ORGANIZACION DE LOS ESTADOS AMERICANOSORGANIZAÇÅO DOS ESTADOS AMERICANOS

ORGANISATION DES ETATS AMERICAINSORGANIZATION OF AMERICAN STATES

17th Street and Constitution Avenue, N.W. Washington, D.C. 20006

MONEY LAUNDERING AS ANAUTONOMOUS OFFENCE

Analysis of the consequences of the autonomy of the money laundering offence: the perpetrator of the predicate offence as

the perpetrator of the offence of money laundreing.

ByRicardo Pinto

Ophelie ChevalierEdited and aprroved byRafael Franzini Batlle

© CICAD

INTER-AMERICAN DRUB ABUSE CONTROL COMMISSION

© C I C A D

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1. Introduction

a. The issues involved in the offense of money laundering

The purpose of a criminal organization is to generate profits for the group or for one of its members. Money laundering is the processing of these criminal proceeds to disguise their illegal origin.1

Criminal activities such as arms diversion, smuggling, or illicit drug trafficking generate huge sums of money, and criminal organizations need to find a way to use these funds without awakening suspicions about their illicit origin.2 During the second half of the 20th century, with the threat of modern and sophisticated forms of transnational criminal activity, concern has arisen over the lack of effective national law to combat organized crime and the laundering of its proceeds.3

As a consequence, new laws and international efforts to combat money laundering have emerged, such as the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, known as the 1988 Vienna Convention4, the 1992 CICAD Model Regulations,5 and the most recent convention on this issue, the United Nations Convention Against Transnational Organized Crime.6 Similarly, both the World Bank and the International Monetary Fund have taken measures to control this activity.7

The current trend of criminal behavior is towards organized rather than individual crime: companies governed by the laws of the market, which

1 FATF-GAFI, Financial Action Task Force on Money Laundering. “Basic Facts about Money Laundering”, see <www.oecd.org/fatf>2 Idem.3 CICAD, Organization of American States, “Manual de Apoyo para la tipificación del delito,” OAS, 1998.4 UN, “United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988”5 General Secretariat of the Organization of American States, Washington D.C., Inter-American Drub Abuse Control Commission, hereinafter CICAD Model Regulations.6 UN, “United Nations Convention Against Transnational Organized Crime.” See Article 5, which criminalizes participation in an organized crime group, and Article 6, which criminalizes the laundering of the proceeds of crime, among other matters.7 See, in this respect, the studies published by these institutions: ”International Monetary Fund and World Bank: Enhancing contributions to combating money laundering,” April 2001, and “Financial System Abuse, Financial Crime and Money Laundering,” February 2001, at<www.imf.org>

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endeavor to profit from the opportunities of a globalized world economy. Estimates of the scope of money laundering indicate that it exceeds the gross domestic product of most countries; so it is easy to see that criminal organizations administer fortunes and that research and legislation to combat the problem are necessary.8

The harmful consequences of these new circumstances may be described as the contamination and destabilization of financial markets, which endangers the economic, political, and social foundations of democracy.9 Since the soundness of the banking system and financial services depends essentially on society’s perception of them, their reputation, in other words their integrity, is one of the most important assets of the two sectors. If funds from illicit activities can enter an institution of the system through the intentional action or the negligence of an employee, the institution may be implicated in organized criminal activity, which will harm its reputation.10

Furthermore, the International Monetary Fund has noted, as one of the dire consequences of asset laundering at the macroeconomic level, the inexplicable change in the demand for money, which makes banking more risky, contaminating financial transactions and increasing the volatility of capital flows and changes in interest rates, owing to unanticipated transfers of capital between countries.11

This is why the money laundering problem affects aspects of society such as the socioeconomic order in a new way. It no longer affects only the administration of justice, as the offense of concealment does; according to a teleological interpretation, laundering harms the socioeconomic order12 by affecting both free competition and the stability and soundness of the financial system.13

b. Laundering as a separate offense and its relationship to concealment

8 Isidro Blanco Cordero, “El delito de Blanqueo de Capitales,” Ed.Aranzadi, 1997, page 32. 9 Idem.10 FATF-GAFI, idem. This has been the basis of a hemispheric program to train officers of banks and of agencies that regulate financial institutions, funded by the Inter-American Development Bank, of which CICAD is the executing agency. 11 Idem.12 Isidro Blanco Cordero, page 187.13 Idem, page 197.

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One of the central issues to be considered in the drafting of criminal law to punish money laundering is what similarities and differences exist between the offenses of money laundering and concealment. It is important to consider whether laundering is a separate offense that can be differentiated from concealment. If so, the perpetrator of the initial offense may also be considered the perpetrator of money laundering and, therefore, may be subject to concurrent punishment for both offenses.14 To understand the offense of asset laundering, one must consider that, according to international legal instruments, one of its elements may fit the definition of concealment (aiding by concealing things, persons, or property); in other words, laundering may be seen as a form of qualified concealment.15

Therefore, this study will examine whether asset laundering can be considered a separate offense and, consequently, whether the perpetrator of the offense that generated the proceeds should be included as a launderer. To do this, we must consider whether both offenses affect the same legally protected interest (under the civil law, this means all those, whether material or immaterial, that is protected by law) and whether the actions described in their definitions are similar. Lastly, we must consider the description of the money launderer.

On that basis, we may conclude that, for criminal policy reasons, it is advisable to allow the perpetrator of the initial act to be punished as the subsequent launderer. We have seen that some criminal organizations engage in money laundering in addition to other offenses, and harm not only the administration of justice but, above all, the national economic order and the international community.16 Therefore, effective control of the phenomenon of money laundering requires that it be approached not only as a form of concealment but as a separate offense against the socioeconomic order.

Along these lines, in Part II we will examine the interest legally protected by the

criminalization of laundering, and how this differs from the interest affected by

concealment. In Part III, the definitions of the offense given in international treaties and

manuals and in different bodies of law will be discussed. Part IV analyzes what

14 Rafael Franzini-Battle, “El delito de lavado de dinero (blanqueo de capitales), page 11, (1995)15 Idem, cf. Horacio Cattani16 In this sense, the doctrinaire opinion is adopted (see Blanco Cordero, idem, page 553).

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participation in the offense of laundering involves and whether or not the perpetrator of the

initial offense should be considered a perpetrator of the laundering offense. Finally, Part V

presents the conclusions.

2. The legally protected interest protected by the criminalization of money laundering

a. The magnitude of the problem of money laundering at the economic level

Studies conducted during the 1990s concluded that money laundering involves two per cent of the gross world product.17 However, these same assessments emphasize that this calculation may not reflect the true extent of the problem18. Indeed, the quantification of its magnitude is limited by the lack of instruments to measure: (1) laundering methods, (2) production in the informal sector, and (3) the criminal origin of income19.

1. Laundering methodsThe development of criminal organizations, on the one hand, and of

electronic monetary instruments, on the other, has changed the panorama of money laundering instruments.

Economic globalization has significantly increased with the development of markets, the deregulation of financial systems, and the reduction of border controls. This globalization process benefits criminal organizations, which develop money laundering techniques that allow them to rapidly and discretely introduce the proceeds of illicit activities into world markets. Laundered money generates rapid movements of capital and, consequently, is involved in speculative transactions.

Among the instruments most often used to hide the source of money are bank drafts, trust funds, self-loans, and swaps20. The development of more 17 Cited by Raine, L.P., and Cilluffo in Global organized crime; the new empire of evil, Center for Strategic and International Studies, Washington, 1994. “Macroeconomic Implications of Money Laundering,” by Peter J. Quirck, Monetary and Exchange Affairs Department, International Monetary Fund, June 1996.18 “Money Laundering Methodologies and International and Regional Counter-Measures,” by Rick McDonell, National Offence Authority, NSW, presented at the conference “Gambling, Technology and Society: Regulatory Challenges for the 21st Century,” organized by the Australian Institute of Criminology, Sydney, May 7-8, 1998.19 This is reflected by the fact that the FATF Ad Hoc Group to measure the magnitude of money laundering has been unable to reach valid conclusions and has discontinued its meetings.20 Report on Money Laundering Typologies, 2000-2001, FATF.

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modern money laundering techniques has generated demand for professionals such as notaries, lawyers, and accountants who can devise complex structures to benefit from shortcomings in regulation and monitoring and from differences between national legal systems. These schemes are used to commit offenses, such as money laundering, that is eminently transnational21. In short, the globalization process does not further efforts to assess the scope of money laundering in the world economy. On the contrary, organized crime uses this process through a diversity of techniques and professionals to hide money laundering activities.

Another change involves electronic monetary instruments, which promote the anonymity and speed of transactions. Although the last FATF report stresses that classic laundering techniques such as the cash purchase of luxury objects and leasing contracts22 continue to be used, the Internet offers new money laundering opportunities and is less regulated. The financial services offered over the Internet are not truly original; they are traditional services of financial institutions, such as direct payments, funds transfers, and purchases of shares, which are now available electronically. The problem with the availability of such services over the Internet is that it makes it difficult to identify the parties involved. The Internet operates through a series of servers that usually maintain proof of each connection (IP number and date of connection). However, if a server is not set up to create a log file, the transaction remains anonymous and cannot be recorded23.

In conclusion, the complexity of laundering instruments gives them a direct role in the “cancer of corruption”24, which feeds on globalization and the new financial techniques to disguise the proceeds of organized crime.

