INTERNATIONAL SOLUTIONS FOR INTERNATIONAL PROBLEMS: ON THE NEED FOR A BETTER UNDERSTANDING OF NATIONAL LEGAL SYSTEMS AS A CONDITION FOR DEVELOPING ADEQUATE SOLUTIONS

There is no need to explain the processes that led to introducing anti-money laundering measures and strengthening the “proceeds-of-crime” approach in criminal law over the last half-century (Naylor Reference Naylor2001:128). They are well known and have been described in depth in specialized literature.^{Footnote 4} However, it is important to keep in mind that they are part of a significant shift in investigation and law enforcement strategies worldwide from the 1970s onwards.^{Footnote 5} For one, money laundering did not even exist as an autonomous offense in most countries until well into the 1980s and 1990s (Giuliani Reference Giuliani2020; Pieth Reference Pieth1998).

It was during that period, as well as over the following decades, that the “follow the money” and “hit them where it hurts” criminal law policy trend (van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:258) took hold at the international level (Naylor Reference Naylor2001; van Duyne and Levi Reference Van Duyne and Levi2005). This, in turn, led to it being quickly propagated to the majority of countries all around the globe – to such an extent that it is difficult, nowadays, to think of places where the laundering of illegal gains has not been outlawed to some degree (Giuliani Reference Giuliani2020:112–13).^{Footnote 6} This “criminalization wave” regarding money laundering practices, set in motion towards the end of the 1980s, was largely a result of the extremely powerful political mobilization, at the supranational level, of key countries and organizations – notably the U.S. and the then newly created Financial Action Task Force (FATF) (Gelemerova Reference Gelemerova2011). In the beginning, the narrative adopted by those actors was geared exclusively towards the “war on drugs” (van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:231).^{Footnote 7} It stressed how important it was to double down on the profits of international drug trafficking, both through preventative measures, such as those to be followed by banks and other financial institutions, and through the repression of any tactics employed by drug traffickers to hide and disguise their illegally obtained assets (Stessens Reference Stessens2003:3; van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:143–4).

This scenario marked an interesting bifurcation in the approach to the subject at hand: while the path of prevention led to the establishment of an increasing number of measures and rules to be followed mainly by the private sector (Badaró and Bottini Reference Badaró and Bottini2019) – given that said rules are mostly situated in the administrative sphere (Oliveira Reference Oliveira2019:26) –, the repression measures led to the criminalization of money laundering and the strengthening of international cooperation to recover assets relating to criminal activities (Alldridge Reference Alldridge2016). Furthermore, though the goals of making money laundering a criminal offense in all countries across the globe and of designing effective instruments to deprive criminals of their illegal gains may have been at the intended “finishing line” of this repression road, over the years, they have been shown to be quite a tricky destination to reach, as they kept being constantly moved farther and farther away from the initially set endpoint. This has to do with the fact that the definition of what constitutes money laundering (and therefore what has to be criminalized, as well as what assets can be subsequently seized) has been continuously expanded throughout the years (Durrieu Reference Durrieu2013:171). That way, the offense that was once only linked to the proceeds of drug trafficking kept being tied to more and more sources of dirty money. Thus, a growing number of conducts had to be included in the circle of punishable offenses in each country (van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:191).^{Footnote 8}

One needs not emphasize how this constant change in the perception of money laundering and its wrongfulness has made an impact on its regulation in the international sphere and, consequently, at the national one as well (van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:109). As it is easy to imagine, implementing all those changes in so many different national contexts has not been a simple task, especially considering the need for it to be as consistent and uniform as possible. In addition to transposing new directives, treaties and recommendations to their language without losing sight of the spirit and purpose of the rules to be integrated, each country has to evaluate their compatibility with the national legal system as a whole. It is usually also necessary to rearrange public expenditures within the national budget in cases where new measures have to be put in place due to these new provisions and pass the necessary laws to enforce them within their territory.^{Footnote 9}

In this process, a couple of obstacles may appear: In some countries, as is the case with Brazil, for instance, other offenses already cover some of the conducts to be included as money laundering, which gives rise to possible incompatibilities or overlaps in the legislation.^{Footnote 10} In other countries, as the heated debate around the penalization of self-laundering in Germany has shown (Schröder and Bergmann Reference Schröder and Bergmann2013), some conducts’ punishability may conflict with constitutional principles. These are just two examples of the sorts of barriers that may lead to the absence of true harmonization of anti-money laundering laws. Such problems often arise from a lack of understanding of how the legal systems in different countries are configured, how these systems work in practice, and the repercussions that some of the modifications suggested (or imposed) through international instruments may have in each of them.

