Money Laundering in the EU
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Methods and Stages

 

The explosion of money laundering

 

Macroeconomic Consequences

 

The Risks to Financial Institutions

 

The Risk to the Financial System

 

Money Laundering as Tax Evasion

 

Social and Political Costs

 

International Conventions

 

EU Directives on Money Laundering

 

The Achilles Heel

 

Bibliography and some useful links




Money Laundering as Tax Evasion

This is a hotly debated topic relating to whether money-laundering laws do or even should relate to tax crimes. The issue here revolves around two main issues. The first of which is whether tax offences are a predicate crime within any particular jurisdiction. In many areas of the world, governments do not raise tax revenue through income tax; hence evasion of income tax cannot be a crime. This is exemplified by the island of Jersey. Secondly, a basic principle of international law is that one country cannot enforce the tax laws of another. The former is not applicable to the EU as all the governments of the EU do raise tax revenue through charging income tax. The latter does pose a problem, though the question of whether tax laws are a predicate offence for the purposes of money laundering laws is a question of the express position of the anti-money laundering laws, or the interpretation of those laws by the Court. In most countries, including the EU, that have ‘all crimes’ anti-money laundering laws, it is almost certain that tax crimes fall within the catchall provisions.

Tax offences fall on the border of what is and is not considered as laundering, this is owed to the fact that money a person lawfully receives cannot be laundered. This is exemplified by the following case. If a person receives a £100 for work and is liable to pay a 40% marginal rate of income tax on it and fails to declare the income, then £40 is considered as being stolen from the Treasury. Therefore, he/she does not launder the £100, he/she launders the £40 i.e. the tax evaded is laundered. The complication that makes this difficult to understand is that in order to retain the £40, he/she puts the whole amount of £100 through the laundering process. He has to show that he received £100 legitimately in order to evade a payment of £40. Tax evasion is an important problem for tax-evading funds are idle and non-productive. Their injection, however surreptitiously into the economy transforms them into a productive source of capital. However, with organised crime syndicates the matter and numbers are slightly different. They have to partake in money laundering, otherwise they would be questioned as to how they came by such vast sums of money and if they cannot prove it was legally obtained, then they risk imprisonment or at the very least a fine.

 

 

 

 

 

 

 

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