117TH INTERNATIONALSEMINAR
VISITING
EXPERTS’
PAPERSVISITING EXPERTS’ PAPERS

COUNTERING MONEY LAUNDERING:THE FATF, THE EUROPEAN UNION
AND THE PORTUGUESE EXPERIENCE,
PAST AND CURRENT DEVELOPMENTS
Gil Galvão *I. INTRODUCTION
A. What is Money Laundering?
Money laundering is the processing of
the criminal proceeds to conceal theirillegal origin1. In popular terms, it consists
in “making dirty money look clean”: The
objective of the launderer is to disguise,
definitely, the illicit origin of thesubstantial profits generated by thecriminal activity, so that such profits canbe used as if they were derived from alegitimate source. This is done byscreening the sources, changing the form,or moving the funds to less controlled
places.
Three stages have been identified in the
traditional laundering procedure. The firstis the placement: the launderer gets rid of
the cash originated by the criminal activity
and introduces it in the financial system2.
This is the choke point of the procedure,
where the launderer is more vulnerable
and the attempt to launder can more easily
be identified. The second stage is thelayering: the launderer executes, or orders
the execution of, so many transactions, as
needed, in particular of international* Director General, International, European andCooperative Relations, Ministry of Justice,
Portuguese Republic
1 According to Webster ’s, money laundering isdefined as “transferring illegally obtained moneyor investments through an outside party to conceal
the true source”.

nature, so that, definitely, the tracing of theorigin of the monies is lost. Finally, thethird stage is the integration: the money,
now apparently of legal origin, is used forinvestment or for the acquisition of goods
and services.
Fighting money laundering is, thus, anattempt to depriving criminals from thepossibility of profiting from their criminalacts. The concept underlying the fightagainst the laundering of the proceeds of acriminal activity is therefore the following:
if you cannot prevent the criminal activity
itself from existing, you should at least
make all the efforts to deprive the criminals
from the proceeds of their crimes! But thisis also the reason why any action againstmoney laundering can only be ancillary to
any other action, preventive or repressive,taken against crime and criminal activity
in general: it’s always a remedy - it comesat all times after an offence has beencommitted!
B. Why Should We Act Against
Money Laundering?
There are, of course, many good reasons- moral, social or political - to ground thewell-founded principle that the criminal
2

Usually it was only into the financial system thatthe cash was directly introduced. However, withthe anti-money laundering measures taken withregard to this sector, experience shows that cash
is now tentatively introduced also through otherchannels.

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RESOURCE MATERIAL SERIES No. 58
should not profit from its criminal activity.
In fact, no decent, legitimate, democraticsociety can be built based on ill-gotten
gains.
However, there have been identified
some macro-economic reasons which also
justify that action is taken against money
laundering. According to a Statement by
the Staff of the IMF, presented to the
Washington Plenary of the Financial Action
Task Force in June 1996 3 , “potential
macroeconomic consequences of money
laundering may be summarised as follows:(i)
Changes in the demand for moneythat seem unrelated to measuredchanges in fundamentals;(ii) Volatility in exchange rates andinterest rates due to unanticipatedcross-border transfers of funds;(iii) Increased instability of liabilities
and heightened risks for asset
quality for financial institutions,creating systemic risks for thestability of the financial sector andfor monetary developments
generally;(iv) Adverse effects on tax collection
and allocation of public
expenditures due to misreportingof income and wealth;(v) Contamination effects on legaltransactions as transactors become
concerned about possible criminal
involvement;(vi) O t h e r c o u n t r y - s p e c i f i c
distributional effects or asset pricebubbles due to disposition of “blackmoney.”
Nevertheless, there are not only
potential macroeconomic effects of money

3“Macroeconomic implications of money laundering”- IMF Staff Statement - Meeting of the Financial
Action Task Force, Washington, D.C., June 26-28,
1996.

264

laundering. Also at the microeconomic
level most pernicious consequences can befound. A total distortion of competition, andthe elimination of legitimate businesses bypeople linked to money launderers andother criminals, may derive from themoney laundering process. In fact, withthe huge margin of profit that the criminal
activities generate, it is possible in asystematic way, to bring legitimate
businesses to bankruptcy, throughdumping and/or the monopoly of entire
sectors of economic activity.
On the other hand, money laundering
can corrupt parts of the financial system
and undermine good governance offinancial authorities. The integrity offinancial markets, an essential element forthe prosperity of the economies, depends
heavily on the application of high legal,
professional and ethical standards. Should
proceeds of crime be laundered through afinancial institution, the reputation of suchan institution would be seriously damaged.
This would affect the willingness ofcustomers and other institutions to deal
with that institution, and could affect themarket as a whole.
Finally, money laundering can lead tothe bribery of individuals, institutions andeven of governments. In the beginning,
good and bad monies coexist, but in the end,
Gresham’s law4 operates, and we run therisk of remaining only with the corrupt
entities. This can seriously weaken the
moral and ethical standards of society andeven damage the principles underlying
democracy. For all these reasons, action
should be taken against money laundering.

117TH INTERNATIONAL SEMINAR
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C. Why Does Action Against Money
Laundering Need To Be
Universal?
In a time of globalisation of financial
markets, it is nevertheless not sufficient
to ensure domestic measures to preventmoney laundering. On the contrary, it isparamount that action against money
laundering and measures to prevent it are
universally applied. It is widely
acknowledged that the strength of the antimoney laundering system depends of thestrength of its weakest link: if a country
does not participate in this battle, themoney being laundered will flow quickly
through it and then return to the globalised
financial system. In such a situation,
experience shows that detecting the illegal
origin of the amounts at stake becomesmuch more troublesome. This means that,
although many efforts have been made toraise awareness of the problem and todevelop international co-operation in thisfield, actions must be developed to ensure
the co-operation in the fight against money
laundering is widespread worldwide, andthat every jurisdiction is engaged in thefight against this plague.
D. How to Fight Money Laundering?
Some arguments have been developed in
the sense that the fight against money
laundering determines the abandon of theliberalisation of the financial markets andthe return to administrative controls of
foreign exchange and of investment. It does
not seem that there is a need to be so. In
fact, the prevention of money laundering

4

According to this principle, which seems to havebeen known since at least Aristophanes, but is
usually attributed to Thomas Gresham, “bad money
drives out good money”. So, when we have two coinsof equal legal value in circulation, but one is
intrinsically lower value than the other, the worsecoinage will drive the better out of circulation, since
the better will be hoarded or melted down.

depends of an adequate legislative
framework, of the monitoring of
information and of international cooperation. The same occurs with theneeded supervision to ensure a smoothfunctioning of free and competitive
financial markets - adequate legislation,
timely and complete information andinternational co-operation.
This paper reports on three different but
related experiences. Section I deals with
the FATF experience, and the strategy tobuild a worldwide anti-money laundering
network. Section II discusses thedevelopments of the European Union fightagainst money laundering, in particular
the Directive “on the prevention of the useof the financial system for the purpose ofmoney laundering”. Section III informs on
the Portuguese experience to fight money
laundering. A short Conclusion tries tobring together some thoughts on the futureof the fight against money laundering.
II. THE FATF EXPERIENCE
A. Early Initiatives
The recent fight against money
laundering had some precursors. In 1980,
on June 27, the Council of Europe approved
its Recommendation No R (80) 10 on
Measures Against the Transfer andSafekeeping of Funds of Criminal Origin.
This was the first call of attention on thepossible abuse of banks for the purpose ofconcealing illegally acquired funds, and it
included a general recommendation on theidentification of clients.
In December 1988, the Basle Committeeon Banking Regulations and Supervisory
Practices adopted a Statement of Principles
on the prevention of criminal use of thebanking system for the purpose of money
laundering. The three main principles
refer to customer identification - “knowyour customer”, compliance with laws and265

