Money Laundering in the EU

Methods and Stages

The explosion of money laundering


Macroeconomic Consequences

The Risks to Financial Institutions


The Risk to the Financial System


The Euro and Money Laundering


Money Laundering as Tax Evasion


Social and Political Costs


EU Directives on Money Laundering


International Conventions


The Achilles Heel


Bibliography and some useful links

International Conventions

Concerted efforts by governments to fight money laundering have been going on for the past fifteen years. The main international agreements addressing money laundering are the United Nations Vienna Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (the Vienna Convention) and the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime. And the role of financial institutions in preventing and detecting money laundering has been the subject of pronouncements by the Basle Committee on Banking Supervision, the European Union, and the International Organisation of Securities Commissions.

The Vienna Convention

The Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances ("the Vienna Convention") was signed in 1988 under the auspices of the United Nations and became effective in November 1990. The signatories, which included the G7 and European Union countries, agreed to join together to combat the laundering of the proceeds of drug trafficking. The measures included the criminalisation of money laundering and enhanced international cooperation together with the commitment of signatories to procure that the laws of their jurisdictions should be amended to bring this about. In addition, an international body was established to oversee the implementation of the principles of the Vienna Convention. This organisation is known as the Financial Action Task Force (FATF) and is based in Paris.  Later, what began as an international effort to combat the laundering of proceeds of drug crime was formally extended to the laundering of proceeds of other serious offences at the meeting of FATF in June 1996.

Much of the success of the Convention depends on enhanced mutual legal assistance and extradition processes. Given the variety of legal systems, languages and political interests in the world such matters are not simply resolved. To assist Nation States in seeking solutions in these areas, the UN has developed two model treaties for countries to use as they negotiate arrangements. The United Nations Model Treaty on Mutual Assistance in Criminal Matters and the United Nations Model Treaty on Extradition are designed to recognise differences in legal systems and suggest bridges between them.

The 1990 Council of Europe Convention

Adopted in November 1990, the Council of Europe Convention establishes a common criminal policy on money laundering. It sets out a common definition of money laundering and common measures for dealing with it. The convention lays down the principles for international co-operation among the contracting parties, which may include states outside the Council of Europe. Its scope is not limited to money from drug trafficking.

Basle Committee statement of principles

In December 1988, the G-10's Basle Committee on Banking Supervision issued a "statement of principles" with which the international banks of member states are expected to comply. These principles cover identifying customers, avoiding suspicious transactions, and co-operating with law enforcement agencies. In issuing these principles, the committee noted the risk to public confidence in banks, and thus to their stability, that can arise if they inadvertently become associated with money laundering. For more information go to Money Laundering: A Banker's Guide to Avoiding Problems.

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