Countering money laundering

Home Affairs Minister Tonio Borg addresses a meeting of the Standing Committee of the Council of Europe on ‘The need for intensified international co-operation to neutralise funds for terrorist purposes’ held last week in Malta. Dr Borg highlights Malta’s role in the struggle and the country’s steps to counter money laundering activities

The events of 11 September and the sporadic but serious terrorist incidents since then have created a new awareness about co-operation in security matters. Multilateral international meetings on security co-operation have increased; meetings of ministers of the Interior on a regional level have become more frequent; suffice it to say that Malta participates not only in the Council of Europe and EU fora on this matter, but also in Mediterranean fora such as the fruitful Western Mediterranean Forum of Ministers of the Interior, and other Euro-Mediterranean initiatives. The emphasis on this Mediterranean dimension is important owing to the turbulent nature of this region and the co-operation needed to guarantee security in this area and also beyond since Europe’s security and that in the Mediterranean are intimately linked.

The Report submitted by Mr Marty emphasises three points: the importance of ratifying international instruments relating to terrorist funding; closer international co-operation in all fields and the strengthening of monitoring instruments through bodies such as the Financial Action Task Force, and the Council of Europe mechanisms.

On the normative level following Malta’s ratification of the European Convention on the Suppression of Terrorism, the European Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime, as well as the 1999 United Nations International Convention for the Suppression of the Financing of Terrorism, the Criminal Code and the Prevention of Money-Laundering have been amended to align them with these international instruments. Indeed since September 2001, Malta has ratified all the UN Conventions on Terrorism.

The Programme of work of the Maltese Chairmanship of the Committee of Ministers of the Council of Europe affirms Malta’s support for the initiatives taken by the Council of Europe in the fight against terrorism. Recalling the guidelines of the Committee of Ministers of the Council of Europe on Human Rights and the Fight against Terrorism, and the prohibition of arbitrariness in all measures taken by States in the fight against terrorism, the Chairmanship expressed its intention to encourage exchange of views amongst member states regarding, and the formulation of standards and best practice in

determining, whether an organisation’s property is to be frozen because of suspicion of terrorism and the safeguards that should be afforded to persons subject to any such orders.

The main legal structure and remedies in Malta regarding the suppression of terrorist and other illicit financing are as follows:

1. In cases of money-laundering relating to criminal activity of a serious nature, or drug trafficking, where the Attorney General of Malta has reasonable cause to suspect that a person is guilty of such crime, he may apply to the Criminal Court for an investigation order ordering any person to supply information about such criminal activity including financial institutions; together with such order the Court may also grant an attachment order attaching in the hands of the garnishee all moneys and other movable property due, pertaining or belonging to the suspect; such an order is valid for a period of thirty days unless new information is available in which case a renewed order is possible. These orders have recently been extended to the suspicion of any crime, not being an involuntary crime, liable to the punishment of imprisonment of at least one year. These orders prevail over any bank secrecy that might otherwise be applicable.

2. Once a suspect is charged in Court, whether for money laundering, or any crime punishable with at least one year imprisonment, not being a crime of an involuntary nature, the Court may freeze the property of the person accused until final judgement;

3. In case of conviction of any crime of money laundering or a crime punishable by at least one year’s imprisonment, the Court shall order the forfeiture in favour of the Government of the proceeds of the offence, or of such property the value of which corresponds to the value of such proceeds.

4. New crimes of conspiracy and belonging to a criminal organisation were introduced in May this year; consequently the mere act of conspiring to commit a crime even though no commencement of the execution has occurred has been criminalised; similarly any person who promotes, constitutes, organises and finances an organisation of two or more persons with a view to commit criminal offences commits the crime for merely helping such organisation even though no criminal activity is actually executed.

5. Moreover, for the first time in the history of local criminal legislation, corporate criminal liability has been introduced for several serious criminal offences such as corruption, fraud, money laundering, participation in or promotion of a criminal organisation.

Malta signed the 1999 UN Convention for the Suppression of the Financing of Terrorism in January 2000 and ratified it in November 2001; it also signed the UN Convention against Transnational Organised Crime in December 2000 and will in the coming weeks ratify this Convention.

As regards the operational level, in 2001 legislation was passed to set up the Financial Intelligence Analysis Unit having a distinct legal personality from Government; it is responsible for the collection, processing and analysis of information with a view to combating money-laundering; it receives reports of suspected transactions, send analytical reports to the Police. It monitors compliance by institutions whose duty is to prevent money laundering mostly financial institutions, and may instruct them to take appropriate steps; it may require information from such institutions and instruct them to produce any documents; it also compiles statistics, issues guidelines and advises the Minister for Finance on all matters relating to money laundering, and may exchange information on such matters with any foreign body or authority; and reports suspect activity to the Police. After a period of transition, when the Unit’s Board was busy recruiting the required personnel, acquiring the necessary IT equipment and software and laying down the infrastructure essential for its operations, the Unit is now fully operational with everybody and everything in place for it to fulfil its duties according to law.