2. The criminal origin of the incomeIt is estimated that income from criminal activities ranges from 300 to

800 billion dollars a year25. Several studies emphasize that the manufacture and illicit distribution of drugs and arms result in a reduction in a country’s

21 Annual Report, 2000-2001, FATF.22 Idem23 Report on Money Laundering Typologies, 2000-2001, FATF.24 Expression used by the President of the World Bank before the Annual Assembly of Multilateral Financial Institutions in 1996.25 Despite the estimates, it is important to remember that several economists have questioned them, because they cannot agree on the reliability of the methods used.

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production as well as in its rate of growth. However, the most recent annual reports of the agencies that combat laundering mention three issues that are directly connected to the problem of income of criminal origin: the corruption of politicians and officials who support criminal companies, the infiltration of criminal activities into legitimate businesses, and the presence of organizations that take advantage of money laundering for offenses other than drug trafficking26.

In view of the foregoing, and considering the harmful effects of money laundering that will be described below, international organizations, States and non-governmental organizations are taking measures to control this offense.

b. Social values affected, according to international organizations. International instruments in the area of money laundering.

1. The 1988 United Nations Drug Convention, the Vienna Convention, and the 2000 Convention Against Transnational Organized CrimeThe former instrument is entitled the “United Nations Convention Against the Illicit Trafficking of Drugs and Psychotropic Substances of 19 December 1988, known as the 1988 Vienna Convention. One of its justifications, and obviously the reason for which the concept of money laundering is developed for the first time in an international instrument, is incorporated in its introduction, which establishes that the parties are “determined to deprive persons engaged in illicit traffic of the proceeds of their criminal activities and thereby eliminate their main incentive for so doing.”

The 1988 Vienna Convention demonstrates the interest in the issue in the international arena and its importance, because it is a problem that goes beyond national jurisdictions. This is why this instrument places special emphasis on international cooperation. The requirement that money laundering should be criminalized and be considered a serious offense will, in future, allow cooperation as regards seizure, reciprocal judicial assistance and extradition.27

Also, in December 2000, the United Nations drew up the Convention Against Transnational Organized Crime. Article 1 of this Convention establishes that its

26 Annual Report 2000-2001, FATF. “Follow-the-money methods in offence control policy” by R.T. Naylor, prepared for the “Nathanson Centre for the Study of Organized crime and Corruption”, www.yorku.ca/nathanson/Publications/washout.htm.27 Blanco Cordero, op. cit. page 117.

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purpose is to promote cooperation in order to prevent and combat transnational organized crime more effectively. Article 5 criminalizes participation in an organized criminal group, while article 6 criminalizes the laundering of the proceeds of crime. It is important to underline that this definition emphasizes the relevance of predicate offenses related to drug trafficking and also that, in the international sphere, laundering is very closely related to international organized crime. As we will see below, the 1999 CICAD Model Regulations adopted this trend, which criminalizes the offense of laundering not only for illicit drug trafficking, but also for other “serious offences”28. The Convention establishes measures to combat money laundering in article 7 and article 8 penalizes acts of corruption.

Likewise, as CICAD had done so in 1993, the United Nations International Drug Control Program (UNDCP) established a model legislation to control money laundering in 1995. According to its preface “it is designed to facilitate the work of the States who wish to complete and modernize their legislation against the illicit trafficking of drugs or psychotropic substances and the laundering of drug money”29

2. The work of the Organization of American States (OAS) The Organization of American States has identified its action against money laundering

and the confiscation of proceeds in the fight against drug trafficking in the hemisphere. In

April 1986, the Program of Action of Río de Janeiro was adopted, establishing the Inter-

American Drug Abuse Control Commission (CICAD).

In 1990, the representatives of the OAS member States adopted the Declaration and Program of Ixtapa, in Ixtapa, Mexico; this established “the need for legislation that defines as a crime all activities relating to the laundering of property and proceeds related to illicit drug trafficking and which makes it possible to identify, trace, seize and forfeit such property and proceeds”.

This was the background to the adoption of the CICAD Model Regulations Concerning Laundering Offenses Connected to Illicit Drug Trafficking and Related Offenses, in 1992. These regulations were modified in 1997 in order to

28 In its definition of serious offences, the CICAD Model Regulations provides a (non-exhaustive) list of offences, including trafficking in drugs, arms, human beings and terrorism, pornography, etc.29 Rafael Franzini, El delito de lavado de dinero y el secreto bancario, Montevideo, 1995.

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include the Financial Intelligence Units as an appropriate tool for combating money laundering and, in 1999, to expand the crime of money laundering, which now includes as predicate offenses not only illicit drug trafficking but other “serious offenses.” Accordingly, the title was changed to the CICAD Model Regulations concerning Laundering Offenses Connected to Illicit Drugs and Other Serious Offenses

In December 1995, ministers representing the 34 States that took part in the Summit of the Americas met in Buenos Aires, Argentina, at the “Ministerial Conference Concerning the Laundering of Proceeds and Instrumentalities of Crime”. During this meeting, the ministers “agreed to recommend to their Governments a Plan of Action for a coordinated hemispheric response to combat money laundering.” It was established that the definition of the offense of laundering should include as predicate offenses, in addition to drug-trafficking, other “serious offenses”; that the countries should implement the CICAD Model Regulations and that the members of both the Financial Action Task Force30 and the Caribbean Financial Action Task Force31 should implement the 40 recommendations and the 19 recommendations, respectively32

3. Activities in Europe: the Council of Europe, the 1990 European Convention on Money Laundering, the European Council Directive The “Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime”, establishes the obligation to criminalize the laundering of property derived not only from the proceeds of illicit drug trafficking, but also extended to any other crime.

Similarly, the European Community established the European Council Directive 91/308/EEC on Prevention of the Use of the Financial System for the Purpose of Money Laundering of June 10, 1991 (hereinafter European Council Directive). It adopted a preventive regime for dealing with the issue. The goal of this regulation is to ensure the integrity and transparency of the financial system. The directive also establishes that laundering may arise not only from

30 This refers to the Group established by the G7 in Paris in 1990, which today is headquartered at the OCDE in Paris.31 This refers to the Caribbean Financial Action Task Force, with headquarters in Trinidad and Tobago32 The 40 recommendations and the 19 recommendations, with standards adopted by the members of GAFI and GAFIC respectively. These recommendations are guidelines for controlling money laundering in legal and financial matters and in the areas of control and monitoring.

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drug trafficking offenses, but also from serious offense such as terrorism or organized crime.

4. The Financial Action Task Force (GAFI) and other regional groups of this type, the Caribbean Financial Action Task Force (GAFIC) and the South American Financial Action Task Force (GAFISUD)

The “Financial Action Task Force on money laundering” was established by the Group of 7 at their 1989 meeting in Paris, in order to develop a coordinated international action to combat money laundering. One of the first acts of the group was to develop 40 recommendations for the establishment of measures at the national level to implement programs that combat money laundering effectively, creating a system of peer evaluation to measure the application of these recommendations by its members.33

This international organization clearly explained how money laundering affects the integrity of the banking system and financial services, since the latter depend on the perception that society has of their professionalism and ethical standards.34 Five members of the Inter-American system currently form part of this group: Argentina, Brazil, Canada, Mexico and the United States.

GAFI has encouraged the creation of regional organizations, established on the basis of the adoption of the 40 recommendations; and they use the system of “peer evaluation” as a method of assessing the application of these recommendations. In the American hemisphere, two groups of this kind have been established: the Caribbean Financial Action Group (GAFIC) and the South American Financial Action Group (GAFISUD) and their headquarters are in Port of Spain, Trinidad and Tobago, and Buenos Aires, Argentina, respectively.

GAFIC includes the countries and territories of the Caribbean, as well as some countries of Central America and South America that form part of the Caribbean sub-region, while GAFISUD is composed of those South American countries that do not belong to GAFIC.

c. Comparative legislation and the Legally Protected Interest

For the purposes of this document, we have chosen the following countries as examples:

33 FATF-GAFI, <www.oecd.org/fatf/34 Ibidem

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Switzerland

The offense of money laundering is established in Article 305 bis and 305 ter of the Swiss Penal Code. In this country, the affected legally protected interest is understood to be the administration of justice. The money laundering perpetrator purports to protect the benefits obtained from the criminal act committed from the measures established by law; he wishes to safeguard them from the actions of the administration of justice.35 The reform of the Penal Code that incorporated the two new articles placed them in Section 17 of the Penal Code on offenses against the administration of justice.36

Germany

In this country, doctrine is divided when considering the legally protected interest in the legislation of §261 StGB (German Penal Code).

