Model Provisions On Money Laundering, Terrorist Financing .

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INTERNATIONALMONETARY FUNDModel Provisions on MoneyLaundering, Terrorist Financing,Preventive Measures and Proceeds ofCrime(for common law legal systems)April, 2009

List of ProvisionsIntroduction to the Model Provisions6Part I:81.2.PreliminaryExtent, Commencement and ApplicationDefinitionsPart II:3.4.Money Laundering OffencesTerrorist Financing OffencesPart III:5.6.1019Cross Border Transportation of Currency and BearerNegotiable Instruments13.Detention and Forfeiture of Currency and Other Bearer Negotiable Instruments25Preventive Measures27Definitions; Authority to make RegulationsCustomer Identification and Account Opening Procedures[Option] Reliance on Identification by Third PartiesCustomers not Physically PresentHigh Risk Customers and Politically-exposed PersonsIdentification and Account-opening for Cross-border Correspondent BankingRelationshipsInability to Fulfil Customer Identification ObligationsProvisions on Ongoing Obligations of Financial Institutions andDesignated Non-financial Businesses and Professions14.15.16.17.18.19.20.2424Customer Identification Provisions8.9.10.11.12.10Obligation to [Declare/Disclose] Physical Cross-border Transportation ofCurrency and Bearer Negotiable InstrumentsPart IV:7.Money Laundering and Terrorist Financing Offences89Record-keepingInternal Programs to Combat Money Laundering and Financing of TerrorismOngoing Due DiligenceSpecial Monitoring of Certain TransactionsObligations regarding Wire TransfersCompliance with Obligations by Foreign Subsidiaries and BranchesProhibition against Shell BanksReporting Obligation Provisions22736364041414243434343444546474747

21.2223.24.25.26.27.Obligation to Report Suspicious Transactions[Option] Obligation to Report Currency TransactionsDisclosing Information regarding Compliance[Option] Inapplicability of Confidentiality ProvisionsProhibition against Tipping-offProtection of Identity of Persons and Information relating to SuspiciousTransaction ReportsExemption from Liability for Good Faith Reporting of Suspicious Transactions47505151515252Provisions on Supervision for Compliance and Maintenance ofBeneficial Ownership Information28.29.[Option] Authorities Responsible for Supervision[Option] Mechanism to Maintain Beneficial Ownership InformationProvisions on Offences Relating to Preventive Measures30.31.32.33.34.35.36.37.Failure to Comply with Identification RequirementsFailure to Maintain or Provide Access to RecordsFailure to Fulfil Due Diligence Obligations or Maintain Internal Controls57Failure in regard to Suspicious Transaction or Other ReportingFalse or Misleading StatementConfidentiality ViolationShell Bank OffenceOther SanctionsPart V:38.39.40.41.42.Financial Intelligence on-Based Confiscation, Benefit Recovery andExtended Benefit Recovery Orders43.535459Establishment and StructureObligation regarding Confidentiality and Use of InformationAction regarding Reports and Other Information ReceivedAccess to InformationSharing Information with Foreign Counterpart AgenciesPart VI:5365Application of Part and Definitions66Restraining Orders74Application for Restraining OrderRestraining OrderEnforcement of Restraining Order AbroadNotice of Restraining Order375788283

48.49.50.51.52.53.54.Further OrdersExclusion of Property from RestraintRegistration of Restraining OrdersContravention of Restraining OrderSeizure OrderProtection of TrusteeDuration of Restraining Order83868787888990Application for Confiscation or Benefit Recovery 70.71.72.Application for Confiscation Order or Benefit Recovery [Option - orExtended Benefit Recovery] OrderApplication for Confiscation Order or Benefit Recovery Order in thecase of Absconding or DeathService of Application and Appearances93Procedure on ApplicationConfiscation Order on ConvictionEnforcement of Confiscation Order AbroadEffect of Confiscation OrderExclusion of Property from a Confiscation OrderBenefit Recovery Order on ConvictionRules for Determining the Value of Benefit[Option] Extended Benefit Recovery OrdersStatements Relating to BenefitAmount Recovered Under Benefit Recovery [Option - and ExtendedBenefit Recovery] OrdersDischarge of Benefit Recovery [Option - and Extended Benefit Recovery]OrdersAppealsRealisation of PropertyApplication of Monetary SumsCompensation OrderInvestigative Orders for Criminal Confiscation73.74.75.76.77.78.Production Order for Property Tracking DocumentsEvidential Value of Information115Failure to Comply with a Production OrderPower to Search for and Seize Documents relevant to Locating PropertyCustomer Information OrdersMonitoring OrdersPart VII:79.80.81.Civil 11111113113115115117119122DefinitionsCivil Forfeiture OrderProperty Freezing Order1221271334

