Money laundering

This thesis concerns itself with money laundering, which may be defined as concealing the illegal source of proceeds obtained through criminal activities or, in other words, of "dirty money", bestowing dirty money with the appearance of legitimacy and introducing it to the financial system. Money laundering constitutes a necessity for criminals seeking to benefit freely from their ill-gotten gains without risking being noticed by authorities and penalized for their illegal actions. Through money laundering, criminals create the illusion of lawfulness with regard to their proceeds and utilize these proceeds to further prosper, both through continuing their criminal activities and through making legal investments. Money laundering is a sophisticated phenomenon, which falls within the sphere of interest of various disciplines such as economy, finance and sociology as well as multiple branches of law. Although this thesis, prepared within the frame of penal law, is centered on and around the offence of money laundering, other dimensions of this concept are also discussed to the extent deemed necessary to study the subject as a coherent whole. Despite the offence of money laundering having a long history, its ability to evolve quickly in accordance with the technologic and economic developments renders the need to study it a continuous one. For instance, the possibility to make online transactions, which could not have been imagined in the recent past, is today not only in the service of the humankind but also exploited by money launderers as a means of realizing their criminal purposes. Furthermore, professional money launderers, who launder the proceeds of crime using their expertise in return for a fee, without participating in the crimes generating these proceeds or even having knowledge of such crimes, have emerged. Taking into account many such developments, of which the abovementioned constitute only a couple examples, and the fact that legislation may not be envisioned in isolation from the concrete events in the world, it may be stated that the issue of money laundering happens to be a current one. Moreover, money laundering has a close connection with other criminal phenomena such as organized crime, financing of terrorism, and corruption, which present unique difficulties to the authorities who aim to fight them. The global acceptance of the idea that the anti-money laundering system may also be used to fight such crimes increases the importance attached to the issue in question. The primary purpose of this study is to make a close examination of the offence of money laundering. The offence of "laundering of assets acquired from an offence", the main money laundering offence stipulated in the first paragraph of Article 282 of the Turkish Penal Code (TPC) numbered 5237 and the offence of "purchasing, accepting, keeping or using laundered assets", which penalizes the next step of money laundering, thus complementing the first paragraph, and is stipulated in the second paragraph of the aforementioned Article of the TPC, shall be discussed comprehensively within this thesis. However, before proceeding to the discussion regarding these offences, money laundering as a concept as well as the global antimoney laundering system and its components shall be contemplated. Thusly, one may better perceive the role given to money laundering offences within the broader construct of the anti-money laundering system and assess their efficacy in fulfilling their purpose. This thesis, which is composed of three parts, is the result of a thorough analysis of academic materials regarding money laundering, international instruments such as United Nations treaties and European Union legislation, domestic and foreign penal codes and jurisprudence as well as material released by organizations active in the field of anti-money laundering. The first part of the thesis is devoted to understanding money laundering as a phenomenon. In this part, the term "dirty money" is defined and its relation with informal economy is explained before moving on to the definition, stages and methods of money laundering. It must be emphasized that the money laundering methods included in this part by no means comprise an exhaustive list and are selected due to either their wide-spread use by money launderers or to the obstacles they pose to the authorities investigating money laundering cases. Indeed, there are virtually endless methods of laundering proceeds of crime, with new ones emerging constantly, and the well-studied methods are used in conjunction to render following the money more difficult. The only certain common denominator to all money laundering cases is that dirty money is moved between its illegal source and the appearance of legitimacy. Nevertheless, being acquainted with the principal methods of money laundering is crucial to shedding light on the concept of money laundering and assessing the sufficiency of the legislation in responding to exigencies created by concrete events. In the first part of the thesis, the social and economic consequences of money laundering are also pondered upon as the great weight placed on antimoney laundering system, both on national and international scales, is the direct result of such grave and far-reaching consequences. Another heading under the first chapter of the thesis is the history of money laundering. In addition, the phenomena of organized crime, financing of terrorism, and corruption, which shall be frequently mentioned through the thesis as they present both as a reason for and a result of money laundering and thus, reinforce one another in a vicious cycle, and their connection to the main topic of the thesis are explained. Organized crime, financing of terrorism, and corruption all share the trait of being extremely destructive to social, economic and cultural constructs and may even threaten the rule of law in certain instances. In cases where it is not possible to fight such types of criminality directly, the anti-money laundering system may be of great help to the authorities. Through pursuing the dirty money, the identity of previously unknown criminals may be uncovered, leading to their prosecution and the seizure of the proceeds of their crimes, depraving them of their means to carry out further unlawful activities. The second part of the thesis revolves around the global anti-money laundering system. To begin, international treaties which have played a significant role in money laundering offences and relevant preventive measures being prescribed in national legislations