For some authors, the legally protected interest is affected by the predicate offense. From this perspective, the intention of the legislator is to ensure that the criminal does not commit other offenses, using the objects derived from a crime. Other authors consider that the legally protected interest is the administration of justice. Accordingly, they propose that the draft law indicate that the law punishes conducts that prevents or obstructs access to the organs of criminal prosecution.37

It is also postulated that the legally protected interest in question is the security of the State and the fight against organized crime. The law attempts to destroy mafia organizations and their illicit property. A minority group of doctrine refers to the economic order as the legally protected interest affected by activities relating to the laundering of property of criminal origin.38

SpainArticle 301 of the Spanish Penal Code regulates money laundering and is

found in Chapter XIV “Concealment of stolen goods and other similar conduct”, within the section on offenses against patrimony and against the socio-economic order. In view of the conducts described in this crime, many authors consider that the legally protected interest affected is the administration of 35 Cordero Blanco, op. cit. page 161.36 The reform law is the federal law of March 23, 1990, reformed, in turn, by a law of March 18, 1994.37 Blanco Cordero, op. cit. page 16338 Blanco Cordero, op. cit. page 165

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justice.39

BelgiumIn Belgium, the Law of January 11, 1993, which is intended to prevent the

use of the financial system for the purpose of money laundering, converted into law the European Council Directive. This clearly demonstrates that the legally protected interest by the law is the financial system and not solely the administration of justice.40

ArgentinaAccording to Argentine law, the legally protected interest is the

administration of justice.41 The draft law elaborated by the National Chamber of Deputies establishes that money laundering is a form of concealment. The Argentine Congress’ opposition to the concept of a money laundering offense that would be different from the offense of concealment arose from the idea that repressing simple concealment also strikes a “financial blow” at the organization that breaks the law, in the same way as the crime of money laundering seeks to do; thus, if those who support an organization that steals cars by acquiring vehicles from it at a low price are prosecuted for concealment, a financial blow would be struck to car stealing, because the organization which carries on this illicit activity would have no way of disposing the stolen goods.42

Despite the foregoing, most people consider that a fundamental element of the crime of money laundering is the presence of “organized crime” reinvesting the proceeds of crime and that this, together with the fact that several countries in the cultural context of Argentina have defined money laundering as an autonomous or separate offense, is sufficient reason to accept at least a “regulation of laundering”, because, in this way, at the level of ‘symbolic criminal law’ also, the country places itself among those that “do not encourage money laundering.” This position is not a majority view, according to trends in the criminalization of the offense of money laundering, which relate

39 Blanco Cordero, op. cit. page 171 and his sources: Diez Ripolles, “Blanqueo de Capitales procedentes del tráfico de drogas. La recepctación de la legislación internacional en el ordenamiento penal español”, in Actualidad Penal, No. 32, of September 11, 1994, page 603.40 Belgian Financial Intelligence Processing Unit, CTIF-CFI, Excerpts from the 5 th annual report 1997/841 The new article 278 of the Penal Code following the reform that dealt with the issue of money laundering is located in the chapter on the Administration of Justice.42 Chamber of Deputies of the Nation, op. cit. page 8668.

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laundering to organized crime and, according to which, its criminalization and punishment is a means of control. The Argentine legislators considered that concealment would be sufficient to combat criminal organizations and, consequently, his criminal conduct is merely a form of qualified concealment, even when an offense of money laundering exists nominally.43

In conclusion, the Argentine legislation assumes that laundering is a form of concealment, that no other legally protected interest is affected and that there is no substantial difference with simple concealment, even when, under the hypothesis that it calls money laundering, it increases the punishment of persons who commit the acts defined in Article 278, which combats the latter offense.

ColombiaIn Colombia, Law 365 of 1997 and Law 333 of 1996 provide appropriate legal

instruments to combat organized crime and, in particular, its purpose, which is financial gain.44 The Colombian Government took into account that criminal organizations, and not only those dedicated to drug trafficking, affect the stability of the judicial system and, in general, generate loss of confidence in the economic order since they destabilize the transparency of the market.45

d. Money laundering as conduct that affects legally protected interests differently from that of the offense of concealment (administration of justice and economic order)

The aforementioned international conventions and the different national legislations reveal that one of the legally protected interests protected by legislation that punish money laundering is the administration of justice. This is possible owing to the similarity of the objective crime with that of the offense of concealment.

However, we should recall that the socio-economic order and the financial health of the State are affected by money laundering maneovers. The criminalization and punishment of the offense of money laundering attempt to protect States from the action of criminal organizations that have “connections

43 When referring to the need to criminalize laundering, the Committee’s report concludes “this symbol can be more strongly achieved ... by a specific crime, although it continues to constitute ... – as always – a form of concealment.”44 Law 365 of 1997, Message of the Presidency of the Republic of Colombia, Ministry of Justice. 45 Law 365, op. cit. page 14.

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with the illicit trafficking (of drugs) and other organized criminal activities with which they undermine legitimate economies and threaten the stability, security and sovereignty of States.”46

The problem of money laundering is related to the influence of ‘drug money’, which generates a parallel economy that influences inflationary processes and fosters abuse of power and non-conventional criminal activities, financial and monetary speculation, while allowing the introduction of large amounts of luxury articles.47

Studies have also been carried out that explain how the inflow of money of an illegal origin affects the State by producing corruption in politics and public administration, and the infiltration of criminal activities into legitimate business.

Should it be considered that the socio-economic order and the financial health of the State are adversely affected by laundering activities, free competition and the stability and solidity of the financial system can be identified as the affected assets.48

One of the aims of criminal organizations is to corrupt public officials in order to obtain sinecures and benefits that appear legal. Those corrupt public officials then have to launder the money obtained from illicit acts such as bribery and illegal payments through international financial institutions.49

The principle of free competition is based on the concept of trust, which is one of the cornerstones of the market economy and economic development. But the objective of organized crime it to infiltrate the legal economy and obtain monopoly markets that eliminate free competition, which is one of the principal risks of markets controlled by a criminal organization.50

If Governments cannot control money laundering, these apparently legal mechanisms, controlled by criminal organizations can affect the demand for money, make interest rates and exchange rates in developing countries highly volatile and cause inflation.51

In summary, the danger of money laundering clearly goes beyond the 46 1988 United Nations Convention on the Illicit Traffic of Drugs and Psychotropic Substances, Preamble.47 Neuman, La legalización de las drogas, Buenos Aires, 1991, page 3948 Blanco Cordero, op. cit. page 191 and ff.49 ODCCP….www….UN page ?50 Blanco Cordero, op. cit. page 196.51 ODCCP - Global Programm….UN ?

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legally protected interest of the administration of justice and may potentially affect the economy of various countries.52

3. Criminalization. Objective element of the offense of laundering

a. International lawsThere are three categories that define money laundering under international

law.53

1. Analysis of conductb. Objective ElementIn this section, we will examine the legal definition of money laundering

in the following international legal instruments: the Vienna Convention, the Palermo Convention, the CICAD Model Regulations, the UNDCP Model Legislation , the Central American Convention for the Suppression of Money Laundering, the European Council Directive and the Convention of the Council of Europe.1.- Conversion or transfer of property . Vienna Convention, article 3 (1) subparagraph b).i); Palermo Convention, article 6 (1) subparagraph a) I); Model legislation (UNDCP) article 1, subparagraph 1 and article 21 (1); Central American Convention, article 2 (1); European Council Directive, article 1 and European Council Convention, article 6.1, a).

The term to convert is defined as “to change or turn one thing into another.” A process of substitution takes place. For its part, transfer implies the transfer of a right from one person to another, while the right maintains its identity.54 Electronic transfers of money from one bank account to another are also included.55

The conversion and transfer of property for the purpose of laundering it is carried out in order to conceal or disguise its illicit origin or to help any person who is involved in the commission of such an offense or offenses evade the 52 See, in addition to the bibliography mentioned: “Private Banking and Money Laundering: A case study of opportunities and vulnerabilities: hearings before the permanent subcommittee on investigations of the Subcommittee on Governmental Affairs, 106 th Congress, USA (1999); Julie Fendo, comment, “Attacking the Tools of Corruption: The foreign Money Laundering deterrence and anticorruption act of 1999, 23 FODHAM Int’l LJ 150 (2000). 53 See, in this respect, Rafael Franzini-Batle, op. cit, page 12, Support Manual, CICAD, op. cit., page 20 and ff; other authors such as Blanco Cordero, op. cit. page 29, understand that there are two methods. According to this position, the methods are: 1) conversion and transfer; and 2) concealment or disguise, and the acquisition, possession and use refer to the receivers of the criminal assets.54 Blanco Cordero, op. cit., page 312 and ff. 55 Ibídem.

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legal consequences of his action.56

For many authors, the conversion or transfer is the offense of money laundering “strictu sensu”57, and the other criminal methods are “special forms of concealment”58. Article 3 (c)(i) of the Vienna Convention does not describe money laundering itself, but relates it to an economic aspect of the offense.59

Conversion is “the transformation of an invalid act into an effective act, by confirmation or ratification” and also the “act or effect of converting”, and to convert is “to change, modify, transform something”. Transfer is defined as “passing or leading a thing from one point to another.” Another meaning is “remittance of funds from one account to another, either of the same person or of other persons.” Among the ways of acquiring ownership of things is the transfer of a right of ownership or other true right, even with regard to personal rights.60

The purpose of such conduct is to transform one piece of property into another, with the intention of making it legitimate; so that property that originated illicitly becomes licit. It has also been considered that various descriptive words are used in the definition in order to refer to a general concept of money laundering, following the example of fraud or misrepresentation, where the legislator may enumerate different descriptive words to the same end. However, in the final analysis, what is sought is to describe and punish those acts that intend to “launder” dirty money.61

Contrary to what is established in the other instruments examined, the CICAD Model Regulations do not require the conversion or transfer to be made for a purpose. It does not entail a subjective element that restricts the formulation of the offense; it only requires that the conduct described is executed knowingly, or that it should be known or wilfully blind that the property derives from illicit trafficking or related offenses.2.- Concealment and disguise of the determination of the true nature, 56 Support Manual, CICAD, op. cit., page 20.57 Thus, Dr. Miguel Langón Cuñarro, “La Convención de Viena de 1988...”, study presented to the UNDCP in Sucre, Bolivia, May 1992. 58 Idem., cf. Horacio Cattani, Jornadas Interparlamentarias sobre Lavado de Dinero 1992, pages 52 to 54.59 Support Manual, CICAD, op. cit., page 23. This aspect was emphasized by the experts responsible for drawing up the 1988 Vienna Convention.60 Ibídem.61 Chamber of Deputies of the Republic of Argentina, op. cit., page 8673.

