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COUNCIL
OF EUROPE
COMMITTEE OF MINISTERS
EXPLANATORY MEMORANDUM
Recommendation
Rec(2001)11
(Adopted
by the Committee of Ministers
I. Introduction 1. Why adopt another Recommendation on organised crime ? Because organised crime is increasingly, as noted by another European institution[1], a threat to society as we know it and wish to preserve it. Criminal behaviour is no longer the domain of individuals only, but also of organisations that pervade the various structures of civil society, and indeed society as a whole. Crime is increasingly organising itself across national borders, also taking advantage of the free movement of goods, capital, services and persons. Technological innovations, such as Internet and electronic banking have become extremely convenient vehicles either for committing crimes or for transferring the resulting profits into seemingly licit activities. Fraud and corruption take on massive proportions, defrauding citizens and public institutions alike. In comparison, effective means of preventing and repressing these criminal activities are developing at a slow pace, almost always one step behind. It was therefore time for the Council of Europe to react, firmly and with determination. The present Guiding Principles – prepared by an expert committee on organised crime – reflect the ideas of both practitioners and policy-makers who would like to take reasonably effective measures against organised crime and thus contribute to making society safer. 2. Following a decision of the Committee of Ministers (587th meeting, 1 April 1997) the Committee of experts on criminological and criminal law aspects of organised crime (PC-CO) was set up. The purpose of this Committee was to analyse, under the authority of the European Committee on Crime Problems (CDPC), the characteristics of organised crime in the member States of the Council of Europe, to assess the counter-measures adopted and to identify means of improving the effectiveness of both national responses and international co-operation in this respect. 3. The PC-CO held three plenary meetings and six working group meetings, between April 1997 and December 1999. It first drew up a questionnaire which was circulated each year, with some amendments, to member States. On the basis of the replies provided, Committee PC-CO produced and submitted to the CDPC three annual reports on the organised crime situation in the member States (1996-1998). In addition, it carried out three best practice surveys, on witness protection, the reversal of the burden of proof in confiscation proceedings and intrusive surveillance measures, respectively. Finally, the PC-CO drew up the present recommendation containing guiding principles on the fight against organised crime and the explanatory memorandum attached to it.
4. The draft recommendation was first submitted to the CDPC at its 49th plenary session in June 2000. However, the CDPC decided to postpone, for lack of time, the examination of the draft and referred the matter to its Bureau. At its meeting of 7-8 March 2001, the Bureau examined and revised the draft Recommendation, taking into account comments made by CDPC Heads of delegation in writing. The revised text was approved by the CDPC at its 50th Plenary meeting, held from 18 to 22 June 2001. The draft explanatory memorandum was adopted on the same occasion. The Committee of Ministers adopted the text as Recommendation Rec(2001).. at the ..th meeting of the Ministers' Deputies and authorised the publication of this explanatory memorandum thereto. 5. The Committee's terms of reference were as follows: “Examine,
in the light of Recommendation N° R (96) 8 on crime policy in a time of change,
with a view to preparing a report and, if appropriate, recommendations, the
following questions : a. Characteristics
of organised crime analysis,
with a view to providing explanation, of the current situation of organised
crime, from a qualitative as well as a quantitative viewpoint, with particular
emphasis on: - the political, social (environmental) economic, legal and regulatory
factors that facilitate the emergence and/or unrelenting level of organised
crime; - the description of offences committed, including the modus operandi
of the organisations committing these offences (taking into account their
national or transnational character); - the description of the degree of organisation (e.g. ad hoc criminal
groups, structured criminal networks, mafia-type organisations); - the description
of offenders (young people or adults, nationals or aliens, legal persons,
national or transnational). b. Measures
with a view to preventing and combating organised crime Assessment of the domestic responses
to organised crime, implemented or envisaged, the resources necessary for them
(material as well as know-how), and the means of information and evaluation
available. In this context, in particular the following should be taken into
account, in relation to the phenomena referred to under (a) above : - legislative measures; - social (prevention) measures (e.g. social and economic policy,
education, information, welfare); -
situational (prevention) measures (e.g. measures to reduce the opportunities
and means of committing offences); -
improvement in the working of the criminal justice system (e.g. training and
specialisation, simplification of procedures, elaboration of new investigative
techniques or intervention of new actors such as financial institutions). c. Study
of national legislation in relation to organised crime To the extent that it appears necessary for
preventing or combating organised crime, national legislations in this area
should be studied in order to : - identify existing
solutions that could serve as examples; - ascertain the criteria used in national legislations to qualify
offences as "committed in an organised manner",
"conspiracy" or
"association de malfaiteurs" with a view to overcoming the
difficulties arising, e.g. in international co-operation resulting from
differences in these concepts, for example by establishing common criteria; - identify lacunae in
international co-operation instruments and possible solutions which could be
included in such instruments, taking into account the work carried out by the
Committee of Experts on the Operation of European Conventions in the Penal
Field (PC-OC); - prepare common
procedural principles, especially in relation to banking secrecy, the
admissibility of certain types of evidence or the length and effect of
statutory limitation periods; - define common
objectives of criminal policy in relation to organised crime.” II. General
comments 6. The text of the Recommendation is divided in four parts: - Principles relating to General Prevention (principles 1 - 7); - Principles relating to the Criminal Justice System (principles 8 - 21); - Principles relating to International Co-operation (principles 22 - 25); - Principles relating to Data Collection, Research and Training (principles 26‑28). 7. The first part, principles relating to general prevention (1 – 7), has been designed by the experts to draw Governments' attention to the importance of involving various segments of society, which are not related to law enforcement or criminal justice, in the prevention of organised crime activities. These segments seem to be often the “points of connection” which organised crime exploits for furthering or legitimising its activities. They are primarily legitimate corporate structures, e.g. banks and companies, which interact with organised crime for example by handling criminal proceeds or serving as a legal front for criminal activities.
Government structures, whether local or central, can also be involved, e. g. by delivering the necessary permits. Certain professionals, particularly in the financial and legal sector, may also act on behalf of organised crime as facilitators or financial conduits of illegal activities. These different types of institutions or professionals which are addressed in the first set of principles should become players or partners of government strategies against organised crime, e.g. by detecting illegal practices and reporting them to the competent authorities. The first set of principles also deals with certain types of regulations, for example in the area of currency exchange and other administrative matters, which can easily be misused for criminal purposes, often because of their complexity and/or weak controls. Finally, some principles relating to general prevention address those measures which corporations and government institutions can take internally in order to ensure transparency and accountability. 8. The second set of principles (principles 8 – 21) is related to the criminal justice system in the broad sense, i.e. it covers issues such as criminalisation of certain behaviour, investigation - including asset-investigations -, confiscation and witness-protection. The rationale behind these principles is that prevention measures can arguably not stop all organised criminal activities and need to be supplemented by repressive measures. The most radical measure which governments are called upon to take is to criminalise certain behaviour, i.e. participation in an organised crime group, the laundering of criminal proceeds and the failure to report suspicious transactions. Some or all of these acts may at present not constitute a criminal offence per se in the legislation of member States, but experts of the Committee considered their criminalisation as necessary building blocks in a comprehensive anti-organised crime strategy. 9. Deprivation of assets generated by organised crime is closely related to the issue of criminalisation, though governments have been suggested various options, including the use of criminal law measures, for dealing with such assets. Measures taken by administrative, e.g. tax authorities would meet the objectives of the principle. Another measure which Governments are invited to take is to pay special attention to fiscal or tax offences, when those are connected with organised crime, however difficult it might be in some cases to prove the link. It is therefore assumed that certain fiscal offences, for example tax evasion or fraud, may well be used against organised criminals, particularly leaders who handle large amounts of criminal proceeds but do not participate directly in illegal activities. 10. In addition to the principles related to criminalisation, the second set also addresses the question of financial investigations, co-operation of certain professionals with the authorities, provisional measures to locate and secure assets originating from organised crime and confiscation of such assets. These principles highlight again the need to focus on the financial dimension of organised crime by making asset-investigations an ordinary feature of anti-organised crime government strategies. Other principles further specify the possible elements of such strategies and recommend the use of protected witnesses, intrusive surveillance measures and covert operations, intelligence-based policing and inter-agency co-ordination to make organised crime-related investigations more effective. 11. A third set of principles (principles 22 – 25) deals with international co-operation and aims primarily at making formal and informal cross-border co-operation easier, e.g. by eliminating obstacles to existing arrangements and enabling new forms of co-operation. In this regard, the Recommendation contains in its Appendix a list of Council of Europe treaties, which Governments are invited to ratify and implement. Those treaties include instruments related purely to international co-operation, e.g. on extradition and mutual assistance, and sectoral treaties on criminalisation, such as money laundering or corruption. 12. Finally, a fourth set of principles (26-28) concerns ways and means of improving data collection, research and training with respect to organised crime.
III. Previous work
13. The Guiding Principles on the fight against organised crime may well be the first specific Council of Europe instrument which deals exclusively with organised crime, but by no means is it the first which mentions the issue. There are two previous recommendations which are worth recalling in this respect: Recommendations No R (86) 8 on crime policy in Europe in a time of change and No R (97) 13 on intimidation of witnesses and the rights of the defence. 14. Recommendation No R (86) 8 contained a number of important principles from which the guiding principles took over ideas. It invited Governments to: - consider the possibility of making it an offence to belong to or support an organised crime association; - endeavour to develop a good knowledge of the features of criminal organisations and to share that knowledge with the governments of other member states; - act on the basis of a strategy, in particular by using intelligence and crime analysis to achieve identified aims; - create specialised police, investigation and prosecutorial structures vested with means to carry out financial investigation and computerised analysis systems; - provide adequate protection for witnesses and other participants in proceedings relating to the fight against organised crime;
- envisage the interception of communications – both telecommunications and direct communications - in order to cope better with the requirements of fighting against criminal organisations; - make money laundering an offence and make provisions for the search, seizure and confiscation of the proceeds of crime; - envisage the possibility of providing for an investigation/prosecution magistrate with jurisdiction over the entire national territory, or providing for the establishment of a central co-ordination body. 15. Recommendation No (97) 13 recommended, inter alia, that: - when designing a framework of measures to combat organised crime, specific rules of procedure should be adopted to cope with intimidation. These measures may also be applicable to other serious offences. Such rules shall ensure the necessary balance in a democratic society between the prevention of disorder or crime and the safeguarding of the right of the accused to a fair trial; - while ensuring that the defence has adequate opportunity to challenge the evidence given by a witness, the following measures should be, inter alia, considered : - recording by audio-visual means of statements made by witnesses during pre-trial examination; - using pre-trial statements given before a judicial authority as evidence in court when it is not possible for witnesses to appear before the court or when appearing in court might result in great and actual danger to the life and security of witnesses, their relatives or other persons close to them; - revealing the identity of witnesses at the latest possible stage of the proceedings and/or releasing only selected details; - excluding the media and/or the public from all or part of the trial. - where available and in accordance with domestic law, anonymity of persons who might give evidence should be an exceptional measure. Where the guarantee of anonymity has been requested by such persons and/or temporarily granted by the competent authorities, criminal procedural law should provide for a verification procedure to maintain a fair balance between the needs of criminal proceedings and the rights of the defence. The defence should, through this procedure, have the opportunity to challenge the alleged need for anonymity of the witness, his credibility and the origin of his knowledge; - anonymity should only be granted when the competent judicial authority, after hearing the parties, finds that:
i. the life or freedom of the person involved is seriously threatened or, in the case of an undercover agent, his potential to work in the future is seriously threatened; and ii. the evidence is likely to be significant and the person appears to be credible. - where appropriate, further measures should be available to protect witnesses giving evidence, including preventing identification of the witness by the defence e.g. by using screens, disguising his face or distorting his voice; - when anonymity has been granted, the conviction shall not be based solely or to a decisive extent on the evidence of such persons; - where appropriate, special programmes, such as witness protection programmes, should be set up and made available to witnesses who need protection. The main objective of these programmes should be to safeguard the life and personal security of witnesses, their relatives and other persons close to them; - witness protection programmes should offer various methods of protection; this may include giving witnesses and their relatives and other persons close to them an identity change, relocation, assistance in obtaining new jobs, providing them with body-guards and other physical protection; - given the prominent role that collaborators of justice play in the fight against organised crime, they should be given adequate consideration, including the possibility of benefiting from measures provided by witness protection programmes. Where necessary, such programmes may also include specific arrangements such as special penitentiary regimes for collaborators of justice serving a prison sentence. IV. Commentary
on the preamble 16. It was noted by the experts of Committee PC-CO when studying responses to the questionnaire 1998, that many - but certainly not all - member States had developed some legislation and taken measures in order to fight organised crime. Individual offences, such as smuggling of human beings or trafficking in illegal drugs, were often criminalised, taking into account the specific features of criminality in a given member State. However, the experts also noted that in many cases neither the interaction between various criminal offences committed in an organised manner, nor the transnational character of such offences was duly considered. This resulted in an apparent lack of organised crime-related offences in criminal statistics and prompted the impression that isolated individuals were behind serious crime. Ultimately, the adequacy of domestic legislation to deal with organised crime seemed, in several cases, questionable.
