European Union: European Commission Publishes Proposed Directive On Countering Money Laundering By Criminal Law

On December 21, 2016, the European Commission published a legislative proposal for a Directive on countering money laundering by criminal law. The proposed Directive is intended to harmonize and establish minimum rules concerning the definition of criminal offenses and sanctions in the area of money laundering. The proposed Directive would implement international obligations such as the Warsaw Convention and Financial Action Task Force recommendations.

The proposed Directive provides for three specific money laundering activities that, when conducted intentionally, would be punishable as a criminal offense. Member States would be able to impose more stringent rules, for example, by making money laundering committed recklessly or by serious negligence a criminal offense. The three criminal offenses are (i) the conversion or transfer of property, when it is known that the property is derived from criminal activity, for the purpose of concealing or disguising the illicit origin of the property or assisting another person involved

in the commission of such an offense to evade the legal consequences; (ii) the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property knowing that such property is derived from criminal activity; and (iii) the acquisition, possession or use of property with knowledge at the time of receipt that such property was derived from criminal activity. Criminal activity is defined widely and includes any kind of criminal involvement in the commission of specific crimes such as the participation in an organized criminal group and racketeering, terrorism, trafficking in human beings and migrant smuggling, illicit trafficking in narcotic drugs and psychotropic substances, illicit arms trafficking, forgery, fraud, corruption, insider trading, tax crimes and cybercrime.

Aiding and abetting, inciting and attempting an offense would also be punishable. The proposed Directive provides that for a money laundering offense to be punishable, it would not be necessary, amongst other things, to establish a prior or simultaneous conviction for predicate criminal activity that generated the property or the identity of the perpetrator of the criminal activity that generated the property or other circumstances related to that activity.

An offense committed by an individual would be punishable by a maximum term of imprisonment of at least four years in serious cases. The proposed Directive also provides which circumstances should be considered as aggravating. In addition, the proposed Directive establishes liability of legal persons for any offenses committed for the benefit of the legal person by any individual acting individually or as part of the legal person and who holds a leading position within the legal person based on a power of representation of the legal person, the authority to take decisions on behalf of the legal person or the authority to exercise control within the legal person. Legal persons would be any entity with legal personality under the applicable law, excluding States, public bodies and public international organizations. Legal persons would also be liable where the lack of supervision or control of the relevant individual made the commission of the offense possible by a person under the legal person's authority. Liability for legal persons would include criminal or non-criminal fines and other sanctions, including placing the legal person under judicial supervision, temporary or permanent disqualification of the legal person from undertaking commercial activities and judicial winding up.

Unlike under the UK's current anti-money laundering regime, there is no mechanism in the directive for consent to be obtained from a regulator for transactions. A Member State would have jurisdiction over an offense committed in whole or in part in its territory or where the offender is one of its nationals. Member States may extend that jurisdiction to offenses committed outside of its territory if the offender is a habitual resident in its territory or the offense is committed for the benefit of a legal person established in its territory.

The proposed Directive is now subject to review by the European Parliament and the Council of the European Union. It is proposed that Member States would have two years to transpose the proposed Directive into national law once it is finalized. Denmark, Ireland and the United Kingdom may opt out of the adoption of the proposed Directive.

The UK's anti-money laundering regime is due to be reviewed by the FATF in 2018 and there is currently a lot of activity around the topic with the Criminal Finances Bill 2016-17 currently before the UK Parliament. The Bill forms part of the Government's 2016 Action Plan for AML and counter-terrorist finance and is one of the most significant changes to the UK AML and CTF regime in the last ten years. The Bill, amongst other things, introduces Unexplained Wealth Orders in England, Wales and Northern Ireland. These would require a person who may reasonably be suspected of involvement in or associated with serious criminality or overseas politically exposed persons to explain the origin of their assets that appear disproportionate to their income. The UK already has criminal offenses for money laundering. The Proceeds of Crime Act 2002 provides a maximum sentence of up to 14 years for offenses such as the acquisition, use and possession of criminal property. The Bill also updates the POCA 2002 with the option for regulators to apply to the Court for an extension to the moratorium period, following a request for consent to deal with criminal property, from the current total of 31 days by up to an additional 186 days. Despite the UK's impending departure from the EU, it is likely that it will continue to legislate in accordance with EU legislation, such as the Fourth Anti-Money Laundering Directive which will come into force from June 2017, and account for future legislation such as the proposed Directive with a view to retaining access to EU financial markets.

The proposed Directive is available at: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=COM:2016:826:FIN&qid=1378484867646&from=EN.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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