er Provisions in relation to Property Freezing OrdersProperty Seizure OrderApplication for and Granting of a Civil Forfeiture OrderOrders regarding Legitimate OwnersFugitive ClaimsAppeals[Option] Limit on Purchase of Forfeited PropertyRealisation of Forfeited PropertyCompensation and Protection of TrusteeObtaining Information from Foreign Authorities[Option] Disclosure of igative Orders for Civil Forfeiture150Production Orders for Property Tracking DocumentsFurther Provisions Relating to Production Orders for Property TrackingDocumentsSearch Warrants for Property Tracking DocumentsFurther Provisions Relating to Search WarrantsPart VIII:97.98.99.Recovered Assets Fund154156158161Establishment of FundReceipts and DisbursementsAnnual Report and AuditAnnex I151161161162Model [Decree/Regulation] on the Financial IntelligenceUnit5163

Introduction to the Model ProvisionsThese model provisions on money laundering, financing of terrorism, proceeds of crime and civilforfeiture are the outcome of a collaboration between the Commonwealth Secretariat, theInternational Monetary Fund (IMF) and the United Nations Office on Drugs and Crime (UNODC).They form a starting point for State authorities as they evaluate the measures that should beincorporated into domestic law in order to prevent, detect, and effectively sanction moneylaundering, the financing of terrorism and the proceeds of crime.Using the Model ProvisionsAs part of an effort to assist jurisdictions prepare or upgrade their legislative framework to conformwith international standards and best practices to implement anti-money laundering and combatingthe financing of terrorism (AML/CFT) measures, the UNODC in 2003 issued the Model MoneyLaundering, Proceeds of Crime and Terrorist Financing Bill.These 2009 updated model provisions, which are based upon the relevant international instrumentsconcerning money laundering and the financing of terrorism, the FATF 40 9 Recommendations andbest practices, replace the 2003 UNODC Model.The model provisions are intended to be a resource in drafting legislation to address moneylaundering and the financing of terrorism. Taken together, the provisions incorporate a legislativebase for many of the requirements of the relevant international instruments and the FATF 40 9Recommendations. The provisions also strengthen or supplement these standards in some respects.They suggest an approach both to criminally confiscate and civilly forfeit proceeds, instrumentalitiesand terrorist property.State authorities considering the provisions should take care to adapt the underlying concepts andspecific language to accord with constitutional and fundamental legal principles in their systems. Aswell, the provisions may be supplemented with additional measures a State considers suited toeffectively combat money laundering and the financing of terrorism in the national context.The eight Parts of these model provisions are set forth as separate units. Taken together they presenta unified whole. Relevant definitions appear at the beginning of each Part. If all or selected Parts areused, adjustments to definitions will be necessary.The document also includes several features to assist drafting authorities to understand the variousprovisions and to facilitate their consideration of choices relating to provisions: “Notes for Drafting Authorities” provide explanations of selected provisions and suggestvarious considerations for drafting authorities as they decide how best to proceed. Some provisions present “variants” and “optional language.” A “variant” provides twoapproaches for authorities to consider. Authorities should adopt one or the other, or theirown separate approach. “Optional language” is italicized and sets forth an addition that maybe included or not. Time periods for orders and other matters, whether days, months or years, appear inbrackets. The bracketed number is a suggestion.6

