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Messy issues need ironing out in antimoney laundering bills

(Article published in the August 27, 2001 issue of TODAY, Business Section)

It is not easy to craft an anti-money laundering law, much less one that could fully satisfy the Financial Action Task Force (FATF).

While money laundering is easy to define (it is, says the FATF, the processing of criminal proceeds to disguise their illegal origin), turning it into a crime is not that simple. Issues that go in the gravamen of the offense are complex and very difficult to resolve.

First, as to illegal origin of the money. Everyone agrees that the money must be proceeds of an illegal act. There is no problem if the illegal act, like jueteng or kidnapping, is committed in the Philippines. But if the act is committed outside of the Philippines, is it proper for the Philippines to be part of the criminal prosecution machinery of the offended foreign country?

There is also no problem if the act is illegal both in the country where committed and in the Philippines. However, when the act is a crime in the place of commission but not in the Philippines, can our law, in a sense, adopt the foreign characterization without a specific act of Congress?

Finally, when is a particular act considered illegal for purpose of convicting an offender for concealing its proceeds?

Some say that the courts of the place of commission must state in a final judgment that the act is indeed illegal. Others maintain that it is sufficient that the law enforcers concerned are in the process of investigating. Still, many believe in a middle course, i.e. that the case must be beyond investigation and must have been considered, by the public prosecutors, to be, prima facie, illegal.

The typical solution to these issues is for the antimoney laundering law to limit itself to an enumeration of offenses, technically known as predicate offenses, which are commonly considered by the family of nations as serious offenses.

But still, some differences of opinion exists on certain acts. For example, some countries refuse to consider tax evasion as a predicate offense. That the act is under serious investigations in the place of commission, as certified by its relevant prosecution officers, is usually a sufficient indication that it is already "illegal" enough to warrant the triggering of the antimoney laundering processes in the other country.

More ticklish is the issue of knowledge on the part of the offender. One obviously cannot be convicted unless it is proven that one knows he is dealing with dirty money. The problem is dirty money is dirty only in the eyes of the law enforcer.

Unlike a stolen car or a counterfeit financial instrument, which will bear somehow some traces of being an object of crime, money paid for drugs or as ransom is exactly the same as money paid by legitimate employers to their workers. And when money is not cash but in electronic medium, the dirt is completely invisible to the eye.

A major issue is whether the offender must know the specific illegal act that gave rise to the dirty money. Thus, if money is from a crime syndicate operating in a foreign country involved both in drugs and kidnapping, is it necessary to prove that the offender knew that the money was from drugs and not from kidnapping? Or is it sufficient to convict him if he knew that the money may have been from drugs or kidnapping or some other illegal act?

More basic is the question of the degree of knowledge. Some believe that the offender must have actual knowledge of the illegal origin of the money. Others maintain that mere information is sufficient. Opinions in between want standards like "reason to know", or "reasonable grounds to believe", or "in reckless disregard" of facts that would cause a reasonable man to know.

Finally, the issue of mens rea. Long standing in our criminal jurisprudence is the rule that a crime is not committed if the accused is of innocent mind.

Must the offender, in order to be convicted, be proven to have intended to conceal the origins of the money, or is it sufficient that he voluntarily participated in a transaction that would have the natural effect of concealing the proceeds of the money?

An example illustrates the difference. Suppose a huge annuity insurance policy was purchased with dirty money and then cancelled the next day. The money paid in refund is now clean money. Assume further that the insurance company knew that the purchaser was a drug lord and that he was paying with drug money. Should the insurance company be considered a money launderer only if it knew beforehand that the purchase was part of a money laundering scheme, or should it be sufficient that it was clear that the purchase could possibly be a money laundering scheme?

Congress, may have realized the complexity of issues that need to be resolved as it has apparently given up on the idea of meeting FAFT’s September 30 deadline to put in place a full antimoney laundering law.

It should, nevertheless, try to show that it is exerting best efforts by moving the bills quickly into committee hearings, and, before the deadline, put them on second reading.

Perhaps, the FATF, could be persuaded once again, to give us a bit more time.