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Keeping Cash Clean - The Reporting Regime and Possible Adverse Effects

Wiklund, Anders (2008)
Department of Law
Abstract
Financial services and cross-border financial activities have developed considerably due to the globalisation of the economy. The utilisation of these new opportunities has, however, attracted financial activities that relates to money laundering. Money laundering is a way to separate and conceal the proceeds of crime in order to reinvest or simply use it in the open economy, without drawing the attention of the authorities. The regulatory initiatives stem first and foremost from FATF and the EU. Regarding the European Union and the three Money Laundering Directives, the national implementation has been fairly uniform, with administrative measures to combat this phenomenon. These measures include in particular the use of a suspicious... (More)
Financial services and cross-border financial activities have developed considerably due to the globalisation of the economy. The utilisation of these new opportunities has, however, attracted financial activities that relates to money laundering. Money laundering is a way to separate and conceal the proceeds of crime in order to reinvest or simply use it in the open economy, without drawing the attention of the authorities. The regulatory initiatives stem first and foremost from FATF and the EU. Regarding the European Union and the three Money Laundering Directives, the national implementation has been fairly uniform, with administrative measures to combat this phenomenon. These measures include in particular the use of a suspicious transaction reporting system, whereby the regulated undertaking is obliged to investigate and report suspicious transactions that may be associated with money laundering. Coupled with the reporting duty is the duty not to participate or facilitate suspicious transactions in any way. The Swedish Act on Measures Against Money Laundering implements the aforementioned Money Laundering Directives. Almost all financial activities are now a part of the reporting regime. The extension of the reporting regime as well as a move from rule- to risk based customer due diligence may have adverse effects, even for the ordinary customer. One key feature of the customer due diligence is the subjective judgment of the regulated undertaking, which may render a transaction in one case as suspicious and in another case as legitimate. Since the regulation prohibits any facilitation of transactions when there is reasonable suspicion of money laundering, a wrongful assumption of suspicion may cause delay to a suspect transaction. The basis and level for the suspicion is not defined by the regulation, only brief guidelines may serve as indicators of money laundering. This leaves considerable leeway for the bank in most cases. A ''gut-feeling'' seems to be sufficient in many cases. Most obligations are superseded by the money laundering regulation. The duty of confidentiality is qualified in these cases, by a statutory exception. The recent time limits for cross border credit transfers are also subject to exception if the bank raises suspicion of money laundering. The risk for the bank to face civil liability in case of a wrongful suspicion is probably limited to cases of intentional or grossly negligent reports. The few cases that have addressed this issue indicate that the bank has considerable leeway in disclosing and taking appropriate actions. (Less)
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author
Wiklund, Anders
supervisor
organization
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
Förmögenhetsrätt, Bankrätt
language
English
id
1563056
date added to LUP
2010-03-08 15:55:31
date last changed
2010-03-08 15:55:31
@misc{1563056,
  abstract     = {Financial services and cross-border financial activities have developed considerably due to the globalisation of the economy. The utilisation of these new opportunities has, however, attracted financial activities that relates to money laundering. Money laundering is a way to separate and conceal the proceeds of crime in order to reinvest or simply use it in the open economy, without drawing the attention of the authorities. The regulatory initiatives stem first and foremost from FATF and the EU. Regarding the European Union and the three Money Laundering Directives, the national implementation has been fairly uniform, with administrative measures to combat this phenomenon. These measures include in particular the use of a suspicious transaction reporting system, whereby the regulated undertaking is obliged to investigate and report suspicious transactions that may be associated with money laundering. Coupled with the reporting duty is the duty not to participate or facilitate suspicious transactions in any way. The Swedish Act on Measures Against Money Laundering implements the aforementioned Money Laundering Directives. Almost all financial activities are now a part of the reporting regime. The extension of the reporting regime as well as a move from rule- to risk based customer due diligence may have adverse effects, even for the ordinary customer. One key feature of the customer due diligence is the subjective judgment of the regulated undertaking, which may render a transaction in one case as suspicious and in another case as legitimate. Since the regulation prohibits any facilitation of transactions when there is reasonable suspicion of money laundering, a wrongful assumption of suspicion may cause delay to a suspect transaction. The basis and level for the suspicion is not defined by the regulation, only brief guidelines may serve as indicators of money laundering. This leaves considerable leeway for the bank in most cases. A ''gut-feeling'' seems to be sufficient in many cases. Most obligations are superseded by the money laundering regulation. The duty of confidentiality is qualified in these cases, by a statutory exception. The recent time limits for cross border credit transfers are also subject to exception if the bank raises suspicion of money laundering. The risk for the bank to face civil liability in case of a wrongful suspicion is probably limited to cases of intentional or grossly negligent reports. The few cases that have addressed this issue indicate that the bank has considerable leeway in disclosing and taking appropriate actions.},
  author       = {Wiklund, Anders},
  keyword      = {Förmögenhetsrätt,Bankrätt},
  language     = {eng},
  note         = {Student Paper},
  title        = {Keeping Cash Clean - The Reporting Regime and Possible Adverse Effects},
  year         = {2008},
}