17. Organised crime appears nowadays as one of the most significant challenges to law enforcement and, in some cases, to the authority of the State. Naturally, the establishment and strength of organised crime may greatly vary from one country to another. As the Annual reports on the situation of organised crime show, some countries are particularly vulnerable to such criminality, whereas others remain relatively protected (e.g. islands). It is generally accepted that one country, however powerful and determined it may be, can hardly eliminate organised crime, given the connections that exist between local and foreign groups and, increasingly, the federation of various domestic groups into “supranational” groups. The Guiding principles are therefore seen by the experts as a necessary “soft-law” instrument to develop a common crime policy with regard to organised crime, both in terms of legislation and co-ordinated action at international level. A common crime policy would be an essential step towards enabling member States to give an international response to organised crime. International co-operation in this respect is not only necessary, but the only key to success. Such co-operation also requires that States share experiences and knowledge about organised crime. 18. When
establishing the annual reports on organised crime, the experts of Committee
PC-CO noted that there was a strong correlation between organised crime and
economic crime, in particular corruption, money laundering and fraud. This
relationship was also acknowledged by various national and international
definitions of organised crime, or criteria used to identify “organised
criminal groups”: these invariably recognise corruption and money laundering as
closely connected, frequent but not always necessary side-activities of organised
crime. Fraud offences, e.g. organised VAT–carousels, are – again - often
committed by organised crime and give rise to substantial illicit proceeds.
This means that the instruments developed to combat corruption and money
laundering are useful tools against organised crime as well, such as the 1990
Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from
Crime (ETS No 141) or the 1999 Criminal Law Convention on Corruption (ETS No
173). As the Council of Europe has, so far, devoted relatively little attention
to fraud, the experts strongly support the idea, put forward by the General
Rapporteur of the 3rd Conference of Specialised Services in the
Fight against Corruption (Limassol, October 1999)[2], that it would be useful to
examine the possibility of drafting a European Convention on tax fraud, a type
of fraud which frequently involves
organised crime, with a view to harmonising domestic law provisions and
eliminating or reducing obstacles to mutual legal assistance in this area. 19. The experts also highlighted the need for innovative solutions when addressing the issue of organised crime. The idea of “best practice surveys”, included in the Committee's terms of reference, emerged out of the simple realisation that certain countries may have designed or implemented measures against organised crime which could prove useful for others as well. Three surveys were carried out between 1997 and 1999: on witness protection measures, on “intrusive surveillance” and on the reversal of the burden of proof in confiscation proceedings. All three provided ideas for the drafting of the Guiding Principles and contained specific recommendations concerning the measures they had dealt with. Reference will be made to those conclusions below, when discussing related issues. V. Commentary
on the principles contained in the Recommendation Definitions 20. The Recommendation contains three definitions, which are designed for the purpose of the text and do not necessarily correspond to any legal or doctrinal definition. Organised crime group 21. The Committee PC-CO did not seek to define organised crime. Instead, the Committee felt that it was more appropriate for the purpose of its work to use a list of criteria concerning organised criminal groups. The main objective of this list was to allow member States identify, along the same criteria, certain criminal groups that could qualify as “organised” and thus make it possible to compare national experiences concerning such groups. A list of 11 criteria was used, based on a similar list established by the European Union[3], which, in turn, was largely inspired by the definition[4] of “organised crime” by the German Bundeskriminalamt (BKA). In the Committee's interpretation, a certain number of minimum characteristics, numbered 1 to 4 (“mandatory criteria”), as well as at least two of the other characteristics (“optional criteria”) needed to be present for any criminal group to be classified as organised. The focus was therefore on groups that meet six or more of these eleven criteria. This can refer to traditional criminal groups but also to legal entities or professionals engaged in various forms of crime, e.g. white-collar crime. The following are mandatory criteria: - Collaboration of three or more people; - For a prolonged or indefinite period of time; - Suspected or convicted of committing serious criminal offences;
- With the objective of pursuing profit and/or power. 22. The following are optional criteria: - Having a specific task or role for each participant; - Using some form of internal discipline and control; - Using violence or other means suitable for intimidation; - Exerting influence on politics, the media, public administration, law enforcement, the administration of justice or the economy by corruption or other means; - Using commercial or business-like structures; - Engaged in money-laundering; - Operating on an international level. 23. The definition of “organised criminal group”, as formulated in the Recommendation takes into account these criteria, and it formally corresponds to the definition used in the United Nations Convention against Transnational Organized Crime[5]; it is also compatible with that in the Joint Action adopted by the Council of the European Union[6]. As the definition in the United Nations Convention, the one in the Guiding Principles also refers to “serious crime”[7]. Law enforcement agencies 24. The purpose of this functional definition is to include, irrespective of any national definition, those public institutions and agencies that carry out under their legal terms of reference, investigations and/or prosecutions of criminal offences. Police forces, gendarmerie, customs, tax or fiscal police, etc. would normally fall under this definition as investigating authorities. Public prosecutors would also qualify as prosecution agencies. Investigating magistrates would also qualify, either as investigation or prosecution agencies. State security or intelligence agencies which do not investigate criminal offences would fall outside this definition, with the exception of financial intelligence units (FIUs), which - at least in some countries – can also initiate or carry out investigations. Private security or intelligence agencies would not qualify as law enforcement agencies for the purposes of the Recommendation.
Principles relating to general prevention Use of cash payments (Guiding Principle No 1) 25. In some countries the economy is still largely based on substantial cash payments and cash currency exchanges are commonplace. This facilitates money-laundering, particularly if administrative controls are weak or non-existent. As proceeds of crime are primarily cash and need to be converted into other financial assets or property in order to disguise their criminal origin – a process which is now commonly called money laundering – large cash payments may be indicators of money laundering by organised crime. Purchase of expensive luxury cars, real estate property, gold or jewellery, works of art, securities or bonds, etc. in cash would normally give rise to suspicion – at least in cash-less economies – and, under certain circumstances, would be reported to the disclosure receiving agency. In addition, customers would be identified for transactions above a certain threshold. This kind of reaction to large cash payments should, over time, become common practice in all Council of Europe member States. It is recalled that Recommendations 22 and 23 of the Financial Action task Force (FATF) suggested already in 1990 that banks and other financial institutions “report all domestic and international currency transactions above a fixed amount” and that measures be taken to “detect or monitor the physical cross-border transportation of cash”. Article 3, paragraph 2 of Council Directive 91/308/EEC on Prevention of the use of the financial system for the purpose of money laundering (10 June 1991) requires credit and financial institutions within the EU to identify customers in respect of any transaction involving a sum amounting to ECU 15.000 or more. 26. It is therefore important that the above-mentioned measures be implemented in all member States in line with the FATF recommendations and the EC Directive. A specific Council of Europe expert committee[8] was created in 1997 with precisely this purpose and has now carried out the first round of its evaluations[9]. 27. What is required by principle 1 is that Governments take measures to prevent natural and legal persons from covering up, through cash payments or cash currency exchanges, the conversion of criminal proceeds into other property. Such policies should include measures to reduce the amount of cash payments, cash currency exchanges and physical cross border transportation of cash through the development of modern techniques of payment. This includes the use of checks, payment cards, direct deposit of salary checks etc. In addition, this principle implies an increased diligence on behalf of bank and financial institutions, as well as those professions, which handle large amounts of cash, to detect suspicious cash transactions.
Use of financial centres (Guiding Principle No 2) 28. Offshore financial centres are an element of the world economic system. Their number and variety have increased with the globalisation of trade and investment and the development of modern information technologies. The use made of their services by the different actors in economic life has risen dramatically and numerous financial institutions in Council of Europe member States – including States in transition - have in fact established their own subsidiaries in off-shore centres. 29. Offshore
centres are jurisdictions where non-residents have the possibility of
establishing companies and using financial services for activities outside the
centre, offering in most cases advantages such as low taxation rates and/or
under-regulation in areas like company, financial, administrative or currency
law. The services they offer vary and competition is developing between
different offshore centres. Some onshore countries have even found it useful to
open offshore zones inside their own jurisdiction. Therefore, the very notion
of an offshore centre could be misleading as it covers many different realities
and legal orders. Whereas some offshore jurisdictions offer bank secrecy,
confidentiality, anonymity, tax avoidance facilities and fail to provide
international co-operation in criminal matters, others have introduced measures
of supervision and control that easily match, or on occasion may even exceed,
those that can be found in some onshore jurisdictions. 30. The services provided by offshore centres are particularly attractive for individuals and companies involved in corruption, money laundering and other criminal transactions. Experience shows that they are often used for the setting-up of slush funds and for the creation of shell companies and there is evidence that large scale laundering operations often involve the use of shell companies or bank accounts domiciled in offshore centres. These operations are facilitated by or intermingled with apparently legal transactions, such as investment through offshore facilities and tax-planning. Often, these operations have no visible commercial purpose, such as deposits of cash into offshore bank accounts with low or no interest rate and subsequent wire transfers to other bank accounts overseas, and lack minimum identification data on the parties involved in the transaction. Customer identification in offshore countries is often limited to local intermediaries, such as lawyers, accountants or trustees, and financial institutions do not seek, as a matter of course, to establish through banks in the prospective customer's country of residence whether his/her background is suitable for entering into a business relationship. Likewise, there is often no identification of the ultimate beneficiary of the transaction, particularly in the case of corporate customers, which is contrary to the due diligence requirements set out by the FATF Recommendations (recommendation N° 11) and the EC Directive (Article 3, paragraph 5). Finally, SWIFT-messages from and to offshore countries often do not contain details of the remitter and/or the recipient of the message, contrary to current international banking practice.