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source, location, disposition, movement, rights with respect to or ownership of such property. (Vienna Convention, article 3 (1) subparagraph b ii); Palermo Convention, article 6 (1) subparagraph a) ii); CICAD Model Regulations, article 2 (3); UNDCP Model Legislation, article 1 (2) and article 21 (2); Central American Convention, article 2 (2); Council of Europe Convention, article 6.1 subparagraph b, and European Council Directive, article 1)

Concealment:According to the dictionary of the Spanish Royal Academy, to conceal

means “to hide, cover, disguise, hide from view.” [According to the OED to conceal signifies “to keep secret, not allow to be seen, hide.”] Concealment refers to removing something in order to take it away from where it can be seen and placing it where no one knows where it is, to hide it in some way; precisely because the person who conceals knows the penalty, he endeavors to proceed with the respective precaution.62

The conduct defined here is that of hiding, covering or disguising the source, location, disposition, movement or ownership of the property.63

This may be carried out by an active conduct – hide, disguise, cover – or passive – concealing what one knows. In the case of the latter, there must be a legal obligation that the perpetrator of the offense has evaded.

The CICAD Model Regulations refer to the person who impedes the determination of the true nature, source, location, disposition, movement, rights with respect to, or ownership of the property.

Article 21 of the UNDCP Model Legislation does not expand on this crime; it modifies it because it punishes those who have “contributed to hide”, which is clearly a form of complicity or co-authorship of the concealment, something that seems absurd, because this text does not incorporate what is included in the Convention or the CICAD Model Regulations, where concealment takes the form of an autonomous offense64. It should be noted that the said article 21 does not include the person who hides the source, etc. of the property as a person subject to punishment.

62 Ibídem.63 Saavedra Rojas, op. cit., page 133.64 Cfr. Langón Cuñarro. Op. Cit. pág. 37

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DisguiseThe dictionary of the Royal Spanish Academy defines the term “to

disguise” as “to conceal something or not to show it”, “to prevent something from being known.” [The OED defines the term “to disguise” as “to alter to conceal the identity, to cover up”.]

The great difference between concealing and disguising may be the fact that a person conceals what belongs to him or what he is legally able to dispose of, while he disguises the acts or property of another.65 To a certain extent, this explanation allows us to make the authors of the prior act responsible for the offense of laundering, as it is the “authors of the predicate offence who concealed their crime.”

Moreover, it should be recalled that in the definition adopted by the Spanish wording of the Palermo Convention, the word ‘to disguise’ has been substituted by the word ‘to dissimulate’, which – when taken in conjunction with the clarification in article 6, (2) subparagraph e), that states that the author of the predicate offense will not be punished for the subsequent laundering if the fundamental principles of the State Party so require – demonstrates that an effort is currently being made to draw up legislation so that a proceeding for laundering can be carried out against the author of the predicate act. With the disappearance of the words “disguise”, there is no reason to sustain that the disguise of the offense itself is being punished, since self–concealment is not punished but rather the subsequent conduct of dissimulating. The use that the Vienna Convention makes of the term disguise has caused problems for those countries whose criminal law is based on the European continental system because this word is understood by part of doctrine as a synonym of hiding.66 For this reason, countries such as Portugal, when incorporating the international normative into its legislation opted for the concept of “dissimulate”, which, as we have seen, is the one that exists in the Palermo Convention.67

Disguise is traditionally criminalized as a form of participation, through the so-called accomplices a posteriori. This model was provided by the 1810 French

65 Saavedra Rojas, op. cit. 134.66 Cordero Blanco, op. cit. page 31967 In the report of the Special Committee responsible for drafting the convention, when commenting on article 6, it was recorded that “the words conceal and dissimulate” should be understood so that they include the obstruction of the discovery of the illicit origin of the property.” See United Nations www.odccp.org/palermo/.

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Code, which, after some reforms, divided the issue between the general part and other parts as an autonomous offense.68

Currently, in the different forms of disguise, the presumption is that a prior act has been committed in which there was no participation; consequently, it is argued that the person who was the author or participant in the prior act cannot be the author of this offense.69

The “disguise of the true nature, source, location, destination, movement or true ownership or of rights relating to such property” is something distinct from classic disguise as it is criminalized in the majority of Latin American Penal Codes, either because they make a distinction between self concealment, property concealment or classic abetting to conceal a crime.70

Therefore, as both the Vienna Convention and the CICAD Model Regulations establish, this type of disguise which is different from the traditional offense of disguise, is not subject to the classic definition of disguise, according to which a person commits a offense if, without having taken part in the predicate offense and without previous collaboration in its perpetration, he helps the author either to ensure the result of the predicate offense or avoid punishment or prevent justice from being done.71 This is the key issue examined in this study: whether we can punish the author of the predicate offense that generated the income in question for the offense of money laundering if we accept the autonomy of the offense of money laundering.3.- Acquisition, possession, custody, use or administration of the property. ( Vienna Convention, article 3 (1) subparagraph c) i); Palermo Convention, article 6 (1) subparagraph b); CICAD Model Regulations, article 2 (2); UNDCP Model Legislation, article 21 (3); Central American Convention, article 2 (3).

Acquisition:Acquisition means to obtain, to attain, by whatever means.72 It implies the

“act by which a person becomes the owner of something,” and also the thing acquired. The word acquisition covers everything that can be attained or

68 Manual para la tipificación, CICAD, op. cit., page 26.69 Fontán Balestra, op. cit., T. VII page 445.70 Rafael Franzini Batlle, op. cit. 71 Ibídem.72 Fontán Balestra, op. cit., page 466.

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obtained by a purchase, a donation or in any other way; even what is obtained with money, in settlement, by skill or hard work, or in any similar way, although not what is obtained by inheritance.

The typical conduct described as acquisition of property is established for third parties only; in other words, it does not cover the author of the predicate offence, and coincides to a certain extent with the conducts that give rise to the criminal offense of abetting. Although the action does not explicitly require the profit motive (the profit motive is characteristic of the offense of abetting), the use of the verb to acquire “includes the assumptions that characterize the acts of the accomplice who abets, and who is inspired by the profit motive.”73

Possession:Possession is the de facto and de jure right to a material object, constituted

by the intentional element or animus (the belief and purpose of owing the object) and the physical element or corpus (the control or effective enjoyment of a material object).74

Use:To use consists in “to make use of”, “to employ, to utilize”, “to avail

oneself of a person or a thing to attain a specific end”.75 Although doctrine understands that the use of property from illicit drug trafficking (or, by extension, other offenses) is not per se money laundering, but rather “a financial aspect of the offence that should be dealt with in any exhaustive plan to combat money laundering... .”76

Administration:In private law, to administer refers “to the management of private

interests, including the acts and tasks that are inherent in this work” or, according to the definition o the dictionary of the Spanish Royal Academy it is “to order, dispose, organize, particularly, property and assets”.77 [OED “to attend to the running of (business affairs, etc.)”]

The purpose of the conduct described is to file a proceeding against the persons who takes on the responsibility for the interests of the authors of the

73 Fontán Balestra, op. cit. page 46574 Manual para la Tipificación, CICAD, op. cit., page 26.75 Saavedra Rojas, op. cit., page 136.76 Cf. Cattani, Horacio. Op. cit. page 5477 Manual para la Tipificación, CICAD, op. cit. page 26.

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predicate offense, for traffickers in drugs and arms, and heads of criminal organizations.

It is well-know that as the methods used to launder property from illicit activities evolve, the legislator expands the list of descriptive words criminalizing money laundering, in order to include the greatest possible number of conducts.78

As we have already seen, for those countries whose criminal law is based on the European continental system, in order to avoid confusion between the offenses of concealment and laundering, it is essential to use the verb to dissimulate instead of to disguise when legislating, as established in the Palermo Convention. In brief, in international legislation, the conduct described in the norm is directed at punishing the acts that hide or dissimulate the criminal origin of the property.

c. Comparative lawIn comparative law, legislations must be classified into those where the

conduct of laundering is specified as a form of the offense of abetting, others that consider it as a form of facilitating and lastly, those that criminalize other conducts.79

Some countries, such as Belgium, classify laundering as a form of repetition. Article 505 of the Penal Code refers to the action of “blanchiment”. The actions established in the legislation consist in buying, possessing, abetting without payment or charge, keeping or administering the capital assets of another article which, in turn, describes the confiscation of the capital assets obtained directly from crime.

Among the countries that consider laundering as a form of facilitating are Switzerland and Germany. Under German legislation, §261 StGB (Penal Code), paragraph I punishes the person who hides property of criminal origin, conceals its source, or prevents or endangers investigation into its source, the seizure, confiscation or embargo of such property. Accordingly, to hide and to disguise may be considered types of concealment

78 The CICAD Model Regulations include this defining verb at the request of Colombia, where the administration of the property of criminal third parties was included as it is a widespread activity, subject to punishment.79 This classification follows the criterion advocated by Blanco Cordero in his op. cit., page 299 and ff.

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In Switzerland, article 305 bis of the Penal Code defines the actions that may prevent investigation into the source, discovery or confiscation of capital assets.

