International cooperation mechanisms to combat money laundering
October 30, 2020

Author: Fabeyra Curieal Lopez

fabeyra.curiel@fexlaw.com

Money laundering is a crime that generates social problems worldwide, which can become a growing threat that increases and can lead to mistrust in financial markets[1], also, gives rise to institutions and organizations being exposed to risks: reputational, operational and legal, which can seriously affect all their activities as well as their presence in the market.

In this sense and in order to define actions to be taken, according to the situation and panorama, the Central Bank of Ecuador (BCE), announced that one of the main goals for 2020 is to measure the volume of money laundering that occurs each year in the country. To achieve this, it will have the advice of the World Bank. In South America the only country that has an estimate is Colombia, so Ecuador could become the second country in the region to register a real figure of the magnitude of this phenomenon[2]. Currently, there is only one estimate from the World Economic Forum, which determines that around $4 billion annually of illicit money could be circulating in the Ecuadorian economy.[3] That amount represents more than 8 times the 500 million that each day passes through the ECB’s payment system, or almost three times the 1,400 million in physical money that the country imports in each fiscal year the country.

The figures are alarming and therefore it is imperative to have international cooperation mechanisms in order to combat money laundering. In this context, the Latin American Financial Action Group (GAFILAT) which was formally created on December 8, 2000 in Cartagena de Indias, Colombia, through the signing of the group’s constitutive memorandum of understanding by the representatives of the governments of nine countries: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay , Peru and Uruguay. Subsequently, Mexico (2006), Costa Rica, Panama (2010), Cuba (2012), Guatemala, Honduras and Nicaragua (2013) joined as full members. It is a regional-based intergovernmental organization that brings together 16 countries in South America, Central America and North America to combat money laundering and terrorist financing, through the commitment to continuous improvement of national policies against both issues, and the deepening of the different cooperation mechanisms between member countries.

The GAFILAT is the regional counterpart of the FATF, which is considered the most important global watchdog on money laundering and terrorist financing. This institution establishes international standards that aim to prevent illegal activities and the damage they cause to society, as a policy-making establishment. The FATF also works to generate the political will necessary to achieve national legislative and regulatory reforms in these areas.

With around 200 countries and jurisdictions committed to implementing them. The FATF recommendations, or FATF Standards, were developed to ensure a coordinated global response to prevent organized crime, corruption and terrorism. Thus, international cooperation plays a transcendental role, and can be focused on three important axes: international instruments, mutual legal assistance, and extradition.[4]

With regard to international instruments, countries must take immediate measures to be party to and fully implement the Vienna Convention, 1988; the Palermo Convention, 2000; the United Nations Convention against Corruption, 2003; and the International Convention for the Suppression of the Financing of Terrorism, 1999. In addition to being necessary, countries are also encouraged to ratify and implement other relevant international conventions, such as the Council of Europe Convention on Cybercrime, 2001; the Inter-American Convention against Terrorism, 2002; and the Council of Europe Convention on Laundering, Detection, Seizure and Forfeiture of the Proceeds of Crime and on the Financing of Terrorism, 2005.

Regarding mutual legal assistance, the countries must provide prompt, efficient and constructive cooperation in the processes related to investigations, judicial proceedings, money laundering, associated crimes and the financing of terrorism. Due to the aforementioned, there must be an adequate legal basis, therefore, it is essential to achieve fruitful legal assistance, that countries do not prohibit or give rise to unreasonable or undue restrictive conditions, in the provision of legal assistance mutual. In addition, they must ensure that they have clear and effective processes for prioritizing the timely execution of requests for mutual legal assistance; countries must also use a central authority or other established official mechanism for the efficient transmission and execution of requests.

Along the same lines, countries should ensure that they comply with the investigative techniques available to their competent authorities, especially in investigations that are related to the presentation, search and seizure of information, documents or evidence that may include financial records of the financial institutions, taking witness statements. A wide range of other investigative powers and techniques are also available to be used in response to requests for mutual legal assistance. The respective legal frameworks must be taken into consideration, to respond to direct requests emanating from foreign judicial or public order authorities addressed to national counterparts. It is important to note that, when issuing mutual legal assistance requests,[5]

And as the last axis of international cooperation there is extradition, the subscribing countries must constructively and efficiently execute extradition requests in relation to money laundering and terrorist financing, avoiding any unjustified delay. It is essential that countries take all possible measures to ensure that they do not offer safe havens to individuals accused of terrorist financing, terrorist acts, or terrorist organizations. In particular, they undertake to ensure that, in their legal system, money laundering and terrorist financing are extraditable crimes; They also undertake to have clear and efficient processes for the timely execution of extradition requests, including prioritization, as long as it corresponds; it is important not to allow unreasonable or undue restrictive conditions in the execution of requests; and ensure that they have an adequate legal framework for extradition.

Each country must extradite its nationals, and when a country does not do so, solely on the grounds of nationality, that country must do it at the request of the country pursuing the extradition, present the case without presenting any undue delay. The countries involved must cooperate with each other, particularly in procedural and evidentiary aspects, to ensure the efficiency of judicial processes, in accordance with the fundamental principles of their legal system. They must also have simplified extradition mechanisms, which will allow the direct transmission of requests for provisional detention between the appropriate authorities, extradition of persons on the basis of arrest warrants or trials.

In conclusion, the existence of a public policy is necessary[6] not only to prevent money laundering, but to harmonize the provisions of the laws at the national level, and also direct the authorities to comply with international precepts. The competent authorities are then the ones who must use clear channels or mechanisms for the efficient transmission and execution of requests for information or other types of assistance. As for the processes, they must be clear and efficient for the prioritization and timely execution of requests, and for the safeguarding of information, act quickly, constructively and effectively. It should then be mentioned that dealing with financial crimes is not an easy task, especially when it comes to multiple jurisdictions, however, in the fight against money laundering,

[1]Varela, E., Venini A. (2007). Norms on the prevention of money laundering in Argentina. Its impact on banking and insurance activity. Invenio, 10 (19), 73-92. Retrieved from http://50.116.13.122/upload/revista_invenio/Invenio_19_Nov Diciembre_2007.pdf

[2] El Universo newspaper “Report on money laundering in Ecuador will be released next year” https://www.eluniverso.com/noticias/2019/12/12/nota/7643285/lavado-activos-banco-central-pib-corrupcion-ecuador

[3]La Hora newspaper. “World Bank will help measure money laundering in Ecuador”https://lahora.com.ec/noticia/1102292649/banco-mundial-ayudara-a-medir-el-lavado-de-dinero-en-ecuador

[4] The Financial Task Force. Who we are? http://www.fatf-gafi.org/home/

[5] GAFISUD-INTERNATIONAL STANDARDS ON THE FIGHT AGAINST MONEY LAUNDERING AND THE FINANCING OF TERRORISM AND PROLIFERATION. 2012http://pplaft.cnbs.gob.hn/wp-content/uploads/2015/05/Las_Nuevas_40_Recomendaciones.pdf

[6] Public policies correspond to specific solutions on how to manage public affairs. Lahera, E. (2004). Introduction to Public Policies. Santiago de Chile, Chile: Economic Culture Fund.

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