RESOURCE MATERIAL SERIES No. 58
co-operation with law enforcement
agencies. The Statement encouragedbanks to put in practice measures to ensurethat all customers are properly identified,that transactions that do not appear
legitimate are discouraged and that cooperation with law enforcement agencies
is achieved.
Still in 1988, on the 19th of December,the United Nations Convention Against
Illicit Traffic in Narcotic Drugs andPsychotropic Substances (the Vienna
Convention) was adopted, and theincrimination of money laundering was
included in an international Treaty for the
first time.
In 1989, in response to mounting concern
over money laundering, namely over drugtrafficking money laundering, theFinancial Action Task Force on Money
Laundering (FATF) was established by theG-7 Arche Summit that was held in Paris.
The Task Force included representatives
from the G-7 members, the European
Commission and eight other countries. In
April 1990, the Task Force published areport containing forty Recommendations
to fight money laundering, which were to
become the standard by which anti-money
laundering measures should be judged.
Almost one year later, on the 11 th ofNovember 1990, the Council of Europe
opened for signature its Convention on
Laundering, Search, Seizure andConfiscation of the Proceeds from Crime.
This Convention is open for signature by
the member States of the Council of Europe
and the non-member States which haveparticipated in its elaboration and foraccession by other non-member States. It
criminalizes money laundering the way the
Vienna Convention had already done it.
F i n a l l y, t o c l o s e t h i s c y c l e o finternational instruments, the Council of266

the European Economic Community
approved, on the 10 th June 1991, theDirective 91/308/EEC “on the preventionof the use of the financial system for the
purpose of money laundering”.
B. Initial Developments
The Financial Action Task Force on
Money Laundering (FATF) was established
as an inter-governmental body to develop
and promote policies, both at national andinternational levels, to combat money
laundering. The Task Force is thus a“policy-making body”, aiming at improving
measures to combat money laundering.
The FATF does not have a tightly definedconstitution or an unlimited lifespan. For
the time being, the Task Force has beenreviewing its work and mission every five
years, and it has been agreed to continue
until 2004. Its future depends on theassessment made by the members’
governments that the FATF is still needed
and that its structure is the best and mostefficient way to carry on the mission
assigned to it. However, due to its own
nature of a Task Force, there will be a point
in time where the question will be renewed
on whether to conclude its work or tochange its nature.
The first five-year mandate of the FATF
lasted from 1989 through 1994. During
such period, the Task Force achieved
considerable results. The report on themoney laundering situation was drafted
and the Forty Recommendations were
established. The first substantial
enlargement of the Group took place withall the at that time members of the OECDjoining the Group, together with HongKong and Singapore, as well as the Gulf
Co-operation Council. The monitoring ofmembers’ progress in implementing antimoney laundering measures was launched.
Self-assessments of the situation in eachmember were prepared. The first round of

117TH INTERNATIONAL SEMINAR
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mutual evaluations of all Task Forcemembers, an essential tool to exercise the“peer pressure” that contributes to thedefinition of the nature of the Group, wasfinalised. The typologies exercises werestarted in order to give us an update ofmoney laundering trends and techniques,and possible countermeasures.
Interpretative Notes on several
Recommendations were drafted to clarify
some issues and provide additional
guidance. The Caribbean Financial Action
Task Force was launched.
The most important achievement of theperiod was undoubtedly the issuance of the
Forty Recommendations. They cover therole of the legal and financial systems in
the fight against money laundering, as wellas the area of international co-operation.
They provide a complete set of measures
to build a coherent anti-money launderingsystem, and are intended for universal
application. Nevertheless, they provide
sufficient flexibility to be followed andadopted by countries and jurisdictions withdifferent legal systems, in different regionsof the globe.
In April 1994, the London Plenary
meeting of the FATF approved the
document FATF-V/PLEN7/REV1 on the
future of the FATF, prepared by the United
Kingdom Presidency. The Ministers of the
FATF members later endorsed thisdocument, which set the FATF strategy forthe period 1994 through 1999. It was thendecided that the FATF should continue forfive years more, to monitor members
compliance with the Forty
Recommendations, to revise and updatesuch Recommendations and to increase therole of external relations work of the FATF.
C. Consolidation and Recognition
The second five-year mandate of the
FATF (1994-1999 5) was an important
period of consolidation of the work of the

Task Force and of recognition of its workfrom the outside world. The FATF
improved the level of its Forty
Recommendations, monitored theimplementation of the Recommendationsin the member countries, continued todevelop the typologies exercises, andcontributed to the launching of the Asia
Pacific Group on money laundering and of
the Committee of the Council of Europe forcountries that are not FATF members- thePC-R-EV Committee.
1. The Forty Recommendations
During this second period of existence,
the FATF carried out the review of the
Forty Recommendations to keep them fully
up to date with existing trends and to
anticipate future threats. This occurredunder the Us Presidency of the FATF, in
1995/96. Additional consideration wasgiven to nine particular matters. Some
Recommendations were amended and newones were introduced. The major changes
were6:(i)
The extension of the money
laundering predicate offences
beyond narcotics trafficking, toinclude all serious crimes;(ii) The mandatory reporting of
suspicious transactions;(iii) The application of the financial
Recommendations to the bureauxde change and all other non-bankfinancial institutions;(iv) The application of the financial
Recommendations to the financial
activities of non-financial
businesses or professions;(v) T h e e x p a n s i o n o f t h e
Recommendation on customer
5

The FATF rounds (coinciding with each Presidency)
run from July 1st through June 30th.
6 A full description of the stocktaking review of the
Forty Recommendations can be found at the FATF
VII Annual Report, available at the FATF Internet
site: http://www.oecd.org/fatf/.

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identification, to take into accountproblems raised by theidentification of legal entities;(vi) The particular attention required
when dealing with shell
corporations;(vii) The need to pay special attention
to and if necessary take measures
to preclude the use of new ordeveloping technologies for money
laundering purposes;(viii) The encouragement of the use of“controlled deliveries” techniques;(ix) The monitoring of cross-bordercash movements.
The FATF 40 Recommendations gained
worldwide recognition as the international
standards in this area during this period.
They have been endorsed by the Caribbean
Financial Action Task Force (CFATF), theCommonwealth Heads of Government and
Finance Ministers, the Council of Europe,
the Black Sea Economic Cooperation, theThree Baltic States (Riga Declaration) andthe Offshore Group of Banking Supervisors(OGBS). The revised terms of reference for
the Asia Pacific Group (APG), adopted inTokyo in March 1998, also recognised that
the Forty Recommendations are acceptedinternational standards. Finally, on June
10th, 1998, the Special Session of the United
Nations General Assembly recalled that“the Forty Recommendations of the
Financial Action Task Force... remain thestandard by which anti-money laundering
measures adopted by concerned statesshould be judged”. It also approved apolitical declaration recommending theStates that have not yet done so to adopt,by the year 2003, national anti-money
laundering legislation and programmes inaccordance with the action plan againstmoney laundering.
The action plan, a document entitled“Countering Money Laundering” whose
content derives directly from the Forty

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Recommendations, offers an excellent
panoply of principles to be applied andmeasures to be taken. Essentially, it referst o t h e t h r e e FAT F m a i n l e v e l s o fintervention: the legislative, the financial
and the law enforcement. At the legislative
level States are urged to establish a
legislative framework to criminalize money
laundering from serious crimes and topermit prevention, investigation andprosecution of money laundering.
Important tools: freezing, seizure andconfiscation of the proceeds of crime,
international co-operation and legal
mutual assistance. At the financial level
States are urged to establish a regulatory
regime to deny criminals and their illicit
funds access to national and international
financial systems. Main tools: customer
identification in accordance with the wellgrounded principle “know your customer”,
record keeping, mandatory reporting of
suspicious activity and removal of banksecrecy impediments. At the enforcementlevel, the main tools are: informationsharing mechanisms, extradition
procedures and other measures to provide
for effective detection, investigation,prosecution and conviction of criminals
engaged in money laundering activities. It
can be immediately recognised that the
document incorporates the policies
established in the Forty Recommendations,and has therefore added weight to theapproach outlined therein.
Further to the review of the
Recommendations, several other essential
FATF documents were produced from 1994
through 1999, in particular on the policy
for expansion of the membership; on thepolicy for dealing with members not incompliance with the Forty
Recommendations; on the participation ofinternational organisations in FATF
meetings, and on the assessment of theperformance of non-members.