In Spain, article 301 (1) of the Penal Code punishes the acquisition, conversion or transmission of property derived from a serious offense in order to conceal or disguise its illicit origin or aiding any person who takes part in committing such an offense to evade the legal consequences of his acts, and also the execution of any other act with regard to such property with the same purpose. This form of criminalization therefore punishes acts intended to conceal or disguise the criminal origin of the property derived from a offense in order to help those who have taken part in the commission of the predicate offense evade the legal consequences of their acts. On the one hand, the law specifies types of abetting and, on the other, concealment.

The second paragraph of article 301 criminalizes a form of property concealment by including the words “to conceal or disguise”; in this way, it follows the formula of article 3 (1) b) ii) of the Vienna Convention and article 1 of the European Council Directive.80

Article 278 of the Argentine Penal Code is similar to the Spanish legislation mentioned above, to the extent that article 301 of the Spanish Penal Code is mentioned in the statement of purpose of the Argentine law. Although the words to conceal and disguise are not used, nor for any type of purpose, the norm is situated within the offenses against the administration of justice and is understood as an aggravated form of concealment.

Lastly, the legislation in countries such as the United States considers money laundering to be a conduct that executes or intends to execute a financial transaction, knowing that property from illicit activities is involved.81 In another presumption, the law punishes those who transport, transmit, transfer – or attempt to do so – a monetary instrument or funds of criminal origin from the United States to other countries or vice versa.82 The presumption for Section (a) (3) is to punish those who attempt to carry out a financial transaction that involves property derived from an illicit activity or used to conduct illicit actions,

80 Blanco Cordero, op. cit. 315.81 Federal Statute 18USC 195682 Ibidem. Section (a) (2)

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with the intention of encouraging the continuation of illicit activities, of hiding and concealing the nature, location, source, ownership or control of the property or to avoid the collection of information on transactions required by state or federal law.83

Legislation may be classified into three types of offenses: 1) participation in financial transactions that involve funds from illicit activities; 2) the international transport of illicit funds; and 3) becoming involved or implicated in monetary transactions with property derived from crime.84

d. Differences between concealment and money laundering

Based on the examination of international and comparative legislation, it is clear that money laundering is very similar to the offense of concealment.

The words used to define it in international and comparative legislation are conversion or transfer; concealment of the nature, source, location, rights to or ownership of illicit property and the acquisition, possession, holding, use or administration of such property.

Concealment is an autonomous offense even when it presumes the existence of another offense before it is committed. The accomplice (who conceals) acts without collaborating previously, but is aware of the predicate offense. The characteristics of concealment is its independence, although it depends on the possibility of prosecuting the previous criminal act.85 In both hiding and abetting, which are two typical forms of concealment, the author acts without collaboration before the predicate offense (because, to the contrary he would be an accomplice), generally acting with a profit motive, although the latter does not always form part of this crime.

In view of the similarity of presumptions in money laundering and concealment, there is a situation of accumulation in the crimes that regulate these offenses. In this respect, the former law against money laundering in Argentina (article 25 of Law 23,737) was very similar to concealment in the Penal Code and to concealment in the Customs Code regarding the concealment

83 Seccion 1957 punishes those who, in determined circumstance, become involved in a monetary transaction of criminal property with a value in excess of $10.000. 84 Steven V. Melnik, “The inadequate utilization of the Accounting Profession in the United States government’s fight against Money Laundering”, New York University Journal of Legislation and Public Policy, V. 4, 2000-2001, page 149 85 Rafael Franzini, op cit. page. 8

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of drug smuggling. 86

However, it should be borne in mind that the action of the drug trafficker and the offense of money laundering constitute an offense that is independent of concealment. The possibility of punishing the author of the predicate offense has been examined by doctrine while: “... the conduct described herein is changing the cash obtained into goods or services, but the convertibility should not necessarily be understood in such a restricted sense because it could equally refer to changing one item for others, according to the contractual norm chosen in order to do this or conceal it: it can be by real or simulated contracts, by the person directly interested or by using third parties..”87 (the original is not underlined)

The issue of the possibility of considering laundering as an independent offense that is different from concealment is closely related to the possibility of considering whether the author of the predicate offense can be the author of the laundering, which is not possible in the case of concealment.

The confusion as regards relating laundering to concealment also occurs owing to the similarity of the juridical nature of both legislation and the words used. In this respect, it can be said that laundering is the “process by which property of a criminal origin is integrated into the legal financial system with the appearance of having been obtained licitly.”88 Laundering is aimed at concealing or hiding the illicit origin of the property; this allows us to compare it to concealment or understand it as a form of concealment.89

4. The criminal in the offense of money laundering

a. The author of the predicate offense may be the author of or participante in money laundering

In view of the similarity of the offense of money laundering and that of

86 Horacio Cattani, “Jornadas Interparlamentarias sobre el money laundering”, Comisión de Legislación Penal, H. Camara de Diputados de la Nación Argentina”, page 52.87 Saavedra Rojas, Edgar; “Nuevos tipos penales creados por la Convención de Naciones Unidas contra el tráfico ilícito de estupefacientes de diciembre de 1988”, published in “Medidas efectivas para combatir delitos de drogas y mejorar la Administración de Justicia Penal”; United Nations Latin American Institute for the Prevention of Offence and the Treatment of the Offender (ILANUD), Costa Rica, page 13188 Blanco Cordero, op. cit. page 101.89 Penal Code of the Republic of Argentina, article 278.

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concealment, the concept of the author in the former offense is a source of discussion. As we indicated at the beginning of this study, the issue lies in determining whether the author of the predicate act can be the author of the money laundering offense.

b. International lawIn international legislation, there are three instruments that mention the

issue of the participant in the crime. The Convention of the Council of Europe expressly mentions the active

participant of the offense of money laundering. In order to coordinate the action of the States, it establishes that money laundering cannot be applied to the person who commits the predicate offense.90 (Article 6 (2) b). It recognizes that the constitutions of some States do not allow a person who has committed the predicate offense to be prosecuted again for its subsequent laundering.

When penalizing the laundering of the proceeds of a crime, the United Nations Convention Against Organized Transnational Crime stipulate in Article 6 (2) that “if required by the fundamental principles of the domestic law of a State Party, it may be established that the offences set forth in paragraph 1 of this article do not apply to the persons who committed the predicate offence.” In this way, it follows the criteria established in the European Council Directive, depending on the country, while including the possibility that the author of the preceding offense may be punished at the same time for money laundering.

The CICAD Model Regulations take a different stand, when, in article 2 (6) it expressly maintains that “an offense defined in this article shall be investigated, tried, judged and sentenced by a court or other competent authority as an offense distinct from other illicit traffic or related offenses.” It can be seen that the legislation’s intention is to differentiate the offense of laundering from concealment, since the offense is considered a distinct conduct.

From the foregoing, it can be concluded that the signatory countries of these international conventions are obliged to criminally prosecute the authors of the predicate offense, and this offense may be trafficking drugs or arms or another serious offense, and the only restrictions are imposed by domestic legislation. In other words, the limit is established by the interpretation that is

90 Blanco Cordero, op. cit. page 459

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given to the law in the domestic sphere. It may be considered that laundering has the purpose of exhausting the effects of the predicate offense and its illegality or unlawfullness is covered by the predicate offense. To counter this point of view, it may be argued that double criminal prosecution does not exist and that constitutional guarantees are not affected, since the illegality or unlawfullness of the offense of laundering has an extra element that goes beyond the concept of concealment, which also affects other legally protected interests and, therefore, the same conduct is not doubly prosecuted.

In summary, the question is to determine whether laundering is a different crime from concealment and, if appropriate, whether the author of the predicate act may be prosecuted for laundering.

c. Comparative law1. Classification In comparative legislation, there are countries in which money laundering

is a common offense and, therefore, any person may be the criminal perpetrator without the need to meet the special characteristics of the author of the crime.91 To the contrary, there are legislations that limit the possible authors of the offense.92 The limitation of the participants in the offense of laundering is usually based on the concept that, as in the case of concealment, the author of the predicate offense cannot be the author of the conduct. In this aspect the Argentine legislation (article 278 of the Penal Code) establishes that only those who have not taken part in the offense from which the property in question derives can participate in the crime of laundering.93 In Germany, before the reform of the law on money laundering, it was stipulated that property of criminal origin had to derive from an offense committed by someone else.94 In Italy, articles 648 bis and ter of the Penal Code are only applicable “outside the coincidence of multiple criminal offences”, which is interpreted to mean the

91 In this regard, article 305 bis of the Swiss Penal Code; article 505 of the Belgian Penal Code modified in July 1995, which introduced a paragraph in which it was expressly declared that the authors, co-authors or accomplices of the prior crime could be punished for the subsequent crime of laundering.92 Blanco Cordero, page 460.93 Penal Code of the Argentine Republic, article 278.94 German § 261StGB. In this country, the Law to Strengthen the Fight against Organized Crime, of March 5, 1998, suppressed the requirement that the illegal prior act had been committed “by another” from the legal description in paragraph 261 StGB (German Penal Code) and, in this way, eventually the person who has participated or been able to participate in the prior criminal act, may also be punished for “money laundering”.

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exclusion of those responsible for the predicate offence from being authors of such an offence, although its application is not possible in conjunction with the prior offense.95

There are other countries, such as Switzerland and Spain that do not stipulate any restriction regarding the authors of the offense in question. They describe it as a common-law crime. Despite this, doctrine in those countries discusses the possibility that any person may be the author of the offense.96

In summary, the offenses may be classified according to three systems: countries that expressly stipulate that the author of the predicate offense may be the author of the laundering offense97; those, where it is described as a distinct offense, without offering any explanation about whether the author may or may not be the perpetrator of the predicate offense98 and, lastly, those countries that expressly exclude those that take part in the predicate offense and characterize it as a form of concealment.99

2. Effects of classification One of the requirements of the offense of money laundering is that a

predicate offense has been committed from which the property to be laundered is derived. This is the subject of in depth study on the concept of the autonomy of money laundering.

