Self-laundering and the impact on a company’s model of organisation, management and control

April 2014 | EXPERT BRIEFING | FRAUD & CORRUPTION

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In recent years issues around money laundering and the reuse of ‘dirty money’ have intensified due to their impact on the market and on free economic development.

The Italian Legislator has introduced a regulatory system based on double-track provisions providing for, on the one hand, criminal measures with repressive purposes and, on the other hand, preventive measures contained in the Legislative Decree no. 231/2007, aimed at introducing obligations to cooperate in respect of those persons who, due to their activities, are more exposed to money laundering phenomena.

On the repressive side, money laundering crime (pursuant to article 648 bis of the Penal Code) punishes with imprisonment from four to 12 years and a fine ranging from €1,032 to €15,493, those who, apart from cases of complicity in the crime, exchange or transfer the proceeds of the crime or carry out operations suitable to hinder the identification of the criminal origin. The current provision is devoid of the previous exhaustive list of crimes and involves new conducts which provide for punishing, essentially, any conduct liable to hinder the identification of the proceeds of the crime.

According to the expression contained in article 648 bis of the Penal Code (i.e., ‘apart from cases of complicity in the crime’), the person acting in the crime from which the utilities derive and those who have been complicit – in moral or material terms – in the crime, are not punished. This exclusion of criminal liability is due to the theory that describes the behaviour of the persons concealing the proceeds of the crime as a natural consequence of the crime which, therefore, being a simple post factum, is not punishable. According to this approach, punishing those activities carried out by the perpetrator of the crime, whose purpose is to benefit from the proceeds, would be a duplication of the penalties referring to the same fact, in breach of the so-called principle ne bis in idem. In other words, a self-laundering crime today would not be considered punishable given that it is a normal consequence of the crime and, therefore, such conduct would already be punished when punishing the crime from which the illicit profit derive.

This approach leads to two thoughts. First, if self-laundering should be punishable (e.g., eliminating the expression ‘apart from cases of complicity in the crime’), its high penalty would be greater and disproportionate to punishment arising from the crime from which the utilities derive. Second, if the self-laundering post factum is a typical enactment and expression of the underlying or predicate offence, the establishment of an autonomous type of offence would make it a hallmark of any offence against property, thus doubling the offence.

It should be noted that the concept of money laundering contained in art. 2 of the Legislative Decree no. 231/2007 does not provide for the expression contained in article 648 bis of the Penal Code (i.e., ‘apart from cases of complicity in the crime’) and, therefore, includes self-laundering. However, its regulatory framework is limited to the decree and shall not affect the Penal Code.

In recent years, the European Directives 2005/60/EC, 2006/70/EC, the International Monetary Fund, the OECD, the Bank of Italy and the National Anti-Mafia Prosecutor pressed the Italian government to introduce a self-laundering crime because, like money laundering, it constitutes one of the main channels through which criminal associations conceal the criminal origin of their resources and obtain the economic tools to strengthen their unlawful action.

On the national level, in January 2013 a Committee was established to verify the opportunity to introduce a self-laundering crime, headed by the Prosecutor of Milan, Francesco Greco. Later, in March 2013, the former national anti-Mafia prosecutor, Piero Grasso, filed a bill aimed at introducing a unified case of money laundering and self-laundering. In June 2013, a further Committee was established to work out a regulatory system against organised crime, in particular by providing self-laundering and vote trading.

The common element of such proposals is to create an independent case of money laundering in a separate title of the Penal Code dedicated to crimes against economic and financial order. This would punish, under self-laundering, only fraudulent operations, without punishing persons for conduct intended solely to allow them to benefit from the proceeds of the crime.

Some public prosecutors have argued that the perpetrator of the crime from which utilities derive might be liable for self-laundering to the extent that the conduct has been committed through other persons misled by him, using the figure of the so-called ‘mediate author’, pursuant to article 48 of the Penal Code (according to which, persons who instruct someone to commit a crime are liable for the crime committed by the person deceived). However, this approach was rejected by the Supreme Court (see Court of Cassation, decision no. 9296 of 27 February 2013), considering irrelevant modes – direct or indirect through a third party – through which the acting author exchanges or transfers the unlawful proceeds.

Article 63 of the Legislative Decree no. 231/2007 has extended company liability for the crime of receiving, laundering and using money, goods or assets of illicit origin by introducing article 25 opties in Legislative Decree no. 231/2001. The involvement of companies in a crime is consistent under a criminal point of view because frequently money laundering operations are disguised by using the company as a screen. The involvement of the company may occur when it places the proceeds of crime into the economic system.

Therefore, the Model of Organization Management and Control (Model) must adopt preventive measure – especially in view of the possible liability of the company in the event that self-laundering is introduced in the Penal Code – commensurate with the nature and size of the organisation and with the kind of activity performed. In this respect, the Model must set procedures for risk assessment and risk management in accordance with the anti-money laundering discipline and carry out customer due diligence (i.e., identifying customers, maintaining records of transactions and reporting suspicious transactions).

Furthermore, the Bank of Italy, in its decision of 24 August 2010 provided a series of ‘anomaly indicators’ aimed at identifying suspicious transactions. Among such indicators there are those related to customer behavior (e.g., the customer refuses to provide information about his identity, the purpose and nature of the business, or about the economic and financial situation), to the kind of transaction (e.g., the relation is economically disadvantageous or unusual compared with market practice), and to the method of payment (e.g., use of cash, especially a significant amount).

Therefore, in implementing the Model, it should be taken into account that all commercial and financial operations should be appropriately verified to ascertain the possibility of crimes of money laundering, the customer’s identify and the origin of the goods, to ensure traceability of financial and commercial relations with third parties.

This involves obligations to disclose and report suspicious behaviour to corporate bodies such as the board of directors and audit committee. In this respect, a key role is played by the Supervisory Body (OdV) which must monitor activities related to sensitive processes and identify atypical financial flows. Moreover, failure of the OdV to report such information to the competent authorities listed in Legislative Decree no. 231/2007 entails criminal liability pursuant to art. 55 of Legislative Decree no. 231/2007, with imprisonment up to one year and a fine ranging from €100 to €1000.

Emilio Battaglia is a partner at CMS Adonnino Ascoli & Cavasola Scamoni. He can be contacted on +39 06 478 151 or by email: emilio.battaglia@cms-aacs.com.

Emilio Battaglia

CMS Adonnino Ascoli & Cavasola Scamoni