117TH INTERNATIONAL SEMINAR
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2. The Mutual Evaluations
The Task Force continued to monitor the
implementation by its members of the
Forty Recommendations, namely throughself-assessment exercises, cross-country
reviews of measures referring to particular
Recommendations and the conclusion of
the second round of mutual evaluations of
all its members.
The mutual evaluation process has been
a central pillar of the work of the FATF,
and has led to important improvements inthe standard of anti-money laundering
measures in all FATF members. This peerpressure system whereby countries open
themselves to independent scrutiny, andare evaluated and subject to criticism by
their own peers, has been very successful.
This success stems not just from theprocess that is used to produce the country
report (questionnaire, on-site visit,
discussion in the Plenary), but also fromthe capacity of the Group to follow up themeasures that are taken to rectify any
deficiencies found.
All FATF-style regional groups haveaccepted the mutual evaluation concept
and some groups have now completed a
substantial number of reports. The
advantages for the country evaluated are
significant:(i)
It receives an independent andobjective analysis of its money
laundering system;(ii) The review is a comprehensive one,which looks at all aspects of thesystem;(iii) The evaluated country obtains
advice on best practice elsewhere
and on how its own system could
be improved; and(iv) The persons who participate as
evaluators, and the countries they
represent, benefit by evaluating
the system in another country.

The mutual evaluation process isenhanced by the FATF’s policy for dealing
with members not in compliance with the
Forty Recommendations. The measurescontained in this policy represent a
graduated approach. There are five steps
in this policy. The first is a progress reportat plenary meetings. A letter by the FATF
President and/or a high-level mission to thenon-complying country can follow it. Then
comes the application of Recommendation
21, which requires financial institutions to
pay special attention to transactions withpersons, including companies and financial
institutions in countries that do not orinsufficiently apply the Forty
Recommendations. As a final measure, theFATF membership of the country inquestion can be suspended. Steps takenin the year 2000 with regard to anonymous
passbooks by a FATF member are an
excellent example of how mutual
evaluations can lead to a more effective
international anti-money launderingsystem.
3. Preparing the Future
During FATF-IX, under the Belgian
Presidency, the FATF conducted a review
of its future. On April 28 1998, theMinisters of the FATF and the European
Commissioner for Financial Services
approved the FATF’s strategy for the years
1999 through 2004. In substance, the needfor continued action against money
laundering was acknowledged, themembership strategy was defined and thefuture direction and objectives of the FATF
were considered. It was recognized that,
although standards have improved
enormously in the past few years,
particularly within the FATF membership,
the challenge is to make those standards
truly global. The FATF’s strategy for the
future therefore emphasises theimportance of spreading the anti-money
laundering message to all continents andregions of the globe. The other major tasks

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of the FATF are the improvement of theimplementation of the Forty
Recommendations in FATF members andthe strengthening of the review of money
laundering trends and techniques.
This strategy intends to give atheoretical and practical answer to thepresent circumstances of the globalisation.
In today’s open and global financial world,
characterized by the strong mobility offunds and the rapid development of new
payment technologies, the need forinternational co-operation has increased
substantially. This strategy is deemed themost cost-efficient way of countering money
laundering.
D. Opening to the World
1. S p r e a d i n g t h e A n t i - M o n e yLaundering Message
The main objective of the FATF for theperiod 1999/2004 is to create a worldwide
anti-money laundering network. This is
to be achieved by expanding the FATF to alimited number of strategically important
countries; fostering the development ofcredible and effective FATF-style regional
bodies; improving the co-operation with
relevant international organisations, andsecuring the adoption of adequate antimoney laundering measures in nonmember countries through the applicationof the FATF’s policy for assessing nonmembers.
As it was already mentioned, in thepresent circumstances of the world
economy, it is paramount that the fightagainst money laundering becomes truly
global. The strength of the anti-money
laundering system relying on the strengthof its weakest link, we cannot afford to have“black holes” in the system whereby theefforts of all countries that are coherently
fighting money laundering are jeopardized
by those countries who do not wish to do
anything or who are doing little against the270

money laundering threat. The FATF hastherefore, in 1999/2000, under thePortuguese Presidency, started thisambitious project of creating the worldwide
anti-money laundering network.
(i)

Expanding the FATF to a limited
number of strategically important
countries

In June 2000, it materialized the second
enlargement of the membership in thehistory of the FATF, by accepting
Argentina, Brazil and Mexico as new full
members 7 , after all three candidates
having completed successfully a mutual
evaluation exercise. The efforts are now
geared to other regions of the globe where
the Task Force is less represented, namely
Africa, Asia and Eastern Europe.
(ii)

Fostering the development ofcredible and effective FATF-style
regional bodies

The FATF external relations programme
contributed to raise awareness of themoney laundering problem throughout theworld. Under the current strategy, thesystematic development of existing FATFstyle regional bodies, and theencouragement to establish new ones isvigorously pursued. A regional group,committed to the Forty Recommendations,exerting peer pressure among its members;
conducting mutual evaluations based on a
FATF-endorsed procedure; carrying out
self-assessment surveys and regional
typologies exercises; having one or several
FATF members within their membershipand a secretariat which would liaise
regularly with FATF, is vital for thedevelopment of the strategy.
7

Argentina, Brazil and Mexico had joined the FATF
as observer members, pending their mutual
evaluation process, at the September 1999 Plenary
meeting in Porto, Portugal.

117TH INTERNATIONAL SEMINAR
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Therefore, the FATF continues tosupport the work of the already existing
FATF-style regional bodies - the Asia/
Pacific Group on Money Laundering (APG),
the Caribbean Financial Action Task Force(CFATF), and the Council of Europe PC.R-EV Committee, as well as the antimoney laundering initiatives of the
Offshore Group of Banking Supervisors(OGBS). The worldwide anti-money
laundering network requires, nevertheless,an entire coverage of all regions. This is
why the policy of the FATF is to strongly
support the establishment of new FATFstyle regional bodies. These are theEastern and Southern Africa Anti-Money
Laundering Group (ESAAMLG) 8 , theIntergovernmental Task Force against
Money Laundering in Africa (ITFMLA)9,and the Financial Action Task Force inSouth America - GAFISUD10. Finally, it isenvisaged to promote the development offurther regional groups where none exists.
(iii) Improving the co-operation with
relevant internationalorganisations
A third element indispensable fordeveloping the worldwide network is the
co-operation with relevant internationalorganisations. Indeed, the FATF does not
act in a vacuum, and a number of otherinternational organisations or bodies (fromthe United Nations to the regional
development Banks) play a significant rolein the fight against money laundering.
Being the world’s leading authority for
setting standards and monitoring
compliance in the anti-money launderingarea, the FATF’s policy is to strengthen cooperative links with all relevant
8

Launched in Arusha, Tanzania, in August 1999.
Its first meeting took place in Dakar, Senegal, in
November 2000.
10 Launched on the 8th of December 2000, in
Cartagena de Indias, Columbia.
9international organisations, and inparticular with the MultilateralDevelopment Banks and the International
Monetary Fund.
(iv)