31. Experience and government reports show that organised crime groups take advantage of the global financial markets and flaws in their regulations as much as tax evaders and money launderers do. In addition, offshore financial centres are likely to co-operate with foreign authorities to an undesirable extent. In this regard, the conclusions of the 4th Conference of specialised services in the fight against corruption[10] identified a number of obstacles that create an impediment for international co-operation: - differences in company laws and other related regulatory norms, in particular the possibility of setting up shell or letter-box companies lacking any commercial or industrial activity which often do not require minimum capital, audited accounts, annual general meetings or even a locally appointed administrator ; - the fact that such shell or letter-box companies are used for operating outside the territory of offshore centres where they have been created, rendering their control difficult or even impossible ; - the lack of means to identify the ultimate physical beneficial owner of shell or letter box companies ; - reluctance to sign, ratify or implement treaties on international co-operation in criminal and administrative matters ; - insufficient staffing and training of law enforcement personnel ; - the misuse of rules providing for bank secrecy, confidentiality, professional privilege and immunities. 32. To prevent the use of offshore financial centres for laundering money and conducting illegal financial transactions as well as to overcome some of these obstacles, Principle 2 urges Governments to take appropriate measures and thus also ensure compliance with the international standards. Of course, offshore and onshore countries both need to comply with those standards. The Principle explicitly recommends governments to allow the inspection of financial transactions which have no apparent commercial purpose and require the identification of the direct or ultimate parties involved. Here are some other measures which Governments should take to implement Principle 2: - Company laws should be brought into line with international « due diligence » standards established by e.g. the Basle Committee, the Financial Action Task Force (FATF), the European Communities requiring, inter alia, the identification of customers, record-keeping, reporting of suspicious transactions, etc;
- Obligations should be established for intermediaries, such as lawyers, accountants, auditors, company formation agents and trustees to require them to comply with minimum professional standards as well as to report suspicious transactions. Effective, proportionate and dissuasive criminal or administrative sanctions should be attached to the non-respect of such obligations; - Bank secrecy should never be an impediment in criminal investigations and procedures should be established for lifting, without delay, bank secrecy at the request of competent foreign or domestic law enforcement authorities; - No company should be registered in offshore jurisdictions before obtaining and verifying detailed information about the identity of the ultimate physical beneficial owner(s) and the effective responsible manager, the activities of the company, reliable bank or company references, criminal records, etc.; - Professionals dealing with the formation and management of companies and trusts should be effectively regulated – including, where appropriate, through compulsory membership of professional associations – and subject to codes of conduct and disciplinary rules; - Financial institutions should consider as 'suspicious' for the purpose of their reporting obligation, the involvement in a transaction of a shell or letterbox company established in an offshore jurisdiction, which does not take the measures described above; - Law enforcement personnel should be trained by specialists in the banking and auditing sector concerning the establishment, operation and possibilities of misuse of offshore shell and letterbox companies. Requirements for vulnerable professions (Guiding
Principle No 3) 33. In some Council of Europe member
States, certain professions, such as notaries, accountants, lawyers or tax
advisors may and do routinely conduct financial transactions on behalf of their
clients. However, as these professions are not subject to “due diligence”
requirements – now customary in the traditional financial sector - and are
often protected by client confidentiality rules as well as corresponding legal
privileges, they do attract dishonest clients (as well) and thus become
vulnerable to misuse for illegal transactions. For some of these professions,
it is necessary to make a clear distinction between the activities performed on
behalf of clients as financial intermediaries (opening bank accounts, accepting
cash deposits, authorising bank transfers via clients account etc.) and other
professional relationship
towards the client (legal representative, defense lawyer, personal
asset-manager, etc). Principle 3 should therefore be interpreted as limited to
the activities performed by these professions as financial intermediaries.
Other professions, such as real estate agents, art dealers, auctioneers,
casinos, automobile dealers, transporters of funds or auditors do not have this
feature of dual activity but are exposed to misuse for illegal transactions on
account of their handling of cash or other financial transactions and the lack
of due diligence requirements in their respect. In short, these professions
will be identified as vulnerable ones for the purposes of this Principle. 34. It is recalled that at present no
international standards exist to oblige these vulnerable professions to
identify their clients, keep business records or report suspicious transactions
to a disclosure receiving agency. The 1991 Directive (91/308/EEC) on prevention
of the use of the financial system for the purpose of money laundering provided
the basis for action at EU level to prevent criminal money entering the
financial system, by requiring financial firms (including 'bureaux de change' and
money transmitters) to know the identity of their customers when opening an
account or safe-deposit facilities or when a single or linked transactions
exceed euro15,000, to keep appropriate records and establish anti-money
laundering programmes. Most importantly it requires banking secrecy to be
suspended whenever necessary and any suspicions of money laundering (even when
the transaction is below the threshold) to be reported to the appropriate
authorities, i.e. disclosure receiving agencies. Since the Directive was
adopted in 1991, both the money laundering threat and response to that threat
have evolved. The EU Member States (in the recommendations of the Amsterdam
European Council's Action Plan to combat organised crime) and the European
Parliament (in two reports and resolutions) have called for a strengthening and
widening of the EU efforts in this crucial area. Most EU and some non-EU
countries did already go beyond the requirements of the 1991 Directive, in
terms of coverage of non-financial professions. The recently adopted second
money laundering directive seeks to enlarge the circle of professions and
institutions subject to due diligence requirements. It is based on the
realisation that as the money laundering defences of the banking sector have
become stronger, money launderers have sought alternative ways of disguising
the criminal origin of their funds. This trend has been clearly noted by the
Financial Action Task Force and by other international fora, which confirm that
the services of lawyers and accountants are being misused to help hide criminal
funds. There have also been numerous cases where the real estate sector is used
to launder money from criminal activity. 35. Principle 3 echoes the objectives of
the Second European Directive* (Footnote)
to strengthen the anti-laundering framework and supports the idea that a number
of professions and activities should now play a more active role in combating
organised crime and the criminal money it generates. The Principle itself does
not enumerate the full list of “vulnerable professions”. Instead, it leaves it
to governments of member States to determine which are the professions they
consider “vulnerable” under their anti-laundering regime. Of course, in so
doing, governments may wish to take into account the list set up by the second
Directive so as to ensure that the same categories of professions observe due
diligence regulations in all Council of Europe member States. 36. The Second Directive contemplates to
require the real estate sector, accountants and auditors and casinos to be
fully involved in the fight against organised crime. These activities and
professions would be obliged to properly identify their clients and report
their suspicions of money laundering to the appropriate anti-money laundering
authorities established by the Member States. These professions would be given
protection against any liability under civil or criminal law arising from the
reporting of money from a suspicious source. In the case of notaries and other
independent legal professionals the obligations of the Directive would apply in
respect of specific financial or company law activities where the money
laundering risk is the greatest (e.g. buying and selling of real estate or
business entities, handling clients' money, securities or other assets, opening
or managing bank, savings or securities accounts, creation, operation or
management of companies, trusts or similar structures). Given the particular
status of lawyers and their duty of confidentiality, they would be exempted
from any reporting requirement in any situation connected with the
representation or defence of clients in legal proceedings. To make full
allowance for lawyers' professional duty of discretion, it is envisaged that
lawyers would have the option to communicate their suspicions of money
laundering by organised crime not to the normal anti-money laundering
authorities but through their bar association or equivalent professional body. 37. With this special treatment for lawyers, the second European Directive is striving to include this profession in the anti-money laundering effort while safeguarding the special role of the lawyer in our society. This policy is fully endorsed by Principle 3 as well. Under the proposal, potential money launderers who attempted to misuse the services of the lawyer, possibly by providing inaccurate or incomplete information, would be liable to be reported to a higher authority. At the same time, lawyers would have the advantage of not being left to manage alone when faced with a suspicion of serious criminal activity. Complex administrative rules (Guiding Principle No 4) 38. The more complex administrative rules are the more likely it is that they will be misused. This is especially the case for areas such as export and import, licensing, fiscal and customs regulations. In most cases the rules in these areas are so complicated that even legal professionals hesitate over what is meant by them. Such complexity creates many possibilities for misuse, particularly for fraud. Various studies[11] and reports[12] on EU-fraud show that losses directly generated by large-scale organised fraud can amount to huge sums (an estimated 1.3 billion ECU in 1996) and point out that one of the usual facilitating factors is the complexity of rules combined with bureaucracy at both national and EU level. Principle 4 invites Governments to identify in their legislation those provisions which are or can be abused by organised crime and to take steps to strengthen legislation to prevent any such abuses. In addition, governments need to ensure consistency among such regulations. Governments' attention is drawn to the fact that regulations in these areas are not only complex but also often inconsistent with each other. Inconsistency creates loopholes that are likely to be exploited by criminals, including those engaged in organised crime. 39. Principle 4 suggests one possible way of dealing with complex administrative regulations, that is by subjecting them to thorough scrutiny by independent auditors who would assess their resistance to criminal misuse, such as fraud. This pre-enactment scrutiny, frequently done by large audit firms in respect of corporate regulations, could result in the early detection of inconsistencies as well as of opportunities for fraud or corruption under the proposed regulation. Use of information technology (Guiding Principle No 5) 40. The use of information technology had and continues to have tremendous impact on all segments of society, including banking. There is an increasing number of large banks in Europe, a tendency which started a few years ago in the Nordic countries, that offer their services through “virtual banks”, open 24 hours a day, 7 days a week. These “virtual banks” are set up by way of creating Internet access to a computer system and users may connect to that system to obtain services. No face-to-face relationship is established between the bank and the customer, though some transactions are generally not automated, such as the opening of a bank account. 41. There is, however, a serious risk of misuse with virtual banks, given that customer identification procedures are either rudimentary (the system requires a photocopy of ID) or totally non-existent (as it allegedly happens with some non-European based virtual banks). Anyone can – of course – be a customer of a virtual bank. There are no geographical constraints and personal knowledge of the customer's financial or indeed social background by the bank no longer makes sense (as in the good old times, when the bank established business relationship with trustworthy clients). In the case of corporate clients, which can be registered anywhere in the world, e.g. in under-regulated offshore financial centres, virtual banks have particularly no possibility of checking the corporation's financial background or its very existence, by asking bank references, proof of incorporation, etc. There is, therefore, a serious potential for misuse created by the possible circumvention or non-application of customer identification rules. 42. Once an account has been opened with a “virtual bank”, a variety of bank services can be obtained, including electronic wire-transfers to other bank accounts. Financial intelligence reports claim that in some regions of the world, “virtual banks” are mushrooming and significant amounts of money, some of suspicious origin, are wire-transferred by using SWIFT messages. Those reports also confirm the keen interest that organised crime groups have developed over the last couple of years in such virtual bank-based accounts in under-regulated offshore jurisdictions. It therefore seems essential that banks operating “virtual outlets” or “virtual banks” adopt, as a matter of policy, stringent measures, which guarantee that they know who their clients are. The application of the “know your customer” rule would mean that virtual banks do not accept clients without checking, as a traditional bank would do, the identity, existence and financial background of customers and the reliability of the information provided in evidence of those. Other due diligence requirements, such as record-keeping, etc. should naturally apply as well. Furthermore, “virtual banks” should identify the remitter and the recipient of any SWIFT message and detect, e.g. by controlling the beneficiary's country of location and bank references, any possible misuse of the system for money laundering purposes. Appropriate security features, such as encryption of transaction data, should also be applied to prevent intrusion and misuse of bank-data. Good Governance (Guiding Principle No 6) 43. Government and businesses are important players in modern societies. They are the largest employers in most countries and their financial resources are equally significant. Public administration in democratic societies is accountable to Government and, ultimately, to people who voted for the political party (ies) in power. Large businesses can hardly survive in today's global and integrated economy if they do not observe minimum rules of accountability, imposed by regulations, competitive environment, stock-markets and share-holders. It is expected from both Government and businesses that they perform their functions with due respect for rules of good governance, as a “bonus paterfamilias” would do. One of the possible and nowadays often used methods to ascertain that common standards apply to employees in both the public and private sector, is to adopt and enforce codes of conduct.