The eight Parts are as follows:Part I:PreliminaryPart II:Money Laundering and Terrorist Financing OffencesPart III:Cross Border Transportation of Currency and Bearer Negotiable InstrumentsPart IV:Preventive MeasuresPart V:Financial Intelligence UnitPart VI:Conviction-Based Confiscation, Benefit Recovery and Extended BenefitRecovery OrdersPart VIICivil ForfeiturePart VIIIRecovered Assets FundAnnex IModel Decree on the Financial Intelligence UnitThe provisions were drafted by a group of experts, including participants from the CommonwealthSecretariat, the International Monetary Fund and the United Nations Office on Drugs and Crime,that met in London in March 2008, and in Washington D.C. in October 2008, and that finalised theprovisions in April, 2009.The document as a whole is a complex instrument with provisions that interconnect in various ways.The model provisions also cover a wide range of subject matter areas. While there was considerableeffort to avoid inconsistencies and drafting errors, a review of model provisions by draftingauthorities, the comparisons that are likely to take place with existing legislation, and experiencethat is gained through actual use of these or similar provisions are all likely lead to suggestions foradjustments and change.The organisations hope to revisit the document within a reasonable period to incorporate newdevelopments and standards, to alter the text to improve the provisions and to address any issues ofinconsistency. We invite your comments and suggestions and your active participation in thisendeavour. Comments should be directed th SecretariatInternational Monetary FundUnited Nations Office on Drugs and Crime7

An Act to provide for criminal offences of money launderingand terrorist financing,to establish preventive measures to combatmoney laundering and the financing of terrorism,and to recover the proceeds of crime,instrumentalities and terrorist property-----ENACTED by the [insert method/name] of [insert name of State]Part I:PreliminarySection 1.Extent, Commencement and Application(1)This Act shall extend throughout [insert name of State].(2)It shall come into force Variant 1: [on (insert date)] Variant 2: [at once].(3)It shall apply notwithstanding any other Act to the contrary.(4)In this Act the word “includes” is a term of specification but not limitation, anyreference to the singular includes the plural and any reference to the plural includes thesingular, and any reference to either gender includes a reference to the other.Drafting Note: Drafting authorities should consider the effect new provisions that arebeing prepared for adoption will have on laws that are in effect, and the need fortransitional provisions to enable ongoing investigations, prosecutions and confiscationproceedings to continue. They should also consider consequential amendments needed forany provisions currently in effect.8

Section 2.DefinitionsIn this Act, unless the contrary intention appears: [applicable definitions should be set forth herein summary form or alternatively at the beginning of each Part].Drafting Note: In the model provisions, the applicable definitions are set forth orreferenced in some manner at the beginning of each Part. Definitions may also appear inthe provisions to which they are specific if the term is unique to that provision, or in thecase of a criminal offence if it is important that definitions be set forth as part of theoffence provision.If a comprehensive Act is formulated using these model provisions, applicable definitionscan be placed here.9

Part II:Money Laundering and Terrorist Financing OffencesSection 3.Money Laundering OffencesDrafting Note: The relevant FATF Recommendation is Recommendation 1 whichprovides for criminalization consistent with the 1988 Vienna Convention Against IllicitTraffic in Narcotics Drugs and Psychotropic Substances (“Vienna”) and the 2000Transnational Organized Crime Convention (“Palermo” Convention).Proceeds of Crime. Proceeds of crime is a defined term. That definition includes areference to “criminal offence.” Drafting authorities should choose an approach to“criminal offence” among the alternatives provided under FATF Recommendation 1. Thescope of the money laundering offence, that is the criminal offences to which it extends,should be clear. One way to accomplish this is by including a definition of “criminaloffence” in the provision that makes money laundering a criminal offence. This approachis taken in the model provisions.Types of Property and Coverage of Foreign Offences. The money laundering offenceshould extend to any type of property regardless of value that directly or indirectlyrepresents proceeds. The definitions section applicable to the money laundering offencesets forth a broad definition of property which covers any kind of assets, and a definitionof proceeds that covers property or economic advantage obtained directly or indirectlythrough the commission of an offence. The definition of offence in turn, in addition todomestic offences, covers foreign offences subject to dual criminality principles.Self-laundering: As the section refers to “any person,” this includes both the person whocommitted the predicate offence and third party launderers. Although generally not anissue in States in the common law tradition, there can be a question whether the offenceshould be extended to the person who also committed the predicate offence.The Vienna and Palermo Conventions provide an exception to the general principle thatboth the predicate offender and third parties should be liable for money laundering wherefundamental principles of domestic law require that it not apply to the person whocommitted the predicate offence. In some countries, constitutional principles prohibitprosecuting a person both for money laundering and a predicate offence. In the case ofmost common law countries, there do not appear to be fundamental principles that prohibitthe application of the money laundering offence to self-launderers. However, if anexception is necessary, an additional provision, as “[t]he offence of money laundering shallnot apply to persons who have committed the predicate offence” should be incorporated.If drafters believe that there is a need for additional clarity beyond the reference to “anyperson” to ensure that those who launder their own proceeds are covered, a provision canbe added as “[t]he offences set forth in Section 3(2) - (5) shall also apply to the person whohas committed the offence(s), other than money laundering, that generated the proceeds ofcrime.”10

