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Resolution 2279 (2019)
Laundromats: responding to new challenges in the international fight against organised crime, corruption and money laundering
1. The Parliamentary Assembly is deeply
concerned about the extent of money laundering involving Council
of Europe member States. The “Global Laundromat”, which enabled
the illegal transfer of at least US$21 billion, and perhaps as much
as US$80 billion, from the Russian Federation to recipients around
the world, the “Azerbaijani Laundromat”, through which US$2.9 billion
were transferred out of Azerbaijan, and the “Troika Laundromat”,
which transferred another US$4.6 billion out of Russia, are the
most alarming recent examples. Money laundering, especially on this
scale, is a serious threat to democratic stability, human rights and
the rule of law in the countries from, through and to which illicit
funds are transferred, inter alia by facilitating,
encouraging and concealing corruption and other serious criminal
activity.
2. The Global Laundromat was made possible by serious structural
issues, at various levels. It originated in the desire of Russian
businessmen, organised criminals and, apparently, interests connected
to State organs (notably the Federal Security Service, FSB) to illicitly
transfer huge amounts of money out of the country, with minimal
transaction costs. It typically depended upon corruption in the
Moldovan judicial and banking systems; the opaque beneficial ownership
of shell companies, often based in the United Kingdom or its Overseas
Territories; and failures and inadequacies in the anti-money laundering
(AML) systems of many banks, especially ABLV bank in Latvia, along
with ineffective national AML supervisory regimes. Despite some encouraging
developments in the Republic of Moldova and the promise of an investigation
in the United Kingdom, the Global Laundromat has still not been
subject to proper criminal investigation. It is of particular concern
that the Moldovan authorities have accused their Russian counterparts
of obstructing their work, allegedly under instructions from the
FSB.
3. The Azerbaijani Laundromat involved several similar features.
The money often came from wealthy businessmen and others closely
associated with the highest levels of government, including family
members of government ministers and the president. It passed through
shell companies with concealed beneficial ownership, the most significant
of which were again based in the United Kingdom or its Overseas
Territories. Much of the money was laundered through a Baltic bank,
in this case Danske Bank’s Estonian branch; Danske Bank’s internal
AML procedures at both branch and group level were catastrophically
deficient. National AML authorities proved ineffective, with uncertainty
over the division of responsibilities between the Estonian and Danish
financial supervisory authorities.
4. The Azerbaijani Laundromat also provided money that contributed
to corruptive activities within the Parliamentary Assembly, as was
established in the report of the Independent Investigative Body
on the allegations of corruption within the Parliamentary Assembly
(IBAC). Five former Assembly members most clearly seem to have received
some of this money, all of whom have been sanctioned by the Assembly
for breaches of its ethical rules. Luca Volontè is being prosecuted
by the Italian authorities for bribery and money laundering. Alain
Destexhe has been investigated by the Belgian authorities. The German
Parliament has found that Karin Strenz violated its ethical rules
and fined her a record €20 000. Transparency International Germany
has filed criminal complaints against both Ms Strenz and Eduard
Lintner for the offence of bribery of a public official. It is,
however, not known thus far whether any action has been taken against
the last of the five: Zmago Jelinčič Plemeniti of Slovenia. Despite
Assembly Resolution 2185
(2017) “Azerbaijan’s chairmanship of the Council of Europe:
what follow-up on respect for human rights?” having specifically
urged the Azerbaijani authorities to start an independent and impartial
inquiry into these allegations without delay, it would seem that
nothing has been done and the two Azerbaijani parliamentarians who
were most deeply involved – Elkhan Suleymanov and Muslum Mammadov
– have not been subject to any form of sanction.
5. The Troika laundromat again involved numerous shell companies,
with three based in the British Virgin Islands playing a pivotal
role, and the central involvement of a Baltic bank, in this case
Ukio Bank in Lithuania. Persons close to the heart of State power
were again implicated, this time including a close friend of President Putin.
The Troika Laundromat is particularly revealing of the origins of
laundered funds in organised crime and corruption. It also illustrates
the importance of effective AML procedures within banks that provide correspondent
banking services to foreign partners as an additional safeguard
against international money laundering.