are examined. Then, the European Union legislation on money laundering is outlined in an effort to trace the evolution of the anti-money laundering system and the standards of compliance with this system. Subsequently, Financial Action Task Force (FATF), the organization which stands at the focal point of the anti-money laundering system and determines the standards and policies concerning the fight against money laundering, and its most prominent contributions to the topic in question are reviewed. Even though FATF Recommendations are non-binding instruments, governments that fail to transpose their provisions to their national legislation may be classified as "non-compliant", which damages their international commercial relations as a non-compliant country becomes subject to increased controls and diligence during international transactions. In addition, the adoption of the standards set forth by Recommendations is promoted through United Nations, a body which have the power to produce binding instruments and impose sanctions. Consequently, a global anti-money laundering system, which is led by FATF and to which all countries are expected to adhere has emerged. The transnational aspect of money laundering offence and its predicate offences, the speed and efficiency with which money launderers exploit brand new technologies as well as developments in communication and logistics, and the contagiousness of economic and legal issues between countries in the face of the present-day integrated markets are all factors that feed the current notion that money laundering is a problem that needs to be handled on an international level. Following from this notion, standardization of national legislations and establishment of high levels of cooperation between countries are considered indispensable. It must be underlined that the global anti-money laundering system, created through international instruments and practices sprouting from various roots, is composed of a preventive pillar as well as a criminal law pillar. Criminal law is envisioned as a secondary resort, the primary purpose of the system being thwarting money laundering activities through preventive measures. Hence, it appears beneficial to describe the preventive measures before focusing on the legislation regarding the offence of money laundering. Therefore, designated organizations and individuals responsible for taking these measures and the measures themselves, which may be listed as customer identification and due diligence, reporting of cash transactions and suspicious transactions, preparing compliance programs and assigning compliance officers, shall be discussed within the third part of the second chapter. Establishment of financial intelligence units, such as the Financial Crimes Investigation Board (MASAK) in Turkey, is also considered under this heading. In the last chapter of the second part, the money laundering provisions in the penal codes of several countries, chosen due to their differing legal traditions and their frequent association with money laundering activities, are presented. This chapter illustrates that countries that are quite diverse in their legal, social and economic structures have very similar provisions pertaining to the offence of money laundering. On the one hand, this standardization is a prerequisite for rendering the fight against money laundering effective, but on the other hand these imported provisions may give rise to disagreeable consequence in countries with idiosyncratic conditions. In the thesis, instances where the money laundering provisions have been abused for financial or political gain or have been used to persecute very smallscale, individual criminal acts, rather than targeting organized crime and high-profile crime as expected, have been provided. The third part of the thesis delves into a detailed analysis of the money laundering provisions in the Turkish Penal Code No. 5237. The first chapter of this part depicts the historical evolution of the offence of money laundering in Turkey. Afterwards, money laundering provisions in the TPC are compared with other offences which exhibit certain similarities to the money laundering offence, namely purchasing or accepting property acquired through the commission of an offence (TPC Art. 165), failure to provide information (TPC Art. 166), destruction, concealing or altering evidence (TPC Art. 281) and protecting an offender (TPC Art. 283), thus elucidating the scope of the provisions in question. After the presentation of the abovementioned topics in the first two chapters of the third part, the third chapter analyzes the offence of "laundering of assets acquired from an offence" as set forth in the first paragraph of Article 282 of TPC. The legislative aspect of the provision and the rights and legitimate interests it protects are explained before proceeding to discussions concerning the predicate offence, which constitutes a precondition of the offence at hand. The relation between the predicate offence and the offence of laundering of assets acquired from an offence, predicate offences committed in foreign countries, the question of temporal applicability and the inclusion of tax offences among predicate offences are discussed within this scope. Perpetrator, victim, actus reus, mens rea, wrongdoing, culpability, aggravating circumstances, special forms of appearance, effective remorse, punishment and security measures, matters of investigation, prosecution and enforcement are all examined in the light of the diverging opinions in the doctrine and the jurisprudence. The last chapter of the third part is concerned with the analysis of the offence of "purchasing, accepting, keeping or using laundered assets", set forth by the second paragraph of Article 282 of TPC. The system of analysis adopted in the previous chapter is utilized in relation to this offence as well and the legislative aspect, rights and legitimate interests protected, precondition, perpetrator, victim, actus reus, mens rea, wrongdoing, culpability, aggravating circumstances, special forms of appearance, effective remorse, punishment and security measures, matters of investigation, prosecution and enforcement are contemplated. As the offence of purchasing, accepting, keeping or using laundered assets constitutes the next step after the laundering of assets acquired from an offence, the explanations under such headings are often identical to those put forth in the previous chapter. In such cases, the relevant subheading in the previous chapter shall be referenced for the sake of avoiding repetition.