To be or not to be a perpetrator? Self-laundering under the Romanian Anti-Money Laundering Law

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Mihai Mares
Mares & Mares, Bucharest
mihai.mares@mares.ro

Introduction

It is well known that the offence of money laundering is dependent on a previously-committed, different offence, from which the assets requiring laundering originate. As such, money laundering is conceived as a subsequent offence (delictum subsequens), whereas the previous offence – also named the primary, the premise or the predicate offence – is considered as the main offence (delictum principale).^[1]

‘Self-laundering’is a situation in which the same person perpetrates both the primary offence and the money laundering offence. In this article, the legislative evolution of self-laundering will be outlined, focusing on two landmark decisions rendered by Romania’s Supreme Court and the Constitutional Court, respectively. This will be followed by indicating the effects of this mandatory case law on the current anti-money laundering (AML) legislation.

2016: Binding judicial interpretation regarding self-laundering

In order to establish an official, unitary interpretation of what is regarded as self-laundering, on 8 June 2016, the High Court of Cassation and Justice (HCCJ), Romania’s Supreme Court, rendered the Preliminary Decision No 16/2016,^[2] whereby it ruled, among other matters relating to the offence of money laundering, that self-laundering was possible as, theoretically, such possibility was not forbidden by law.

In this respect, the HCCJ made reference to the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, adopted in Warsaw on 16 May 2005, ratified by Romania by Law No 420/2006. Specifically, Article 9 paragraph 2b of the Convention, stipulates that, for the purpose of implementing or applying legislative and other measures as may be necessary to establish as offences under its domestic law, ‘it may be provided that the offences set forth in that paragraph do not apply to the persons who committed the predicate offence’. The HCCJ noted, in this context, that the Romanian State did not express any reservations and the AML law in force at the time (Law No 656/2002, currently repealed) did not explicitly prevent self-laundering either.

Moreover, the HCCJ also referred to a previous Romanian Constitutional Court Decision (No 73/2011), whereby it was held that the configuration of the money laundering offence in force at the time was not in breach of the ne bis in idem principle, enshrined in Article 4 paragraph 1 of Protocol No 7 to the European Convention on Human Rights (ECHR).

Nevertheless, the HCCJ drew attention to the fact that the money laundering charge must not be automatically brought against the perpetrator of the offence from which the assets originate, as this would deprive the money laundering offence from being an individual offence. Consequently, it is for the judicial bodies to decide, depending on the actual circumstances of a case, whether the money laundering offence is sufficiently individualised by comparison with the offence from which the assets originate and whether multiple offences or a single offence should be imposed.

For instance, in one specific case^[3] the HCCJ ruled that the money laundering charge cannot be imposed together with the tax evasion charge as the premise offence, if the acquiring of such money is not followed by a subsequent act for the purpose of dissimulating the illicit origin thereof, as this approach would breach the ne bis in idem principle. In that particular case, it was held that the defendant did not commit any action to exchange or transfer money originating from tax evasion, but solely appropriated the proceeds of tax evasion. As such, the defendant was acquitted of the money laundering charge.

Although the preliminary decision mechanism generally aims to prevent and not provide remedy for the non-unitary case law, there had already been conflicting views encountered both in the case law of national courts as well as in the relevant legal literature with respect to different hypotheses of self-laundering.

Thereafter, certain issues of unconstitutionality relating to self-laundering were brought to light, which determined a referral before the Constitutional Court of Romania.

2018: Partial unconstitutionality of the provisions incriminating money laundering with respect to self-laundering

The Constitutional Court of Romania (CCR), by Decision No 418/2018,[4] rendered on 19 June 2018, analysed the constitutionality of the provisions incriminating money-laundering, as interpreted by the HCCJ Decision No 16/2016, and ruled as follows:

‘Relating to the first two legal modalities of the money laundering offence, as they were provided under Article 29(1)(a) and (b) of Law No 656/2002, CCR noted that they may be perpetrated either by the same perpetrator of the predicate offence or by a different one, as they do not raise any concerns of unconstitutionality (paragraph 26). These modalities consisted of:

1. the exchange or transfer of assets, knowing that they originate from the committing of offences, for the purpose of concealing or dissimulating the illicit origin thereof or for the purpose of aiding the person that has committed the offence from which the assets originate to abscond from prosecution, trial or the serving of the penalty;
2. the concealment or dissimulation of the true nature of the provenance, location, disposal, circulation or ownership of assets or of the rights over them, knowing that the assets originate from offences.’