Drafting Note continued:Kinds of Offences: As the UN’s Legislative Guide to the Palermo Convention andLegislative Guide for the Implementation of the United Nations Convention AgainstCorruption make clear, there are four general kinds of conduct that should be criminalized.The minimum requirements for each are:1. Conversion or transfer of proceeds of crime. This includes “instances inwhich financial assets are converted from one form or type to another, forexample, by using illicitly generated cash to purchase precious metals or realestate or the sale of illicitly acquired real estate, as well as instances in which thesame assets are moved from one place or jurisdiction to another or from one bankaccount to another.” (See, e.g., paragraph 231, in Legislative Guide for theimplementation of the UN Corruption Convention). Regarding mental elements,the conversion or transfer must be intentional, the accused must have knowledgeat the time of conversion or transfer that the assets are criminal proceeds, and theact must be done for either one of the two purposes stated – concealing ordisguising criminal origin or helping any person (whether one’s self or another) toevade criminal liability for the crime that generated the proceeds.2. Concealment or disguise of proceeds of crime. There are many aspectsnoted in the provision as to which there can be concealment or disguise – almostany aspect of, or information about, the property, so this section is broad. Theconcealment or disguise must be intentional and the accused must haveknowledge that the property constitutes proceeds of crime at the time of the act.This provision deals with the intentional deception of others. This will include theintentional deception of law enforcement authorities. True nature may be theessential quality of it having been derived from criminal activity. Origin may bethe physical origin, or its origin in criminality. For this second offence, thereshould not be a requirement of proof that the purpose of the concealment ordisguise is to frustrate the tracing of the asset or to conceal its true origin.Although as a general matter this will be the purpose of the concealing ordisguising, the applicable UN Conventions require that there be criminalizationthat is not dependant upon a showing of such purpose.3. Acquisition, possession or use of proceeds. This section imposes liability onrecipients who acquire, possess or use property, and contrasts with the twoprovisions above that deal with liability for those who provide illicit proceeds.There must be intent to acquire, possess or use, and the accused must haveknowledge at the time of acquisition or receipt that the property was proceeds.4. Participation in, association with or conspiracy to commit, attempts tocommit and aiding, abetting, facilitating and counselling. There are varyingdegrees of complicity or participation other than physical commission of theoffence: assistance (aiding and abetting, facilitating) and encouragement(counselling). In addition, attempts are to be criminalized. Finally, this sectionincludes conspiracy, a common law concept, or as an alternative, an associationof persons working together to commit an offence.Knowledge: The variants suggested are first, the basic one of knowledge that the propertyis proceeds of crime (which knowledge may be inferred from objective factualcircumstances); and secondly a more flexible standard of knowledge or suspicion that theproperty is proceeds of crime.11

Drafting Note continued: An even less demanding negligence standard may also beadded. It is set forth in a separate subsection, here Section 3(5), as States adopting thisstandard often choose to provide lesser penalties for negligent money laundering. Thesecond variant which includes “suspecting” eases the proof by covering situations whereevidence suggests that the person had a suspicion that the property might well be proceeds.Some States also use, as the alternative standard in their criminal money launderingprovision, that the person had reasonable grounds to believe the property constitutedproceeds.Drafters may also wish to consider adding to “knowing” in each of the subsections, theterm “believing.” This would provide for liability where persons believe what they havetaken or converted is proceeds, even though it is not. It would apply, for instance, wheremonies or goods were provided by a law enforcement of

Laundering, Proceeds of Crime and Terrorist Financing Bill. These 2009 updated model provisions, which are based upon the relevant international instruments concerning money laundering and th e financing of terrorism, the FATF 40 9 Recommendations and best practices, replace the 2003 UNODC Model.

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