GROUP 2

THE ECONOMIC CRIME INCLUDING MONEY LAUNDERING;ITS LEGAL AND FINANCIAL IMPLICATIONS
Chairperson
Co-Chairperson
Rapporteur
Co-Rapporteur
Members

Mr. Animesh Bharti
Mr. Yoshikatu Yamato
Mr. Fatos Lazimi
Mr. Takuro Himeda
Mr. Bounma Phonsanith
Mr. Thomas Toara
Mr. Abul Kashem
Mr. Satoshi Shibayama(India)(Japan)(Albania)(Japan)(Laos)(Vanuatu)(Bangladesh)(Japan)Advisers

Prof. Keisuke Senta
Prof. Masato Uchida(UNAFEI)(UNAFEI)

I. INTRODUCTION
There is a strong belief among the members of Group 2 that economic crimes, including money
laundering constitute a serious threat to national economies, and respective governments. Economic crimes
can have a devastating effect on a national economy since potential victims of such crimes are far more
numerous than those in other forms of crime. Economic crimes also have the potential of adversely affecting
people who do not, prima-facie, seem to be the victims of the crime. For example, tax evasion results in lossof government revenue, thus affecting the potential of the government to spend on development schemes
thereby affecting a large section of the population who could have benefited from such government
expenditure. A company fraud not only results in cheating of the people who have invested in that company
but may also adversely impact investors’ confidence thereby affecting the growth of the economy. There
have also been instances of manipulation of stock markets resulting in the loss of a substantial amount ofassets of the small investors. Corruption not only results in loss of citizens’ rights but also has the potentialof ruining the moral fabric of the society. Therefore, economic crimes constitute a serious threat to thenational economy and system of governance.
Therefore, our Group sees as vital the clear identification of incentives of economic crime on a national
and international scale. There is a potential need on behalf of our members to seriously look at the efficiency
and transparency of the legal systems adopted.
Being aware of the incessant increase and rich variety of forms of economic crime, the impressive
sophistication of money laundering operations and techniques, the Group deems as necessary theacknowledgment of each governmental strategy, so far pursued, in order to counter the offensive oforganized economic crime.

II. THE MAJOR FORMS OF ECONOMIC CRIME
The participating countries in Group 2, demonstrate various levels of performance in the criminalizationof economic offences, depending on the legal systems adopted. In addition to traditional forms of economic
crimes, new schemes to defraud people and governments are used incessantly by criminals to challenge thelaw enforcement mechanism. They are aided in their efforts by the ongoing revolution in the area of
information technology. Generally speaking the fraud schemes, embezzlement, breach of trust, loan
sharking, tax evasion or crimes in the fiscal area, trafficking in goods and humans, counterfeiting of currency
and other securities prevail in most countries.
Some countries are faced with predominant criminal offences, like in Albania, where the law enforcement
authorities need to deal mainly with tax evasion offences. In Albania, these forms of crimes are developed,
due to clear deficiencies in fiscal legislation and a series of cumbersome bureaucratic procedures.
The major commercial companies that operate in oil, fuel and the construction area in this country are246

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illegally favoured, thanks to their consistent ties with decision-making political groupings.
The key people that work on a day-to-day basis in the fiscal and customs authorities are sometimes
politically appointed, facilitating the functioning of tax evasion.
The money evaded is used to invest and expand other illegal activities or strengthen the existing ones.
Some other countries like Bangladesh or Laos have the problem of trafficking in human beings andsmuggling of various commodities. In Laos, while the traditional economic offences were smuggling of goods
along the borders, now there is a tendency of illegal smuggling of vehicles and other construction goods suchas cars, trucks, cement, steel and so on.
Vanuatu is considered a tax heaven, and criminals cunningly use it as a base for shell companies andoffshore financial centres for their illicit funds.
In Japan, in addition to corruption and corporate crimes, seemingly the situation favours the fraud
scheme and loan sharking that make up the largest portion of economic crime occurring in this country.
Concerning fraud, three types of crime prevail: investment fraud promising high returns, “ore ore’’ (it’s me,
it’s me) frauds and fictitious billing. Due to technological advancement “ore ore” frauds and fictitious billingare committed using mobile phones, the internet and fictitious bank accounts.
Apart from the traditional economic offences, India has been witnessing highly organized criminal acts ofcounterfeiting of currency and other government securities such as registration stamps, postal stamps, etc.