44. Codes of conduct should be clear and concise statements of the guiding principles of conduct by which an organisation expects its members to behave and the values for which it stands. It is both a public document and a message addressed to every individual employee. It is particularly important in the public sector, as it cannot be assumed that a public servant knows what standards of conduct are expected of him if he has never been told what they are. Reliance on some unwritten process of absorption of standards in the working environment is haphazard and insufficient. If the public servant is to be called to account for his conduct, it is essential that he should have been informed of what was expected of him and that he should know in what respects his conduct has fallen short of those expectations. A clear, concise and accessible written statement of the standards by which his working life is to be conducted is a basic requirement. In the private sector, the code may be seen as part of the employment contract and may in such cases be signed by the employee. A subsequent breach of the code can be a breach of the contract of employment and result in disciplinary proceedings or dismissal. Some codes may not provide for any sanctions but may simply make reference to the relevant offences, such as embezzlement or corruption, in existing criminal codes. To a great extent the effectiveness of a code may depend on the sanctions which are provided. The scope for taking disciplinary measures is of course wider than the scope for criminal law measures. 45. Codes of conduct should not be limited to addressing corruption. They should go further and promote high standards of ethical behaviour. They should state general principles covering lawfulness, diligence, efficiency and thrift, transparency, confidentiality and the handling of classified information, personal responsibility and independent judgement, fair dealing and integrity, and professional training. Their guidance can also be broadly divided into provisions dealing with personal integrity and those dealing with managerial responsibilities for upholding the integrity of the public service or the company, such as devising and putting in place appropriate systems of operation, ensuring that subordinates are informed and aware of their duties, applying systems of supervision and accountability, applying proper selection procedures, enforcing the code of conduct and maintaining discipline. A minimum is that codes of conduct should reflect the standards of the criminal law relating to dishonesty and corruption. Moreover, there should always be a relationship between codes of conduct and the laws and regulations concerned with disciplinary action. 46. The adoption of codes of conduct is particularly important in the area of public procurement, where substantial public funds are spent on expensive public works, and there is a greater risk of corruption or other malpractice. Practice indeed shows that as regards the volume of money, public procurement is by far the most important domain of corruption. The Council of Europe's Programme of Action against Corruption[13] noted that “the main remedies are attribution procedures which render corruption as difficult as possible (by, for example, the splitting of decision competencies between several persons or administrations, submission procedures which put all competitors on an equal footing, the requirement of very detailed estimations by competitors, good technical knowledge of the personnel of the public auditors who scrutinise the offers, etc.) and a very high degree of transparency at all stages of the process, including after the procedure has been terminated. Additional remedies include the reliability checks on administrators involved in the decision making in public procurement, etc”. 47. The adoption and application of codes of conduct by Government and businesses would, naturally, not only strengthen transparency and ethical values but help render illegal behaviour, including fraud, corruption, misuse of position, money laundering, more visible and, eventually, help eliminate it. Ultimately, organisations which do observe such codes of conduct and uphold the principles of transparency and accountability better resist penetration or control by organised crime. Whistle-blowing (Guiding Principle No 7) 48. This Principle is closely related to the previous one. It aims
at encouraging ethical behaviour in corporations, by adopting the principles of
responsibility and zero tolerance towards illegal practices. The Principle also
calls upon Governments to adopt common rules for the protection of
whistle-blowers, i.e. persons who report cases of corruption or other suspected
criminal activities committed by or within corporations. 49. Several documents recently adopted by the Council of Europe drew attention to the need to protect whistle-blowers and thus help emerge a collective attitude towards illegal behaviour within corporations. First, the aforementioned Programme of Action against Corruption pointed out that given the consensual nature of most corruption offences, the co-operation of corporate information-sources with the law enforcement authorities was of vital importance to uncover and prosecute these offences. It admitted, though, that in a large majority of cases persons who have information on corruption offences do not report it to the police, mainly because they would thus incriminate themselves or because of fear of the possible consequences. This is true both in the administration and in private business. Second, Article 22 of the Criminal Convention on Corruption [ETS N° 173] required States to take the necessary measures to provide for an effective and appropriate protection of collaborators of justice and witnesses. The drafters of this Convention, were inspired, inter alia, by Recommendation N° R (97) 13[14], which had suggested a comprehensive set of principles to guide national legislations when addressing the problems of witness-intimidation, either in the framework of criminal procedure law or when designing out-of-court protection measures. Both Article 22 of the Convention and Recommendation N° R (97) 13 referred to “witness” in a large sense so that it comprises persons who possess information relevant to criminal proceedings concerning criminal offences, e.g. corruption, and includes whistleblowers.
50. Principle 7 calls for the protection of whistle-blowers. Of
course, the level of protection needs to be adapted to the risks, which
whistleblowers face. In some cases it could be sufficient, for instance, to
maintain their name undisclosed during the proceedings, in other cases they may
need more far-reaching protection
measures. 51. The third and most recent document which deals with the
“reporting” duties of public officials is Recommendation No.
R (2000) 10 of the Committee of Ministers to Member states on codes
of conduct for public officials. It advised Governments, in Article
12 (Reporting) to ensure, in particular, that: - The public official who believes he or she is
being required to act in a way which is unlawful, improper or unethical, which
involves maladministration, or which is otherwise inconsistent with this Code,
should report the matter in accordance with the law. - The public official should report to the
competent authorities any evidence, allegation or suspicion of unlawful or
criminal activity relating to the public service coming to his or her knowledge
in the course of, or arising from, his or her employment. The investigation of the reported facts shall be carried out by
the competent authorities. - The public administration should
ensure that no prejudice is caused to a public official who reports any of the
above on reasonable grounds
and in good faith. Principles relating to the Criminal Justice System Making the participation in an organised criminal group a criminal offence (Guiding Principle N° 8) 52. There has been much debate lately on the widening gap between the complex criminological reality of organised crime and the individualistic approach of traditional criminal law. This gap – also visible in other areas of the law - has grown large because of the emergence and rapidly changing features of an ever more sophisticated, often entrepreneurial-type, organised crime, which can no longer be captured by the traditional “one man - one crime” offences. It is no longer a matter of a murder, a burglary, a robbery or a sale of contraband goods. One can, in the best of the cases, detect, investigate and prove such offences and obtain the offender's conviction. The problem is that even by adding those individual offences and offenders to each other, the result does not correspond to the reality of organised crime, which, as the name indicates, supposes some “organisation” of crime. As the annual organised crime reports of the Council of Europe clearly show, organised crime can be “organised” along various structures, e.g. pyramidal mafia-type, network-type etc., but what makes it ultimately specific compared to individual crime is the interaction between group members, who set objectives, divide and execute a criminal plan together. In certain cases, this criminal programme becomes permanent and the expression coined by the US legislators “continuing criminal enterprise” describes well the idea of organised crime. 53. As traditional criminal law focuses on
individual offences, even if committed by several persons, it usually does not
capture the social – organisational dimension of organised crime, for
conceptual reasons. Common law countries are in principle better equipped to
address such features with the concept of “conspiracy”, though it remains
unclear to what extent this could apply to offences committed by organised
crime. There is, however, an essential element in “conspiracy”, which civil law
countries do usually have difficulty with: the “agreement” of the conspirators
is sufficient to constitute the offence. Something similar is the essence of
organised crime: some people agree to commit offences together as part of a
long-term criminal programme. However, the agreement itself may not be
sufficient for criminalisation under certain laws, and some form of external
manifestation may be required. That said, a group of people with such an
agreement may divide up for committing offences, some members may only
contribute a car, a garage or participate only in preparations (in itself perhaps
legal) but what matters is to act towards a common objective. It is therefore
not necessary that all group members
commit offences according to an agreed plan – some may only support the group
with material help or - as leaders usually do - only give instructions. To make
those persons responsible, Principle 8 invites Governments to strive to
criminalise membership of criminal organisations as defined under the
corresponding definitions in the Guiding Principles (first indent of Part I)
irrespective of the place in Council of Europe member States in which the group
is concentrated or carries out its criminal activities. The formulation of the
Principle is such that it highlights the need to address organised crime groups
on a cross-border level. 54. The
1997 Report on the organised crime situation in Council of Europe member States[15]
contained a specific chapter on the criminalisation of membership in organised
crime groups and indicated that a number of member States had already taken the
steps suggested by Principle 8. In Belgium, for example, the law on criminal
organisations aims at making any person who is part of a criminal organisation
explicitly punishable, even if the person does not intend to commit an offence
within that organisation or to get involved in an offence as a co-offender or
an accomplice. The Italian Criminal Code has two provisions covering the
participation in a criminal association. The first, contained in Article 416,
is very similar to the French concept of “association
de malfaiteurs" and it does not require that specific offences be
committed[16]. The second
Italian provision is contained in Article 416bis
of the Criminal Code (introduced in 1982,
amended in 1992) and it covers the participation in a “mafia-type” criminal
association[17]. This
provision provides for aggravating circumstances if the association is armed
and if the economic activities which the members intend to perform or control
are financed in whole or in part by the proceeds of crime. 55. The
differences between membership of a mafia-type organisation and simple criminal
association are worth mentioning. While a simple association only requires the
creation of a stable organisation, however rudimentary, for the purposes of
committing an indeterminate number of offences, membership of a mafia-type
organisation requires in addition the organisation to have acquired a genuine
capacity for intimidation in their area. The members of the organisation must
also exploit this power to coerce third parties with whom the organisation
establishes relations and thus oblige them to enter into a conspiracy of
silence. Intimidation may take various forms, from simply exploiting an
atmosphere of intimidation already created by the criminal organisation to
committing new acts of violence or making threats that reinforce the previously
acquired capacity for intimidation. The “mafia-method” (or rather, the whole
host of instruments on which it is based) is therefore identified under Italian
criminal law by means of three characteristics (“powers of intimidation
deriving from the bonds of the organisation”, “coercion” and “conspiracy of
silence”) and all three are essential and necessary aspects of this association
offence. 56. In terms of aims, whereas a simple association aims at committing acts defined as criminal offences by the law, a mafia association can also be organised with the aim of obtaining direct or indirect control of economic activities, authorisations, public procurement contracts and services or profits or other unjustified advantages for the organisation or others, or to prevent or obstruct the free exercise of the right to vote or to procure votes for itself or others at elections. In its answer to the 1997 Council of Europe questionnaire on the situation on organised crime, Italy pointed to an important problem that had arisen over the past years, i.e. the need to legally qualify external support to the Mafia. It is the case of politicians, directors, or entrepreneurs co-operating with mafia organisations, i.e. doing each others "favours" (e.g. hiring members of the association in their company in return for protection and development of economic activities, or paying money or “adjusting trials”, or granting public contracts in exchange for votes). The question is whether such licit behaviours (very important for the survival and development of mafia associations) can be punished when perpetrated by non-members of mafia associations. The case-law[18] of the Court of Cassation has provided an important answer on this issue, when establishing that if an “external” contribution to the association has a special significance, either because it is a continued contribution or because it occurs at times of crisis of the organisation, such contribution can be equalled to “internal” participation, as far as punishment is concerned. In fact, the Court of Cassation clarified that even when a non-member of a criminal association carries out a single occasional act, and does so for the purpose of accomplishing any one of the aims of the organisation, such conduct must be considered as complicity in the offence. 57. At an
international level, the European Union addressed the issue of criminalisation
of participation in a criminal organisation by a Joint Action of 21 December
1998[19].
The text first defined the term “criminal organisation” as “a structured
association, established over a period of time, of more than two persons,
acting in concert with a view to committing offences which are punishable by
deprivation of liberty or a detention order of a maximum of at least four years
or a more serious penalty, whether such offences are an end in themselves or a
means of obtaining material benefits and, where appropriate, of improperly
influencing the operation of public authorities”. It then went on to establish
an obligation for EU member States to “undertake, in accordance with the
procedure laid down in Article 6, to ensure that one or both of the types of
conduct described below are punishable by effective, proportionate and
dissuasive criminal penalties: a. conduct by any person who, with intent and with
knowledge of either the aim and general criminal activity of the organisation
or the intention of the organisation to commit the offences in question,
actively takes part in: - the organisation's criminal activities falling within Article 1, even where that person does not take part in the actual execution of the offences concerned and, subject to the general principles of the criminal law of the Member State concerned, even where the offences concerned are not actually committed, - the organisation's other activities in the further knowledge that his participation will contribute to the achievement of the organisation's criminal activities falling within Article 1; b. conduct by any person consisting in an agreement with one or more persons that an activity should be pursued which, if carried out, would amount to the commission of offences falling within Article 1, even if that person does not take part in the actual execution of the activity.” 58. The text of the Joint Action makes it clear, as does Principle 8, that where in the territory of EU Member States the organisation is based or pursues its criminal activities, has no relevance. (Article 4). 59. At the level of the United Nations, the Convention against Transnational Organized Crime contemplates establishing a similar offence to that in the EU Joint Action or in Principle 8: Article 5 of the Convention (”Criminalization of participation in an organized criminal group”) obliges Parties to criminalise as a separate offence, inter alia, the agreement between at least two persons to commit a serious crime for obtaining financial or other material benefit and involving an organised criminal group, even if no act was committed in furtherance of it. In addition, the text provides that the agreement can be inferred from objective factual circumstances. An organised criminal group is defined (Article 2/a) as a structured group of three or more persons, existing for a period of time and acting in concert with the aim of committing one or more serious crimes or offences established in accordance with the Convention, in order to obtain, directly or indirectly, a financial or other material benefit. Criminalisation of the laundering of organised crime
proceeds (Guiding Principle No 9) 60. The purpose of organised crime is primarily to make money. Money helps criminals gain respect, buy legitimacy, bribe officials, etc.: in short, it enables criminals to continue doing business and make it appear legitimate. This process, which is hardly distinct from the normal course of business in many cases, makes it necessary that the direct profits from crime – often large amounts of cash - are turned into legitimate money, goods or other items of financial value. By disguising the illegitimate origin of such proceeds, derived most frequently from a range of illegal activities, such as drugs or other illegal commodities, trafficking, fraud, racketeering, etc., through a process which many call today “money laundering”, organised crime obtains clean money that can be used for doing “normal” business, e.g. investing it. This process is a sine qua non condition for organised crime to access – and possibly influence – legitimate financial and economic circuits and has been referred to by all existing definitions of organised crime as one of its constituting elements.