As we all know, money laundering has a marked international dimension, and so do the policies and regulations designed to prevent and repress it. Asset recovery, an integral part of the proceeds-of-crime approach to combating transnational organized crime, requires international cooperation and enough similarity and uniformity between national legislations regarding the statutory definitions of the criminal offense – otherwise, seizing assets located abroad is not possible (van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:111). The criminalization of money laundering and the crafting of the necessary framework to implement effective anti-money laundering systems have been, without a doubt, a product of countries joining forces to tackle shared criminal policy problems (Giuliani Reference Giuliani2020:155). However, despite considerable approximation levels between most legal systems regarding money laundering regulation, an optimal degree of harmonization has not yet been reached.

ANTI-MONEY LAUNDERING REGULATION IN BRAZIL: AN OVERVIEW OF THE SUBSTANTIVE CRIMINAL LAW CURRENTLY IN PLACE

Money laundering was criminalized as an autonomous offense in Brazil in 1998, with Law 9.613. In the course of the past 22 years since it came into force, the Brazilian Money Laundering Law (BMLL) has been subjected to successive modifications, most of them aiming at adapting national legislation to the latest international standards on the matter as well as at legally internalizing commitments entered by the Brazilian government before the international community (Badaró and Bottini Reference Badaró and Bottini2019:23). In its original version, the crime of money laundering, as described in Brazilian legislation, encompassed conducts exclusively relating to the illegal proceeds of drug trafficking, terrorism, trafficking of arms and ammunition, crimes against public administration (such as corruption), crimes against the national financial system (such as those described in Law 7.492/86), and crimes committed in the context of a criminal organization. The legislator initially justified this restrictive list of predicate offenses, reasoning that the practices associated with and legally described as money laundering were only considered deserving of criminal reproach when deriving from very serious criminal activity.^{Footnote 11}

Now, many aspects regarding the evolution of anti-money laundering legislation in Brazil are probably not known in depth outside national borders, so a bit of contextualization is due here – especially since, in my opinion, they did end up having an impact on the current configuration of the national systems (legal and otherwise) tasked with preventing and combating money laundering. Therefore, I believe a short detour seems reasonable, to allow for a better understanding of our legal framework regarding the legal treatment of the crime of money laundering.

So, let us go back to when the BMLL first came into force in 1998. Nearly 10 years earlier, Brazil had officially signed the Vienna Convention of 1988 and thus committed to criminalizing money laundering concerning the proceeds of drug trafficking.^{Footnote 12} Over that same decade, the Brazilian government also had, on many official occasions, publicly declared to the international community the intention to make money laundering related to specific crimes a criminal offense within its territory (Giuliani Reference Giuliani2020:161). From the perspective of international law and policy, the BMLL represents Brazil’s following through those commitments. But not only that. From a criminal policy point of view, it also represented the addressing of a problem that the Brazilian legislator had already noticed for a while and for which the criminal law legislation of the time did not provide an adequate answer. Therefore, the BMLL was enacted to fill the very specific gap perceived in the legislation of hiding and disguising assets illegally obtained through some offenses, known for their potential to generate large sums of money (Cervini, Oliveira, and Gomes Reference Cervini, Oliveira and Gomes1998:313). At least initially, this was an important demarcation element of the legislative motivation behind the law.

