Special Committee on Organised Crime, Corruption and Money Laundering (CRIM) 2012-2013

Thematic Paper on Money Laundering Relationship between Money Laundering,Tax Evasion and Tax Havens.

Money laundering is a very vast and complex topic, which requires a flexible and thoroughgoing political response to it. The present paper will only deal with the relationship between money laundering tax evasion and tax havens, for practical reasons and to remain in line with the decisions of the European Parliament’s CRIM Special Committee. However this is done with the tacit understanding that a narrow approach to anti-money laundering can only result in a concentration of criminal activities to those means that remain inadequately regulated. In other words the channels for money laundering function as communicating vessels where money can flow from one area to all the rest and as such only a holistic approach to anti-money laundering can be effective. Money laundering is a criminal offence aimed at presenting wealth of illicit origin or the portion of wealth that has been illegally acquired or concealed from the purview of tax and other authorities, as legitimate, through the use of methods that obscure the identity of the ultimate beneficiary and the source of the ill-gotten profits.

It is a criminal offence whose effects usually are deleterious for the functioning of a polity and pernicious for the socioeconomic fabric, both domestically and globally. The process of laundering money may occur in a variety of ways, such as with the shrewd exploitation of a complex, interweaving web of secrecy jurisdictions and/or tax havens, the manipulation of the concept of legal persons and legal arrangements to concoct ‘shell companies’ that can operate as covers for corrupt individuals, the abuse of loopholes in existing anti-money laundering legislation, the weak implementation of these rules, the corruption of authorities; all combined with the profiteer culture of numerous established financial institutions and market insiders in developed economies as in the European Union. Regardless of the origin of the money, whether it has been acquired by means of a criminal activity or a punishable offence, the conduits for money laundering effectively are the same.

Because of inadequate disclosure rules, it is far too easy to make use of a company or legal arrangements such as trusts in the EU, to conceal one’s identity for the purposes of money laundering. To create extra complexity a web of such legal structures can be bound together, often taking advantage of the lax regulation or opacity in a secrecy jurisdiction, which might as well result in the formation of a shell company with no staff or effective operations. In this respect trusts, foundations and various other types of legal arrangement or entities are also very important for money laundering and tax evasion. The assiduous criminals will opt for the safety of a complex network of facades, even though it might be the case that one may escape the purview of the law with a rather simple legal edifice.