61. What is recommended by Principle 9 is that member States criminalise the laundering of any kind of proceeds, as it is required by the 1990 Convention on Laundering, Search, Seizure and Confiscation of Proceeds from Crime [ETS N° 141], including proceeds from organised crime. This would require member States to revisit their money laundering laws and, where necessary, enlarge their lists of predicate offences to any criminal offence[20], but at least include offences, which are usually committed by organised crime and generate significant proceeds. The proceeds of several activities may be, and often are, laundered together. If anti-money laundering measures are to be effective against organise crime groups which operate across the spectrum of criminal activity, the offence of money laundering must be based on a large number of offences particularly because in practice it is sometimes virtually impossible to know what specific offence the proceeds came from. At any rate, predicate offences should include tax offences as well. 62. Principle 9 echoes therefore an increasing international tendency to make money laundering offences applicable to all possible kinds of predicate offences, which in itself would make prosecutors' work easier when establishing the link between the laundering offence and the offence which generated the proceeds, but stresses particularly the need to criminalise organised crime-based laundering and thus the need to focus on the financial aspects of organised crime. Criminalisation of the non-reporting of suspicious
financial transactions (Guiding Principle No 10) 63. This Principle is closely related to the reporting obligation of suspected money laundering imposed on financial and non-financial institutions or professions[21] (hereafter reporting entities) by various international standards, e.g. the 40 FATF Recommendations (Recommendation N° 15) and Directive 308/91/EEC (Articles 6 and 12). It also takes into account the forthcoming Second EU Directive. These standards provide a general regulatory framework for dealing with money laundering in the financial and, increasingly, non-financial sectors. The central piece in this framework is the obligation on reporting entities to disclose their suspicions on possible money laundering operations to a designated authority, often called “disclosure receiving agency” or “financial intelligence unit” (FIU), which will process those for further investigations. The reporting entities or their employees have to be protected from any liability, whether criminal or civil, for breach of confidentiality. 64. If, despite their legal duties, the reporting entities intentionally refrain from forwarding information on money laundering suspicions, this may constitute under certain criminal laws aiding and abetting of money laundering. It is, however, rather difficult to prove that the reporting entity knew that the money was proceeds, even if most jurisdictions accept that intent or knowledge can be inferred from factual circumstances. In practice, banks or other financial institutions are seldom convicted for money laundering, whereas supervisory authorities or auditors frequently discover information, which should have been reported. In some cases it might be negligence or lack of training which explains non-reporting, in others, information is deliberately concealed from superiors and in others still, the whole reporting entity may be involved in furthering illegal activity.
65. Principle 10 invites member States to penalise the intentional non-reporting of suspicious transactions, i.e. when any reporting entity - including professionals such as lawyers and accountants – wilfully turns a blind eye on a suspicious transaction. Penalising such behaviour in this context implies imposing either criminal or admiminstraive law sanctions. Even if such behaviour amounts, perhaps, to aiding and abetting money laundering, a separate criminal or administrative offence would certainly play a preventative role by making the professions concerned act in a more responsible and careful manner. Depriving persons from illegal assets (Guiding Principle
No 11) 66. Many criminal organisations generate substantial profits and revenues, in reality proceeds derived from crime, which remain in their possession and are available to support further criminal activities or can be spent on personal consumption. The organisations involved in drugs, prostitution, selling stolen goods and illegal gambling in the UK are estimated to have generated between £ 6.5 billion and £ 11.1 billion in 1996[22]. Other countries estimated much lower profits during the same year: Spain had an estimate of USD 326 million, while Germany one of USD 549 million, generated by identified organised crime groups[23]. Though with a lot of caution, the FATF, IMF and other international organisations put forward enormous figures when estimating drug-generated proceeds, i.e. between USD 500 - 800 billion. Whatever the exact figures may be – if ever they will be known – it seems undisputed that the wealth accumulated by organised crime takes unprecedented proportions. 67. There are various legal avenues for depriving criminals of their wealth, if criminally acquired: these can be criminal, civil or administrative. Criminal law measures may, for example, include making the person responsible criminally for offences involving “illicit enrichment” and, as a consequence, confiscating the illicit assets. Administrative measures could consist of e.g. fiscal sanctions for non-declaration of revenues or wealth. The criminal law avenue remains, at present, very controversial. Even if limited to public officials, whose financial situation is relatively easy to control as they are on the State's payroll and have, in several countries, to declare their assets, an illicit enrichment offence raises various political, constitutional and legal problems. Following the example of the United Kingdom (Corruption Act (1906)), several countries introduced the offence of “illicit enrichment” to curb widespread corruption in the public sector (e.g. Hong Kong), by making public officials criminally liable for a significant increase in their assets which they cannot reasonably explain and account for in relation to their lawful earnings during the performance of their functions. However, assets of persons in the private sector cannot be controlled with the same ease. Any investigation by a public authority into someone's assets, the person not being a public official, needs solid legal grounds, e.g. some level of suspicion of illegal activity, whether criminal or fiscal violation (for example tax avoidance).
68. Guiding Principale 11 is intended to apply, under certain circumstances, to suspected organised criminals who manage to escape prosecution because they do not participate, or cannot be caught for having participated, in the commission of crime. First, there must be some evidence that the person's assets originate from organised crime (e.g. circumstantial or life-style evidence). The Principle requires that such evidence lead to a reasonable suspicion that the person's assets originate from organised criminal activity. Second, if reasonable suspicion is sufficient for criminal law action, for example a non-conviction based confiscation, member States should apply, in conformity with their constitutional principles, such a measure. This may require that the onus of proving the legitimate origin of the assets is reversed and placed on the defendant. If no reasonable explanation is given that the assets have a legitimate origin and the person, under the circumstances (no revenues, etc), appears to have no plausible source of such assets other than crime, this person could be subject to the said criminal sanction. 69. Where the above situation does not justify under the country's constitutional principles criminal law measures, civil or administrative ones may offer an effective alternative; for example, the use of tax sanctions for unaccounted assets/revenues. Tax and revenue authorities in many countries, for example in the Netherlands, do impose enormous fines on suspected organised criminals for non-declaration of revenues and non-payment of taxes. In this scenario, the same conditions apply as above, but the sanction is imposed by administrative authorities. Both solutions require careful consideration of the legal position of the assets and the proprietor's legitimate income and occupation. If, however, serious indicia are at the authorities disposal and their presumption of the assets' illicit origin cannot be rebutted, at least one of these measures, as described above should be made available. Liability for legal persons (Guiding Principle No 12) 70. Organised crime often needs corporate
structures for committing its primary profit-generating activities (e.g.
fraud), for laundering money and for integrating legitimate business. As the
1997 Council of Europe Report on the situation of organised crime noted “one
important aspect of organised crime – both in relation to fraud and money
laundering - is the use of businesses as a medium of organised crime.
Fraudsters will almost by definition have used some commercial vehicle as a
'front' for fraud, and smugglers (of legal and illegal goods and of people) may
find it convenient to use corporate mechanisms as a cover for their activities
(or because they want to make some extra money from crime to help with living
expenses and working capital). Furthermore,
extortion not uncommonly leads to the take- over of the firm itself, as the criminals become shadow directors or even real owners: this enables the racketeers to enter into pseudo-legitimate contracts with their commercial victims”[24]. 71. According to the findings of the Report, many Council of Europe member States experience all of the three types of business involvement that the questionnaire asked about, i.e. (1) belonging to already existing lawful companies where one or more employees co-operate with organised crime; (2) exploitation of a company by criminal groups mixing lawful and unlawful business; and (3) utilisation of a front company, including off-shore companies, carrying out no real business. The involvement of such business structures in organised crime was reported by, among others, the “the Former Yugoslav Republic of Macedonia”, Hungary, Ireland, Italy, Norway, Poland, Romania and Turkey, while Italy observed « criminal companies » that carry out apparently lawful activities and are perfectly symbiotic with the economic world, concealed by huge structures, and always closely linked to political leadership. Nordic and Baltic countries also acknowledged that organised criminals use real or fictitious front companies for business purposes. Germany reported that actual business structures were used in 257 domestic and 159 overseas proceedings, and that front companies were detected in 108 domestic and 66 overseas proceedings. Portugal mentions the legal businesses used to falsify documents and to recycle stolen securities. One now dismantled organisation mixed its illegal business with legal hotel industry profits of millions of Escudos. Non-trading companies from offshore finance centres, Canada and the US are often used as a front for fraud (as well as for money-laundering purposes, especially at the layering stage). Belgium noted that organised crime's economic benefit totalled nearly BEF 30 billion (about USD 825 million), and that three quarters of detected organised crime groups used an average of 2.3 commercial structures each, with nearly half commingling legal and illegal activities and only 11.3 per cent being mere artificial front companies not doing any real trading. The Netherlands (like Poland) reported substantial real business run by criminals in the transportation, hotel, restaurant and import/export sectors. Dutch private companies, one-man businesses, and Foundations are used to screen off illegal activities, and it is implied that all three types mentioned in the questionnaire occur in the Netherlands. 72. The liability of legal persons for crime has long been on the agenda of international organisations, such as the European Union, OECD and the Council of Europe, particularly in areas of fraud, environmental crime and corruption. The first step was taken in the area of environmental crime (a major source of profit for organised crime in certain countries) by the Council of Europe in 1977, when it called through Resolution (77) 28[25] for “the re-examination of the principles of criminal liability, with a view, in particular, to the possible introduction in certain cases of the liability of corporate bodies, public or private” (item 2).
The attached report noted that a “large part of European criminal legislation still adheres to the principle, established by Roman law, that legal persons cannot be held liable” (societas delinquere non potest), only their representatives as natural persons. Later on, at the level of the Council of Europe, more specific and legally binding instruments in the area of environmental crime[26] and corruption[27] gave full recognition to the principle of corporate liability, though they admitted both criminal and non-criminal (e.g. administrative) forms of liability. A similar tendency could be detected at the level of the European Union[28] and the OECD[29]. 73. All existing international instruments recognise the conceptual and legal difficulties which some countries may have in introducing corporate criminal liability, given, in particular, that criminal guilt supposes some kind of mens rea which only physical persons may have. It is therefore left, for the moment, to States' discretion whether under these instruments they introduce either criminal or administrative liability for legal persons, as long as such liability entails effective, proportionate and dissuasive sanctions or measures for the criminal offences committed within or by the corporation. 74. Principle 12 follows the path of the aforementioned legal instruments and invites member States to introduce corporate liability. This was considered crucial by the experts given organised crime's influence and dependence on corporate structures. What is required is to “ensure that legal persons can be held liable for offences linked to organised crime committed by them”, and, as a consequence, appropriate sanctions are applied against them.
