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‘Fake Passports’: What Is to Be Done About Trade-Based Money Laundering?

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The Palgrave Handbook of Criminal and Terrorism Financing Law

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Abstract

Trade-based money laundering (‘TBML’) is a problem that is relatively straightforward to describe but, from a law enforcement perspective, one that is very difficult to tackle. This chapter considers, inter alia, what might be put in place instead of traditional anti-money laundering (AML) tenets as a framework for tackling TBML, in order to at least offer the possibility that the law enforcement response to it can be materially improved. The chapter thus attempts to formulate a platform for developing ideas in this sphere that will provide practical suggestions rather than the usual counsels of despair.

The views expressed in this chapter are those of the author and should not be read as being the views of Police Scotland.

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Notes

  1. 1.

    See, for example, Anonymous, ‘Uncontained—Trade is the Weakest Link in the Fight Against Dirty Money’ The Economist (London, 3 May 2014) <www.economist.com/news/international/21601537-trade-weakest-link-fight-against-dirty-money-uncontained> accessed 28 July 17.

  2. 2.

    Clare Sullivan and Evan Smith, Trade-Based Money Laundering: Risks and Regulatory Responses (Australian Institute of Criminology 2011), 19–20.

  3. 3.

    United States Senate Caucus on International Narcotics Control, The Buck Stops Here: Improving U.S. Anti-Money Laundering Practices (113th Congress 1st session, 2013) 19 <www.drugcaucus.senate.gov/sites/default/fi les/Money%20Laundering%20Report%20-%20Final.pdf> accessed 28 July 17.

  4. 4.

    See the FATF webpage on money laundering <www.fatf-gafi.org/faq/moneylaundering/#d.en.11223> accessed 28 July 17.

  5. 5.

    Stephen Platt, Criminal Capital: How the Finance Industry Facilitates Crime (Palgrave Macmillan 2015) Ch. 2.

  6. 6.

    Anonymous (n 1). A survey of core TBML techniques is provided in FATF, Trade Based Money Laundering (FAFT/OECD 2006).

  7. 7.

    Asia/Pacific Group on Money Laundering, APG Typology Report on Trade Based Money Laundering (APG 2012).

  8. 8.

    PwC, Goods Gone Bad: Addressing Money Laundering Risk in the Trade Finance System (PwC 2015) 3 <www.pwc.com/us/en/risk-assurance-services/publications/assets/pwc-trade-finance-aml.pdf> accessed 28 July 17.

  9. 9.

    Anonymous (n 1).

  10. 10.

    Dev Kar and Joseph Spanjers, Illicit Financial Flows from Developing Countries: 2004–2013 (Global Financial Integrity 2015).

  11. 11.

    ibid. vii.

  12. 12.

    ibid. Chart 2.

  13. 13.

    ibid. para 17, Chart 7.

  14. 14.

    International Monetary Fund, World Economic Outlook Database April 2015 (IMF 2015); World Bank, World Development Indicators (WB 2014).

  15. 15.

    PwC (n 8) 18.

  16. 16.

    For the latest assessment of the resilience of cash smuggling as a money laundering method, however, see the joint report FATF/MENA-FATF, Money Laundering Through the Physical Transportation of Cash (FAFT/OECD 2015).

  17. 17.

    John Zdanowicz, ‘Trade-Based Money Laundering and Terrorist Financing’ (2009) 5(2) Review of Law and Economics 855.

  18. 18.

    HM Treasury and Home Office, UK National Risk Assessment of Money Laundering and Terrorist Financing (2015) paras 6(16)–6(19).

  19. 19.

    Financial Conduct Authority, Banks Control of Financial Crime Risks in Trade Finance (Thematic Review TR13/3 2013).

  20. 20.

    ibid. para 8.

  21. 21.

    ibid. para 10.

  22. 22.

    FATF (n 6).

  23. 23.

    Samuel McSkimming, ‘Trade Based Money Laundering: Responding to an Emerging Threat’ (2010) 15(1) Deakin Law Review 37, 50–51.

  24. 24.

    ibid.

  25. 25.

    PwC quote a UN value for global merchandise export trade of $18.3 trillion in 2012: PwC (n 8) 8.

  26. 26.

    McSkimming (n 23) 61.

  27. 27.

