. Research in
this area could help provide much needed direction or insight to legislators,
lawyers and law enforcement personnel.
It must be made very clear
that there are dishonest lawyers knowingly orchestrating money laundering for
organized crime clientele. These
lawyers hide behind codes of ethics and the constitutional right of
solicitor/client privilege allowing these crimes to be committed. In many instances lawyers are benefiting
from these heinous crimes knowing there is little the police can do to detect,
investigate and successfully prosecute them.
Law enforcement needs to be able to more effectively investigate these
issues with either legislation or a system of checks and balances within the
law society. Something is clearly
needed to fully address this issue so that the Canadian public is satisfied
that lawyers are not part of the process that makes Canada appear to be a
money-laundering haven.
References Cited
Abadinsky,
H. (2003). Organized Crime (7th ed.). Toronto, ON:
Wadsworth/Nelson Thomson Learning.
Allan,
M. J. The Honourable Madam Justice.
(2003). Law Society of British
Columbia v. Canada (Attorney
General). Retrieved July 19, 2004 from
http://www.canlii.org/bc/cas/bcsc/2001/2001bcsc1593.html
Beare, M. (2003). Critical
reflections on transnational organized crime, money
laundering and corruption. Toronto, ON: University of
Toronto Press.
Financial
Action Task Force (FATF). (2003). The Forty Recommendations.
Retrieved July 19, 2004 from http://www1.oecd.org/fatf/40Recs_en.htm
Hubbard,
R., Murphy, D., O’Donnell, F., and P. DeFreitas. (2004). Money
Laundering & Proceeds of Crime. Toronto, ON. Irwin Law Inc.
Robinson,
J. (2003). The Sink. Toronto,
ON: McClelland & Stewart Ltd.
Tromans,
R. (2002). Canadian lawyers win reprieve from new reporting
legislation. Legal Week. Retrieved May
30, 2004 from
http://www.1wk.co.uk/ViewItem.asp?id=11548
Topical Outline of Annotated Bibliography
Textbooks:
Abadinsky,
H. (2003). Organized Crime (7th ed.). Toronto, ON:
Wadsworth/Nelson Thomson Learning.
Beare, M.
(2003). Critical reflections on transnational organized crime, money
laundering and corruption. Toronto, ON: University of
Toronto Press.
Hubbard,
R., Murphy, D., O’Donnell, F., and P. DeFreitas. (2004). Money
Laundering & Proceeds of Crime. Toronto, ON. Irwin Law Inc.
Sherriff, S. (2003). Convicting
the guilty. A strategy manual of law and
technique for dedicated investigators and prosecutors
combating major
crime. (10th ed.). Toronto, ON. Steve
Sherriff.
Case
Law:
Allan,
M. J. The Honourable Madam Justice.
(2003). Law Society of British
Columbia v. Canada (Attorney
General). Retrieved July 19, 2004 from
http://www.canlii.org/bc/cas/bcsc/2001/2001bcsc1593.html
Financial
Action Task Force excerpts:
Financial
Action Task Force (FATF). (2003). The Forty Recommendations.
Retrieved July 19, 2004 from http://www1.oecd.org/fatf/40Recs_en.htm
FinTrac,
FinCen:
Interview
staff and read published literature.
Interviews:
Specifically
The Honourable Anne McLellan the Minister of Justice who was pivotally involved
with the lawyer-exempt money laundering legislation evolution. (She lives in
Edmonton)
Money
Laundering Books:
Robinson,
J. (2003). The Sink. Toronto,
ON: McClelland & Stewart Ltd.
Money
Laundering Articles:
Tromans,
R. (2002). Canadian lawyers win reprieve from new reporting
legislation. Legal Week. Retrieved May
30, 2004 from
http://www.1wk.co.uk/ViewItem.asp?id=11548
Websites:
Lots
of developments on the anti-money laundering front recently:
* NEW YORK. The National Association of Securities Dealers, the
NY Stock Exchange and the SEC team up for a national ML sweep. LINK:
http://www.compliancereporter.com/news/nasd+nyse+sec+to+join+forces.asp
* LONDON. British accountants are pressed into being government
anti-ML agents. LINK: http://www.accountancyage.com/News/1121812
* MONTREAL. Sovereign Society advisor Prof. Pierre LEMIEUX
explains "Why Big Brother Attacks Money Laundering"
LINK: http://www.zolatimes.com/V5.21/tyranny_laundering.html
* EUROPE. Introduction of euro notes & coins on Jan. 1st means
risk of money laundering, counterfeiting and fraud in Europe. LINK:
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT34P68L0NC&liv
* MOSCOW. The Russian Dumas creates a new anti-ML agency in
an effort to get of the FATF blacklist and clean up their image.
LINK: http://www.themoscowtimes.com/stories/2001/05/25/002.html
* KUALA LUMPUR, Malaysia. Warnings that the Internet is
becoming a lucrative, new conduit for dirty money activity.
