Table Of ContentA Comparative Guide to Anti-Money
Laundering
A Comparative Guide
to Anti-Money
Laundering
A Critical Analysis of Systems in Singapore,
Switzerland, the UK and the USA
Edited by
Mark Pieth
Professor of Criminal Law and Criminology, University of
Basel, Switzerland
and
Gemma Aiolfi
Barrister at Law
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
©Mark Pieth and Gemma Aiolfi 2004
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted in any form or by any means, electronic,
mechanical or photocopying, recording, or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
Glensanda House
Montpellier Parade
Cheltenham
Glos GL50 1UA
UK
Edward Elgar Publishing, Inc.
136 West Street
Suite 202
Northampton
Massachusetts 01060
USA
Acatalogue record for this book
is available from the British Library
Library of Congress Cataloging in Publication Data
Acomparative guide to anti-money laundering: a critical analysis of systems in
Singapore, Switzerland, the UK and the USA/ edited by Mark Pieth and Gemma
Aiolfi.
p. cm.
Includes bibliographical references.
1. Confidential communications—Banking. 2. Banks and banking—Records
and correspondence—Law and legislation. 3. Money laundering. I. Pieth, Mark.
II. Aiolfi, Gemma, 1960–
K1089.C66 2004
345´.0268—dc22
2004043319
ISBN 1 84376 673 6
Typeset by Cambrian Typesetters, Frimley, Surrey
Printed and bound in Great Britain by MPGBooks Ltd, Bodmin, Cornwall
Contents
Foreword viii
Abbreviations ix
Contributors xvi
Executive summary xvii
Mark Pieth and Gemma Aiolfi
Introduction xxii
Mark Pieth
PARTI
1. International standards against money laundering 3
Mark Pieth
I Introduction 3
II Creating a new paradigm (1970–1990) 3
III Spreading the gospel 12
IV The 1996 and 2003 revisions of the FATF recommendations:
‘beyond drugs and banks’ 15
V Securing implementation within the club and with
non-members 19
VI Re-defining the problem: moving from anti-money
laundering to OFCS 22
VII Sharpening the focus on CDD: towards a risk-based
approach 23
VIII September 11th and the aftermath: a new paradigm – or
more of the same? 33
PARTII: COUNTRYREPORTS
Foreword to the country reports 45
Mark Pieth
2. Role of Switzerland, United States of America, United Kingdom
and Singapore as major financial centres 47
Oxford Analytica Ltd
I Overview of world financial markets 47
II Sectoral trends 48
v
vi Contents
III The role of the banking system within the domestic
economy 54
IV Private banking 56
V Non-banking financial services: organizers and introducers 61
3. Country Report: Anti-money laundering laws and regulations in
Singapore 64
Madeline Lee
I Executive summary 64
II Introduction 65
III Historical development and significance of Singapore as
a financial centre 66
IV Institutions of the anti-money laundering system 73
V Criminal law 75
VI Mutual legal assistance 87
VII Extradition act 89
VIII Law enforcement agencies of the Singapore AMLsystem 91
IX Supervisory law 92
X Financial institution’s internal controls in relation to AML 97
XI AMLand bank secrecy 97
XII Conclusion 99
Annex I 104
Annex II 105
Annex III 106
4. Country Report: Combating money laundering in Switzerland 114
Nadja Capus
I Historical development and significance of Switzerland
as a financial centre 114
II Criminal law and the development of the anti-money
laundering system 127
III Inter-Cantonal and international co-operation 154
IV Supervisory law 175
5. Country Report: Customer due diligence in Switzerland 227
Mathias Pini
I Introduction 227
II Ordinary procedures 229
III Simplified procedures 240
IV Increased diligence in special cases 246
V Documentation 253
VI Terrorism and the AMLsystem 254
VII Cross border effect of CDD 257
Contents vii
6. Country Report: Anti-money laundering rules in the
United Kingdom 265
Oxford Analytica Ltd up-dated by Nicola Padfield
I Introduction: historical development and significance of
London as a financial centre 265
II Development of the supervisory system and regulatory
regime 266
III Major anti-money laundering themes 270
IV Institutions of the AMLsystem 271
V Criminal law 277
VI Supervisory law 312
7. Country Report: The US anti-money laundering system 346
Lucinda A. Low, James G. Tillen and Karl Abendschein,
Miller & Chevalier Chartered, Washington, DC and Daniel M.
Fisher-Owens, formerly of Miller &Chevalier Chartered
I Overview of the USanti-money laundering system 346
II Criminal law 350
III Supervisory law (regulatory) 380
Appendix: Regulatory obligations of US financial institutions 411
PARTIII
8. Synthesis: Comparing international standards and their
implementation 415
Mark Pieth and Gemma Aiolfi
I Anti-money laundering as a multifunctional concept 415
II Country summaries 418
III Searching for reasons of difference 439
IV Acase for convergence 445
V Conclusion 450
Index 457
Foreword
Money laundering is the process by which criminals attempt to conceal the
source and ownership of the proceeds of their illicit activities; if successful,
the criminal maintains control and access to these funds when and where he
chooses. The efforts to combat this phenomenon are the subject matter of this
study, and in particular how anti-money laundering (AML) rules and regula-
tions impact on four of the major cross-border banking centres: UK, USA,
Singapore and Switzerland.