This topic under discussion resides on determining whether those responsible for this predicate offense may be criminally prosecuted for the offense of laundering. The typical example is the case of a drug trafficker who, following the sale of the drug, carries out activities intended to launder the illicit origin of such funds.

In those countries where laundering is defined as concealment, which excludes the participant in the predicate offense, the author of the laundering cannot be the author of the predicate offense. This approach closes to any kind of discussion about the possibility that the author of drug trafficking or the offense that generated the property from which the profits to be laundered

95 Cf. Blanco Cordero, op. cit. page 460; cf Antolisei, “Manuale di Diritto Penale. Parte Speciale, I, page 376.96 Idem, page 460.97 Belgium Penal Code, article 505, and Honduras in its draft anti-laundering law.98 In this aspect, legislations of countries such as Spain, article 301 of the Penal Code, Germany and Switzerland.99 Article 278 of the Penal Code of the Republic of Argentina.

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derive may be considered the possible author. On the contrary, in countries such as Spain and Switzerland, this is precisely the aspect on which discussions focus. Part of the doctrine resorts to the crime of concealment and to the offense of abetting when analyzing the crime of laundering. It is considered that the author of the prior act cannot be punished, using the concept of privilege, based on the privilege of self-concealment.

d. Grounds for advocating the exclusion of the author of or participant in the predicate offense as the author of the money laundering offense

It should also be indicated that, in Switzerland, the basis for the impunity of the author of the predicate offense in the offense of abetting is not the same as in concealment, since the offense of abetting can be considered a subsequent act. As there is a subsequent co-penalized act (this is the one to which a new punishment for the same offense is not imposed), according to doctrine, it is necessary that no new legally protected interest should be harmed, merely the one that had already been harmed by the predicate offense.100

Another basis for excluding the responsibility of the author of the previous criminal act is the criteria that a different conduct cannot be required. If the author of a criminal act cannot be forced to give himself up to justice, concealing the goods derived from his offense would only be an act intended to avoid being detained (which obviously includes the intention not to give oneself up to justice).

It is also necessary to emphasize that it is difficult to make a difference between the offense of laundering and concealment, as has been described above. Should laundering be considered a form of concealment in those legislations that do not establish limits to the author of concealment, it could be considered that, since in the legal definition of concealment there is the possibility of arguing the impossibility of a double incrimination owing to the privilege that self-concealment does not exist, the same situation should be applied to the presumption of laundering101. Some doctrine indicates that the

100 Blanco Cordero, Ibidem, page 462; see also Jakobs, “Allgemeiner Teil”, Berlin New York, 1983; Wessels, “Derecho Penal Parte General”, translated by Conrado Finzi, Buenos Aires, 1980, page 239, who explain that the subsequent co-penalized act, does not harm a new legally protected interest.101 Ibidem, page 464

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subsequent difficulty in investigating the property derived from illicit activities is a “natural consequence” of the illegality or unlawfullness of the prior act.102

In the end, the basis for the impunity of self-concealment is the concept of the subsequent co-penalized act (already punished because there is no new legally protected interest to be protected) and the criterion that a different conduct cannot be required (respecting a person’s right not to incriminate himself).

1. The criteria of the subsequent co-penalized act in order to support the exclusion of the author of the prior act

The impunity of the subsequent repetition of those who are authors or participants in the predicate offense is supported by the subsequent co-penalized act. There is a conflict of laws between the prior act and the subsequent repetition that is resolved in accordance with the principle of extinguishment.103 The problem is that it is not possible to apply two offences to what is considered a single action, because the offense is the same, so that it would suppose bis in diem. The principle of extinguishment implies that the illegality or unlawfullness of the prior act includes the illegality or unlawfullness of the subsequent one, in our case laundering, and, consequently, it is not possible to punish the last offense, which is aimed at abetting and concealing the illicit profits of the predicate offense, without affecting constitutional guarantees. Thus, it is considered that the subsequent acts that are subsumed in the predicate offense constitute the means to ensure or take advantage of the profits of the offense and, in this way, do not harm any other legally protected interest than that which was harmed previously.

2. Money laundering as a form of concealment It is also argued that laundering is a form of concealment, since it is not

possible for the author of the predicate offense to commit this offense. If the subject took part in the prior act, for example the operation of selling drugs, the subsequent fact is merely a “subsequent co-penalized act” in the illegality or unlawfullness of the prior act.104 It is understood that, when evaluating any

102 Ibidem, page 464; see also Ackermann, “Geldwascherei-Money Laundering”, Zurich, 1992, page 207 (quoted in Blanco Cordero)103 Ibidem, page 466.104 1999 Statement of purpose, Report of the Majority of the Chamber of Deputies of the Republic of Argentina. Regular Sessions, 1999, pages 8659, 8673. This is one of the reasons why

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offense that enhances the author’s property, the law takes into account the fact that the author will profit from this property, or will introduce it onto the market. It is therefore said that there is no point in applying another punishment to him for “laundering the ill-gotten goods”, since this circumstance is already anticipated in the punishment of the prior act. Thus, the author of the predicate offense cannot be the author of the laundering.105 Consequently, according to this position, self-concealment and laundering, as such, remain unpunished; in other words, they are co-penalized with the punishment of the prior act.106

This criteria is based on the idea that it is not fair to apply the punishment for laundering to the author of the predicate offense because, when evaluating this predicate offense, the legislator has already considered that the property disappears for ever from the ambit in which it was and is transferred to another ambit, usually in order to become part of the capital assets of the author of the act. This occurs once the property has been laundered.107 There is no reason to punish the drug trafficker for the subsequent laundering, since converting or transferring money or property is part of the exhaustion of the offense committed previously. The punishment of the predicate offense covers the need for sanction. Added to this are the normal effects of any guilty verdict, concerning the confiscation of the property, the instruments of the crime and all their effects.108

The person who has participated in committing the predicate offense cannot be the author of the concealment of this, since the offense of concealment is independent and, according to this position, the accomplice who conceals is excluded from participating in the predicate offense because, for concealment to exist, there cannot be a previous undertaking by the accomplice, which is what characterizes complicity.109 According to Carrara’s classification, Accomplices are those who, without breaking the same law violated by the prior offense, aid the authors of the criminal act in order to according to the law of this country on the offence of money laundering, abetting appears as a special form of concealment in which the author of the offence from which the illicit property derives cannot participate.105 Statement of purpose, Republic of Argentina, Ibidem.106 Statement of purpose, Republic of Argentina, Ibidem.107 Statement of purpose, Republic of Argentina, Ibidem.108 Miguel Langon Cuñarro, “La carga de la prueba y el lavado de activos.”, Document of the Inter-American Drug Abuse Congrol Commission (CICAD).109 Fontan Balestra, “Tratado de Derecho Penal”, T. VII, Special part, page 445.

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prevent its discovery. 110 Thus, this criteria that addresses the crime of money laundering as a way

of concealment maintains that the author of the predicate offense cannot be the author of the latter also, because the constitutional principle of non bis in idem would be impaired. This is so, provided there is a single operation, with unity of purpose, which implies a true concurrence of laws (offences are treated jointly or considered together). Likewise, it can also be considered that there is a relationship of alternativeness between the offense of concealment and the predicate offense, because the author either commits an offense (eg. drug trafficking or another serious offense) or concealment, since he cannot be prosecuted for the consequences of the predicate offense. Self-concealment goes unpunished because it is the exhaustion of the predicate offense.

It may also be maintained that there is an apparent concurrence of laws, since the content of the illicit act of the offense of laundering, integrates the predicate offense, which is usually more serious, for which the author of the conduct will be punished. It has been stated that there is an apparent concurrence of laws when a fact seems to satisfy the requirements of two or more different crimes but, finally, is regulated by one of them, while the others are displaced due to logic or reason.111 Therefore, it is not possible to separate a single conduct. If the person who commits the serious offense112 is accused of this offense, he cannot then face double prosecution owing to the exhaustion of this conduct, as the concealment of his offense would be (this is the concept of laundering as a form of concealment). The execution of the first offense, which is the most serious, includes and comprehends exhaustively the illegality or unlawfullness of the whole act and, consequently, the commission of other less important offenses.113 For those who maintain this position, if the diversity of 110 Carrara, “Teoria de la tentativa y de la Complicidad, o del grado de la fuerza fisica del delito”, Madrid 1926, page 326.111 Federal Criminal and Correctional Chamber of the City of Buenos Aires, Argentina, case “Dadone et all for fraud”, 16/6/97; see also his sources: Cury Urzúa, Enrique, Derecho Penal Parte General, T.II, page 281, Santiago de Chile, 1985 and Bacigalupo, Enrique, “Principios de Derecho Penal-Parte General”, Madrid, 1994, page 273.112 In the concept of the definition provided in article 1 of the CICAD Model Regulations.113 Ibidem. In this decision, the Chamber of Appeal examined whether the conduct of defrauding the State in an operation that prejudiced the Central Bank includes and covers the crime of bribery of public officials implied in the said operation. Although there is no relation of alternativeness between the crimes, as in the case of concealment and the prior crime, it is interesting to highlight the case, since the concept of illegality or unlawfullness, single conduct and the application of the principle of bis in idem is the basis for the decision to support the

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the legal framework and a double criminality were admitted, the criminal prosecution would be two-fold and this would affect constitutional guarantees by violating the principle that no one may be punished twice for the same offense.114

In that case, there would be a violation of due process since there would be a coincidence of persons prosecuted, for an identical nature of a claim and for identical cause for prosecution.