Unlike the above-mentioned two modalities, the third legal modality of the money laundering offence (paragraphs 27–29), consisting of ‘acquiring, owning or using assets, knowing that they originate from the committing of offences’ (Article 29(1)(c) of Law No 656/2002, as interpreted by the HCCJ), may be regarded as problematic as it would imply incurring criminal liability twice for the same acts in the hypothesis of self-laundering. Specifically, CCR held that the alternative actions of acquiring or owning inevitably result from the committing of the offence from which the acquired or owned assets originate. They are not distinct actions that may be committed by the perpetrator of the predicate offence at a subsequent time, based on a distinct criminal resolution. In its turn, the alternative action of using assets, knowing they originate from an offence, does not imply a new criminal resolution by itself, only if such use is related to activities of exchange or transfer of assets then the inherent characteristics of money laundering occur.

As such, this third modality of money laundering only meets the standards of clarity and logical coherence in so far as self-laundering is excluded. Practically, this legal text refers to a form of aiding and abetting, which can only be committed by a person other than the perpetrator of the offence from which the assets originate (paragraph 31).

Consequently, the configuration of the money laundering offence with respect to self-laundering in this hypothesis is, in CCR’s view, in breach of the constitutional requirements of clarity, precision and predictability resulting from the rule of law principle, as set out under Article 1, paragraph 5 of Romania’s Constitution, as well as of the provisions set out under Article 23, paragraph 12 of the Constitution and Article 7 ECHR, entitled ‘no punishment without law’ (paragraph 34).

2019: Romania’s current legal framework regarding self-laundering

The current AML provisions in Romania are set out under Law No 129/2019 on preventing and combating money laundering and terrorism financing as well as on amending and supplementing certain pieces of legislation (the AML Law), in force since 21 July 2019. This new law transposed the provisions under the 4th AML Directive (Directive (EU) 2015/849) and Directive (EU) 2016/2258 regarding access to AML information by tax authorities.

The AML Law provides, under Article 49(1)(a) through (c), alternative modalities of the money-laundering offence, all punishable by imprisonment of between three and ten years, which are largely similar to the ones previously provided under Law No 656/2002.

However, as compared to the previous Article 29(1)(c) of Law No 656/2002, the current version under Article 49(1)(c) of the AML Law incriminates the purchasing, owning or using of assets ‘by a person that is different than the perpetrator of the offence from which those assets originate’, knowing that they originate from the committing of offences. As such, under the legislation in force, it is clear that the perpetrator of such money laundering offence cannot coincide with the perpetrator of the predicate offence. By excluding self-laundering in this modality, the Romania’s lawmakers prove compliance with the CCR 2018 decision.^[5]

2020: Prospective improvements to Romania’s AML legal framework

Romania must now expedite the transposition of the 5th AML Directive (Directive (EU) 2018/843), amending the 4th AML Directive and improve the fight against money laundering.^[6]

Subsequently, the 6th AML Directive (Directive (EU) 2018/1673) on combating money laundering by criminal law is to be transposed until 3 December 2020. In paragraph 11 of the Recitals under this Directive, there is direct reference made to self-laundering, as follows:           

‘Member States should ensure that certain types of money laundering activities are also punishable when committed by the perpetrator of the criminal activity that generated the property (‘self-laundering’). In such cases, where the money laundering activity does not simply amount to the mere possession or use of property, but also involves the transfer, conversion, concealment or disguise of property and results in further damage than that already caused by the criminal activity, for instance by putting the property derived from criminal activity into circulation and, by doing so, concealing its unlawful origin, that money laundering activity should be punishable.’ [emphasis added]

Therefore, in our opinion, the current legislative option is also in line with the prospective 6th AML Directive as it denies self-laundering in the cases where the money laundering activity cannot be sufficiently distinguished from the activity of perpetrating the predicate offence.^[7]

The current view on self-laundering may also be an incentive for the criminal judicial bodies to look beyond the usual self-launderers towards those providing specialised money laundering services, as emphasised in one of the reports issued by the Financial Action Task Force (FATF).^[8]