Nonetheless, over the years, the BMLL has undergone significant changes, the purpose of which can easily be identified as the broadening of the scope of sanctions and measures against practices of money laundering and other serious offenses. In its most recent reform, the BMLL was altered in key points to allow for a wider spectrum of conduct to be characterized as punishable (Badaró and Bottini Reference Badaró and Bottini2019). Since this last major change, the law no longer provides a material limit on what crimes constitute a predicate money laundering offense. Thus, as of 2012, basically any criminal offense, however minor,^{Footnote 13} can theoretically lead to a subsequent money laundering crime, so long as it generates some financial profit. In other words, there are currently absolutely no legal parameters, no thresholds as to the severity of a predicate offense or the actual dimension of money being laundered that could serve as an interpretative guide in concrete laundering cases.

To that, one must add the not-so-detailed legal description of the criminal conduct of money laundering in Brazilian legislation.^{Footnote 14} All of this leads to an extremely wide field of application of the law. From a criminal law policy perspective, it is not hard to see why this may not be the best^{Footnote 15} strategy to combat and repress money laundering. As it is well known, money laundering investigations are usually costly, time-consuming and require a considerable amount of human hours (van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:193). From a financial point of view, one can assume that not every crime committed will be successfully elucidated and prosecuted, if not for reasons inherent to those crimes’ particular circumstances, for the finite resources that law enforcement has at its disposal (Gelemerova Reference Gelemerova2011:255). If almost any amount of money derived from virtually any illegal source can be the object of money laundering conduct (in a criminal law sense), logic dictates that law enforcement authorities, given their limited resources,^{Footnote 16} will end up having to choose which cases to investigate (van Duyne et al. Reference Van Duyne, Harvey and Gelemerova2018:230). One may safely posit that, as has been observed in other countries in cases of possible fraud offenses (Gelemerova Reference Gelemerova2011:72), the authorities will have to choose between dedicating their time and efforts to going after “easier” or more complex cases, which, in turn, may lead to decisions that are not necessarily in tune with the public’s best interests.^{Footnote 17}

It is important to highlight that, in the documents that accompanied the bill that later became the BMLL, it was stated that hiding or concealing financial gains from criminal offenses other than those listed in the law did not constitute money laundering in a criminal law sense. Instead, they were meant to fall under the broader category of after-the-fact offenses, also called ancillary offenses,^{Footnote 18} which were already sufficiently covered by the existing penal clauses in Brazil. Examples of those ancillary offenses are handling illicitly obtained goods (art. 180 Brazilian Criminal Code (BCC)) and different forms of accessory-after-the-fact offenses (art. 348 and 349 BCC). The Brazilian legislator explicitly stated that without an interpretation criterion like that of a set list of predicate money laundering offenses, the bill would be proposing some “mass criminalization,” indistinctly covering endless conducts financially connected to any number of crimes. According to the bill’s authors, that would essentially lead to the (unjust) punishing, as a money launderer, for instance, of a thief who used the stolen object to purchase a wristwatch.^{Footnote 19}

Although the reasoning given in the explanatory memorandum has its flaws (the one mentioned above is superficial at best), it does make clear the intentions with which the BMLL was imbued. The reasons given by the legislator when drafting a bill and for later enacting it as a law are not binding in a legal sense, but they can be – as often they are – used as a means for interpreting and successfully implementing its legal provisions (Alexy Reference Alexy2016:84–5; Badaró and Bottini Reference Badaró and Bottini2019:96). However, in the case of the BMLL, these very intentions were later on contradicted without much consideration of the law’s spirit and structure and without the necessary reflection on the actual impact those changes would have on its systematic consistency. In 2012 the list of predicate offenses was removed from the BMLL, leaving it with no legal parameters as to what crimes are capable of originating assets susceptible to being laundered. This, along with the vagueness of the legal description of the punishable conduct, led to an extreme widening of the scope of applying the corresponding criminal provisions (D’Avila and Giuliani Reference D’Avila, Giuliani, Busato, Sá and Scandelari2016). Now it is not only hard to determine what exactly can be subsumed under the law as an offense of money laundering, but also, and most importantly, what cannot be subsumed.

It is not difficult to see how expanding the applicability of the scope of the criminal law provisions beyond any reasonable material limits can be damaging, rather than beneficial, to the “efficiency” of the fight against money laundering.^{Footnote 20} It is counterproductive in practice. Suppose a legal provision can be applied to almost any conduct relating to illegally obtained money in a wide array of contexts, then in this sea of punishable behaviors, authorities may end up missing the ones that actually should be investigated and prosecuted. Of course, this is merely speculation, as no research has been carried out specifically on this matter.