3. The criterion that a different conduct cannot be required The argument to exclude the authors and participants in the predicate

offense as subjects of laundering rests on the concept of the subsequent co-penalized act (the punishment of the subsequent act being included in the punishment of the predicate offense). There are legislations, such that of Spain, which establish that the offense affects the administration of justice as a legally protected interest (article 301 of the Penal Code); therefore, impunity does not rest on the identity of the legally protected interest, such as property for example, but must be supported by another criteria different from that of affecting the same legally protected interest. If we understand that laundering uses actions that are typical of concealment, and that the impunity of the author of the predicate offense is supported by the privilege for authors and participants, we must turn to another concept, which is that a different conduct cannot be required. A person who has committed an offense cannot be forced to give himself up to the police or justice. The author of an offense that produces financial profit conceals his offense by hiding the property he obtained from committing the offense, which includes the conduct intended not to incriminate himself.

In Germany, the privilege of self-concealment is also recognized. Contrary to the practice in Spain, this is based on the concept of the subsequent co-penalized act in relation to the form of property concealment, in view of the similarity of the affected legally protected interest. On the contrary, in the case

nullity of separating a single conduct, fraud, in an apparent conjunction of laws. The same basis, with the exception of the principle of extinguishment, is used to maintain the impossibility for the author of the prior act to be responsible for the subsequent laundering. 114 Ibidem. Judgment of the Federal Chamber; see also judgments of the US Court of Justice: “Pace v. Alabama” 106 US 583; “Leeper v. Texas”, 139 US 462 and “Moore v. Missouri”, 159 US 673.

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of personal or self concealment, resort is had to the idea that the state of necessity, because the affected legally protected interests are distinct; the state of necessity arises when the participant in the prior act is forced to conceal himself and to avoid being criminally punished.

In summary, the underlying idea in the privilege of self-concealment lies in the legal principle that a distinct conduct cannot be required, since the offender cannot be required to incriminate himself. The offender who attempts to escape the action of justice goes unpunished. The constitutional basis lies in the constitutional laws and in international treaties that protect the criminal from having to declare against himself or plead guilty.115 A different conduct cannot be required of the person who commits the offense and then wants to hide it since, to the contrary, he would be required to incriminate himself.116 The substantive basis is the concept that a person cannot be required to give himself up. This is the criteria of most doctrine in countries such as Spain and Switzerland that have distinct crimes for laundering, where it is not specified whether the author of the prior act may be the author or not.

e. The perpretrator of the predicate offense as author of or participant in money laundering. Criticism of exclusion.

1. Reasons relating to criminal policy From another perspective, it may be considered that the punishment of

the author and the participants in the prior acts should be accepted when they subsequently launder the proceeds of the illicit act. Criminal organizations and, in particular, their heads, seriously harm the national socio-economic order, as described in the section on the legally protected interest. In this way, contrary to what is maintained by the legislations that specifically exclude the authors of the predicate offense as authors of the offense of laundering, since they consider it a form of concealment, it may be concluded that if the legislator proposes to protect the legally protected interests of the socio-economic order, he could penalize the author of the predicate offense.

2. Distinct legally protected interests affected and different illegality or unlawfullness

The position, according to which the use of the property derived from the 115 American Convention on Human Rights, art. 8 (4).116 Blanco Cordero, Ibidem, page 475

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offense goes unpunished because this act is included in the punishment of the predicate offense, has limits. The point of view that restricts this position starts off by examining whether the offense of abetting is a subsequent co-penalized act, and whether it is a natural consequence of the predicate offense. As we have seen, there is doctrine that maintains that the predicate offense (drug trafficking) harms the same legally protected interest as the subsequent offense (laundering), so that the subsequent conduct (laundering) is considered to be a subsequent co-penalized act (only penalized with the punishment of the predicate offense). If we consider that the legally protected interest affected by laundering is the administration of justice or the socio-economic order, we see that the illegality or unlawfullness of the prior act does not always cover the whole illegality or unlawfullness of the subsequent laundering. Different legally protected interest are affected.117 Therefore, we can criticize the reasoning according which there is a co-penalized act because, the illegality or unlawfullness of the conduct of the author of the laundering is already foreseen in the punishment of the predicate offense; as we see, the legally protected interest affected by the offense of laundering may be more extensive than that of the predicate offense, the desvalor of which is not covered by the commission of the predicate offense.

3. Existence of a different criminal act, while laundering includes an extra element that does not exist when the administration of justice is affected. Different illegality or unlawfullness of the action in relation to the conduct of the predicate offense

It is generally said that laundering money derived from an offense is the exhaustion of that offense and it should be considered that obtaining financial resources by committing the offense of the illicit trafficking of drugs, arms or human beings and its subsequent use is inherent in the offense of trafficking. The offense and the use of the resources derived from it constitute two acts and one illicit activity, when the person accused of trafficking is also the one laundering. As we have seen, this position may be supported by the constitutional principle non bis in idem.118 However, it may be considered that

117 Blanco Cordero, Ibidem, page 468118 Jurisprudence, Law 19,366, Cooperación Judicial Internacional, CONACE, Chile, November 1997, page 107.

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trafficking arms, drugs and human beings and the subsequent laundering are distinct acts and, therefore, it is possible to punish the laundering of the proceeds of the offense separately, even when the person who incurred in this conduct was same of the above-mentioned offenses.

Thus, for example, in the anti-terrorist law in Chile, there are crimes for which different acts are defined that constitute terrorist conduct and the mere fact of forming an illicit association is punished. The same criterion is applied in Law 19,366, where those who associate or organize themselves in order to commit some of the offenses included in the law are punished.119 In that country, it has been explained that the concept “any person” defined in the Law, may only refer to the person who has not intervened in the prior act, because, if he had done so, he should be punished for that act.120

And, as an analogous situation, but from another perspective, it is worth mentioning that, in Argentina, it is considered that the offense of the unlawful possession of combat weapons exists and it is punished as an independent offense from the crime of armed robbery. In such cases of an offense of abstract damage, unlawful possession constitutes an act that is independent of the robbery, even though the said arms have been used in the attack and aggravated the crime of robbery.

Despite the foregoing, in Argentina, we should indicate that in some cases such as bribery and fraud, it is maintained that there is a single act and an ideal concurrence of laws, in the sense that the conduct is encompassed by the most serious offense, fraud.121

As can be seen, it is fundamental to clarify the question of whether the offense of money laundering is a form of personal or property concealment and, therefore, the conduct of incurring in the predicate offense constitutes purely 119 Jurisprudence, Law 19,366, Ibidem. The Committee of the Chamber of Deputies of Chile indicated that the active participant of the offence of laundering should not have taken part in or cooperated in the execution of the criminal acts relating to illicit drug trafficking see Official Gazette of the Republic of Chile, page 27; however, a prosecutor appealed a decision based on this interpretation. In any case, doctrine does not admit without discussion either of the two interpretations, even when the legal text does not make specific reference to support either interpretation. In this respect, the jurisprudence of the Federal Criminal and Correctional Chamber of the Republic of Argentina also understands that the offence of illicit association materially exists alongside fraud (they are independent acts and distinct offences).120 Fernando García Diaz, “Lavado de dinero y Narcotráfico. La Droga como Negocio.”, Universidad Central, Chile, 1996, page 49.121 Federal Criminal and Corrective Chamber of the City of Buenos Aires, Argentina, case “Dadone et al. for fraud”, 16/6/97.

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and simply its exhaustion, or whether it is an offense that is autonomous and independent of the previous conduct and one that affects a different legally protected interest and, therefore, merits being considered an independent act.

The offense of laundering and those defined as serious offenses by the CICAD Model Regulations are always related. Money laundering protects the criminal activities of organized crime and makes it profitable, constituting a distinct act. But if we consider that money laundering is based on concealment, the participant in the predicate offense goes unpunished for the subsequent money laundering.

It is understood that article 301 of the Spanish Penal Code explicitly regulates the activities typical of concealment (classic abetting) and, in this offense, the punishment of the author of the prior act is not admitted, according to the criteria of the privilege of self-concealment, resting on the principle that a different conduct cannot be required, the author of the predicate offense cannot be punished in cases of laundering that occur in Spain. However, if we accept that, when laundering the proceeds of their illicit activities, the organizers and heads of criminal organizations seriously harm the legally protected interest affected by this offense, the socio-economic order, we must also accept that article 301 of the Penal Code allows those who participate in the predicate offense to be punished.122 Those who follow this line of thought understand that the legislator has left open the possibility of punishing the authors of the predicate offense for the subsequent laundering of their gains.

As laundering potentially affects the socio-economic order, the amount laundered could be an indicator to consider in the illegality or unlawfullness of the crime in order to punish the perpetrator of the offense. As the affected legally protected interest differs from that established in the predicate offense, and laundering is not considered to be concealment, there would be no subsequent co-penalized act.

To illustrate the doubts that the autonomy of laundering arouses and, consequently, the possibility of applying punishments to both the author of the predicate offense and the launderer, when the Colombian Ministry of Justice and Law opted for a clearer definition, it stated that: “Although it is a fact that with 122 This is the position of Blanco Cordero, op. cit. page 501, and Vives Antón and González Cussac, “Comentarios al Código Penal de 1995”, T. 2.

