Academic journal article Business Law International

Anti-Money Laundering: A Comparative Review of Legislative Development

Academic journal article Business Law International

Anti-Money Laundering: A Comparative Review of Legislative Development

Article excerpt

Executive summary

The historical background of money laundering legislation began with the drug trade. Initial anti-money laundering (AML) efforts were introduced primarily to prevent drug cartels from being able to process money gained from illegal drug activity, which cartels often used to build larger drug businesses. The key historical turning point of AML legislation is the Vienna Convention of 1988 (the 'Vienna Convention'), where 43 countries agreed on an approach to address money laundering rather than solely focusing on drug trafficking and related monetary issues. Shortly thereafter, the Group of Seven's (G7's) Financial Action Task Force (FATF) issued a report specifically addressing money laundering, citing 40 recommendations that needed to be implemented by the international community to effectively address this issue. These recommendations have driven the structure of the AML regimes of Canada, the United Kingdom and the United States.

Canada's AML legislative system was originally designed to address drug offences, but underwent two major changes. The initial change occurred with the adoption of Part XII.2 into the Criminal Code (the 'Code'), which specifically criminalised laundering and possessing the proceeds of crime. Part XII.2 also granted powers to law enforcement to detain, search and seize property from anyone thought to be in possession of the proceeds of crime, expanding the scope of enforcement powers available in Canadian law against money laundering. The second major change occurred in the early 2000s with the adoption of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the 'PCMLTFA').1 This law is Canada's current AML regime and implements various tools, such as reporting and record-keeping obligations, additional offences, and administrative monetary penalties to strengthen enforcement against money laundering. Furthermore, this legislation created the Financial Transactions and Reports Analysis Centre (FINTRAC), Canada's special intelligence unit, which has responsibility for reviewing reports and conducting preliminary investigations into money laundering.

Currently, money laundering prevention efforts focus on increasing international cooperation and addressing terrorist financing. The FATF and World Bank have consistently advocated international unity in addressing organised crime and money laundering by terrorist organisations as a necessary precursor to making any significant change in this global issue. Although there is some harmonisation among countries such as Canada, the UK and the US, there are various other countries, such as the Cayman Islands, whose legislative system is not harmonised.

Introduction and historical overview of anti-money laundering policy and legislative initiatives

Although the prevention of money laundering is the purpose of modern legislation and law enforcement both domestically and internationally, globalised efforts to address money laundering began with efforts to stem the drug trade. The problems associated with drug abuse and trafficking in the early half of the 20th century had grown into somewhat of an international crisis. The modern world experienced mass international exposure to various new illicit substances, and the fallout from drug abuse and addiction prompted the global community to come together and address this matter. Starting with the International Opium Convention of 1912, which was the world's first international drug control treaty, various international instruments and agreements were signed and later consolidated into the Single Convention on Narcotic Drugs (the 'Convention') in 1961.2

The Convention created schedules of drugs, each of which had certain restrictions on their use (Schedule I being subject to all restrictions).3 All members to the Convention generally committed to give it effect, cooperate in the execution of the Convention with other states, and limit the production and manufacture of drugs to medical and scientific purposes. …

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