6. Analysis of the laundromats and other large-scale money-laundering
schemes of recent years points to problems at various levels. These
include the following:
6.1. at the
level of financial institutions and other commercial entities:
6.1.1. inadequate understanding and implementation of AML requirements
by trust and corporate service providers, financial institutions
and other regulated entities, including failure to apply basic procedures
to identify customers and the source of funds/wealth, incompatible information
technology systems preventing application of AML common standards
and procedures, branches relying on crucial documents in languages
not understood in the head office and failure to fill key AML staff
positions;
6.1.2. deliberate or negligent minimisation of money-laundering
risks by top and senior management of financial institutions;
6.1.3. complicity between employees and known or suspected money
launderers;
6.1.4. lack or weakness of whistle-blowing procedures and protection
within financial institutions;
6.2. at the national level:
6.2.1. inadequate domestic
law and policy on prevention of corruption, notably a lack of publicly
accessible declarations of the property and income of public officials,
including parliamentarians and government ministers, and candidates
to elected public office, and the possibility for persons charged
or even convicted of corruption or money-laundering offences to run
for and be elected to public office;
6.2.2. inadequate AML legal frameworks, including provisions
allowing for opaque beneficial ownership of companies and trusts;
6.2.3. under-resourced AML supervisory and investigative bodies
and fragmentation of AML responsibilities between numerous agencies,
some of which may be uncertain of their precise role;
6.2.4. failure to prosecute money laundering as a third-party
or standalone offence, instead requiring proof of a predicate offence,
which is often committed in an unco-operative foreign jurisdiction;
6.2.5. inadequate identification and tracing of the proceeds
of crime during the early stages of criminal investigations;
6.2.6. criminal sentences for money-laundering offences that
are insufficiently dissuasive;
6.2.7. repression and restriction of the activities of independent
civil society and media actors, who provide an important democratic
check on corruption and other criminal activity;
6.2.8. failures by national authorities to co-operate with AML
investigations conducted by other countries’ authorities, and even
obstruction of those investigations;
6.2.9. uncertainty over the division of responsibility between
national financial supervisory authorities in relation to AML supervision
of multinational financial institutions;
6.2.10. particular vulnerabilities in the banking systems and
AML systems in the Baltic States;
6.3. at the European and international levels:
6.3.1. European
Union AML supervision that is dependent on decentralised national authorities,
despite their proven inadequacy in some countries;
6.3.2. incomplete transposition into national law and implementation
of key European Union instruments, notably the fourth Directive
on the prevention of the use of the financial system for the purposes
of money laundering or terrorist financing (Directive (EU) 2015/849);
6.3.3. the Financial Action Task Force (FATF) and the Council
of Europe’s Committee of Experts on the Evaluation of Anti-Money
Laundering Measures and the Financing of Terrorism (MONEYVAL) only
recently increasing their focus on the effectiveness and implementation
of national AML regimes, following a change to the methodology by
the FATF in 2013.
7. The Assembly therefore calls on:
7.1. the Russian Federation to:
7.1.1. investigate
fully and effectively the Global Laundromat, as revealed in widespread
public media reports, making full use of evidence obtained in other
criminal investigations, and to prosecute and punish all those who
have committed related offences;
7.1.2. co-operate fully with the relevant authorities of other
countries in the investigation of the Global Laundromat and other
international money-laundering schemes involving Russia;
7.2. the Republic of Moldova to:
7.2.1. pursue its
investigation of the Global Laundromat fully and effectively and
prosecute and punish all those who have committed related offences;
7.2.2. introduce provisions preventing persons charged or convicted
of serious offences, including corruption and money laundering,
from taking or exercising public office;
7.2.3. pursue investigations and prosecutions of candidates for
public office and public officials, including elected officials,
expeditiously, whilst scrupulously avoiding unequal treatment on
political grounds;
7.2.4. consider repealing the “fiscal amnesty” introduced in
July 2018, as it risks facilitating money laundering;
7.2.5. ensure that its “golden visa” programme is strictly regulated,
as this too risks facilitating money laundering, especially when
taken together with the “fiscal amnesty”;
7.3. Azerbaijan to:
7.3.1. investigate fully and effectively
the money laundering from Azerbaijan, as revealed in widespread
public media reports, including the IBAC report, and prosecute and
punish all those who have committed related offences;
7.3.2. fully respect the fundamental rights and freedoms of independent
civil society and media bodies, as previously requested by the Assembly