Aside from that, there are also concerns of a more substantial nature that speak against such a wide scope of criminally punishable money laundering offenses that we cannot explore more in depth here for reasons of space. However, it is worth noting that the sentence for money laundering in Brazil can range from 3 to 10 years of imprisonment, plus a fine. In comparison, this is more than what a person would get for abandoning a newborn baby, thereby causing her death (art. 134 BCC), or for kidnapping a person for over 15 days or in such a manner that it leads to grave physical consequences for the victim (art. 148 §1 III and §2 BCC). This abstract range of custodial sentence is comparable to that applicable to crimes of corruption (art. 317 and art. 333 BCC), and its maximum is equivalent to that of rape (art. 213 BCC).

Thus, it is evident that money laundering is a very serious offense in Brazil, at least from a legal viewpoint. The fact that the legal description of the crime of money laundering in Brazil does not include any objective or material criteria to differentiate between a serious money laundering offense and a less serious one for purposes of sentencing also gives rise to a problem of proportionality and even of predictability – something that could be circumvented either by limiting the spectrum of predicate offenses according to their seriousness or by better circumscribing the elements of punishable money laundering conducts, in order to help separate them from less relevant ones.^{Footnote 21}

Moreover, concerning the fines applicable in a conviction case, they are calculated according to the daily-fine system (art. 49 BCC) and should reflect the seriousness of the offense and be adjusted to the convicted person’s financial conditions (Prado Reference Prado2017:1027). The stipulated amount is then deposited on a fund for penitentiary administration (Nucci Reference Nucci2019:433).

COMPENSATION, CONFISCATION AND ASSET RECOVERY: AN OVERVIEW OF THE BRAZILIAN LEGISLATION

Aside from being sanctioned criminally, being convicted of a crime entails other consequences for the convicted person. Art. 91 BCC lists some of the automatic effects that are imposed as a result of sentencing. According to this legal provision, a criminal conviction for any crime will, among other things, always lead to the confiscation of (i) all instruments used for carrying out the criminal enterprise, so long as they constitute objects whose possession, in a broad sense, is also illegal (instrumenta sceleris) and of (ii) the profits or any other financial benefits gained from the criminal conduct (producta sceleris).^{Footnote 22} In other words: as a consequence of conviction, the person convicted, besides being made responsible for indemnifying or compensating the damages brought on by the crime (art. 91 I BCC), loses, in favor of the State, both the instruments used in the crime and any profit or financial gains that have resulted from that crime (art. 91 II BCC).

In 2012 this provision was altered, and two paragraphs were added to it, basically determining that, if the proceeds of a crime are not to be found or happen to be located in another jurisdiction outside of Brazil, assets of equivalent value to the sums due may be confiscated from the convicted person’s legally amassed property.^{Footnote 23} The new rules are applicable both after the conviction and before or during the trial as a protective measure for forfeiture (Prado Reference Prado2017:1063–4).

As pointed out above, these provisions are enforceable to all crimes described in our national criminal law legislation, meaning they are “generic” consequences of a criminal conviction. In addition to those, the BMLL describes other, more specific effects of a conviction for money laundering. According to art. 7 of the BMLL, all assets related, directly or indirectly, to money laundering offenses, including those that have been used to post bail, are subject to confiscation as a consequence of criminal conviction (Barros Reference Barros2013:245–51). What this means is not only are the proceeds of money laundering subject to confiscation as a direct consequence of art. 91 II BCC, but also the object of money laundering – that is, the money or assets obtained through predicate offenses that are being or have been laundered – is to be confiscated as a result of a money laundering conviction (Badaró and Bottini Reference Badaró and Bottini2019:233–5).