III. MONEY LAUNDERING AND ITS MODUS OPERANDI
It is widely accepted that money laundering can be defined as the process of legitimizing “ill-gotten
wealth”. It is an act which follows the commission of a predicate crime so as to use the proceeds of crime as
if derived from a legitimate source. Thus, the process of money laundering involves disguising of illegal
assets, converting them into legal gains, and removing them from access by the criminal justice system
while retaining their economic value.
With the globalization of economies, the act of money laundering often involves complicated financialtransactions in multiple jurisdictions; thus making it virtually impossible to trace the origin of such funds.
With the growing activities of trans-national organized crime syndicates, the laundering of criminallyderived gains is fast becoming a lucrative and sophisticated business across the globe involving lawyers,
accountants, bankers, etc.
The need for criminalizing the act of money laundering stems from the fact that hitting at the flow ofproceeds of crime is an important instrument in hurting the criminals, especially those engaged in organizedcrime. People who engage in criminal activity, with the motive of seeking huge financial gains, are found tobe highly vulnerable to attack on the proceeds of crime.
Criminalization of money laundering activities is, therefore, perceived to work as a threat to criminal
gains, thus acting as a deterrent to criminal activities.
In some countries, which lack the respective legislation, this mechanism of money laundering moves
more quickly and smoothly.
In countries like Albania, the major part of illegal proceeds is derived from trafficking in drugs and humanbeings at the transnational level. The huge gains profited are invested by formal means in legitimate
businesses, such as construction companies and in the lubricants trade.
In Japan, a money laundering scheme is implemented through the purchasing of bearer securities, use offictitious accounts and remittance to foreign bank account for the purpose of concealing the true ownershipand origin of the money.

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In countries like India, money laundering takes place through over invoicing of exports, under invoicingof imports, investment through shell companies and extensive use of hawala channels in the transmission ofmoney.
Obviously, the process of money laundering goes through a consolidated three-tier mechanism, likeplacing, layering and integrating of illegal proceeds. The first stage is the introduction of money, obtained byillegal activities, into the financial system. The second stage is the conversion of money in as many banks as
possible, especially abroad. The third stage is the reinvesting or integrating of this money into the economy,
taking the shape of legitimate businesses.

IV. CRIMINALIZATION OF MONEY LAUNDERING AND ITS ENFORCEMENTAS A PRESSING NEED
By a thorough inspection and examination of respective local criminal legislation and the legal means at
the disposal of governments to suppress organized crime, it would be reasonable to acknowledge that thelegal system to counter money laundering needs considerable strengthening at the global level and a lot ofwork is required to tackle the menace of the effects of money laundering
In addition, the legal structures on money laundering differ greatly from one country to another sincecriminalization of money laundering is dependant upon the economic, social, political and psychologicalbackgrounds that these countries offer.
Actually, we may group countries, based on a three tier assessment device, with regard to the scope ofconcerns expressed by them on money laundering.
First tier countries, such as Japan and Albania, have well-defined laws against money laundering. They
have also set up FIUs which provides and shares relevant information on money laundering withinvestigative authorities.
In Japan, the Anti-Organized Crime Law came into force in February 2000. This law expanded the scopeof predicate offences of money laundering, from traditional drug crime to various serious crimes.
In addition, this law provides for the suspicious transactions reporting systems for these offences, and it
unifies money laundering crime information. After arrangement and analysis, the chief of the FIU is eligible
to share the relevant information with investigation authorities. A Bill to revise the Anti Organized Crime
Law is now under discussion at the National Diet in order to ratify the UN Convention against Transnational
Organized Crime.
Second tier countries are those who have enacted or are in the process of enacting legislation to countermoney laundering. India and Bangladesh can be placed in this category since they have enacted legislation
on money laundering which defines predicate offences; a suspicious transaction, etc. and seeks to put a
Financial Intelligence Unit in place. However, the specialized system, to be put in place to combat moneylaundering operations, will take time to bear fruit.
The third tier are countries like Laos, which are yet to give their full attention to this matter.
The enforcement of law on economic crime, especially on money laundering is becoming a serious
handicap or impediment to the normal functioning of the rule of law. The level of law enforcement differs
greatly among countries.
More specifically in Albania, there is challenging legislation, when it comes to the compliance withstandards of major international treaties and conventions that universally cover the issues of transnationalorganized crime, including money laundering, but the level of law enforcement is still modest.
Several perpetrators of economic crime may be considered as “untouchable”, because they manage towaive their appearance in courts of law, thanks to their consistent relations with ruling corrupt politicalclans.