Securing the Adoption of Adequate
Anti-money Laundering Measuresin Non-member Countries throughthe application of the FATF’s policy
for assessing non-members

A last and essential component of thestrategy to counter money laundering
worldwide relates to the situation in nonmember countries. Taking into account theinterdependence and interrelation of antimoney laundering policies it is ofparamount importance to secure theadoption of adequate anti-money
laundering measures in non-member
countries to prevent, detect and punish
money laundering. In this context, the Non
Co-operative Countries and Territories(NCCTs) exercise plays an irreplaceablerole to reduce the vulnerability of theinternational financial system to money
laundering.
The FATF has therefore engaged in asignificant initiative to identify key antimoney laundering weaknesses injurisdictions inside and outside its
membership. It started by setting up
twenty-five criteria, consistent with the
Forty Recommendations, to identify
detrimental rules and practices that
obstruct international co-operation againstmoney laundering. Main obstacles
identified were loopholes in financial
regulation, inadequate or no requirements
for the registration of businesses and legal
entities and the identification of theirbeneficial owners, lack of international
administrative and judicial cooperation,and inadequate resources for preventing,detecting and repressing money
laundering. Then, the FATF reviewed theanti-money laundering regimes of a271

RESOURCE MATERIAL SERIES No. 58
number of jurisdictions against the abovementioned twenty-five criteria. The
reviews involved the gathering andanalysis of all the relevant information. A
draft report was prepared and eachreviewed jurisdiction sent their commentson their respective draft reports. These
comments and the draft reports themselves
were discussed between the FATF and thejurisdictions concerned during a series offace-to-face meetings. Subsequently, theFATF Plenary discussed and approved thereports.
On the 22nd June 2000, the last FATF
Plenary under the Portuguese Presidency
made public a “Report to identify Non-Cooperative Countries or Territories:
Increasing the Worldwide Effectiveness of
Anti-Money Laundering Measures” 11 .
Fifteen countries have been identified as
Non-Co-operative in the fight againstmoney laundering: Bahamas, Cayman
Islands, Cook Islands, Dominica, Israel,
Lebanon, Liechtenstein, Marshall Islands,
Nauru, Niue, Panama, Philippines, Russia,
St. Kitts and Nevis, St. Vincent and the
Grenadines. It is expected that this NCCTs
exercise, along with the efforts of regionalanti-money laundering bodies, willcontribute for all jurisdictions to matchinternational standards in the global fightagainst money laundering, and to join theworldwide anti-money laundering network.
The FATF is continuing to review thesituation in the fifteen countries named as
non co-operative, as well as in othercountries that had not yet been subject to
the NCCT survey. As the NCCT list is an
open one, it is expected that some names
will be deleted while some others could be
added. A particularly important issue isto guarantee fairness and transparency
throughout the whole process, the only way
11 The full text of this report can be found at the FATF

website: http//www.oecd.org/fatf/272

to avoid undermining the credibility of the
FATF, and to secure the possibility to deal
constructively with the reviewed
jurisdiction in a pro-active manner toensure future co-operation. In fact, wecannot lose sight that the aim of theexercise is too bring all jurisdictions toapply the international standards in thefight against money laundering. The best
result to be achieved by the NCCT exercise
would be to arrive at the conclusion that
there are no countries to be listed.
2. Strengthening the Review ofMoney Laundering Trends andCountermeasures
Further to the spreading of the antimoney laundering message, another majortask to be accomplished by the FATF
during the years 1999/2004 is to strengthen
the review of money laundering trends andtechniques (the third consisting in the
improvement of the implementation of the
Forty Recommendations in the member
countries).
Deep knowledge of money laundering
trends and techniques is essential to findthe adequate countermeasures. The
typologies meetings have generated themain source of expertise in this field, withlaw enforcement officials exchanging theirexperiences, annually. However, an effort
to make discussions more interactive
should be made. The increased
contribution from FATF-style regional
bodies and other relevant observerinternational organisations, as well as theparticipation of law enforcement andregulatory delegates from non FATF
members is an experience that has started
during FATF XI and I hope it will continue
in the future permitting to increase theinternational knowledge of the money
laundering phenomenon. An extension of
the geographical scope of the futuretypologies exercises is also in the agenda
for the next meetings.

117TH INTERNATIONAL SEMINAR
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The next years will be of crucial
importance for the fight against all forms
of serious crime, in particular againstorganized crime, narcotics trafficking,corruption, terrorism, etc. The fightagainst money laundering can make animportant contribution to that purpose, as
it may deprive criminals from the use of
the profits of their criminal activity.
However, it should be taken into accountthat no action against the laundering of theproceeds of serious crimes will, by itself
alone, achieve the goal of overcoming the
problems raised by organized crime. A
much more comprehensive action isneeded, and any illusions on this point can
only give rise to future delusion!
III. THE EUROPEAN UNIONEXPERIENCE
A. The 1991 Directive
The European Commission was amember of the Financial Action Task Forcesince 1989. However, the first legal text of
the Economic Community (EEC) on money
laundering was published only in June
1991. The legal instrument chosen to set
the Community standards on the matter
was the Directive 91/308/EEC “on theprevention of the use of the financial
system for the purpose of money
laundering”12.
The Directive profited substantially fromthe work of the FATF, and most of the
12 Under Community law, a directive sets the resultsthat have to be obtained and imposes the obligationon the Member States to achieve such results.
However, it gives the Member States the liberty
and flexibility to find the most adequate ways toaccomplish their task through the transposition of
the directive into its internal law. The 1991
Directive sets only minimum standards, and forthat reason, any Member State may adopt or retainin force stricter provisions in the field covered by
the Directive to prevent money laundering.

solutions included in its text were alreadycontemplated in the Forty
Recommendations. Nevertheless, while
the Forty Recommendations dealt with thelegal and financial systems, as well as with
the international co-operation, theDirective, in accordance with theCommunity rules then in force, had its
scope limited to the financial system. As
the title indicated, the objective of the
Directive was much more limited than the
Recommendations: it sets the rules to“prevent the use of the financial system forthe purpose of money laundering”. The
reason for the introduction of the Directive
was mainly the protection of the financial
system of the Community. On one hand,protection against the advantages thelaunderers could try to take of the existing
freedoms of capital movement and to
supply financial services; on the other
hand, protection of the single market, since
the lack of Community action againstmoney laundering could lead Member
States, to adopt measures which could beinconsistent with completion of suchmarket.
The Directive used a definition of money
laundering taken from that adopted in the
Vienna Convention 13, but admitted thepossibility for the Member States to extend
the predicate offences beyond drugtrafficking to any other criminal activity
designated as such for the purposes of the
Directive by each Member State.
1. O b l i g a t i o n s I m p o s e d t o t h eMember States
The Directive imposes several
obligations on the Member States. The firstis the obligation to ensure that money
laundering as defined in the Directive is
prohibited. It is assumed that theprohibition will be made mainly by penalmeans, within the framework of the Vienna
and Strasbourg Conventions. However, itis acknowledged that the penal approach

