"Money laundering issues and recent trends" Forbes Latvia

August 9, 2022 at 8:00 pm

Attorney-at-law Ph. D., Dr. iur. Liene Neimane

Money laundering issues and recent trends

The opinions of various experts on whether to seize property because it has been declared criminal property by a body, rightly or wrongly, are becoming more and more frequent, and this is causing controversy.

Relevance:

the issue of the examination period is becoming more and more topical. We have heard of cases where a person is asked to provide documents relating to transactions that took place 20 years ago;
if a person has to prove the origin of certain property in accordance with the principle of procedural economy, where there is no uniform and clear understanding of what constitutes clear and reliable evidence and what is the scope of these activities? There are different views on what steps should be taken to prove this .

Latvia does not have a uniform practice and understanding of money laundering; it has adapted to the circumstances and learned from each case. As K.Dreimanis pointed out, the old European countries have found the fulfilment of the norms in many years of practice, but Latvia adopts good norms, translates them and writes them into the law, but there is no practice and experience in the adequate application of these norms, which is why strange situations arise. I would point out that the Netherlands has gained a great deal of practical experience in combating the laundering of the proceeds from the sale of illegal drugs. Latvia has so far had five Moneyval assessments - the first four were technical (compliance of the law with the Directive), which produced good results, but as soon as the fifth assessment touched on the effectiveness of these provisions, the assessment became unsatisfactory .

On 13 February 2018, the US Department of the Treasury FinCEN published a notice on Latvian AS ABLV Bank . On 18 February 2018, the Financial and Capital Market Commission (FCMC), at an extraordinary meeting of its Supervisory Board, acting on the instruction of the European Central Bank (ECB) No ECB-SSM-2018-FCMC-1, decided to temporarily impose payment restrictions on ABLV Bank, prohibiting debit operations on customer accounts in any currency. In effect, this decision meant that the bank was forced to start a process of self-liquidation, which resulted in the freezing of funds of some non-residents, as AS ABLV Bank was the largest bank in Latvia servicing non-residents. Numerous investigations were launched, which were reduced to criminal proceedings.

After loud announcements, only on 21 November 2019 the Saeima adopted amendments to the law, where the fifth paragraph of Section 356 of the Criminal Procedure Law was amended to read as follows: 'If it is alleged that property was criminally acquired or related to a criminal offence, the person directing the proceedings shall notify that person that within 45 days from the date of notification he/she may submit information on the legality of the origin of the property concerned, as well as inform the person of the consequences of failure to submit such information. " With these amendments, Article 125 of the Criminal Procedure Law "Legal Presumption of Fact" was amended by adding a third paragraph which states: "If a person involved in criminal proceedings is unable to plausibly explain the origin of the property with which the laundering activities were carried out, and the totality of the evidence gives the person directing the proceedings grounds for presuming that the property was most likely criminally acquired, this shall be presumed to be proven ." The amendments entered into force on 24 December 2019. They actually became effective at the beginning of 2020.

The author can agree with the above-mentioned that there is still no uniform case law on the fair settlement of property issues. In order to create a common understanding of criminal offences among investigators, prosecutors and the courts, the Financial Intelligence Service (FIU) developed a methodological material "Typologies and characteristics of money laundering ", which states "According to Article 124(7) of the Criminal Procedure Law, the investigation of money laundering (ML) can be carried out independently, i.e. to prove ML it is not necessary to prove specifically from which criminal offence the funds were obtained. This means that the offence under Article 195 of the Criminal Law can be investigated as a "stand-alone" or autonomous money laundering offence, based on circumstantial evidence indicating the criminal origin of the property, the typologies and characteristics of money laundering offences, as well as the persons' inability to prove the lawful origin of the property .

Corruption is one of the main crimes generating dirty money around the world. Proving every case of corruption is unrealistic, but getting the dirty money out is realistic. Corruption is the stand-alone offence.

Section 126(3)¹ of the Criminal Procedure Law provides that if a person involved in criminal proceedings claims that property should not be considered as criminally acquired, the burden of proving the lawfulness of the origin of the property in question lies with that person. If a person fails to provide reliable information on the lawfulness of the origin of the property within the prescribed time limit, that person shall be deprived of the possibility to obtain compensation for the damage caused to him/her in connection with the restrictions imposed in the criminal proceedings on the disposal of that property. Article 125 of the Criminal Law (legal presumption of fact) provides that it shall be presumed that property laundered has been criminally acquired if the person involved in the criminal proceedings is unable to provide a reliable explanation of the lawful origin of the property and if the totality of the evidence gives the person conducting the proceedings reason to believe that the property is likely to have criminal origin.

In practice, the question of what constitutes sufficient evidence of the lawful origin of the property in question on the part of the investigator, the prosecutor and the court is a matter of debate. Example: a person is gainfully employed and receives a salary. Criminal proceedings are initiated against that person without the person even knowing it. This fact came to light when, during a vacation, the person went outside the borders of the Republic of Latvia to visit his relatives in another country. At the border, the person was stopped and told that the car had been declared stolen and that he should leave the car at the border of the other country and continue on his own. At the border, the person tried to prove that he was both the owner and the keeper of the car and that it was impossible for him to steal the car himself. The arguments did not help, as the fact that the car was internationally wanted as stolen was enough. The person was left without a car at the border and without a means of subsistence at the same time, because when the person contacted the investigator the next day, his bank accounts were blocked, making it impossible for him to pay with a payment card. It was only on his return to Latvia that the reason for the blocking of the bank accounts became clear, which the person was only able to resolve on his arrival in Latvia.

Looking at the situation, in conjunction with many other circumstances, one wonders whether officials who are endowed with a certain amount of power can really do absurd things to a human being and his right to a basic existence. On his return to Latvia, he was asked, in accordance with Article 365 of the Criminal Procedure Law, to provide information on the legality of the origin of the property in question (the purchase of the car) within 45 days of the notification. The person did so, but the evidence provided was insufficient in the opinion of the investigator. In the context of this case, the author returns to the problem of what constitutes sufficient evidence in the investigator's opinion.

Often, it is found that the threshold of verifying sufficient evidence is crossed, which becomes an invasion of a person's privacy. In this example, it is significant that the basis for initiating criminal proceedings was information about a stolen car, the handling of which falls within the jurisdiction of a particular national police department, but information about another article, namely money laundering, later emerges. It was not until several months later that the person found out what the criminal proceedings were about.

In conclusion, this may be a new trend in criminal proceedings, but how justified it is is another matter. The author has come across many different cases in practice, each of which is different and the analogy does not apply here, but investigators and prosecutors think differently.

In order to have grounds for criminal proceedings at all, the amount of evidence required, its credibility and its validity must be clearly and comprehensibly defined. It is unacceptable that, due to a lack of knowledge, no evidence can be considered reliable and everything is considered to be the proceeds of crime. It is time to have a professional understanding of cases and to be able to assess the facts, which may also be sufficient grounds for closing a case.

1 https://www.db.lv/zinas/pagatnes-darijumu-pieradijumiem-var-but-zelta-vertiba-494170
2 https://www.fincen.gov/sites/default/files/federal_register_notices/2018-02-13/ABLV%20NPRM%2020180212%20%28Final%20for%20FR%20Submission%29.pdf
3 https://www.fid.gov.lv/uploads/files/Dokumenti/Vadl%C4%ABnijas%2C%20rekomend%C4%81cijas/FID_Tipologiju_materials_2020.pdf