Tax or fiscal offences (Guiding Principle No 13) 75. Governments have different policies regarding tax and fiscal offences, depending on a number of factors, such as the applicable tax-rates, law-abiding and tax-paying culture, legal provisions and enforcement policies, the need and ability of the government to collect taxes, etc. Governments usually regard tax offences as low-priority if tax-payers do pay voluntarily and as high-priority if they do not. Likewise, violations of tax and fiscal regulations are dealt with either under administrative law as minor offences if tax-payers don't need strong incentives, or under criminal law as more serious offences, if they do.
76. Tax avoidance or tax evasion are typically individual offences as long as income taxes are concerned, but may turn into serious tax fraud if corporations engage in massive tax violations. In some cases, tax fraud may be directly linked to organised crime, which naturally evades taxes as far as its illegal revenues are concerned, but get increasingly involved in highly sophisticated VAT-carousels (organised VAT-fraud) as well. Professor Savona suggested[30] that EU-fraud, including VAT caroussels, had become attractive for organised crime and losses indicated that these were large-scale organised financial crimes. UCLAF Reports[31] confirm that assumption. 77. Principle 13 therefore invites Governments to pay special
attention to those tax and fiscal offences, which though they seem low-priority
violations, can be linked to organised criminal activity. Indicators of such a
link could be the persons involved, irregularities with the legal entities
involved (e.g. registered in under-regulated offshore centres), other illegal
activities detected by law enforcement or intelligence agencies, for example
money laundering, the scale of the evasion or fraud-offence, etc. These cases,
which certainly require from tax authorities an “increased diligence” similar
to that in the banking sector to detect
laundering operations, should be taken seriously by governments and
investigation should take place routinely. To enable an effective prosecution
of such cases, obstacles to mutual legal assistance in this area should be
eliminated. Furthermore, training programs should be provided to staff of the
involved agencies on tax crime related mechanisms and modus operandi. Financial investigations (Guiding Principle No 14) 78. Police investigations usually focus on the material elements of crime, e.g. instruments and objects of crime, which can later be produced in evidence at court. Until relatively recently, there has been little attention given to the financial circumstances of the offender during criminal investigations and only if the crime directly involved assets or other financial means was there a seizure order issued for eventually confiscating those. Organised crime, given its fundamental objectives of making profit and gaining power, has an embedded feature of dealing with (dirty) money derived from its criminal activities, e.g. for laundering and re-investing it for further business or for personal consumption of criminals. Virtually every crime committed by organised criminal groups has some financial dimension, which – if properly investigated – may lead to other evidence of crime. Professor Levi and Lisa Osofsky described[32] a number of scenarios where financial investigations were useful in UK-based criminal investigations, including: - Showing that between the date of the offence and the arrest, the offender spent the equivalent of one third of the proceeds of an armed robbery over and above his legitimate income; - Ascertaining that large amounts of money had been deposited in a bank account, which had originated from drug trafficking. The offender was arrested and charged with supplying. He asserted that the funds had been accrued as a result of car dealing. Financial investigations rebutted this; - Establishing income in excess of means, which was appropriate to the goods stolen in an enquiry into professional car theft; - Linking drug traffickers to substantial amounts of drug proceeds on the basis of deal books and other evidence. 79. Professors van Duyne and Levi further stressed[33] that “the tackling of profit-directed (organised) crime-enterprises by means of the analysis and examination of their financial management (the flow of goods, payments and spendings) can be indicated by the broad concept of 'financial investigation'. This orientation to the 'crime-money connection' can serve several goals: - Financial investigation can contribute to the generation of evidence against individuals under suspicion, like the payment for the acquisition of smuggling transports (boat, trucks), the payment of bribes or the money-flow versus the invoicing in cross-border VAT-frauds; - In connection with this search for evidence, financial investigation can add value by establishing a data-base which can help to construct the suspected facilitating networks, including particular lawyers, accountants or seemingly legitimate investment companies which have so far escaped attention; - It can strip the criminal of his ill-gotten assets and finance (directly or, more commonly such as in the UK, indirectly) the costs of the police investigation; - Financial investigations can have an added value to the actual prosecuted crime enterprises by contributing to weaken or even disrupt the market network in which they are commercially situated. 80. The purpose of financial investigations, applied to the context of organised crime is, therefore, multiple: scrutinising the assets of suspected criminals to find out whether there is a relation to possible charges, unravelling the paper-trails in a labyrinth of money transactions in order to get a clear picture of the money flows and prove charges; and, ultimately, getting behind the money-flows and assets by uncovering the working and power relations of organised crime groups with a view to proving their existence and eliminating them. In addition, according to Professors van Duyne and Levi[34], the combination of those elements can and should go beyond the tactical objectives of a given investigation and used more for the strategic purpose of “mapping the criminal landscape or market-section in order to find the weak spots which can be used for subsequent investigation”. These strategic financial investigations should embrace the basic criminal “acquisition market” (all illegal goods, commodities and services), the “financial processing market” - where crime proceeds are laundered - and the “precipitation of the crime-money”, i.e. the markets where criminal investments are made (catering and hotel industry, real estate, etc.) and aim, ultimately, to “hamper the consolidation of the market position of crime-entrepreneurs and/or the acquisition of a sphere of influence or power in the upperworld”. 81. The means of financial investigations are, primarily, gathering and analysis of financial intelligence on suspected criminals or corporations, usually before a formal investigation is started. This is increasingly handled by Financial Intelligence Units (FIUs) where money laundering offences are concerned, following disclosures from the financial sector. However, organised crime investigations often do not or cannot benefit from the analysis produced by FIUs, and often asset-investigations and laundering-investigations are carried out by different agencies. Frequently, these agencies ignore each other's investigations because at the stage of their investigations the connections between assets, criminals and laundering activities are not fully understood. 82. What is required by Principle 14 is to enable inter-connected financial investigations into the assets of organised crime, e.g. by using financial intelligence available at other agencies, and making these investigations a primary feature of any criminal investigation concerning organised crime. That means, in practical terms, that financial investigations should be undertaken into the assets and properties of any suspect as soon as there is indication of his/her involvement in organised crime or connected offences, e.g. corruption, fraud or laundering of proceeds. This would entail, in accordance with the powers held by the investigating agency, to lift bank secrecy for gaining access to bank information, gathering information from professionals, such financial intermediaries, lawyers, accountants, on the person's assets, investments, income, etc., with due respect to professional privileges. 83. It is recalled that Article 3 (Investigative and provisional measures) of the 1990 Laundering Convention requires from contracting parties to be able identify and trace property which is liable to confiscation and to prevent any dealing in, transfer or disposal of such property. Article 4 (Special investigative powers and techniques) further requires parties to the Convention to empower its courts or other competent authorities to order that bank, financial or commercial records be made available, e.g. for financial investigations. The explanatory report noted in this respect that in general bank secrecy does not constitute an obstacle to domestic criminal investigations or the taking of provisional measures in the member States of the Council of Europe, in particular when the lifting of bank secrecy is ordered by a judge, a Grand Jury, an investigating judge or a prosecutor. Principle 14 stresses that there should be quick legal mechanisms to lift bank secrecy for the purpose of financial investigations, but also mentions production orders, by which financial institutions or intermediaries could be compelled to produce financial records or statements. Such production orders were also mentioned, inter alia, by the 1990 Laundering Convention (Article 4, paragraph 2). Confiscation and asset forfeiture (Guiding Principle No
15) 84. Depriving organised crime of its financial potential, i.e. its means to corrupt, to buy legitimacy and to continue its criminal programme, is one of the few tested successful methods against organised crime. It has been used extensively in a few countries, such as Italy, the United States and Ireland, in the fight against criminal organisations and it is said[35] to have impacted on the target groups by disrupting their financial background. Principle 15 is based on this experience and aims at making the removal of organised crime assets an integral part of any anti-organised crime strategy. The simple philosophy of “hit the criminal where it hurts, in his pockets” is, unfortunately, not yet fully understood and used by all member states at present. It emerged during mutual evaluations carried out by the FATF or by the Council of Europe, both involving monitoring of compliance of domestic anti-laundering regimes with international standards, that many countries have old-fashioned confiscation provisions which can apply only in a limited number of cases, often at the trial court's discretion. Furthermore, some countries still regard confiscation as an accessory penalty, usually applicable if the offender is convicted and he/she has assets as a direct fruit of his/her criminal activity. This approach results sometimes in odd situations, for example when the offender gets convicted for money laundering but his/her assets remain intact or have to be returned after the trial because there is no sufficient evidence of its direct relationship to criminal activity. Principle 15 reminds member States of the fundamental objective of the 1990 Laundering convention, i.e. to enable nationally and internationally the confiscation of proceeds and instrumentalities of crime, in particular drug trafficking and other forms of organised or serious crime. It should be recalled that confiscation may not only concern the sources of wealth constituting illicit profits, but also those used or planned to be used in committing crimes. Therefore, any sources of wealth possessed by organised crime should be subject to confiscation, including businesses which provide material elements in the organisational-operational structure of an organised crime group, even if it is not possible to reconstruct its criminal origin. Criminal assets, even if intermingled with legitimate ones, should be subject to confiscation, along with instrumentalities and direct criminal proceeds. Only by being systematic, therefore automatic if the conditions are met, will confiscation become what it ought to be: a strategic weapon against the economic and financial background of organised crime and, ultimately, against its very existence. 85. Principle 15 does not only address confiscation but also those provisional measures which enable its undertaking: tracing, freezing and seizing assets. Again, reference is made to the various powers which countries need to introduce in conformity with this Principle, which follows the logic of Article 3 (and 11) of the 1990 Laundering Convention, e.g. restraint and attachment orders, monitoring and tracing orders, seizure or sequestration orders, etc. Independent confiscation or
forfeiture proceedings (Guiding Principle No 16) 86. As it was pointed out
above, confiscation is often considered an accessory penalty which supposes,
notably, that the offender be convicted by a criminal court for a criminal
offence. It has to be noted that such a traditional concept of confiscation, as
implemented by certain member States, cannot be used effectively against
organised criminal group members and their leaders. Investigations into
organised criminal groups often lead to suspicions about the criminal origin of
their wealth, based sometimes on tax data or lifestyle intelligence, but
produce little evidence of their involvement in criminal activity. 87. What is proposed by Principle 16 is to
cut off confiscation or forfeiture proceedings from the traditional trial
proceedings focusing on the supposed offender's guilt and extend civil
forfeiture powers. This means that member States should envisage establishing
proceedings focusing on the assets to be confiscated/forfeited without
necessarily requiring the suspected offender's conviction for a necessary condition
of the final confiscation/forfeiture decision. Those countries which are
familiar with “in rem” proceedings,
could content themselves with some lower level of evidence (e.g. balance of
probabilities) of the criminal origins of the assets in the absence of, or
insufficient evidence for, criminal conviction of the owner. Other countries -
which need a criminal conviction and do not recognise “in rem” proceedings -
could introduce separate post-conviction proceedings for confiscation, in which
all assets would be assumed to have originated from crime, and the convicted
offender could also be required to prove that some or all have not. There is
some experience with both systems in Europe, described by the IInd Best Practice Survey on the reversal
of the burden of proof in confiscation proceedings[36],
being in all cases limited to serious organised
crime cases, such as drug trafficking. The Principle does not require that
member States' legislation place the burden of proof regarding the origin of
the assets exclusively on the defendant, but it implies that the burden on the
prosecution is mitigated, i.e. some information is required from the defendant
as well concerning its assets. 88. Civil forfeiture, used as a strategic
tool against organised crime is seldom used at present in Europe. As noted by
the UK Government policy paper[37]
on asset-forfeiture (“recovery of crime proceeds”) “civil forfeiture is a
significant extension in the powers available to the State to deal with the
proceeds of crime. It can be expected to be viewed as controversial by some”.