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RESOURCE MATERIAL SERIES No. 58
should not be the only way to countermoney laundering and, therefore, several
obligations with regard to the financial
system 14 are imposed on the Member
States.
Member States are required to ensurethat credit and financial institutions
identify their customers by means ofsupporting evidence when entering intobusiness relations, particularly when
opening an account or savings accounts, orwhen offering safe custody facilities”(article 3). The most important
contribution the financial system can giveto the fight against money laundering is
13 “Money laundering means the following conduct

when committed intentionally:- the conversion or transfer of property, knowingthat such property is derived from criminal activity
or from an act of participation in such activity, forthe purpose of concealing or disguising the illicit
origin of the property or of assisting any person
who is involved in the commission of such activity
to evade the legal consequences of his action,- the concealment or disguise of the true nature,source, location, disposition, movement, rights withrespect to, or ownership of property, knowing thatsuch property is derived from criminal activity orfrom an act of participation in such activity,- the acquisition, possession or use of property,
knowing, at the time of receipt, that such property
was derived from criminal activity or from an actof participation in such activity,- participation in, association to commit, attempts
to commit and aiding, abetting, facilitating andcounselling the commission of any of the actions
mentioned in the foregoing paragraphs.
Knowledge, intent or purpose required as anelement of the abovementioned activities may beinferred from objective factual circumstances”.
14 The Directive covers credit institutions andfinancial institutions, as well as insurancecompanies in so far as they carry out life insurance
activities. It covers also branches located in theCommunity of all such institutions even if theirhead offices are situated outside the Community274

the help to detect and to trace illegal funds.
Therefore, the Directive introduced several
other important obligations. The obligation
to keep a copy or the references of theevidence required for customer
identification for a period of at least five
years after the relationship with theircustomer has ended, or in the case oftransactions, of the supporting evidence
and records for a period of at least five years
following execution of the transactions(Article 4). The obligation to examine withspecial attention any transaction which
financial institutions regard as particularly
likely, by its nature, to be related to money
laundering (Article 5). The obligation of
the financial institutions to cooperate fully
with the authorities responsible forcombating money laundering, by informing
those authorities, on their own initiative,of any fact which might be an indication ofmoney laundering, without alerting thecustomers concerned, and by furnishingthose authorities, at their request, with allnecessary information (Articles 6, 7 and 8).
Lastly, the obligation for credit andfinancial institutions to establish adequate
procedures of internal control andcommunication in order to forestall andprevent operations related to money
laundering, and to take appropriate
measures so that their employees areaware of the provisions contained in the
Directive.
The most striking contrast between the
obligations created by the Directive and the1990 FATF Recommendations was the
mandatory nature of the reporting of
suspicious transactions. In fact, while the1990 Recommendations admitted that thereport could be made only on a voluntarybasis, the Directive, from the very
beginning, established a mandatory regimeof suspicious transactions report. The
remaining obligations created by the
Directive were equivalent to the measuressuggested in the FATF Recommendations.

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They constitute the basis for the cooperation of financial institutions and theirsupervisory authorities with theauthorities responsible for combating
money laundering.
2. The Lifting of the Banking Secrecy
A major discussion took place in the lateeighties/first half of the nineties aroundbanking secrecy. Traditionally, therelations within the financial sector werebased on the confidentiality of therelationship between the banker and his
customer: the banker did not ask questions;the customer did not make disclosures. The
fight against money laundering, namely
against drug trafficking money laundering,
introduced an entirely different approach.
For the first time, it was said that thebankers should care about the origin of
their customer’s money, co-operate withlaw enforcement agencies, and denouncesuspicious transactions of their customers,
without alerting them to this fact. For the
traditional banking system, thisconstituted a Copernican revolution.
To introduce this new concept in thefinancial sector was not an easy task. A
complete change of mentalities both of thebank directors and employees, as well asof the supervisory authorities was needed.
The idea met many resistances, and it wassaid that it could not succeed. Some saw
banking secrecy as the essential basis of
the financial business. Nevertheless, theForty Recommendations clearly
established that “secrecy laws should beconceived so as not to inhibit
implementation of the Recommendations”,
and the Directive required Member States
to lift the banking secrecy, either offinancial institutions or of supervisory
authorities, whenever necessary, namely
when a suspicion arises. The mandatory
reporting of suspicious transactions cameinto force for all EC Member States on the
1st January 1993.

Ten years later the discussion, as far as
the financial system is concerned, seems
entirely outdated15. In fact, in particularafter the BCCI case, financial institutions
understood that it was in their interest to
avoid being tainted by money laundering.
The image and good reputation of afinancial institution depends heavily on theperception that high legal, professional andethical standards apply. Any suggestionthat an institution is deliberately or
negligently involved in a money launderingcase can only contribute to its discredit. No
serious institution can afford to see its
image and reputation shaken by thesereasons.
B. The Amendment of the 1991
Directive
1. The Amendment Process
The application of the 1991 Directive in
the Member States, accompanied by thework of a Contact Committee created tofollow up the developments of the fightagainst money laundering in the
C o m m u n i t y, s h o w e d t h a t s o m eamendments to update the Directive, andto extend its scope were needed. The
European Commission, came to theconclusion that the 1991 Directive, “as oneof the main international instruments inthe fight against money laundering, should
be updated in line with the conclusions of
the Commission and the wishes expressedby the European Parliament and theMember States. In this way the Directive
should not only reflect best international
practice in this area but should also
continue to set a high standard in protecting
the financial sector and other vulnerable
activities from the harmful effects of theproceeds of crime”. Having reached thisconclusion, the European Commission, who
has the right of initiative under
15 It restarted, however, with regard to the so-called

gatekeepers: lawyers and accountants.

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RESOURCE MATERIAL SERIES No. 58
Community law, presented, in 1999, a
Proposal for a European Parliament andCouncil Directive amending Council
Directive 91/308/EEC of 10 June 1991 on
prevention of the use of the financial
system for the purpose of money
laundering. The proposal was ambitious.
According to the Explanatory
Memorandum, “as the 1991 Directive
moved ahead of the original FATF 40
Recommendations in requiring obligatory
suspicious transaction reporting, theEuropean Union should continue to impose
a high standard on its Member States,
giving effect to or even going beyond the1 9 9 6 u p d a t e o f t h e FAT F 4 0
Recommendations. In particular, the EU
can show the way in seeking to involvecertain professions more actively in the fightagainst money laundering alongside thefinancial sector”. The main changes
introduced by the Proposal with regard to
the 1991 Directive were a widening of theprohibition of money laundering toembrace not only drugs trafficking but also
all organized crime, and an extension of theobligations of the Directive to certain nonfinancial activities and professions.
According to the European Union
legislative process, a Working Group of theC o u n c i l 16 w a s s e t t o a n a l y s e t h eCommission’s Proposal and the European
Parliament prepared its opinion. The
Council Working Group started to consider
the Proposal in late 1999, and concluded
its work under the Portuguese Presidencyof the European Union during the firstsemester of the year 2000. The European
Parliament, after having considered the
Proposal in several different Committees,
formally approved its opinion on July 5,
2000. Taking into account the opinion of
the European Parliament, as well as theopinion of the Economic and Social
16 The Council integrates Ministers from each

Member State.

276

Committee, a political agreement was
unanimously reached at the Council levelin September 2000 to adopt a Common
position of the Council with a view to theadoption of the new Directive. The
European Parliament has now to consider
whether it fully accepts the views of theCouncil or still suggests amendments. If
the Parliament accepts the Common
Position of the Council, the Directive isimmediately adopted; if the Parliament
makes new suggestions, there will be aconciliation process between the
Parliament and the Council.
2. The Contents of the Amendments
The Commission’s proposal had theintention to widen the predicate offences
and to extend the scope of the 1991
Directive to several non-financial
businesses and professions, since the wholefinancial sector (including non-bankfinancial institutions, such as bureaux dechange, financial leasing, brokers, dealers,etc.), was already covered. The mainchanges to the 1991 Directive resulting
from the Council’s Common position, andcurrently under consideration by theEuropean Parliament, affect mainly thoseareas. However, there are also some otherminor changes to clarify some points.
The first clarification affects thedefinition of “financial institution” toensure that bureaux de change and moneytransmission/remittance offices, as well as
branches located in the Community offinancial institutions, whose head offices
are inside or outside the Community come
explicitly under the directive. It also
included in the definition investment firms
and collective investment undertakings
marketing its units or shares, and thus
made them subject to the obligations
contained in Directive.
One of the two major changes to the 1991
Directive is the definition of criminal