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We have to bear in mind that the money laundering operations are obviously facilitated through loopholes
in our legal systems. The whole process of placing, layering and integrating of the illegal proceeds in money
laundering poses a serious threat to the integrity of national and international financial institutions. Weakcentral banks, existence of illegal non-banking institutions and the failure on behalf of intergovernmental
structures responsible within FIU to perform adequately and professionally their vital responsibilities indetecting and preventing suspicious transactions are some of the issues which need to be addressed to makethe detection of money laundering more effective.
Eventually, each country needs to seriously revise their local legal policies, in the light of relevantinternational engagements, in order to invoke more efficient money laundering deterrent devices.

V. THE EFFICIENCY OF NATIONAL LEGISLATION
IN THE LIGHT OF THE UN TOC CONVENTION
The establishment of a reliable legal system composed of deterrent measures against organized crime,
including money laundering, marks a major step forward, which many countries should take in defining theirviable national strategies.
The most serious obstacles which these countries encounter in their attempts to mitigate the negative
impact of organized crime on respective economies, is the lack of substantially effective legislation capable ofconfronting the complex nature of various crimes, including money laundering.
The legislative body in each respective country should pay full attention to enact laws that are up-datedwith the latest tendencies of organized crime and the most recent developments on modi operandi in money
laundering. This is to say; at least countries should define a long list of predicate offences that are likely to
put in motion the money laundering process.
Confiscation and seizure instruments should be in place as an effective instrument to dismantle thesubstance of such offences. In addition to that, the countries should be aware that without an appropriate
international cooperation mechanism and mutual assistance instruments, no positive result, in the fightagainst organized crime, will be yielded.
Therefore, it is imperative for all countries to further encourage the instalment of a system of norms
which operates in a dynamic way in the common interest of the states sharing the same concerns andproblems.

VI. THE PREDICATE OFFENCES
Generally speaking, the countries share different approaches with regard to the legislation on predicate
offences. The long list approach is the predominant thesis. The countries that advocate the long list
approach reason that if the threshold approach is taken the scope of predicate offences will be too wide.
Therefore the offences that have a possibility of generating illegal proceeds should be listed.
The sources of law that cover the list of predicate offences are different in the countries. Albania exposes
this list of predicate offences through the Penal Code. Six sections in this Code deal with the various legal
nature of predicate offences. There is a severe penalization strategy for the commission of these predicate
offences considered as serious offences, where the minimum level of punishment is 5 years. The money
laundering offence is foreseen in this code as an offence with different levels of punishment, depending onseriousness, the level of cooperation and the danger to the economy and society this offence entails.
India follows the list approach for identifying the predicate offences for money laundering. The list
includes offences committed under the Indian Penal Code and covers offences committed against the State,body and property; The Narcotics Drugs and Psychotropic Substances Act 1985; The Arms Act 1959; The
Wild Life (Protection) Act 1972; The Immoral Traffic (Prevention) Act 1956; and The Prevention of
Corruption Act 1988. The Indian law on money laundering broadly covers the predicate crimes identified in
the UN Convention on Trans-national Organized Crimes.
In Japan, predicate crimes, other than traditional drug related offences which are listed in a special law on

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drugs, are defined in the Anti-Organized Crime Law, Article 2. Predicate crimes are certain crimes provided
under approximately 70 different laws including the criminal law, stimulant drug control law, andimmigration-control and refugee-recognition law. For example, murder, fraud, counterfeit of currency, crimes
related to firearms, habitual gambling, robbery, distribution of indecent materials and collective illegal
immigration are some of the predicate crimes.
In Bangladesh, the predicate crimes are defined in Penal Code-1860. For example, cheating conduct, suchas cheating by impersonation, etc. Bangladesh backs the idea of a long list of predicate offences.
Laos has no money-laundering Act. The traditional forms of economic crimes, such as fraud,embezzlement and breach of trust are taken care of in the Penal Code. The Laos government is currently
drafting a money laundering law and will submit it to the next National Assembly. This law will be inconformity with the UN conventions which Laos has already ratified such as: The United Nations
Convention against Illicit Traffic in Narcotic Drugs and Psychotropic substances and The United Nations
Convention against Transnational Organized Crime.