A financial institution which is aware or suspects that a transaction which is to be executed may be linked to money laundering has to inform the Unit before executing the transaction giving all information concerning the transaction. The Unit may even order the postponement of the transaction should this be deemed expedient.

The Report by Mr Marty proposes that members states jointly declare what they mean by illegal mechanisms of terrorist financing. In this respect it is perhaps questionable whether one should talk at all of "illegal mechanisms" of terrorist financing since this would seem to imply that there are "legal mechanisms" to finance terrorism. To my mind this is not the case. All financing of terrorism is to be seen as being illegal and therefore it should be superfluous and misleading to qualify such mechanisms as illegal. Even the financing of terrorism by otherwise "lawful" means should still be considered as illegal and therefore it is enough to talk of "mechanisms of terrorist financing" without any further qualification. On the other hand, as the Report suggests, it is not only perfectly legitimate, but it may prove essential and very productive, that a distinction be made between the financing of terrorist activities and the laundering of funds generated by terrorist activities because to date the same procedures and mechanisms set up to combat money laundering are being used to combat terrorist financing when the two are distinct phenomena with a different dynamic which may require different responses, mechanisms and strategies.

While the tools devised to combat money laundering were meant to identify and impound at an early stage of the financial system the unlawful proceeds generated by a crime already committed, in the case of financing of terrorism we are dealing with what could be perfectly lawful funds being directed towards the commission of criminal activities. Therefore, in anti-money laundering strategies the target is the source of the funds while in financing of terrorism the target is the destination of the funds. It is useful, therefore, to keep the two phenomena distinct in order not to miss the possibility of devising new tools and strategies which could be more effective in combating the financing of terrorism. The Report suggests that this matter could be dealt with by a separate Convention or a Protocol to the Laundering Convention. Certainly the efforts for the immediate future is to close the loopholes, to reach for all kinds of transactions in all kinds of institutions, banks or outlets which in any way may be involved in the financing of terrorism.

In this regard the philosophy behind FIU’s and the legislation which has been elaborated to date in the creation of an FIU should be carefully re-examined precisely because the same legislation was drafted to cater for a particular phenomenon, money laundering, and therefore might not be fully equipped to respond to a different phenomenon such terrorist financing. It should be sufficient to point out that within an anti-money laundering strategy, banks and financial institutions have been gradually conditioned to concentrate on the source of the funds entering the financial system on that basis to assess whether a financial transaction is suspicious and if so to report it to the FIU. While such an approach still has its uses in combating terrorist finance, since the identity itself of the originator of the funds may be sufficient to give rise to the suspicion that the funds are meant to finance terrorism, this approach may need to be integrated by an equally focused attention on the ultimate destination of the funds. The legislation and working methods of FIUs may therefore need to be revisited if these are to have an enhanced role in combating terrorist finance.

The strengthening of monitoring mechanisms in this area is of paramount importance; Malta was recently visited by the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures (PC-R-EV, recently renamed "MONEYVAL") which, incidentally, is currently chaired by the Deputy Attorney General of Malta, and its report on Malta is keenly awaited by the Maltese authorities, as usual, since Malta is always receptive to any useful suggestions which could strengthen its readiness to counter any form of criminality. Monitoring mechanisms have become almost the hallmark of Council of Europe’s activities; this trend started with the inspection of places of detention in 1989 (CPT), continued with the setting up of the Monitoring Committee to examine human rights issues and those relating to the rule of law in member and candidate countries; the monitoring mechanism in money-laundering matters and on corruption issues (GRECO) and in other areas; with a Council of Europe approaching 45 members, the Council may have become a victim of its own success, becoming over-stretched, and unable to really monitor carefully the situation legal and administrative in each member state.; unless the necessary funds, organisational reform and human resources are not made available.

As regards co-operation in the fight against terrorism and the financial strangling of this criminal activity, Malta will soon conclude a co-operation agreement with Europol, even though it is not yet a member of the European Union; as an accession country Malta through this agreement, even prior to membership, will be able to exchange and share in the collection of information relating to criminal activities including the financing of terrorism.

Mr. Schwimmer recently commented to the effect that terrorism cannot be fought at any

cost, that is to say without having regard to the common European values of rule of law and respect for human rights; indeed this fine balance between protecting civilization against new dangers in new forms and guises and safeguarding the fundamental rights of the individual is not an easy task at all; indeed in moments of crisis, emotions and public pressure make politicians veer dangerously towards emphasising the security rather than the human rights aspect of the situation facing them; belonging to the Council of Europe and to the European continent and its common heritage of values, guarantees that our fight against international terrorism is not conducted at the expense of proper respect for human rights and freedoms.