There is, therefore, a careful balance to be struck between the civil rights of
the individual and the need to ensure that the State has the tools to protect
society from crime. Some countries, such as the US, Australia, Italy and
Ireland have successfully implemented civil forfeiture legislations and those
in the latter countries resisted, so far, challenges under domestic
constitutional and European human rights norms[38].
The Irish system seems to be a good model for other countries, in terms of
effectiveness and balance with human rights concerns. Witness protection (Guiding Principles Nos 17 - 18) 89. Over the past 10 - 15
years the question of witness-protection has become a major concern for the
justice systems of many countries in Europe. This special attention towards
witnesses can be related to several different factors. First of all, a
noticeable rise in the criminal activities of terrorist and organised crime
groups could be registered during this period at both European level and
worldwide. These groups increasingly attempt to corrupt and even destroy the
normal functioning of the criminal justice system by all possible means,
including threats of violence or bribery of justice officials and the systematic
intimidation or elimination of witnesses. The protection of witnesses and of
their relatives thus became a necessity going beyond the personal interests of
the individuals and becoming a duty of public authorities in order to ensure
the integrity and effectiveness of criminal justice. 90. Principles 17 and 18 address the question of protecting witnesses or collaborators of justice who accept to provide information or to give testimony in court against organised crime. The measures proposed by these two Principles are identical to those developed in detail by Recommendation No R (97) 13 on the intimidation of witnesses and the rights of the defence. As this Recommendation observed, “the need to protect witnesses against intimidation has arisen in connection with terrorism, organised crime, drug related crime, crime amongst closed minority groups and violence within the family. Detection of these kinds of crime is often based on the testimony of persons who are closely connected with the organisation, the gang, the group or the family. Such persons are therefore more vulnerable than others to easy intimidation in order to deter them from giving evidence for the prosecution or from answering questions leading to the conviction of the accused. Intimidation and/or threats may be directly exercised either upon the witness or upon his family.Where there are reasonable grounds to believe that a witness may become the victim of an offence against his life, his health or his freedom, the public authorities e.g. the police, should be obliged to inform him of his position and to take appropriate protective measures as required by the situation. This might mean that criminal proceedings will have to be adapted in order to adequately protect witnesses. Here a balance must be found between the rights of the defence and protecting the safety of witnesses and their families. Special protective measures such as disguising the witness, changing his identity, giving him a new job or moving him should be considered.”[39] 91. Taking into account both
the seriousness of the crimes committed by and the power of intimidation of
organised crime groups, it is recommended that States should adopt specific
rules of procedure to cope with problems of witness intimidation when devising
measures against organised crime. States are recommended, for example, to
consider the opportunity or necessity of keeping the personal data and
whereabouts of witnesses secret from the defendant or enlarging the
admissibility of pre-trial statements. Some States do already have provisions
on anonymous witnesses and/or provisions which allow technical measures to make
the identification of witnesses more difficult (e.g. Italy, Germany). In the case where anonymity cannot be granted,
or is not sufficient to protect the witness, a range of other measures could be
envisaged under Principle 18, such giving
testimony via telecommunication links, limiting the disclosure of their
addresses and other identifying particulars, enlarging the use of pre-trial
statements and temporarily relocating witnesses who are in custody. These measures could also require other protective measures that make
the identification of the witness by the defence difficult or impossible e.g.
by disguising his face or distorting his voice, either while present in the
courtroom or by means of audio-visual link. Such hearing via a video-link can
offer a number of advantages, in terms of lowering the risk and also costs of
protection. These measures should not be seen as disproportionate and should be
granted by the court, taking into account the rights of the defence. These
measures may also be admissible for countries experiencing constitutional or
other difficulties in introducing measures permitting anonymous testimonies in
a strict sense. 92. Finally, Principle 17 envisages full witness protection programmes for long-term protection. Witness protection programmes, or crown-witness schemes, apply to witnesses and collaborators of justice who need protection beyond the criminal trial and may last for a limited period or for life. Such programmes exist in a number of countries, such as Italy, the United States, Canada, Turkey (related to terrorism acts only) and the United Kingdom. It is recalled that a detailed analysis of the organisation and practical functioning of witness protection programmes was contained in the Ist Best Practice Survey on Witness Protection Programmes[40], produced by Committee PC-CO, on the basis of the practical experiences of three Council of Europe member States.
Special investigating techniques (Guiding Principle No
19) 93. Organised crime evolves over time, as do
the societies in which it operates. Yesterday's legendary “men of honour”, led
by a respectable Godfather, today run multiple billion dollar businesses in a
series of criminal markets and their vulnerability to traditional law
enforcement methods seems to have shrunk over the years. As a result,
traditional street-level policing strategies have proved too limited in their
reach. Controlling organised crime requires methods which are necessarily more
intrusive than the traditional ones and law enforcement experience in many
countries suggests that in order to strengthen investigative capabilities,
reduce time needed for building a strong case and gather reliable evidence, it
is necessary to rely on information obtained by means of electronic
surveillance and interception of telecommunications[41],
undercover (sting) operations and covert agents, informants, pentiti
(“reformed” or “co-operating” criminals) , controlled delivery of drugs or
money. Although there is a general agreement among countries concerning the
need to empower law enforcement agencies to use such investigative methods in
the fight against organised crime, a number of differences appear in their
practical implementation[42], in
particular as regards undercover operations, controlled delivery and electronic
surveillance. It is important to note that all Council of Europe member States
which uthorize by law or in practice the use of these methods had, at some
stage, to resolve the difficult question of striking a balance between the
potential benefits of intrusive powers for law enforcement versus the
protection of civil rights, including privacy. One will remember that the
European Convention on Human Rights authorizes intrusions into privacy (Article
8) under the conditions that the use of powers such as telephone interception
is necessary in a democratic society in the interests of e.g. national security
or prevention of crime, that is carried out in accordance with the law and is
proportionate to the circumstances invoked by the authorities to justify its
use. 94. There is a
growing list of international instruments calling for the use of special
investigative techniques against organised crime or its component crimes, e.g.
money laundering or corruption. Recommendation 36 of the FATF's forty
recommendations identified controlled delivery of funds as “one valid and
effective investigative technique” in relation to assets known or suspected to
the proceeds of crime and strongly recommended its use in domestic and
cross-border money laundering investigations. Article 11 of the 1988 United
Nations Convention against illicit traffic in narcotic drugs and psychotropic
substances also suggested using controlled delivery in investigations into drug trafficking and
related money laundering offences, whereas Article 4, paragraph 2 of the 1990
Council of Europe Laundering Convention [ETS No 141] invited countries to consider
introducing “special investigating techniques facilitating the identification
and tracing of proceeds and the gathering of evidence related thereto.” Special
techniques explicitly mentioned by the Convention were monitoring orders,
observation, interception of telecommunications, access to computer systems and orders to produce specific
documents. Article 23 of the Criminal Law Convention on Corruption [ETS no 173]
imposed an obligation on parties to adopt measures permitting the use special
investigative techniques in order to facilitate the gathering of evidence
related to corruption offences defined by the Convention. 95. Principle 19
is based on the widely accepted idea that organised criminal groups are
secretive and closed, therefore difficult to penetrate. It recommends Governments
to introduce investigative measures that would enable law enforcement agencies
to gain insight into the activities of such groups, by using surveillance,
interception of communications, undercover operations, controlled deliveries
and informants. Some of these techniques have long been restricted to the investigation of most serious offences,
such as terrorism or mafia-type murders, but nowadays their use is usually
authorised, under specific conditions, in organised crime-linked investigations, e.g. in drug trafficking
cases. Principle 19 invites Governments to make full use of them for
penetrating organised crime groups and gathering evidence of their activities,
for the purpose of criminal investigations. They need to be used, naturally,
with due respect for civil rights and under judicial or other effective
control. The use of technology-dependent techniques, e.g. interception of
communications or electronic surveillance, requires appropriate equipment, for
example interception and decryption devices. Pro-active policing methods (Guiding Principle No 20) 96. As it was pointed out above, organised crime should be dealt with by the police in a different way then traditional forms of serious crimes. With crimes such as fraud and drugs trafficking, usually no complaint is made by an actual victim. Forensic evidence (such as bloodstains and fingerprints) is seldom to be found, partly because the crime is not committed in one specific location and at a specific time. This makes it particularly difficult to find substantial evidence or even to find clues which provide a sufficient basis for suspicion within the meaning of the national criminal procedures In combating serious and organised crime a (more) pro-active strategy is needed. This strategy differs from the traditional way of investigative work, which can be characterised as reactive. Traditionally, detectives concentrate on reported offences and apply routine techniques such as the examination of the scene of the crime in search for forensic evidence, the questioning of witnesses and the interviewing of suspects. 97. In pro-active investigations, detectives focus their attention upon the current behaviour of people thought to be involved in crime and less upon past offences. The investigators listen to rumours in the criminal circuit, and base their actions (using informers, tapping telephones, keeping individuals under surveillance) on these. The focus is less on the gathering of evidence and more on finding clues. This strategy is therefore sometimes called “intelligence-led investigation”, as some techniques used in pro-active policing directly come from the arsenal of intelligence (security) agencies. The aim of pro-active investigation is to find out how a criminal organisation is structured, what criminal activities are planned, where they (will) take place, etc. Because of the circumstance that organised criminal groups usually maintain secrecy about their plans and activities and there is a pattern of criminal activities carried out by more then one individual on several locations at different points in time, an extra effort is needed on behalf of law enforcement bodies in order to be able to track, trace and prosecute the individuals involved. The use of strategic intelligence, provided by criminal or financial intelligence units, and crime analysis are primary tools in such pro-active investigations. Apart from criminologists and crime-analysts, they suppose the involvement of analysts from the economic sector (e.g. in macro-economics, market-analysis), intelligence agencies and social sciences (sociologists). 98. Since information is not only gathered on suspects but also on individuals whose involvement in the criminal activities is not (yet) clear, extra attention should be given to the protection of human rights, especially to the right of privacy. Procedural or other guarantees are required to ensure that pro-active investigative methods are applied only when there are clear indications of serious or organised crime being planned or committed. Inter-agency teams (Guiding Principle No 21) 99. In most jurisdictions, organised crime may be investigated by a range of different law enforcement agencies, principally because they don't know that their investigations are linked to organised crime. One agency or its criminal investigation department may be dealing with a murder-case, another with corruption of public officials and yet another agency with tax evasion. In such (not so hypothetical) multiple crime cases, it may turn out, eventually, that the murder was committed by contract for someone who wished to take control over some legal or illegal business and had to bribe an official to get licences and evaded paying taxes to avoid detection. The person, in some countries, would be likely to be convicted – if ever caught – for 3 separate offences and it would hardly come to light that these were linked one with the other. In addition, there would be no trace of “organised crime” in criminal statistics. No co-ordination and no centralisation of offender-related data: these are the primary causes of failures in investigations into organised crime. 100. Another closely related issue is that some countries have many law enforcement agencies - such as the Carabinieri, Guardia di Finanza, Polizia di Stato etc. in Italy – which may all be involved in the investigation of organised or economic crime. They often have special knowledge in a specific area, but their competences may never-the-less overlap. It is not pure fiction that sometimes these agencies fight each other rather than crime and their internal feuds lead to total inefficiency in a given area. Division of tasks and specialisation are therefore as important as co-ordination. Although some Council of Europe member States do not seem to have specialised units to investigate organised crime cases, where resources so permit, there may be value in the creation of one or more (central and regional) multidisciplinary units exclusively or specifically dedicated to the investigation of organised criminal groups, e.g. in the areas of drug trafficking, money laundering and grand corruption. 