VII. CONFISCATION AND SEIZURE MEASURES
Confiscation and seizure instruments are a potential means in the hands of the prosecution authorities tosuppress the substance of crime. However, to make them effective, it is imperative that broad powers are
stipulated in the laws so as to effectively deal with the incidence of proceeds of crime.
In Albania confiscation and seizure procedures are in place in their Civil Code. The spirit of thisprocedural law doesn’t give full and lengthy powers to the prosecution office in this matter. In such cases aheavy onus of proof lies with the prosecution to satisfy the necessity of granting confiscation and seizureorders by the court, even the guilt of the subject must be proved- i.e. the convicted person has played an
active role in achieving the common goals (laundering the illegal proceedings) in a structured organizedgroup.
In India, the Prevention of Money Laundering Act 2002 empowers the Enforcement Directorate toinvestigate crimes of money laundering. The Director or other officers of the Directorate can attach
property, believed to be proceeds of crime as per the schedule, for a period not exceeding ninety days.
Similarly, these officers can search premises, break open lockers, etc., seize records or property and search
and arrest persons.
The Act provides for setting up of Adjudicating Authorities for adjudicating cases related with money
laundering. If after a hearing the Adjudicating Authority decides that any property is involved in money
laundering, it will confirm the attachment pending proceedings relating to the predicate crime before a court.
Once the guilt of the person is proved in the trial, an order confiscating the property shall be made. When aperson is accused of having committed the offence of money laundering, the burden of proving that proceedsof crime are untainted property is on the accused. An appeal against the order of the Adjudicating Authority
will lie with the Appellate Tribunal.
Japan has an advanced system of confiscation and seizure measures. In addition to the Penal Codeprovisions which provide for confiscation measures, the Anti-Organized Crime Law stipulates that
confiscation and collection of equivalent value orders will be made at the same time as the sentence for themain conviction is given.
In addition, the law allows confiscation of not only tangible items and financial credits but also proceeds
derived from criminal acts and this law allows attachment of the above stated items in order to ensure
confiscation and collection of the equivalent value.
According to the Criminal and Criminal Procedure Law of Lao PDR, the prosecuting and investigative
authorities can issue an order seizing illegal proceeds during the investigation of economic crimes, including
Money Laundering.
In Bangladesh, it is the authority of the Court to order confiscation, freezing or forfeiture of proceeds of250

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crime under the Special Powers Act 1974, The Negotiable Instrument Act 1881, The Anti-Corruption Act
1957, and Money Laundering Prevention Act 2002.
In Vanuatu, The Serious Offences (Confiscation of Proceeds) Act 1989 deals with confiscation and seizureof the proceeds of crime.

VIII. MUTUAL LEGAL ASSISTANCE
International cooperation is essential in identification, tracking and prosecuting of illegal proceeds ofcrime.
Albania has implemented Reciprocity Treaties with neighbouring countries, like Greece, Italy and
Macedonia, for exchanging vital information on matters related to the dynamic conversion of illegal
proceeds.
The Prevention of Money Laundering Act 2002 provides for mutual legal assistance in India by making
enabling provisions for agreements with foreign countries to enforce this Act, assistance to a contracting
State in the investigation of an offence, reciprocal arrangements for processes and assistance for transfer ofaccused persons and attachment, seizure and confiscation of property in a contracting State or India.
In the case of Japan, the basic law covering mutual legal assistance is the Law on Mutual Legal
Assistance in Criminal Matters. In addition, the Anti-Organized Crime Law stipulates mutual assistance inthe execution of court orders for confiscation, collection of equivalent value and securance in criminal cases
occurring in foreign countries and this law also stipulates the provision of information regarding suspicioustransactions to foreign authorities.
Lao PDR made extradition treaties with Vietnam in 1999, Thailand in 2000, and China and Cambodia in
2001. To tackle crime, including Money Laundering, it is necessary to build cooperative relationships withother countries, as well as to enact laws regarding mutual legal assistance in criminal matters.
In Bangladesh, The Money Laundering Prevention Act 2002 provides for mutual legal cooperation toother countries upon request.
In Vanuatu, The Mutual Assistance in Criminal Matters Act 2002 deals with mutual legal assistance.

IX. ISSUES UNDER SCRUTINY
The members of Group 2 consider that the extent of problems encountered with economic crime,
including money laundering, has grown in recent years.
There is a general consensus on the sources and nature of problems that organized economic crime,
including money laundering, expose each country.
The trend of increasing scale of organized economic crime, including money laundering, is strongly
believed to be a direct consequence of the following major causes.
1.