on numerous occasions;
7.3.3. respond without further delay to Assembly Resolution 2185 (2017),
in particular by starting an independent and impartial inquiry into
the allegations of corruption of Assembly members set out in the
IBAC report and by co-operating fully with the competent international authorities
and bodies on this issue;
7.4. the United Kingdom to:
7.4.1. ensure full implementation
of the new requirement that the authorities of British Overseas
Territories introduce a publicly accessible register of the beneficial
ownership of companies and trusts within their jurisdictions;
7.4.2. consider extending that requirement to the Crown Dependencies
Jersey, Guernsey and the Isle of Man;
7.4.3. consider requiring full transparency of beneficial ownership
of all United Kingdom-based companies and trusts, including limited
liability partnerships, with a publicly accessible register;
7.4.4. ensure that trust and corporate service providers comply
fully with AML requirements and are effectively supervised by relevant
domestic authorities;
7.4.5. ensure that the new National Economic Crime Centre operates
effectively to avoid fragmentation and inefficiency of AML activity;
7.4.6. ensure that the potential of the new Unexplained Wealth
Order is fully exploited;
7.4.7. ensure that there is no weakening of AML standards or
activities following the United Kingdom’s departure from the European
Union, and make every effort to ensure that the United Kingdom remains
as fully engaged as possible with relevant European Union bodies,
including Europol;
7.5. Denmark to:
7.5.1. ensure that Danske Bank fully
and effectively implements all orders given to it by the Danish
financial supervisory authorities;
7.5.2. take appropriate action, including criminal action, against
any employee of Danske Bank, including top and senior management,
who may have violated AML regulations and laws;
7.6. Estonia to:
7.6.1. ensure that Danske Bank fully
and effectively implements any measures indicated to it by the Estonian
financial supervisory authorities;
7.6.2. take appropriate action, including criminal action, against
any employee of Danske Bank, including top and senior management,
who may have violated AML regulations and laws;
7.7. the Baltic States to address the particular features of
their banking systems, including the prevalence of non-resident
accounts, that may make them peculiarly vulnerable to international
money laundering;
7.8. Sweden to ensure that the relevant police and regulatory
authorities vigorously investigate the growing reports of potentially
very large-scale money laundering at Swedbank and its branches in
the Baltic States, with connections to the Danske Bank scandal,
which have already led to the resignation of Swedbank’s Chairman
and Chief Executive Officer;
7.9. all member States of the Council of Europe to:
7.9.1. investigate fully and effectively any and all involvement
in the laundromats of natural or legal persons within their jurisdiction;
those which are member States of the European Union should request
the creation by Europol of joint investigative teams to ensure effective
cross-border investigations;
7.9.2. require elected public officials and candidates for elected
office, including candidates for president, to make publicly accessible
declarations of their property and income;
7.9.3. ensure that their domestic AML regimes are fully compliant
with all applicable international standards and effectively implemented;
7.9.4. ensure that their AML supervisory bodies are adequately
resourced, with sufficient, appropriately skilled and remunerated
staff;
7.9.5. provide for non-conviction-based confiscation in their
national laws, as well as the possibility of equivalent value confiscation
and taxation of illegal gains, while establishing appropriate safeguards,
as recommended in Resolution
2218 (2018) on fighting organised crime by facilitating
the confiscation of illegal assets;
7.9.6. ensure that banks providing correspondent banking services
fully and appropriately implement relevant AML requirements;
7.9.7. remain vigilant and responsive to the persistent risk
of large-scale international money laundering and the constant evolution
of the forms it may take;
7.9.8. implement promptly and fully all relevant recommendations
of the FATF, MONEYVAL and the Council of Europe’s Group of States
against Corruption (GRECO);
7.10. the European Union to:
7.10.1. ensure that its
member States transpose into national law and implement fully and effectively
the European Union’s fourth and fifth (Directive (EU) 2018/843)
anti-money laundering directives;
7.10.2. ensure that the proposed amending regulation on banking
supervision enables the European Banking Authority to co-ordinate
and evaluate relevant national authorities, so as to ensure synergies,
avoid discrepancies in the interpretation of rules and practical
activities, and address weaknesses in and enhance the functioning
of the overall AML system;
7.10.3. ensure full and effective implementation of its December
2018 Anti-Money Laundering Action Plan;
7.10.4. ensure that the proposed directive on whistle-blower protection
provides for effective protection for whistle-blowers in the financial
sector;
7.10.5. enhance co-ordination of its AML activities with those
of the Council of Europe.