117TH INTERNATIONAL SEMINAR
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activity. Under the 1991 Directive,
criminal activity means “a crime specified
in Article 3 (1) (a) of the Vienna Convention
and any other criminal activity designatedas such for the purposes of this Directiveby each Member State”. This was a narrow
definition, which was already left behindby the revision of the FATF Forty
Recommendations, namely
Recommendation 4, which refers to serious
crimes. The new EU definition identifies
criminal activity with any kind of criminal
involvement in the commission of a serious
crime. It then defines serious crimes as
being, at least, narcotics trafficking, theactivities of criminal organisations, fraud
against the European Communities’
financial interests; corruption and any
offence which may generate substantial
proceeds and which is punishable by asevere sentence of imprisonment inaccordance with the penal law of theMember State. Moreover, Member Statesagree that, before three years from theentry into force of the new directive, they
will revise the definition of predicate
offences to money laundering, (essentiallyto include all crimes punishable with morethan one year imprisonment)17. With the
new wording, two major causes of concern
come now explicitly under the definition of
criminal activity: organized crime andcorruption.
In addition to the widening of the list ofpredicate offences, the second major change
the Common position introduces in relation
to the 1991 Directive is the extension of
the obligations imposed therein to several
non-financial businesses and professions.
According to the new Article 2a, Member
States shall ensure that the obligations laid
down in the Directive are imposed on
auditors, external accountants and tax
advisors; real estate agents; notaries andother independent legal professionals,
dealers in high-value goods and casinos18.
Thus, the European Union tries to give ananswer to the modern trends in money
laundering. Actually, there is evidence thatthe tightening of controls in the financial
sector has prompted money launderers toseek alternative methods for concealing theorigin of the proceeds of crime, with anincreased use of non-financial businesses.
Further to accountants and lawyers, withwhom we will deal in particular in the next
section, real estate agents, dealers in highvalue goods, whenever payment is madein cash, and in an amount of 15000 Euroor more, and casinos will now be required
to comply with the Directive’s obligations.
They will have to respect the rules oncustomer identification, record-keeping,increased diligence, co-operation with law
enforcement authorities and internal
control and training.
The new directive will also improve therules on customer identification, in
17 The full definition of serious crimes in the Common

Position reads:“Serious crimes are, at least:- any of the offences defined in Article 3(1)(a) of theVienna Convention;- the activities of criminal organisations as definedin Article 1 of Joint Action 98/733/JHA;- fraud, at least serious, as defined in Article 1(1)and Article 2 of the Convention on the protection of
the European Communities’ financial interests;- corruption;- an offence which may generate substantial proceeds
and which is punishable by a severe sentence ofimprisonment in accordance with the penal law of
the Member State.”
Member States shall before [three years from theentry into force of the Directive] amend the definition
provided for in this indent in order to bring thisdefinition into line with the definition of serious
Crime of Joint Action 98/699/JHA. The Council
invites the Commission to present before [...] aproposal for a Directive amending in that respect
this Directive.
Member States may designate any other offence asa criminal activity for the purposes of this Directive”

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particular to deal with the increased riskcreated by new technologies, Internet
banking, direct banking and other types of
non-face to face financial transactions. A
new Article 3 (10) has been agreed andrequires Member States to ensure thatspecific measures are taken to deal withthis problem19.

3. Lawyers and Accountants - theGatekeepers
The question of the submission oflawyers and accountants to anti-money
laundering obligations has raised
controversy. During the last year or two, a
new term has made its career in the antimoney laundering jargon: the gatekeeper.
A gatekeeper can be defined as someone
who is responsible for allowing someone
else access to a field, although he/she does
not necessarily own the gate or the fieldhe/she allows you access to.

18 Article 2A of the Common position reads:“Member

Gatekeepers are, according to the recent
terminology, lawyers and accountants.
They provide several services that may
open “gates” to financial transactions.
Such financial transactions may be used
for laundering purposes. In fact, financialtransactions made for money laundering
purposes are no different in substance fromlegitimate financial transactions: the only
difference being the origin of the funds
i n v o l v e d . M o r e o v e r, l a w y e r s a n d
accountants have been found involved intomoney laundering schemes, and therefore

States shall ensure that the obligations laid downin this Directive are imposed on the following
institutions:
1. credit institutions as defined in point A of Article
1;
2. financial institutions as defined in point B of
Article 1;
and on the following legal or natural persons
acting in the exercise of their professional
activities:
3. auditors, external accountants and tax advisors;
4. real estate agents;
5. n o t a r i e s a n d o t h e r i n d e p e n d e n t l e g a lprofessionals, when they participate, whether:(a) by assisting in the planning or execution oftransactions for their client concerning the(i) buying and selling of real property or
business entities;(ii) managing of client money, securities orother assets;(iii) opening or management of bank, savingsor securities accounts;(iv) organisation of contributions necessary forthe creation, operation or management ofcompanies;(v) creation, operation or management oftrusts, companies or similar structures;(b) or by acting on behalf of and for their clientin any financial or real estate transaction;
6. dealers in high-value goods, such as precious
stones or metals, whenever payment is made in
cash, and in an amount of EUR 15000 or more;
7. casinos.”278

19 Article 3 (10): “Member States shall, in any case,ensure that the institutions and persons subject tothis Directive take specific and adequate measuresnecessary to compensate for the greater risk ofmoney laundering which arises when establishingbusiness relations or entering into a transaction
with a customer who has not been physicallypresent for identification purposes (“non-face to face
operations”). Such measures shall ensure that thecustomer’s identity is established, for example, by
requiring additional documentary evidence, or
supplementary measures to verify or certify the
documents supplied, or confirmatory certification
by an institution subject to this Directive, or byrequiring that the first payment of the operations
is carried out through an account opened in thecustomer’s name with a credit institution subject
to this Directive. The internal control procedures
laid down in Article 11 (1) shall take specific accountof these measures.”117TH INTERNATIONAL SEMINAR
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attention has been brought to the role of“gatekeepers.
Gatekeepers may provide numerous
services, which can be misused for money
laundering purposes: introduction to banks
and other financial institutions,management of deposit, savings or
securities accounts, real estatetransactions, investment services,company formation, creation of trusts andfinancial and tax advice. However,lawyers, and in some cases accountants,
have a special privileged relation with theirclients within the framework of thefundamental right of defence. Therefore,
the imposition of the obligations laid downin the directive on lawyers and accountants
raises some difficult issues, namely on how
to harmonize the requirements of theprofessional secrecy and the needs to fightorganized crime. A balanced solution
requires a lot of good sense, and aparticular ability to find the adequateanswers to several questions, specificallywhen lawyers and accountants should be
subject to anti-money laundering
provisions and when their activities should
be excluded from any such provisions.
After a deep debate, the Council decided
that notaries and independent legal
professionals, as defined by the Member
States, should be made subject to theprovisions of the Directive whenparticipating in certain financial or
corporate transactions, since in thesetransactions there is a greater risk of theirservices being misused for money
laundering purposes. However, it isacknowledged that where independent
legal professionals are ascertaining thelegal position for a client or representing aclient in legal proceedings, there should be
an exemption from any obligation to reportany information obtained in the course ofascertaining the legal position for a clientor before, during or after judicial

proceedings. The same kind of reasoning
applies to auditors, external accountants
and tax advisors who, in some Member
States, may defend or represent a client in
the context of judicial proceedings orascertain a client’s legal position.
The new Article 2 A-5 (see footnote 18),
subjects notaries and other independent
legal professionals to the obligations laid
down in the directive in two different
situations: when they assist in the planningor execution of certain transactions fortheir clients or when they act on behalf of
their clients in any financial or real estatetransaction. The rationale for this solution
is the idea that the privilege of professionalsecrecy was granted to the lawyer/customer
relationship to safeguard the fundamental
right of defence. The intervention in
financial transactions, namely in thetransactions referred to in the new
directive, cannot be construed as a typicalact of the lawyer’s profession, and therefore
does not deserve that kind of protection.
On the other hand, from the axiologicalpoint of view, the value of the fight against
serious criminality precedes, in these cases,
other values.
Another issue that had to be solved in
the new directive was the question of theentity that should receive suspicioustransactions reports from notaries andother independent legal professionals. The
solution found was that Member Statesshould be allowed, in order to take properaccount of these professionals’ duty of
discretion owed to their clients, to nominate
the bar association or other self-regulatory
bodies for independent professionals as the
body to which reports on possible money
laundering cases may be addressed bythese professionals. Thus, the new Article
6 (3) states that “In the case of the notaries
and independent legal professionals
referred to in Article2a(5), Member States
may designate an appropriate self-