LINK: http://www.siliconvalley.com/docs/news/tech/021288.htm
* HONOLULU, Hawaii. The Asian Pacific region is a major ML area.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=3708
* ABU DHABI, U.A.E. The Gulf states defend themselves against
charges of rampant ML action in the area.
LINK: http://www.gulf-news.com/Articles/news.asp?ArticleID=17668
* BEIRUT, Lebanon. Tough new anti-ML law adopted here.
LINK: http://208.2.80.22/business/23_05_01_b.htm
Database
Money Laundering Articles:
Aninat, E., Hardy, D., &
Johnston, R. B. (2002, September). Combating money
laundering and the financing of terrorism. Finance & Development.
39(3),
44-7.
Retrieved September 21, 2003 from WilsonSelectPlus database.
Geddes, J. (2002, May). The money trail. Canada’s fight against money
laundering. Maclean’s. 115(19), 44. Retrieved October 1, 2003 from
WilsonSelectPlus database.
Komisar, L. (2003, Spring).
Offshore banking: The secret threat to America.
Dissent. 50(2), 45-51. Retrieved September 21, 2003 from WilsonSelectPlus
database.
Lavoie, E. & Leclerc G. (2001, October). Keeping your hands clean.
Accounting
firms;
complying with money-laundering rules. CA Magazine. 134(8), 35-38.
Retrieved October 1, 2003 from WilsonSelectPlus database.
McLaughlin, P. (2001, October). The spin cycle. CA
Magazine. 134(8), 20-24.
Retrieved October 1, 2003 from WilsonSelectPlus database.
Robin, R. (2001, October). Not-so-easy money. Canadian
Business. 74(20), 52-
54.
Retrieved October 1, 2003 from WilsonSelectPlus database.
Schroeder, W. R. (2001,
May). Money laundering: a global threat and the
international community’s response. FBI Law Enforcement
Bulletin. 70(5), 1-
9.
Retrieved September 21, 2003 from WilsonSelectPlus database.
Suter, K. (2002.
August/September). Banking on terrorism. The World Today.
58(8/9), p. 35-6. Retrieved September 21, 2003 from WilsonSelectPlus
database.
Weintraub, S. (2002,
Winter). Disrupting the financing of terrorism. Washington
Quarterly. 25(1), 53-60. Retrieved September 21, 2003 from WilsonSelectPlus
database.
Dissertations on Money Laundering:
Benning, J. (2001). "That's
where the money is": An exploration of the
international effort to contain transnational organized crime
through the
formation of an anti-money laundering regime. Dissertation
Abstracts
International, 62, (02), 765A. (UMI No. AAI3003033). Retrieved
September
28, 2003 from Dissertations database.
Government
websites:
Department
of Justice Canada. (2000). Federal action against organized
crime. Retrieved September 15, 2003 from
http://canada.justice.gc.ca/en/news/nr/2000/doc_25605.html
Department of Justice Canada. (2000, September 11). Government
of Canada
makes
significant progress in combating organized crime. Retrieved
September 27, 2003 from
http://canada.justice.gc.ca/en/news/nr/2000/doc_25603.html
U.S. Department of State. (2000). Canada, Mexico
and Central America.
Retrieved September 27, 2003, from Office of Citizens Services and
Communications Online via GPO Access:
http://www.state.gov/g/inl/rls/nrcrpt/2000/888.htm
Conferences on Money Laundering:
Johnson, J. E. (2000, October 21). Treasury under
secretary for enforcement
James E.
Johnson remarks to the pacific rim money laundering and
financial crimes conference Vancouver, Canada (Publication No. LS-965).
From
the Office of Public Affairs. Retrieved September 27, 2003, from Office
of
Citizens Services and Communications Online via GPO Access:
http://www.treasury.gov/press/releases/ls965.htm
O’Neill, P. (2001, November 17). Statement by U.S.
Treasury Secretary Paul
O’Neill
Ottawa, Canada (Publication No. PO-805). From the Office of Public
Affairs.
Retrieved
September 27, 2003, from Office of Citizens Services and
Communications Online via GPO Access:
http://www.treasury.gov/press/releases/po805.htm
Legislation:
Canadian Charter of Rights and Freedoms
Criminal Code
American Constitution
Bill of Rights
Peer Reviewed Articles:
Malkin, A. & Elizur Y. (2001, Spring). The
dilemma of dirty money. World
Policy
Journal. 18(1), 13-23. Retrieved September 15, 2003 from
WilsonSelectPlus database.
Malkin, L. & Elizur, Y.
(2002, Spring). Terrorism’s money trail. World Policy
Journal.
19(1), 60-70. Retrieved September 21, 2003 from WilsonSelectPlus
database.
Controversial Scholars:
Naylor, R. T. (2000, September 29). Expert panel on
emerging crimes. From the
Research
and Statistics Division, Canada. Retrieved September 27, 2003,
from the
Department of Justice Canada Access:
http://canada.justice.gc.ca/en/ps/rs/rep/expertpanel.pdf
Experts:
Police
Criminologists
Lawyers
Police Case Files:
From RCMP offices across the country
Foreign Literature and Legislation:
Review of various laws and perspectives
across the globe.