This provision was altered in 2012 to clarify that the assets do not have to be directly related to the offense. Overall, the provision can be seen as reasonable given that money laundering itself is a crime whose very existence depends on the perpetration of another crime and of this other crime having generated financial profits that subsequently can be laundered. Although not dependent on a corresponding conviction for the predicate offense, a conviction for money laundering depends on it being proved a source of the assets. Thus, if in the course of due process it is proved that the assets derive from criminal activity and bear a relation to the charges at hand, it makes sense that they be susceptible to confiscation as well. The proceedings that stipulate how this confiscation or forfeiture will occur are mainly regulated in the Brazilian Criminal Procedure Code (BCPC).^{Footnote 24}

More recently, the newly enacted Law 13.964/19 added another provision to the BCC, which, in effect, corresponds to a form of “extended confiscation” similar to that found in some European countries.^{Footnote 25} According to this new clause (art. 91-A BCC), in the case of a conviction for a crime to which the law stipulates a maximum sentence of more than six years of imprisonment, all assets belonging to the convicted person which are not compatible with her demonstrated legal income are also subject to seizing (Lopes Jr. Reference Lopes2020:781–2). Here, the confiscation takes place due to a legal presumption of illicit enrichment, in situations in which the difference between what the defendant has and what she should have, according to her legal earnings, cannot be explained. Considering that money laundering has a maximum sentencing limit of 10 years, this is relevant to this article’s subject. This new legal provision has, however, sparked debate among criminal law academics, given that, in essence, it seems to invert the burden of proof, now that the prosecution does not have to prove that the assets come from an illegal source in order to subject them to confiscation (Bottini Reference Bottini2020; Fabretti and Smanio Reference Fabretti and Smanio2020:35).

Finally, there is the question of asset recovery, which involves the repatriation of property located abroad outside of Brazilian jurisdiction. This form of securing and confiscating assets is arguably more complicated to execute in practice, as it presupposes the existence of some form of international cooperation agreement between the countries involved (Brazilian Department for Asset Recovery and International Cooperation 2019:12). Since the coordination of information between national and international authorities can comprise, in this context, several more complex tasks, in 2004, a special department within the Brazilian Ministry of Justice was created specifically to deal with issues related to international cooperation and asset recovery.^{Footnote 26} Besides, the BMLL has a special provision that stipulates the conditions for executing, in Brazilian territory, foreign requests for seizing or securing assets that are located within its borders.

Especially in the context of criminal cases, when the assets subject to confiscation happen to be located in a foreign country, recovering them is considerably more difficult than if they were located in the national territory. One of the reasons why it usually takes so long for the authorities in one country to seize, let us say, money that is deposited in a bank account in another jurisdiction has to do with the fact that each country has its own specific rules for asset confiscation, and sometimes the petition does not fulfill all conditions necessary in the requested state (Medeiros Reference Medeiros2012). Besides, criminal proceedings can last a very long time, notably when dealing with cross-border unlawful activities or more complex money laundering and corruption schemes. In those situations, preliminary investigations may also take a longer time to conclude. For this reason, assets located abroad that have been effectively identified as the product of criminal activity will likely be subject only to freezing and will remain outside Brazilian jurisdiction until res judicata is achieved (Giacomet Jr. Reference Giacomet2019).^{Footnote 27}

Considering this scenario, an efficient exchange of information between authorities and institutions from different countries, the collecting and sharing of evidence situated in foreign jurisdictions and the enforcing of preventative measures abroad to secure illicitly obtained capital are essential steps for making the actual confiscation and repatriation of assets possible (Brun et al. Reference Brun, Gray, Scott and Stephenson2011:23–6). Through the creation of the Departamento de Recuperação de Ativos e Cooperação Jurídica Internacional (DRCI; Brazilian Department for Asset Recovery and International Cooperation), Brazil has visibly improved the coordination of investigative efforts between its authorities and foreign ones,^{Footnote 28} thanks to Brazil having a central agency dedicated to helping process international cooperation requests (Giacomet Jr. Reference Giacomet2019).^{Footnote 29} However, processing these requests still tends to take a long time, whether in Brazil or other jurisdictions. It is only logical that the more the legal systems and pertinent laws in the countries involved differ from one another, the longer it will take to process any request – particularly in the area of criminal law, since the requested country has to make sure the measures requested are in accordance with its applicable legislation (Brun et al. Reference Brun, Gray, Scott and Stephenson2011). For this reason, achieving greater degrees of legal harmonization is of utmost importance.