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RESOURCE MATERIAL SERIES No. 58
regulatory body of the profession concerned
as the authority to be informed of the facts
referred to in paragraph 1(a) and in suchcase shall lay down the appropriate formsof cooperation between that body and theauthorities responsible for combating
money laundering.
Member States shall not be obliged toapply the obligations laid down inparagraph 1 [obligation to report suspicions
and to provide the authorities with allnecessary information] to notaries,
independent legal professionals, auditors,
external accountants and tax advisors withregard to information they receive from or
obtain on one of their clients, in the courseof ascertaining the legal position for theirclient or performing their task of defendingor representing that client in, or concerning
judicial proceedings, including advice on
instituting or avoiding proceedings,
whether such information is received or
obtained before, during or after suchproceedings”
This is the status of the discussions as
far as the European Union directive isconcerned. A final word, however, should
be said on other developments at the EU
level. A Political agreement has beenreached on a framework decision on money
laundering, the identification, tracing,
freezing, seizing and confiscation of
instrumentalities and the proceeds ofcrime, and also on the extension ofE u r o p o l ’s m a n d a t e t o l a u n d e r i n gtransactions in general. A Decision has
been approved facilitating cooperation andinformation exchange between thefinancial intelligence units of the Member
States. All these measures try to make thefight against financial crime more effective.

280

IV. THE PORTUGUESE
EXPERIENCE
Portugal being a member of the FATF
and of the European Union, the Portuguese
experience follows naturally thedevelopment of the fight against money
laundering in these “fora”. From this pointof view, more than repeating the contentsof all legislation, which materializes, andin some cases anticipates, the solutions of
the Forty Recommendations and of the EU
Directive, it might be more interesting to
draw the attention to one particular aspectof the implementation of an anti-money
laundering system: the need for cooperation. Co-operation needed, first,
between the legislators and the financial,judicial and law enforcement sectors, and,after the entry into force of the legislation,
among these sectors.
A. The Development of thePortuguese Anti-Money
Laundering Legislation
The development of the Portuguese
legislation against money laundering
started with the implementation of therules of the 1988 United Nations
Convention (the Vienna Convention).
In January 1993, a Decree-Law wasissued (Decree-Law nr. 15/93, dated 22-0193), which incriminated autonomously themoney laundering conduct, i.e., created theoffence of drug money laundering. This
was a major change, since before the entry
into force of such law, money laundering
was punishable within the framework of
the obstruction to justice offence, but there
were no cases under this legislation.
The first sign of the need for co-operationin this field arose during the drafting of
the Decree-Law (actually during thedrafting of the Bill to be approved by the
Parliament authorising the Government tolegislate in this field, due to the exclusive

117TH INTERNATIONAL SEMINAR
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competence of the Portuguese Parliament
to legislate on criminal matters underPortuguese constitutional law). In fact,that legislation was prepared by amultidisciplinary group withrepresentatives of the Ministry of Finance,
Ministry of Justice, central Bank, Office of
the Attorney-General, Criminal
Investigation Police, Customs Authorities(as well as Health and Education
Ministries, since we were dealing also withdrug trafficking).
This proved to be very interesting
because, since the beginning, all Ministries,
Departments and Agencies to be involvedin the fight against money laundering had
an opportunity to give their opinions andconsider each others’ issues in the draftingof the legislation itself. This method was
followed in the further developments of thePortuguese legislation, in particular in theimplementation of the European
Community Directive on money
laundering, and in the development of new
initiatives in the fight against money
laundering.
The Directive was implemented throughDecree-Law nr. 313/93 (dated September
15, 1993), which created a number ofobligations for all financial institutions(either bank or non-bank financial
institutions, including currency exchange
businesses - “bureaux de change”) and foroffshore branches. The obligations createdby the Decree-Law were our already known
obligations imposed by the Directive:
customer identification, record keeping,
special diligence, report of suspicioustransactions, and training and internal
control. The Decree-Law was also draftedby a task force with representatives fromall the already mentioned Ministries andAgencies, the only peculiarity being, in thiscase, the consultation made to thePortuguese Banking Association, which
had almost all Portuguese Banks asmembers.
Finally, this method of co-operation
between legislators and ministries andagencies involved in the fight againstmoney laundering was also followed in thelast important development of thePortuguese legislation, which we may callstage III. With the co-operation of the
Ministry of Commerce and of both the
General Inspectorate of Gambling and theGeneral Inspectorate of the Economic
Activities, as well as of the other entities
already mentioned, a new Decree-Law wasdrafted and published on December 2, 1995
(Decree-Law nr. 325/95).
This Decree-Law anticipates almost all
the solutions that are now being discussed
at the European Union level within theframework of the amendment of the 1991
Directive. In fact, save for the issues
related to lawyers and accountants20, allother matters are already covered. It
extends the offence of money laundering
beyond drug proceeds to those arising fromall serious economic crimes and from othercrimes which generate important proceeds(terrorism, arms trafficking, extortion,
kidnapping, pandering, corruption, etc.). It
extends some of the obligations imposed to
the financial institutions (customer
identification for cash transactions above
a given threshold, record keeping andsuspicious transaction reporting) to some
non-financial businesses. The entities
covered by this Decree-Law are casinos,
real estate agents, bookmakers and lottery
dealers and traders in goods of highindividual value (precious stones andmetals, antiques, objects of art, aircrafts,
boats and automobiles).

20 It should be said, however, that in the beginning of

the nineties the intervention of Portuguese lawyers
in financial transactions was much more reduced
than some years later.

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The first conclusion, that can be drawn
from the fact that this legislation has been
approved without opposition, is that the
involvement in its drafting of the several
Ministries and Agencies anyhow relatedwith the fight against money laundering
has created a “consensus” not only about
its need, but also about its content. The
point is particularly important since someof the solutions introduced by thelegislation were not quite orthodox. This,
if nothing else, would be an importantreason to start the national co-operation
against money laundering at the level ofthe drafting of the legislation.
B. The Legislative Solutions inPractice
Once entered into force, the legislation
requires the co-operation of the entities
which have to fulfil the obligations createdby the law (financial or non-financial
institutions either privately or publicly
owned) and the different authorities withresponsibilities in the fight against money
laundering (either judicial or supervisory).
The system that the Portuguese legislation
has created is the following:(i)
The institutions covered by law (allfinancial institutions, including all
non-bank financial institutions,and some non-financial
institutions) have to comply withthe regulations and to fulfil acertain number of obligations, themost significant of which, by its
external relevance, is theobligation to report suspicioustransactions;(ii) The supervisory authorities(including those that control theactivities of non-financial
institutions) are required to control
the compliance of the supervisedor controlled entities and have thepower to apply administrative
sanctions in case of noncompliance. The administrative282

