Revelations of Panama and Paradise Papers brought the issue of money laundering and its prevalence for many countries including ours. The Panama Papers revealed names of world leaders, drug peddlers and high net worth individuals; and the Paradise Papers disclosed information about offshore activities of blue-chip clients, celebrities and multinationals and how they took advantage of offshore jurisdictions.
Money laundering has become a worldwide concern due to its pervasive impact on social and economic stability of countries. It is an avenue for drug dealers, smugglers, terrorists, illegal arms dealers, corrupt public officials, and others to operate and expand their criminal enterprises. It can also adversely affect collection of government revenue and deprives a government of due revenues. Although difficult to quantify, money laundering is detrimental to the economy of a country and the society at large.
Money laundering is the process by which proceeds from a criminal activity are disguised to conceal their illicit origins in order to "legitimise" the ill-gotten gains or wealth. In Bangladesh, money laundering is defined under Section 2(v) under the Money Laundering Prevention Act, 2012.
Money laundering may occur through sale of narcotics, terrorism, evasion of tax, drug trafficking, theft or burglary, smuggling, criminal deception, illegal gambling, prostitution, book making, blackmailing, extortion, loan sharking, and other offences. If it is left unchecked, the consequences can be severe. Organised crimes can penetrate into the financial institutions and acquire control of a large stake of the economy through investment.
Anti-Money Laundering drive is governed by the Money Laundering Prevention Act of 2012 (Amendment-2015) & Anti-Terrorism Act of 2009 (Amendment-2012 & 2013) along with Bangladesh Bank Circulars & Instructions besides other related local and international regulations. There is a provision of 4 to 12 years' jail under this Act.
Money laundering covers all kinds of methods used to change the identity of illegally obtained money (i.e. crime proceeds) so that it appears to have originated from a legitimate source. The rules incorporate corruption, bribe, fake currency trading, extortion, cheating, embezzlement, illegal weapon, drug or addictive products trading, smuggling, hijack, kidnap, black marketing, siphoning local and foreign currencies, theft, robbery and human trafficking, dowry, tax and customs-related corruption, terror financing, production of adulterated products, environmental crime, sexual assault, corruption relating to capital market, realising money through threats and what not.
Under the money laundering Act 2012, reporting organisations include, among others, banks, financial institutions, insurers, money changers, any company or institution which remits or transfers money or money value, stock dealers and stock brokers, portfolio managers, security custodians, asset managers, non-profit organizations, NGOs, cooperatives, real estate companies, dealers in precious metals and stones, trust companies, lawyers and accountants.
The Ministry of Finance (MoF) has issued the rules of the Money Laundering Prevention Act 2012 by defining working areas of the investigators like CID, ACC, NBR, BSEC etc.
As per the rules, a high-powered national coordination committee will be formed with the finance minister in the chair. A working committee under Financial Institutions Division (FID) secretary will also be formed.
ANTI-MONENY LAUNDERING ACTION IN UK AND ROLE OF LAWYERS /ACCOUNTANTS: Money laundering is commonly regarded as the process whereby the proceeds of crime are changed or disguised so to hide their unlawful origin. However, in English law money laundering is any activity in relation to the proceeds of crime, even passive activity such as mere possession.
Under the Obligations of British Law, where the professionals like Lawyers / Accountants are undertaking work that falls within the scope of the Regulations, he/she may commit a criminal offence if:
- They suspect that money laundering is taking place and fail to make the required disclose to the authorities, or
- They make an unauthorised disclosure of your suspicion of money laundering or terrorist financing of their knowledge of a money laundering investigation to another person ("tipping-off").
Under the British Law, the professionals are required to make a disclosure of suspected money laundering or money laundering by way of making a Suspicious Activity Report to the NCA. Such reports should be made electronically via the NCA's website. It is the duty of professionals like CAs and lawyers to understand the principles of money laundering and terrorist financing and how to recognise them. The professionals owe an obligation not to become involved in conduct that involves money laundering or terrorist financing. A professional must know how to address those risks and how and when to take the correct and necessary action when such risks arise.
Professionals who advise on financial or real property transactions or who provide tax advice have additional obligations under the Regulations, including an obligation to undertake Customer Due Diligence before acting, to keep a record of their compliance with the Regulations and to make disclosure of suspicious activity to the authorities. We will need to be able to determine whether the service that you are providing to your client is subject to the Regulations.
The "financial or real property transactions" concern:
- the buying and selling of real property or business entities;
- the managing of client money, securities or other assets;
- the opening or management of bank, savings or securities accounts;
- the organisation of contributions necessary for the creation, operation or management of companies; or
- the creation, operation or management of trusts, companies or similar structures;
If the professionals are participating in the transaction by
- assisting in the planning or execution of the transaction or
- otherwise acting for or on behalf of a client in the transaction,
they would be within the scope of the Regulations.
Regarding Tax Advice, if a professional is acting as a tax advisor in relation to the provision of tax advice, then he/she is within the scope of the Regulations. However, if the work that you are undertaking is not transactional and not providing tax advice, then you are not subject to the Regulations.
OBLIGATIONS UNDER THE REGULATIONS: Professionals must undertake Customer Due Diligence.
- Professionals must keep a record of the Customer Due Diligence that they carry out
- Professionals must monitor the relationship with their customer
How to Address those Obligations:
- Professionals must take a risk-based approach to the above obligations: the measures that he/she takes must be sufficient to meet the perceived level of risk.
- Therefore, they need to know how to assess and determine the existence and level of the risk of money laundering or terrorist financing.
Enhanced Due Diligence:
- Like British Law, there may be circumstances where the risk of money laundering or terror financing is such that the professionals need to apply an enhanced level of Customer Due Diligence, for example-- where the lay client is based in or operating from a country that is known to present such a risk. In those circumstances they need to apply greater due diligence to mitigate the increased level of risk.
These concepts are broadly defined in the British Court of Appeal authority that involvement in the "ordinary conduct of litigation" does not count, which will mean that most of the things that a lawyer does will not trigger anti-money laundering or counter-terror financing obligations. However, a lawyer should be alert to circumstances that may take litigation out of the "ordinary" and note that the "ordinary conduct of litigation" exception does not apply to activities performed outside a litigation or arbitration context. Though ideally, the risk of a lawyer becoming involved in conduct that involves ML or TF is relatively low (in particular because a lawyer is generally not permitted to handle client money), still some risk remains.
Accountants are required to establish a complete compliance programme to deter Money Laundering and terror financing as well as ensure compliance with the relevant laws, regulations, guidelines and other interpretations relating to anti-money laundering and combating financing terrorism;
Considering the gravity of this offence, a separate tribunal and separate bench of HC division may be formed to deal with the matter. Anti-money laundering agencies' drive should particularly focus on curbing human trafficking related to money laundering. We may create a NCA (National Crime Authority) like UK for dealing ML offences.
S M Abu Nayem Ahmed is an Advocate, Supreme Court of Bangladesh,