    FATF (n 6).

  28. 28.

    HM Treasury and Home Office (n 18).

  29. 29.

    John Zdanowicz, ‘Who’s Watching Our Back Door?’ (2004) 1(1) Business Accents, College of Business Administration magazine, Florida International University 26.

  30. 30.

    For the core application of gravity models to trade, see Jacob Bikker, ‘An Extended Gravity Model with Substitution Applied to International Trade’ in Steven Brahman and Peter Van Bergeijk (eds), The Gravity Model in International Trade: Advances and Applications (Cambridge 2010). For consideration of gravity models relating to money laundering, see John Walker and Brigitte Unger, ‘Measuring Global Money Laundering: “The Walker Gravity Model”’ (2009) 5(2) Review of Law and Economics 822.

  31. 31.

    Joras Ferwerda and others, ‘Gravity Models of Trade Based Money Laundering’ (2011) De Nederlandsche Bank (‘DNB’) Working Paper 318.

  32. 32.

    Zdanowicz (n 17) 878.

  33. 33.

    Bikker (n 30).

  34. 34.

    Brigitte Unger and Johan den Hertog, ‘Water Always Finds Its Way—Identifying New Forms of Money Laundering’ (2012) 57(3) Crime Law and Social Change 287.

  35. 35.

    Walker and Unger (n 30).

  36. 36.

    Ferwerda and others (n 31).

  37. 37.

    ibid.

  38. 38.

    ibid. 15.

  39. 39.

    PwC (n 8).

  40. 40.

    Asia/Pacific Group (n 7).

  41. 41.

    Mark Yeandle and others, Anti-Money Laundering Requirements: Costs, Benefits and Perceptions (Z/Yen, 2005); British Bankers’ Association, BBA Response to Cutting Red Tape Review: The Effectiveness of the UK’s AML Regime (BBA 2015).

  42. 42.

    McSkimming (n 23).

  43. 43.

    Erika Solomon, Guy Chazan and Sam Jones, ‘Isis Inc.: How Oil Fuels the Jihadi Terrorists’ Financial Times (London, 15 November 2015) <www.ft.com/content/b8234932-719b-11e5-ad6d-f4ed76f0900a> accessed 28 July 17. See also FATF, Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (FAFT/OECD 2015).

  44. 44.

    FATF (n 6).

  45. 45.

    Zdanowicz (n 17).

  46. 46.

    ibid.

  47. 47.

    Jo Becker, ‘Beirut Bank Seen as a Hub of Hezbollah’s Financing’ New York Times (New York, 13 December 2011) <www.nytimes.com/2011/12/14/world/middleeast/beirut-bank-seen-as-a-hub-of-hezbollahs-financing.ht ml> accessed 28 July 17.

  48. 48.

    Nate Raymond, ‘Lebanese Bank to Pay US $102 Million in Money Laundering Case’ Reuters Business News (London, 25 June 2013) <www.reuters.com/article/us-lebanesebank-settlement-idUSBRE95O17P20130625> accessed 28 July 17.

  49. 49.

    US v Lebanese Canadian Bank SAL et al. [2012] U.S. District Court 11–9186.

  50. 50.

    Raymond (n 48).

  51. 51.

    Ross Delston and Stephen Walls, ‘Reaching Beyond Banks: How to Target Trade-Based Money Laundering and Terrorist Financing Outside the Financial Sector’ (2009) 41(1) Case Western Reserve Journal of International Law 85.

  52. 52.

    McSkimming (n 23).

  53. 53.

    Dinah Shelton, ‘Law, Non-law and the Problem of Soft Law’ in Dinah Shelton (ed), Commitment and Compliance: The Role of Non-Binding Norms in the International Legal System (OUP 2003) 15.

  54. 54.

    FATF (n 6).

  55. 55.

    See Jackie Harvey, ‘Asset Recovery—Substantive or Symbolic’ in Colin King and Clive Walker (eds), Dirty Assets: Emerging Issues in the Regulation of Criminal and Terrorist Assets (Ashgate 2014).

  56. 56.

    See, for example, the Association of Certified Anti-Money Laundering Specialists <www.acams.org> accessed 28 July 17.

  57. 57.

    Delston and Walls (n 51).

  58. 58.

    Asia/Pacific Group (n 7).

  59. 59.