sanctions are, in most cases,
pecuniary, but, in the extreme
cases, can be either the suspension
or the revocation of any
authorisation needed for the entity
to carry on its business;(iii) T h e r e p o r t o f s u s p i c i o u stransactions is made directly to the
Office of the Attorney-General,
who commands both the competent
Public Attorney to open an inquiry
and to start a procedure, and thespecial unit of the Criminal
Investigation Police, whichcentralises the reports (BIB-FIU),
to carry on the investigations;(iv) Should the investigations be
successful, the competent Public
Attorney brings the case to court
for judgement.
One issue has to be solved before andduring the course of the investigations: theproblem of bank secrecy. As far as banksecrecy is concerned, it must be said that
Portugal, due to historic reasons, which
had their genesis in the years immediately
after the 1974 Revolution, has a strongbank secrecy regime. Only in very few
cases, namely in cases of judicial
investigations of criminal activities, is banksecrecy overridden. However, in cases ofmoney laundering, the Portuguese
legislation made it clear that there is noroom for bank secrecy. This is of vital
importance for the development of the fightagainst money laundering. The existence,in some countries, of bank secrecy rules
which prevail, even in cases of criminal
activities such as money laundering, canbe held responsible for some of theunsuccessful cases in the fight againstmoney laundering at the international
level, and was one of the reasons that lead
the FATF to engage in the Non-cooperative
Countries and Territories exercise.

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The Portuguese system overrides thebank secrecy in cases of money launderingand the abrogation of the bank secrecy
rules has two important consequences.
The first is that any institution subject tobank secrecy rules (or other rules ofprofessional secrecy), which has to comply
with the obligation to report suspicioustransactions, is exempted from any liability
whatsoever, provided that it has reported
in good faith. The disclosure of information
to the authorities, by its own initiative of
the reporting entity, does not involve any
breach of any duty of secrecy or any liability
provided that, as mentioned, suchdisclosure is made in good faith (Article 13
of Decree-Law nr. 313/93, dated September
15, 1993, applicable to the non-financial
sector by means of article 9 of Decree-Law
nr. 325/95, dated December 2, 1995). The
second consequence is that no entity canrefuse the disclosure of any information
requested by the competent judicial
authority in cases of investigation of money
laundering (article 60 of Decree-Law nr.
15/93, dated January 22, 1993). According
to this rule the communication of any
requested information, either manuallystocked or in a computer data-base, or thesurrender of requested documents may not
be refused by any entity, either public or
private, the only peculiarity being the fact
that, in the case of financial institutions,the request is made through the centralbank.
A system in action to fight money
laundering requires a deep co-operation ofmany entities, institutions and authorities,
but one clear conclusion that can be drawn
from the Portuguese experience is that
there cannot be any room for bank secrecy
rules in the fight against the laundering of
the proceeds of serious crimes.
Portugal has not created any special
body to ensure co-operation between thedomestic authorities concerned. However,the Portuguese delegation to the FATF,
which includes representatives from the
Ministries of Finance and Justice, from theSupervisory Authorities (central Bank,
Insurance Institute and Securities
Commission), as well as from the Office of
the Attorney General and the Criminal
Investigation Police, has been the forum
to share experiences, co-ordinate actions
and suggest improvements either to thelegislation or to the practice. On the other
Portugal has, since 1991, a very
comprehensive domestic legislation
governing international judicial cooperation. It provides for full mutual cooperation with the authorities of othercountries in the fields of extradition,transfer of criminal cases and execution ofsentences, as well as the transfer ofconvicted persons and assistance incriminal matters, including the detection,
seizure and confiscation of the proceeds ofcriminal activities. These provisions were
contained in Decree-Law Nr. 43/91 of 22
January, which has been substituted andreinforced by Decree-Law Nr. 144/99 of 31
August, which entered into force on 1
October 1999. This text is applicable when
there is no treaty or convention with acountry, and is based on the principle ofreciprocity with respect to coercive
measures. When there is an existing treaty
or convention laying down the frameworkand terms of co-operation, this legislation
still applies, but it is limited to thesubsidiary role of defining co-operation
procedures and determining which entities
implement these procedures.
C. Training
One final word should be written about
training and the co-operation in this field.
When fighting money laundering, it isnecessary to ensure that financial
institutions know what are the needs of law
enforcement people and that law
enforcement people know how financialtransactions are carried on. It is also

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further needed that all are aware of howmoney launderers work and that everybody
is kept updated with the new technologies
used for money laundering purposes.
Training, together with some form of
feedback to the reporting institutions, isthus of paramount importance.

main task is now to ensure the correct
application of the existing legislation inorder improve the effectiveness of the antimoney laundering system. This will
depend, however, not only of the domestic
efforts, but also of the degree ofinternational co-operation.

Considering this, in Portugal, a training
programme was prepared, based on a
Protocol signed between the Criminal
Investigation Police School of the Ministryof Justice and the Training Institute of thePortuguese Banking Association.
According to this programme, seminars
were held for the staff of financial
institutions with the presence of speakers
from the School of the Criminal
Investigations Police and, on the other
hand, senior staffs from financial
institutions and from the supervisory
authorities of financial institutions haveparticipated in sessions for the students of
the Criminal Investigation Police School.

V. CONCLUSION

This co-operation has also proved to beof great importance, not only because it
permitted to share experiences between
people with different backgrounds and notalways used to work together (police people
and financial people), but also because it
helped to build the basis for an informal
co-operation between the people involved.
This informal co-operation has proved tobe, in some cases, the main key for successin the fight against money laundering.
The Portuguese legislation has had
during the last years some other minor
amendments in order to improve its
effectiveness. As it was acknowledged
during FATF evaluations, the Portuguese
authorities have worked very hard to
establish a particularly comprehensive
anti-money laundering system. All players,
in both the public and the private sector,
have mobilised their forces to implement
wide-ranging prevention measures. The

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A huge effort is being made worldwide
to counter the laundering of the proceedsfrom serious crimes. The FATF, The
European Union, and many countries andjurisdictions, as well as many international
Organisations are taking measures toeradicate this plague from the face ofEarth. The FATF strategy to create aworldwide anti-money laundering network,with the co-operation of FATF-style
regional bodies, the European Union
improvement of the legislation of their
Member States, and the efforts of many
States to introduce more effective measures
to fight financial crime are concurring to
make this objective achievable. The mostrecent United Nations Convention Against
Transnational Organized Crime (Palermo
Convention), open for signature on the 12thof December 2000, will undoubtedly
represent a huge step forward and will givea further impulse to the current fight.
However, it should be retained that thebasis for success in this field is co-operation.
Therefore, it is of paramount importanceto ensure that all the pending efforts toimprove the anti-money launderingsystems keep or increase a high degree of
co-operation. This applies to the FATF
exercise on NCCT’s, as well as to the reviewof the Forty Recommendations, where cooperation with FATF-style regional bodies
has to be warranted. It applies to theEuropean Union efforts, where cooperation among Member States should be
increased. It applies at the domestic level,
where co-operation between different

117TH INTERNATIONAL SEMINAR
VISITING EXPERTS’ PAPERS
agencies and different sectors is absolutely
needed. Finally, it applies to the work of
relevant international Organisations.
The fight against money laundering
became somehow fashionable in the lastyears. Ten years ago, only a few pioneers
were engaged, in very difficult conditions,
it must be said, in the dissemination of theanti-money laundering idea. Today, many
entities, bodies, organisations, evencommercial companies, have initiatives on
the fight against money laundering. All
these entities have their own agendas andcoordination is sometimes very difficult.
However, further to the co-operation thatis needed, an effort of coordination should
be made to avoid duplication and otherforms of wastefulness.

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