The crime of money laundering (Money Laundering) under Law 4557/2018 (after Law 4816/2021)

Legal Insight

October 2021

Christina Kapourani, M.Sc. (mult.), Pgcert, PhD Cand.

(republished from lawnet.gr)

Summary: The crime of money laundering (or as it is known "money laundering") is provided, after a series of legislative amendments, in Law 4557/2018 as amended by Law 4557/2018 (following the amendment of Law 4557/2018 by Law 4557/2018). 4816/2021, which incorporated EU Directive 1673/2018). Below we will try, briefly, to describe the main characteristics of the offence, its criminal treatment as well as relevant considerations that arise regarding, in particular, when assets become "dirty" and therefore constitute the product of money laundering, depending also on the type of prior criminal activity (the basic, by law, offence) with further risk of their seizure.

1. Introduction: The crime of money laundering is provided for in Law 4557/2018, which was recently amended by Law 4816/2021, following the compliance of the Greek legislator with the European Parliament Directive 1673/2018 (EU). For its establishment, the commission of a temporally and substantially earlier criminal act is required, the so-called basic crime, i.e. the crime from which the property to be legalised arises. The basic offences constitute offences expressly enumerated in the law (see Art. 4 of Law No. 4557/2018) criminal acts (indicatively: criminal organisation, bribery and bribery of an official, human trafficking, fraud, theft, robbery, forgery, trafficking in human beings, drug trafficking, smuggling, tax evasion, non-payment of debts to the public, unfaithfulness, stock exchange offences, etc. and so on) and any offence for which the law provides for a sentence of deprivation of liberty of at least three months and from which a pecuniary benefit is derived. 

It is an offence which is often found in practice and in various forms and, for the most part, reflects the basic idea that "the crime doesn't pay", in the sense that the perpetrator of an unjust act should not profit from it. By 'laundering', in short, we mean the process by which the traces of the criminal acts from which the illicit proceeds were derived are concealed or disappear, so that they can then be used in the formal economy 'disguised' and mixed with legitimate money. According to official reports by the Financial Action Task Force on Money Laundering (FATF), the money laundering of criminal proceeds takes place mainly through (a) the creation and operation of dummy companies, (b) the use of the specific knowledge of certain groups of professionals (such as notaries, tax advisers, business consultants, etc.), (c) the use of the expertise of certain groups of professionals (such as notaries, tax advisers, business consultants, etc.) and (d) the use of the money laundering of criminal proceeds. and so on), (c) investments in real estate, works of art and luxury goods, (d) the establishment and operation of trusts and foundations, (e) the establishment and operation of offshore companies and (f) the establishment and operation of informal money transfer systems.

2. The ways of committing the offence after law 4816/2021. Article 2 of Law no. 2.4557/2018, we find the four ways of committing the offence which is committed by anyone who, according to the wording of the legislator, commits:

(a) conversion or transfer of property with the knowledge that it comes from criminal activity, or from an act of participation in such activity, with the purpose of concealing or disguising its illegal origin, or assisting anyone involved in such activity to avoid the legal consequences of his actions (example: transfer to a third party of a car derived from theft or robbery committed by the seller or by a third party with the knowledge, in any case, of the former), 

(b) concealing or disguising the truth concerning the nature, origin, disposition, supply, movement or use of property or the place where it is located or the ownership thereof, or the rights pertaining thereto, knowing that such property is derived from criminal activity or from an act of participation in such activity (example: placing money derived from the offence of fraud in the safe-deposit boxes of private security companies),

(c) acquisition, possession or use of property with knowledge, at the time of acquisition, or at the time when the possession or use is acquired, that the property is derived from criminal activity or from an act of participation in such activity (example: possession of money derived from smuggling without transferring possession of it to a third person and without taking precautionary measures to place it. It is clear how the legislator in this way tries to criminalise any other case that does not fall within the first two cases of criminal activity),

(d) using the financial sector by placing in it or moving through it the proceeds of criminal activities in order to give legitimacy to those proceeds (example: depositing money derived from fraud against a legal person in a number of accounts, moving it further by incorporating it into bank cheques and endorsing it to other natural or legal persons).

It is worth mentioning that (after Law 4816/2021) the so-called cases of laundering organisation (i.e. the establishment of an organisation or a group of at least two persons to commit the aforementioned acts of cases a - d) and the attempt to commit laundering, the incitement, facilitation or provision of advice to commit the same, as the claim for criminal punishment is already covered by the provisions of the Penal Code, do not constitute separate ways of committing the offence. 

