MONEY LAUNDERING, CYBERCRIME AND CRIMINAL RESPONSIBILITY OF LEGAL PERSONS
Miguel Abel Souto
University of Santiago de Compostela – Spain
This paper was subject of report in Beijing by its author on November 30, 2019, at the Tenth Session of the International Forum on Crime, and Criminal Law in the Global Era. This work was financially supported by the RTI2018-6H-093931-B-100 (AEI/FEDER, UE) project of the Spanish State Research Agency (Ministry of Science, Innovation and Universities), Operational Program FEDER2014-2020 A way of making Europe.
Directives 2015/849, and 2018/843 on Money Laundering require continuous adaptations of the legal framework to respond to threats of the use of new technologies in money laundering. Directive 2018/843 extends the scope of Directive 2015/849 toproviders engaged in exchange services between virtual currencies and fiat currencies as well as custodian wallet providers. Undoubtedly, the new payment systems facilitate money launderers’ criminal activity. These systems are better than cash for moving large sums of money, non-face to face business relationships favour the use of straw buyers, and false identities, the absence of credit risk, as there is usually a prepaid payment, discourages service providers from obtaining a complete, and accurate customer information, and the nature of the trade, and the speed of transactions make it difficult to control property or freezing. However, the development of technologies, including the internet, has unquestionable advantages involved and even provides, through online resources, verification of identity, or other duty of surveillance, for the prevention of money laundering. In addition, the reform of June 22, 2010 introduced in Spain the criminal liability of legal persons, and incorporated money laundering together with other crimes to this innovative model of criminal responsibility. Soon after, Organic Law 1/2015, of March 30, modified the hereto barely applied regulation. It is quite surprising that Organic Law 1/2015 boasts of making a technical improvement, as it incurs obvious contradictions by exempting criminal liability to legal persons for a money laundering, that should not have existed due to the adoption and effective execution of suitable or adequate compliance programs to prevent it, as well as taking into account to limit the punishment non-serious breaches of supervisory, monitoring, and bis only takes into consideration serious breaches of those duties. Already in 2010, in order to introduce the criminal liability of legal persons, the Spanish Legislator invoked the alleged need to comply with international commitments. However, this model of responsibility was not mandatory, because international agreements normally only require effective, proportionate, and dissuasive sanctions. In addition, managers and executives, who have not adopted an effective compliance program, will be held liable together with the company, given that now all act as police officers. In conclusion, the use of dummy corporations for money laundering is frequent, as it is evidenced by the judgments of the Supreme Court of June 26, 2012, and February 4, 2015, but until recently, the accessory consequences and the doctrine of piercing the corporate veil were sufficient.
Money laundering, cybercrime, expansion of the punishment, foreign exchange, money remittance, transboundary movements of cash, new technologies, electronic money, virtual currencies, and criminal liability of legal persons
Cyber Crime and Money Laundering
Directive 2015/849 of the European Parliament, and the European Council of May 20, 2015 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing requires quick and continuous adaptations of the legal framework (28 Whereas) to respond to threats of the use of new technologies in money laundering and Directive (E.U.) 2018/843 of the European Parliament, and the European Council of May 30, 2018, amending Directive (E.U.) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing insists on the need to adapt to new threats (6 Whereas), and extends the scope of Directive 2015/849 to providers engaged in exchange services between virtual currencies and fiat currencies, as well as custodian wallet providers (8 Whereas).
Money laundering is a crime of globalization3. Its importance nowadays is transcendental, because of the economic crisis we are suffering.
Indeed, it was noted that an offense that has benefited most from the internet is money laundering4, generalized and radicalized5 by the new electronic media, with a spectacular6 development thanks to the potential provided via internet and electronic transfers for executing this crime.
The increasing use of new payment methods, such as transactions and movements of funds, resulted in an increase in the detection of cases of money laundering committed using telematic media.
These new technologies are appealing to money launderers mainly because of the anonymity provided, high marketability, usefulness of funds, and global access to AT M network. To these factors, one should add: the problems of persecution, which requires new investigation methods that must maintain the delicate balance between security and fundamental rights. In any case, to avoid misuse of legal insufficiencies in new technologies by organized crime, internet cannot be an area outside the Law, but must be regulated.
Undoubtedly, the new payment systems facilitate money launderers’ criminal activity. These systems are better than cash for moving large sums of money, non-face to face business relationships favour the use of straw buyers and false identities, the absence of credit risk, as there is usually a prepaid payment, discourages service providers from obtaining a complete and accurate customer information, and the nature of the trade and the speed of transactions make it difficult to control property or freezing17.
However, the development of technologies, including the internet, has unquestionable advantages involved and even provides, through online resources, verification of identity or other duty of surveillance for the prevention of money laundering18. The new payment methods are the result of the need to both offer commercial alternatives to traditional financial services, and to include everyone in the system irrespective of poor credit rating, age, or residence in areas of low bank offer. These methods can also have a positive effect on the economy, given their efficiency in terms of speed of transactions, technological security, low costs compared to payment instruments based on paper, and accessibility, especially for prepaid cards, and payment services with mobile phones, identified as a possible tool to integrate excluded individuals because of poverty19.
For example, a total of 4 million people in the United States receive Social Security benefits without actually being bank accounts holders. To reduce their dependence on checks, which force transactions in them, spending between $50 and $60 dollars a month in check cashing, bill payment, or sending money to their families, benefits were provided with prepaid cards with which could buy goods or get cash. Moreover, in 2009, the war displaced in Pakistan more than a 1,000,000 people, and their government distributed prepaid cards with a maximum value of 25,000 rupees, about $300, for the immediate assistance of 300,000 families. Similarly, in Afghanistan, the police salary is paid via mobile phones, so that policemen do not have to leave their job, in order to collect their salary. This also reduces the possibility of corruption or bribery20.
In 1996, the Financial Action Task Force (FATF) was specifically concerned in the recommendation number 13th. with new technologies, and the danger they pose for potential money laundering by allowing the realization of huge transactions instantly from remote locations, while keeping the anonymity of the transgressor and without the involvement of traditional financial institutions. The absence of financial intermediation makes it difficult to identify customers and to keep a record of relevant information. In addition, traditional investigation techniques become ineffective or obsolete to new technologies: the problem of physical volume of money posed for launderers21 -to the point of leaving the paper money because of slow movement-is minimized with electronic money, its rapid mobility, especially on the internet, difficult to trace the funds transferred and the unusual volume of data to analyze make it almost impossible to detect any suspicious activity. Please note that 30 years ago, there was no internet. However, a decade and a half later the closure of the European Union