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Law 1990 of 1995 money laundering was defined as ‘the abetting, legalization and concealment of property derived from illegal activities’, this definition was not clear as to the possibility of applying it in addition to the predicate offence [...] in accordance with the criteria of the privilege of self-concealment, based on the principle that a different conduct cannot be required; Law 365 of 1997 created a new chapter in the Penal Code devoted exclusively to the issue of money laundering”.123 The opinion of the Government of Colombia adds that laundering is an autonomous offense, and punishment for the offense of laundering can be cumulated with that of the original offense as they are different offenses; in this way, it clearly indicates the possibility of convicting the drug trafficker for this activity, and also for money laundering, for having legitimized the proceeds of this illicit trading.124

4. Concurrence of offenses when separable conducts exist If we argue in favor of the independence and autonomy of the offense of

money laundering and the possibility of punishing the author of the prior act who launders the proceeds of the offense in which he participated, we must maintain that there is a real distinction between the crimes. Accordingly, we must then consider whether the legally protected interest protected by the norm is the financial and economic health of the State and not only the administration of justice or property, as is traditionally admitted by doctrine in the elements that make up the crime of concealment. In that case, the State is obliged to punish those who affect and damage social values.

As we have already seen, those who do not agree with the position we have just stated consider that even when the predicate offense protects a different legally protected interest from the one protected by concealment (for example, property in the predicate offense and administration of justice in concealment), the author of the prior act cannot be obliged to behave differently, so that multiple sanctions could not be applied to the person who conceals in order not to incriminate himself. They also add the concept of illegality or unlawfullness and exhaustion of the predicate offense, in which the

123 DCJ/620/CRM “Actualización de la respuesta del Gobierno de Colombia presentada en la CICAD, el 6 de noviembre de 1996”.124 Quoted in the “Manual de apoyo para la tipificación del delito de lavado”, Inter-American Drug Abuse Control Commission (CICAD).

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author of the prior act cannot be prosecuted twice.However, it is clear that those in favor of the previous interpretation do

not take into account the social harm that money laundering causes to the socio-economic order and the financial health of the State; this damage would remain unpunished. Reasons of justice and equality require that the member of the community that affect legally protected interests should be punished. Therefore, if this illegality or unlawfullness is included when considering the punishment for laundering that is applied to its author, it would be arbitrary – in similar circumstances – to make provisions that benefit some (the authors of the prior act who laundered the produce of their offense) and prejudice others (the offender who only takes part in laundering).

If the protected social asset is the same in the predicate offense and the money laundering (as a form of concealment), punishing the author twice would not be justified. On the contrary, if the legally protected interests are different and laundering damages the administration of justice, it would not be in order to punish the author of the predicate offense who then launders the proceeds of his offense either, owing to the principle that a different conduct cannot be required and the principle that protects the right not to incriminate oneself. Nor does this position take into account the socio-economic damage that is caused to society by these apparently legal transactions. Reiterating our previous reasoning, if those who damage this legally protected interest are sanctioned with a specific norm (money laundering), an arbitrary classification cannot be made that only includes those who launder property and do not take part in the predicate offense.125 It is not sufficient to argue that by individualizing the punishment of the predicate offense, financial repercussions and other arguments would be taken into account. It is not the same to criminally prosecute two crimes for one criminal conduct.

Beyond reasons of public interest, for the protection of this legally protected interest, this criteria necessarily requires that the author of the conduct should have an illegality or unlawfullness of action that is distinct from the predicate offense in order to be able to make a new proceeding. In this

125 In this respect, the totally opposite position to the one maintained here is to be found in the current wording of article 278 of the Argentine Penal Code, which represses laundering only with regard to those who have not intervened in the prior crime.

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respect also, we could criticize the position according to which the illegality or unlawfullness of the action is included in the predicate offense and in the punishment of that offense, so that prosecution for laundering is double and affects constitutional guarantees and international treaties.

5. An extra element in the illegality or unlawfullness of the action In the crime of money laundering, the illegality or unlawfullness of the

action has an extra element that is not established in the classic legal definition of concealment as defined in most Penal Codes. It does only mean that the author hides or conceals the offense in order to evade justice or for profit. The offense in question affects other social values and the conduct of the criminal is always guided by the profit motive that inspires the criminal organization, by allowing it to reinvest the proceeds of the offense, and converts it into a manufacturer of crimes; this goes beyond both the mere increase in capital sought by the author of the predicate offense and the traditional concept of concealment, the author of which seeks to evade the action of justice.

The purpose of laundering as it is defined in the preceding paragraph is not always included as an element of the crime of the predicate offense, for example in the trafficking of drugs or arms, or other criminal acts from which financial gain is derived. This purpose of dissimulating and concealing the illicit origin of the funds contains an extra element of illegality or unlawfullness.

Moreover, it is necessary to analyze whether the predicate offense has a profit motive as an element of the crime and whether this illegality or unlawfullness covers the profits sought by the criminal enterprise in a type of laundering that consists not only in concealing but also in using the fabulous profits as fuel for crimes that are intended to keep the criminal enterprise in operation by making it into an anti-State.

This is precisely the crux of the problem, around which revolves the issue of whether it is in order or not to punish the author of the predicate offense for the subsequent laundering of its profits.

6. The profit motive and criminal business activities as a different element of money laundering.

Another of the reasons to maintain that there is a relationship of alternativeness between concealment and the predicate offense lies in the fact

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that, in the former offense, in the elements that make up the crime, the author of the offense attempts to evade justice and, therefore, it cannot be maintained that he should give himself up to the authorities: while his conduct is encompassed in the predicate offense, it is not in order to carry out a new proceeding. However, as we have already explained, the illegality or unlawfullness in the conduct of money laundering has an extra element that exceeds the previous crime, a profit motive designed to ensure the survival of the criminal organization, which is not always present in the prior act. And, even when profit is present in the previous conduct, the illegality or unlawfullness of money laundering goes further, because it involves conducts that are repeated over time with the purpose of strengthening the structure of a criminal enterprise with a legal appearance, which will challenge the State’s very reason for existence. It is therefore evident that this operation in which the author of the prior act plays an active part, has a desvalor that cannot be considered to be included in the predicate offense.

In view of the foregoing, we must consider whether, just as in the offense of illicit association (criminal), true concurrence with the offenses that are committed through such association is allowed, a similar situation should be assumed with money laundering. Thus, the operation is not unique nor the criminal intention a single one. Similar arguments are also made with regard to the crime of armed robbery and the illegal possession of arms that are used in an assault.

It should be noted that, in this case, constitutional guarantees would not be affected, since the act in question is different, because there is additional criminal intention to that of the predicate offense. The lack of merit of the action affects other legally protected interests and it is the obligation of the State not only to guarantee due legal process and comply with the corresponding international conventions, but also to interpret the international conventions and treaties integrally, precisely with the constitutional guarantees on which the rule of law is based. In this respect, in order to comply with international legislation, the nation States must protect the economic order of their communities and the financial health of their banking system126, since in a

126 Notice the negative effects described in paragraph 2.

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globalized economy the health of national systems is a significant factor. It should be recalled that the 2000 United Nations Convention Against Transnational Organized Crime, provides for the criminalization of the offense of money laundering as one of the crimes to be punished in order to combat transnational organized crime. Moreover, it should be borne in mind that, if there is no constitutional objection in the domestic sphere to the punishment of the author of the predicate offense as the subject, in turn, of the offense of laundering, for the considerations mentioned, he should be punished in order to provide appropriate protection to the social values at risk and comply faithfully with the international treaties, which usually have a constitutional rank in the signatory countries.

As we have explained, there is no constitutional obligation in the punishment of the author of the prior act for this offense, since there are no grounds for supporting double criminal prosecution nor can he be required to declare against himself or give himself up to justice, but its illegality or unlawfullness is more serious than that of the predicate offense and affects a legally protected interest of great significance.

5. Provisional conclusions

In summary, the type of money laundering that is defined by actions that are clearly established in the offense of concealment is not a form of concealment. It is an autonomous and independent offense in which the author may be the active participant of the predicate offense. The damage to the State’s economy and financial system are not provided for in the predicate offenses, so that, in order to apply the law, a specific amount must be established as regards laundering or a specific quantity of operations. Also, the illegality or unlawfullness of the action exceeds that of concealment and the predicate offense. The profit motive, which is not only personal but also to finance criminal enterprises, is present in this type of action.

Another option could be to increase the sanctions of the predicate offense, should there have been a profit motive in that offense; this would allow us to argue that the author of the act cannot be criminally prosecuted twice.

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But, as we have seen, since the legally protected interest is not only the administration of justice and other legally protected interests are affected, the punishment should be increased if the author not only benefits at the personal level through his profits but also affects society. Moreover, as we have seen, since it affects the principle of equality before the law, it is unconstitutional that only one group of persons should respond for the damage that money laundering produces in society (those who were not the authors of the predicate offense) and not the authors of the predicate offense who also affected the legally protected interest by laundering. As we explained, the illegality or unlawfullness of the author of the predicate offense, although it included the search for personal profit affected another legally protected interest and his conduct cannot remain unpunished without violating the commitment that States assume in the international sphere.

Consequently, the possibility of adding an element to the crime of money laundering should be considered, which takes into account these two points of view in order to clearly differentiate it from concealment and, in this way, allow the authors of the predicate offense to be punished without getting involved with the offense of concealment.

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