THE COMPATIBILITY OF ANTI-MONEY-LAUNDERING REGIMES WITH HUMAN AND CIVIL RIGHTS IN THE US AND EU - Научное сообщество
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THE COMPATIBILITY OF ANTI-MONEY-LAUNDERING REGIMES WITH HUMAN AND CIVIL RIGHTS IN THE US AND EU

07.02.2018 11:29

[Секция 2. Конституционное право. Конституционное процессуальное право. Международное право]

Автор: Michele Sciurba, Doctoral student, PhD candidate, Department of International law and Comparative law, Educational and Scientific Institute of Law named after Prince Volodymyr the Great

The focus of this article is to analyse the objectives, the development and the efficiency of Anti-money Laundering (AML) regulation in the US and EU in order to assess their compatibility with human and civil rights. Specifically, this article questions whether AML/Counter-Terrorism Financing (CTF) legislation still effectively complies with its original objective to prevent organised crime and terrorism financing considering its new catch-all approach. The initially developed AML legislation aimed to prevent the abuse of financial institutions by money laundering (ML) [1, p. 635]. At the latest since the 9/11 terror attacks, the US has extended the AML regulations throughout the world by CTF regulations. In the US, this has resulted in the USA Patriot Act 2001 [2] and the tightening of the Bank Secrecy Act 1970 [3] and in the EU in the fourth AML Directive (4th AMLD) [4]. These laws have additionally included tax evasion as ML offence in conjunction with the current FATF recommendations [5]. This catch-all approach has changed these laws from punitive to preventive legislation [6, p. 292]. Financial institutions have de facto become the extended arm of law enforcement authorities. One core problem of the catch-all approach is that no harmonisation of the predicate offence of tax evasion exists among the EU member states, the US and other FATF members. 

The AML regulations have largely suspended banking secrecy. In addition, banks have developed a new de-risking policy, for fear of excessive sanctions imposed by AML/CTF legislation, which denies the opening of a bank account to entire population groups in order to avoid the banks’ liability [7, p. 16]. The AML legislation, based on the FATF recommendations, leads unintentionally to the fact that ordinary citizens are systematically and methodically placed under general suspicion. The implementation of this AML legislation in the financial institutions excludes people with a migration background, which forces them to use alternative systems of money transfer like Hawala, ultimately not resulting in more transparency, but to the fact that opaque and uncontrollable financial systems are strengthened that are suited for terrorist financing. 

This article concludes that instead of effectively preventing terrorist attacks, the current AML/CTF legislation results in the unintended consequence of the discrimination of entire population groups through a cost-optimised de-risking policy by banks to meet AML/CTF legal requirements. Moreover, the 4th AMLD is inconsistent with regard to tax predicate offences, as there has been no harmonisation of tax offences in the various national criminal laws of the EU member states, which makes the investigative authorities’ cooperation at EU level problematic. The systematic extension of the scope of AML/CTF legislation promotes the ongoing erosion of civil rights in the fight against money laundering, terrorist financing and tax evasion and puts ordinary citizens under general suspicion without any reasonable initial suspicion. The article stresses the issue of the tension between countries’ security interests and the maintenance of standards of the rule of law in order to emphasise the importance of the respect of fundamental human rights in the debate on current and future AML/CTF legislation designs.

Literature:

1. N Ryder, ‘The Financial Services Authority and Money Laundering. A Game of Cat and Mouse’ (2008) The Cambridge Law Journal 67(3) 635-653

2. Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (Pub. L. 107-56)

3. An Act to Amend the Federal Deposit Insurance Act to Require Insured Banks to Maintain Certain Records, to Require that Certain Transactions in U.S. Currency be Reported to the Department of the Treasury, and for Other Purposes. The Bank Secrecy Act (BSA) 1970 (Pub. L. 91-508)

4. Directive (EU) 2015/849 of the European Parliament and of the Council on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing, Amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and Repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (4th AMLD) [2015] OJ L 141/73

5. Financial Action Task Force (FATF), ‘International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation. The FATF Recommendations’ (Updated November 2017) 1-129

6. V Mitsilegas and N Vavoula, ‘The Evolving EU Anti-Money Laundering Regime: Challenges for Fundamental Rights and the Rule of Law’ (2016) MJ 23(2) 261-293

7. D Artingstall, N Dove et al., ‘Drivers & Impacts of Derisking. A Study of Representative Views and Data in the UK, by John Howell & Co. Ltd. for the Financial Conduct Authority’ (2016) 1-73

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