The failure of national legislation to meet the up-dated standards and norms on fighting organizedeconomic crime, including money laundering.

2.

Inadequate level of local legislation to resist the offensive nature of organized economic crime,
including money laundering.

3.

The lack of preparedness of the present financial - institutional framework in many countries andineffective investigative practices to deal effectively with the complexity of the nature of money
laundering.

4.

The poor performance of law enforcement agencies, on account of the low level of authority andmeans provided to them.

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5.

An ineffective system of mutual legal assistance has been found to be another factor hindering thetackling of transnational organized economic crime, including money laundering.

6.

Fictitious bank accounts are often used as tools to commit fraud and money laundering, and cell
phones and the internet are frequently used for committing fraud and drug offences. Therefore, suchtools that are often used to commit the above crimes need to be controlled properly. In addition
financial institutions, telephone carriers and internet service providers should take responsibility forpreventing their services from being misused as criminal tools.

X. FUTURE CHALLENGES
Group 2 concludes that joint efforts made by each country, in developing a reliable strategy of a vigorous
domestic enforcement of law as well as international cooperation, is the most effective means to cope withproblems related to economic crime, including money laundering. It would also be beneficial to adopt someof the following measures:
1.

First and foremost it is important that the number of state parties to the TOC convention should be
increased.

2.

Given the fact that the TOC convention gives due consideration to diversities of the legal andfinancial system of member states and allows each state party to exercise discretionary power to acertain degree, it is feared that those committing economic crimes, including money laundering, maytarget countries with lenient legal provisions and international criminal organizations may end up
setting a strong foothold in these countries, even if every State accedes to the Convention. In order
to dispel such concerns States Parties should be encouraged to apply article 34 paragraph 3 of the
TOC convention which stipulates “each State Party may adopt more strict or severe measures thanthose provided for by this Convention for preventing and combating transnational organized crime’’,since a thorough revision of the convention, increasing the mandatory provisions, is not possible in
the near future.

3.

Borderless criminal justice is essential in order to deal with borderless economic crimes including
money laundering. Group 2 considers it necessary that any sense of turfdom embedded in thecriminal justice system of each country be removed.

4.

It should be recognized that information sharing is important in order to suppress cross-bordercrimes. Items of information to be shared are as follows: suspicious transaction reports; information
relating to offences and suspects modus operandi and others. Despite some countries’ efforts to
exchange information on economic crimes, including money laundering, it has become more evident
that “information sharing” instead of information exchange is more necessary.

5.

To have a unified standard for Criminalization of common criminal offences occurring in eachcountry. Grant authority for universal jurisdiction on the above offences to all countries.

6.

The adaptation in local legislation of legal criteria applicable to an increase in scope of predicate
offences, which would enable the successful combating of organized economic crime, including
money laundering.

7.

The establishment of viable practices on confiscation and seizure measures, through the renewed
legal concepts that enhance the powers of prosecuting authorities.

8.

The financial institutions, telephone carriers and internet service providers should takeresponsibility for preventing their services from being misused as criminal tools. In view of this, thefollowing will be in order:(a)Reinforce personal identification in financial institutions through know your customer
identification norms. Impose sanctions on financial institutions when this is neglected.
Criminalize the selling, purchasing and transferring of bank accounts in the case of Japan.
(b)Create regulations to prevent the use of cell phones for criminal acts. Impose sanctions on cell
phone companies when the above regulations are violated.
(c)Create regulations to prevent the use of the Internet for criminal acts. Impose sanctions on
Internet service providers when these regulations are violated.

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9.

The proper attention should be given to the establishment of mutual legal assistance practices,
through the means of legal and political instruments. Frequent informal correspondence between
officials in charge should be encouraged.

10. The development of high expertise within each FIU is crucial in fighting economic crime, including
money laundering.
11. Conducting academic workshops at the local and broader level, in addressing the interactive andinterrelated matters exposed in the routine activity of the responsible financial and non-financial
institutions and independent professions.
12. Intensive publication through the mass-media or other sources of the issues and concerns, relating
to the personality and dynamic of organized economic crime, including money laundering.
A strong commitment to the goal of establishing a regime of measures incorporating the above will go along way in building a society free of crime.

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