Money laundering and predicate offences

The purpose of a criminal organisation is to generate profits for the group or for one of its members. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. Criminal activities such as arms diversion, smuggling, or illicit drug trafficking generate huge sums of money, and criminal organisations need to find a way to use these funds without causing suspicions about their illicit origin. During the second half of the 20th century, with the threat of modern and sophisticated forms of transnational criminal activity, concern have arisen over the lack of effective national laws to combat and penalise the offenders and to control the laundering of its proceeds.
As a consequence, new laws and international efforts to combat money laundering did emerge, in 1988 the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, known as the 1988 Vienna Convention was introduced, in 1992 CICAD Model Regulations, and the most recent convention on this issue is the United Nations Convention Against Transnational Organised Crimes. Similarly, both the World Bank and the International Monetary Fund have taken measures to control this activity.
The current trend of criminal behaviour is towards organised rather than individual crime: for example, commercial companies are governed by the laws of the market and endeavour to profit from the opportunities offered by a globalized world economy. Estimates of the scope of money laundering indicate that it exceeds the gross domestic product of most countries; so it is easy to see that criminal organisations administer fortunes that is why legislations to combat the problem are necessary.
The harmful consequences of the emerging circumstances may be described as the contamination and destabilization of financial markets, which endangers the economic, political, and social foundations of democracy. Since the soundness of the banking system and financial services depends essentially on society's perception about them, their reputation, or in other words their integrity, is one of the most important assets of these sectors. If funds from illicit activities can enter an institution of the system through the intentional action or the negligence of an employee, the institution may be implicated in organised criminal activity, which will harm its reputation.
Furthermore, the International Monetary Fund has noted one of the dire consequences of asset laundering at the macroeconomic level, the inexplicable change in the demand for money, which makes banking more risky, contaminating financial transactions and increasing the volatility of capital flows and changes in interest rates, owing to unanticipated transfers of capital between countries.
This is why the money laundering problem affects aspects of society such as the socio-economic order in a new way. It no longer affects only the administration of justice, as the offense of concealment does; according to a teleological interpretation, laundering harms the socio-economic order by affecting both free competition and the stability and soundness of the financial system. In this background, Pakistan introduced anti-money laundering laws and many of the offences have been made predicate offences.
As per the provisions of the law, the offences enumerated in the Schedule to the act have been declared as predicate offences. [sec sub-section (S) of section 2 of the Act].
A predicate Offence represents an act that must be completed before legal consequences can attach either to it or to another act or before further action can be taken. A predicate act itself can be criminalized if it is followed by or performed in tandem with another prohibited act. The legal doctrine in this regard states that an authorisation of an act also authorises the necessary predicate act. A predicate fact is one from which a presumption or an inference arises. It is a fact necessary to the operation of an evidentiary rule. For example, there must be a conspiracy for the conspirator, however exemption to hear say rule applies. Predicate offence can be used to enhance a sentence levied for a later conviction.
Predicate offenses were initially designed for drug-related crimes. In the case of money laundering, a predicate offense may cover actions used to obtain the initial funds, such as theft, bribery, counterfeiting, illegal betting, forgery and fraud, etc. A predicate offence can be used in conjunction with other offenses to produce a more severe sentence.
Under the Schedule to the money laundering Act, 2010, a number of offences have been declared as predicate offences and these include abetment, concealing, criminal conspiracy, taking gratification, wrongful confinement, kidnapping, extortion, criminal breach of trust, dishonest and fraudulent dealings. Forgery, act of counterfeiting, falsification, infringement, designs and trade mark offences and specified tax offences under the Customs, Sales Tax and Income Tax and Corporate Laws.
As per section 3 of the Anti-Money Laundering Act, 2010, the acquisition of a property known to be a proceed of crime is an offence. For the Commission of this offence concealing or disguising, benami possession or participation in these acts makes the person guilty of these offences.
These complex offences present a challenge to businesses as knowingly or unknowingly these kinds of acts may be done by an individual, company or business and make them liable for the punishment of a predicate offences thus it is now imperative for the businesses to initiate compliance programme.
Understanding anti-money laundering is an essential component for today's businesses. The primary goal is to protect the organisation against money laundering and to ensure that the organisation is in full compliance with relevant laws and regulations. Designing, structuring and implementing of a model compliance programmes should thus be the top priorities of businesses.
A compliance programme is needed to be designed to mitigate the money laundering and terrorist financing risks. Not all aspects of an institution's business present the same level of risk. Certain aspects of the business which the institutions conduct pose greater money laundering risks than others and require additional controls to mitigate the risks.
(The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates Karachi)