101. The seeting up of specialised multidisciplinary teams is therefore recommended by Principle 21. Such multidisciplinary work implies close co-ordination, regular communication and sharing of knowledge between the various agencies in the investigation of economic and organised crime to enhance the effectiveness of such investigations. The creation of a centralised data-base containing crime-, offender-, victim- and assets-related data, with nation-wide access by local or regional units, could also improve the management of organised crime investigations by the criminal justice system as a whole. Principles related to International Co-operation (Guiding principles No 22 - 25) 102. The liberalisation of trade and capital investment, the scientific and technological revolution, the emergence of world-wide communication networks, increased mobility, the dismantlement of national borders within certain regions and the creation of supranational spaces where persons, goods and services move freely, all positive elements of modern life as they certainly appear to be, are also factors that criminal organisations do not hesitate to exploit to their own benefit. Not so long ago criminal justice was, almost exclusively a national problem. Nowadays, any criminal policy which were not to take full account of the organised, trans-national elements of criminality would be bound to fail. States which intend to successfully combat organised crime have to co-operate, have to share experiences and have to put together their findings and means. International co-operation is, therefore, a key condition to any national policy's success against organised crime. There is growing awareness about this in the international community. The number of bilateral and multilateral agreements on crime, e.g. money laundering, corruption, terrorism etc. or on various forms of international assistance are evidence of this tendency. Yet, States seem to have been much too slow, certainly slower than criminals, to adapt their law enforcement strategies to the international framework in which modern organised crime is evolving. 103. Principles 22 – 25 mention but a few ideas that States ought to consider if they want to make international co-operation more effective. The following issues are addressed: - Exchange of information on legal entities: national investigations related to fraud, corruption, money laundering – whether committed by organised crime or not - are often hampered by a lack of information on foreign corporations and other legal entities that seem to have been involved in the facilitating or concealing of a transaction. Principle 22 invites governments to take measures to enable legally and practically such exchange of information across borders, including information about their creation, ownership, direction and funding;
- Asset-sharing agreements: assets confiscated by certain countries often remain there even if they originated from overseas; usually these criminal assets have no other reason of being there other than that of the protection offered by the country's bank secrecy of client-confidentiality regime and confiscation is undertaken on behalf of foreign authorities, on the basis of foreign evidence. Notwithstanding the cases in which such confiscated assets are eventually returned to the country from which they originated, a sadly rare scenario today, it appears that in the majority of large international confiscations, there is no reward for a country which investigates the underlying crime and locates the assets because the confiscating country takes it all upon successful confiscation. Though certain bilateral treaties of memoranda of understanding do exist between some European and North-American jurisdictions, the lack of a multilateral asset-sharing agreements is still a serious impediment for international asset-investigations (which are usually rather costly). Principle 23 therefore invites countries to share the confiscated assets among those jurisdictions which contributed to the confiscation by taking some measures, such as tracing or freezing the assets subject to confiscation; - Implementing witness protection programmes across borders: in small countries it is virtually impossible to hide persons from
organised crime groups. If small countries want persons placed in witness
protection programmes to be effectively protected they often need to transfer
them to another country. This requires close co-operation, considerable trust
and burden-sharing between the requested (receiving) and requesting (sending)
countries. So far, this kind of co-operation is not explicitly covered by any
international treaty on mutual assistance but the need to create at the level
of the Council of Europe such an instrument has been recognised, first by
Recommendation N° R (97)13 (item 30) and the
Ist Best Practice Survey; - Ratifying and implementing international legal instruments of judicial co-operation: Principle 25 gives a number of ideas on how to improve international co-operation in the investigation and prosecution of organised crime, in particular by pointing to possible legal or structural obstacles to co-operation, calling for innovative and constructive co-operation channels and inviting governments to further speed up and rationalise communication between authorities or persons called upon to co-operate. A list of the relevant Council of Europe treaties, which member States should ratify, is appended to the Recommendation. Principles relating to Data Collection, Research and
Training Data collection
(Guiding Principle No 26) 104. Guiding Principle 26 is based on the realisation that in the absence of a systematic collection and analysis of data related to organised crime, the planning and implementation of national anti-organised crime strategies respond less to the crime situation than to policy objectives. These two elements are, ideally, linked one with the other. 105. It has become clear in the elaboration of PC-CO's annual organised crime reports, that most member States do not have a specific system of data collection in this area and that their general criminal statistics are unable to provide certain types of information required for such annual reports. Principle 26 therefore recognises the need for organised crime-specific data collection, provides some specific criteria for such data-collection (e.g. geographical scope of groups, their organisation, financial background, connections with foreign groups, etc.) and recommends that these be used for analysing organised crime. In addition, it recommends that national systems of data collection and criminal statitistics take into account the specific features of organised crime (see paragraphs 52 and 53) and be properly resourced and staffed. Research (Guiding Principle No 27) 106. Guiding Principle 27 supplements the previous one and aims at enhancing research capacities, whether private or public, on organised crime. It invites governments to support institutions, for example universities, foundations or public bodies (police academies), carrying out research in this area. Such support may be funding, but also granting access to files and data relevant for the research activity. Training (Guiding Principle No
28) 107. This Principle is a recognition of the fact that new methods
usually don't work if people who are supposed to implement them are not
familiar with or committed to them. This is particularly true if the new
methods, such as financial investigations or pro-active policing, require
additional skills, i.e. in accounting, auditing, which are not necessarily
accessible to all agents across the law enforcement sector through initial
training. Principle 29 therefore invites governments to provide all law
enforcement agencies and, where appropriate, personnel of judicial or
prosecution bodies, with training on these new investigative methods, both in
theory and practice. Training should be both initial and permanent, depending
on the nature of the investigating method (interception techniques for example
do change over time). [1] European Union - Action Plan to combat organised crime, adopted by the Council on 28 April 1997, 97/C 251/01. [2] See documents Conf/4 (99)8, Conclusions, item IV/7. [3] See document Enfopol 161/1994, Appendix C. [4] “Organised crime is the planned violation of the law for profit or to acquire power, which offences are each, or together, of a major significance, and are carried out by more than two participants who cooperate within a division of labour for a long or undetermined timespan, using : a. commercial or commercial-like structures; b. violence or other means of intimidation; c. influence on politics, media, public administration, justice and legitimate economy.” [5] Article
2 (a) of the United Nations Convention. [6]
See
98/733/JHA Joint Action of 21 December 1998 adopted by the Council on the basis
of Article K.3 of the Treaty on European Union, on making it a criminal offence
to participate in a criminal organisation in the member States of the European
Union – Official Journal L 351, 29 December 1998, p. 1 – 3. [7] Article
2 (b) of the United Nations Convention. [8] Select
Committee of Experts on the evaluation of anti-money laundering measures
(PC-R-EV). [9] See
the Annual Reports of Committee PC-R-EV for the years 1997 – 1998 and
1998-1999. [10] See
footnote No. 4. * At the moment of the approval of this draft Recommendation by the European Committee on Crime Problems (CDPC) at its 50th plenary session (June 2001), the Second European Directive was not yet finally adopted. Pending its final adoption, the text in these paragraphs is subject to changes which may occur in the Directive's scope and provisions. [11] See
e.g. Hans de Doelder, Legal Fraud Trends, address given at the University of
Trento on 22 October 1998. [12]
See
European Commission, Protection of the financial interests of the communities,
Fight against fraud, Annual Reports 1996 – 1999. [13]
See
document GMC (96) 95. [14]
See Recommendation N° R (97) 13 on the intimidation
of witnesses and the rights of the defence, adopted by the Committee of
Ministers of the Council of Europe on 10 September 1997. [15] See document PC-CO (1999) 7. [16] Article 416: “When three or more persons associate for the purpose of committing more than one crime, those who promote, constitute or organise the association shall be punished, for that fact alone, with imprisonment from three to seven years. The punishment for the sole fact of participating in the association shall be imprisonment from one to five years. The leaders shall be subject to the same punishment as is prescribed for the promoters. If the persons associated overrun the countryside or public roads in arms, a term of imprisonment from five to fifteen years shall be imposed. The punishment shall be increased if the number of persons associating is ten or more”.
[17] Article 416 bis: “Persons
belonging to a Mafia-type association of three or more persons shall be liable
to imprisonment for a term from three to six years. A Mafia-type association is
an association whose members use the power of intimidation deriving from the
bonds of membership and the atmosphere of coercion and conspiracy of silence
(omertà) that it engenders to commit offences, to acquire direct or indirect
control of economic activities, licences, authorisations, public procurement
contracts and services or to obtain unjustified profits or advantages for
themselves or others, or to prevent or obstruct the free exercise of the right
to vote, or to procure votes for themselves or others at elections…The
provisions of this section are also applicable to the Camorra and any other
organisations, whatever their names, that make use of the power of intimidation
deriving from the bonds of membership to pursue goals which are typical of
Mafia-type organisations.” [18] See
the judgment rendered by the Joint sections of the Court of Cassation on
5 October 1994 in the Demitri case. [19] See
98/733/JHA Joint Action of 21 December 1998 adopted by the Council on the basis
of Article K.3 of the Treaty on European Union, on making it a criminal offence
to participate in acriminal organisation in the member States of the European
Union – Official Journal L 351, 29 December 1998, p. 1–3. [20]
Article
6 of the Convention contains, in principle, an «all-crime» based money laundering
offence, but reservations can be entered by Parties to the Convention to limit
the scope of the offence to proceeds of certain specific offences. The 40 FATF
Recommendations, revised in 1996, require countries to « extend the
offence of drug money laundering to one based on serious offences »
(Recommendation 4), whereas the Joint Action of 3 December 1998 of the European
Union (98/699/JHA) on money laundering, the identification, tracing, freezing,
seizing , and confiscation of instrumentalities and the proceeds from
crime requires EU Member States to lift reservations made to Article of the
1990 Laundering Convention so that their laundering offences at minimum cover
proceeds from all serious offences, e.g. those punishable by imprisonment for
at least 1 year. [21] See
observations made under Principle 3. [22] See
Recovering the Proceeds of Crime, a PIU Report, Cabinet Office, UK, June 2000,
page 10. [23] See
document PC-CO (98) 26 REV : Report on the Organised Crime Situation in
Council of Europe Member States – 1996, page 20. [24] See
document PC-CO (1999) 7, pages 28 – 29. [25] See
Resolution (77) 28 on the contribution of criminal law to the protection of the
environment and the Report of the European Committee on Crime Problems, Council
of Europe 1978. [26] See
Convention on the protection of the environment through criminal law [ETS N°
172], Article 9 [27] See
Criminal Law Convention on Corruption [ETS N° 173], Article 18. [28] See
Second protocol to the Convention on the Protection of the European
Communities' financial interests, Council Act of 19 June 1997, 97/C 221/02,
Article 4. [29] See
OECD Convention on Combating Bribery of Foreign Public Officials in
International Business Transactions signed in Paris on 17 December 1997,
Article 2. [30] Trends
of cross-border organised crime in the European Union, Paper presented at EUCOS
Seminar (8-9 November 1999), page 11. [31] European
Commission, Protection of the financial interests of the Communities, Fight
against fraud, Annual Reports 1996 –1999. [32] Michal
Levi & Lisa Osofsky : Investigating, seizing and confiscating the
proceeds of crime, Home Office Police Research Group, Crime Detection and
Prevention Series, Paper 61, London
1995, pages 14-15. [33] See
Petrus C. van Duyne, Michael Levi – Criminal Financial Investigation, A strategic
and tactical approach in the European dimension, doc. PC-CO (97) 15, pages 2
and 3. [34] See
footnote 35, op. cit., page 3. [35] See
footnote 24, op. cit. pages 18 – 20. [36] See
“Best Practice Survey” No. 2 – Reversal of the burden of proof in confiscation
of proceeds of crime – doc. PC-S-CO (2000) 8. [37] See
footnote 22, op.cit. pages 35-36. [38] See
footnote 37, op.cit. pages 8 – 11. [39] See
Recommendation No R (97) 13 concerning intimidation of witnesses and the rights
of the defence, page 13. [40] Best
Practice Survey No. 1 – Witness protection programmes, Council of Europe 1999. [41] See
Best Practice Survey No. 3 – Report on Interception of Communications and
Intrusive Surveillance – Council of Europe 2000. [42] See
for a detailed analysis on the various powers used in Council of Europe member
States – Report on the organised crime situation in Council of Europe member
States – 1997, pages 41 – 45. |