    Criticisms of the SARs regime were acknowledged in HM Treasury and Home Office (n 18), 5–6.

  60. 60.

    FATF (n 6).

  61. 61.

    ibid.; Platt (n 5) in particular 29.

  62. 62.

    Personal experience of the author in 2015.

  63. 63.

    Proceeds of Crime Act 2002, ss 327–329.

  64. 64.

    In the next section, we discuss how recent judgments appear to have the intended effect of reestablishing the concept of a predicate offence under the POCA offences.

  65. 65.

    Robert Bell, ‘Abolishing the Concept of Predicate Offence’ (2002) 6(2) Journal of Money Laundering Control 137.

  66. 66.

    Proceeds of Crime Act 2002 (n 63) Part 7—Money Laundering Offences.

  67. 67.

    R v Anwoir [2008] EWCA Crim 1354.

  68. 68.

    HMA v Ahmed [2009] HCJAC 60.

  69. 69.

    R v Anwoir (n 67) para 21.

  70. 70.

    R v Geary [2010] EWCA Crim 1925, para 19.

  71. 71.

    R v GH [2015] UKSC 24.

  72. 72.

    R v Geary (n 70) quoted in R v GH (n 71) para 26.

  73. 73.

    R v GH (n 71) para 20.

  74. 74.

    Proceeds of Crime Act (n 63) s 340 (3)F.

  75. 75.

    R v GH (n 71) para 39.

  76. 76.

    ibid.

  77. 77.

    For example, HMA v Michael Handley [2013] Sentencing statements.

  78. 78.

    Vivian Walters, ‘Prosecuting Money Launderers: Do the Prosecution Have to Prove the Predicate Offence?’ [2009] Criminal Law Review 571.

  79. 79.

    R v GH (n 71).

  80. 80.

    Michael Levi, Drug Law Enforcement and Financial Investigation Strategies: Modernising Drug Law Enforcement Report 5 (International Drug Policy Consortium 2013).

  81. 81.

    Not least by FATF (n 6).

  82. 82.

    Platt (n 5).

  83. 83.

    McSkimming (n 23).

  84. 84.

    Delston and Walls (n 51).

  85. 85.

    Peter Calvocoressi, Guy Wint and John Pritchard, Total War: Causes and Courses of The Second World War (2nd edn, Penguin 1989) 461.

  86. 86.

    The Bribery Act 2010, s 7.

  87. 87.

    ibid. s 7(2).

  88. 88.

    The Ministry of Justice, The Bribery Act 2010: ‘Quick Start Guide’ <www.justice.gov.uk/downloads/legislati on/bribery-act-2010-quick-start-guide.pdf> accessed 28 July 17.

  89. 89.

    Ministry of Justice, The Bribery Act 2010: Guidance About Procedures Which Relevant Commercial Organisations Can Put into Place to Prevent Persons Associated with Them From Bribing <www.justice.gov.uk /downloads/legislation/bribery-act-2010-guidance.pdf> accessed 28 July 17.

  90. 90.

    Proceeds of Crime Act 2002 (n 63). For further discussion, see Chap. 26 (Lord and Levi) in this collection.

  91. 91.

    David Green CB QC, SFO Director, Speech at the Cambridge Symposium on Economic Crime 2016, Jesus College, Cambridge.

  92. 92.

    ibid.

  93. 93.

    Kar and Spanjers (n 10).

  94. 94.

    See Credit Agricole Corporation and Investment Bank v Papadimitriou [2015] UK PC 13. In this appeal from the Court of Appeal of Gibraltar, the Court of the UK Privy Council held that the bank was liable for losses arising from laundering activity that it ought to have been in a position to be aware of and to prevent.

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  1. Police Scotland, Glasgow, UK

    Kenneth Murray

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  1. University of Sussex, Falmer, United Kingdom

    Colin King

  2. University of Leeds, Leeds, United Kingdom

    Clive Walker

  3. Notre Dame Law School, Notre Dame, IN, USA

    Jimmy Gurulé

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Murray, K. (2018). ‘Fake Passports’: What Is to Be Done About Trade-Based Money Laundering?. In: King, C., Walker, C., Gurulé, J. (eds) The Palgrave Handbook of Criminal and Terrorism Financing Law. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-64498-1_10

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