In looking at the evolution of the AMLparadigm from its origins as a tool
to combat drug trafficking, to its most recent application in the fight against
terrorism, it is clear that the concept remains high on the political agenda.
However, despite a plethora of rules there is still a lack of harmonization and
uneven implementation, leaving open the question whether national AML
systems really meet the international standards. To determine levels of imple-
mentation in these countries, the AMLsystem in each of the four jurisdictions
is examined in close-up. These country studies are then analysed as to their
merits and deficiencies leading to the question, ‘is the playing field being
levelled in AML?’
Put in its wider context, this question reveals the reformulation of AMLin
terms of a shift from the ‘rule based’to the ‘risk based’approach. It may be
that this change is just a reshuffling of ideas and approaches that were already
in place before – nevertheless the impact on financial institutions cannot be
underestimated. Banks and other financial service providers find themselves
obliged to take responsibility for screening their clients according to certain
risk factors. This means that financial institutions are increasingly being drawn
into doing what so far had been the task of the public sector: anticipating risk,
defining the details, such as what constitutes a terrorist threat, who should be
regarded as a ‘politically exposed person’and so on.
This study was commissioned by the Stiftung Finanzplatz Schweiz, the
research was conducted by independent contributors situated in each of the
four countries examined in detail, as well as experts from the Basel Institute
on Governance. The study findings were presented at a seminar in January
2003 where the following international experts engaged in a critical discussion
of the study’s conclusions; Professor Michael Levi of Cardiff University,
Professor Ernesto Savona of Transcrime at the University of Trento and Mr
Stanley Morris, former head of FinCen.
viii
Abbreviations
ABS Association of Banks (Singapore)
AJP Aktuelle juristische Praxis (periodical), Lachen
AML Anti Money Laundering
ARA Asset Recovery Agency
Bank Act Bundesgesetz über die Banken und Sparkassen
vom 8. November 1934
BBA British Bankers Association
BCBS Basel Committee on Banking Supervision
BCBS, CDD 2001 Basel Committee on Banking Supervision,
Customer Due Diligence for Banks, October
2001.
BCC Board of Commissioners of Currency
(Singapore)
Botschaft 1996 Botschaft zum Bundesgesetz zur Bekämpfung
der Geldwäscherei im Finanzsektor vom 17
Juni 1996, BBl 1996 III 1116
Botschaft 26 June 2002 Botschaft betreffend die Internationalen
Übereinkommen zur Bekämpfung der
Finanzierung des Terrorismus und zur
Bekämpfung terroristischer Bombenanschläge
sowie die Änderung des Strafgesetzbuches
und die Anpassung weiterer Bundesgesetze
vom 26 Juni 2002, BBL2002, No. 32, p. 5390
et seq.
BSA Bank Secrecy Act (USA)
BIS Bank of International Settlements
BSP Basel Statement of Principles
CAD Commercial Affairs Department (Singapore)
CAFRA Civil Asset Forfeiture Reform Act (USA)
CBP The Wolfsberg Anti-Money Laundering
Principles for Correspondent Banking,
http://www.wolfsberg-principles.com/
wolfsberg_principles.html
CC Criminal Code
CCTV Closed Circuit Television
ix
x Abbreviations
CDB (German: VSB) Code of Conduct with regard to the exercise of
Due Diligence (Switzerland)
CDB 98 Swiss Bankers Association’s Code of Conduct
(1998 version).
CDB 03 Swiss Bankers Association’s Code of Conduct
(2003 version).
CDD Customer Due Diligence
CDSA Corruption, Drug Trafficking and Serious
Offences Act (Singapore)
CFATF Caribbean Financial Action Task Force
Cf. Compare
CFTC Commodity Futures
CHF Swiss Francs
CICAD Inter-American Drug Abuse Control
Commission
CIP Customer Identification Programme
Council of Europe, No.141 Convention on Laundering, Search, Seizure
and Confiscation of the Proceeds from Crime,
Strasbourg, 8 November 1990
CPF Central Provident Fund (Singapore)
CTR Currency Transaction Report
DBG Bundesgesetz über die direkte Bundessteuer
(Swiss Federal Tax Legislation)
Dept. Department
Directive 91/308/EEC Council Directive of the European
Communities of June 1991 on Prevention of
the Use of the Financial System for the
Purpose of Money Laundering.
Directive 2001/97/EC Directive 2001/97/EC of the European
Parliament and of the Council of 4 December
2001 amending Council Directive 91/308/EEC
on prevention of the use of the financial system
for the purpose of money laundering
DPA Data Protection Act (UK)
Draft Ordinance Draft Ordinance of the Swiss Federal Banking
Commission Concerning the Prevention of
Money Laundering, dated June 2002
DSG Swiss Data Protection Legislation
(Datenschutzgesetz)
DTA Drug Trafficking Act (Singapore and UK)
Due Diligence Regulation Verordnung der Kontrollstelle für die
Bekämpfung der Geldwäscherei über die