As regards the fourth way of committing the offence, i.e. through the use of the financial sector, there has been much debate as to whether this is possible, given the increased obligation of banks to identify and report suspicious and unusual transactions. According to the case law, 'a particularly sensitive aspect of the whole operation is the financial system itself, which, through the accounting of the flow of funds and the virtual disappearance of the identity of individuals through the various companies, combined with the operation of banking secrecy, can very easily cover up the traces of the origin of illegal money and, ultimately, allow it to be reinvested in legitimate activities (Council Regulation 2912/2004).

Thus, the simple deposit of illicit funds in a bank account, without being accompanied by other specific circumstances (such as, for example, opening the account in a false or non-existent name, carrying out complex transactions, interfering companies, fictitious transfers, etc.) - given that in these cases there would indeed be a purpose of concealment - is likely to have the opposite effect to that which the launderer wants to achieve. 

In fact, in this way, and because of the above-mentioned increased duty of care and supervision of the banks on suspicious transactions, traces of the illicit assets are created and, since these actions cannot be included in the other ways of committing the offence, they should be considered to go unpunished. 

Furthermore, in the judgment of the Council of State in Case 4304/2015, the inability of the account holder to justify the origin of the funds does not imply that the offence in question is established through this mode of commission, if it is not inferred from other circumstances. Similarly, the deposit of money by the perpetrator of money laundering in a joint bank account does not, without anything else, mean that the joint beneficiary has committed money laundering, and this is because the joint account can only be opened by one person and in the name of another, while it can be used by all the joint beneficiaries without the involvement of the others (Council of Europe Convention 349/2015).

3. The criminal treatment of the offence after law 4816/2021: 

In no. 4557/2018 provides for the criminal sanctions threatened against the perpetrators of the offence of money laundering. In particular, in Art. 1a of the law formulates a general clause according to which the perpetrator of money laundering acts is, in principle, punished with felony penalties (imprisonment of up to 8 years and a fine). The perpetrator of money laundering is punished with imprisonment of up to 10 years and a fine if a) the illegal pecuniary benefit exceeds 120. 000 €, b) if it is carried out by persons liable to report suspicious transactions in the exercise of their activity (indicatively: representatives of financial institutions, auditors - accountants, notaries, etc. and so on) and c) if the illicit property comes from felonies specifically mentioned in the law (indicatively: criminal organisation, terrorist organisation, drug trafficking, robbery, etc.). Anyone who commits an act of money laundering on a professional basis or as a member of a criminal organisation is punished with imprisonment (i.e. a custodial sentence of 5 to 15 years) and a fine. However, if the previous criminal activity is a misdemeanour, a prison sentence of up to three years and a fine is imposed. Under Article 39(39)(a) of the Criminal Code, a penalty of three years' imprisonment shall be imposed. 4 of the Act, the offender's acquittal for the predicate offence also entails his acquittal for the offence of money laundering. 

4. Cases of release from the "dirty" label - Who is not subject to legalisation: 

Assets directly derived from the criminal activity are eligible for legalisation, i.e. even if they end up in the hands of a third person who does not have the status of a perpetrator (instigator or participant) in the prior criminal act, as they are "tainted". However, as it follows from Article 40 par. 1(c) of Law No. 4557/2018, assets cease to be "tainted" when they are acquired by a person who does not know that they are derived from the prior criminal activity (i.e. when they are acquired by the so-called " third party in good faith"). Thus, in practice, we have two consequences: a) the third party in good faith who acquires the illicit asset does not commit the crime of legalisation (the existence of knowledge is judged at the time of acquisition of the asset and not afterwards) and b) anyone who acquires from a third party in good faith does not commit legalisation either, even if he or she knows the criminal origin of the asset, because of the prior "cleansing" of the asset. Then, of course, the product that was "sanitized", obviously, and can be a suitable asset for legalization, in the context of a, new, subsequent criminal activity (Examples: A donates a painting to B without her knowing that it is the product of embezzlement. A is not legalised. If A in turn donates the painting to her friend F, there is still no act of legalisation, even if F knows it is the product of criminal activity. Finally, if A or F donates the painting to a public official in order to obtain favourable treatment in their case, then the product again acquires the status of being derived from criminal activity - bribery this time - and is, in this context, a legalisation product linked to the latter criminal activity.

5. Committing the offence when the predicate offence is tax evasion:  The main concern that arises, in this regard, from the inclusion of tax offences in the list of predicate offences of the Laundering Act is whether the savings of an expenditure achieved by the offender through tax evasion can be included in the concept of property derived from the predicate offence and whether the amount of tax that the offender has not paid to the tax authority constitutes "dirty" property. The above two considerations are based, on the one hand, on the statutory definition of the concept of property, which includes an increase in assets and not an avoidance of a reduction in those assets and, on the other hand, on the assumption that the property saved by the offender, which is equal to the amount of tax which he has avoided paying to the tax authorities, does not derive from the offence of tax evasion, but, on the contrary, pre-exists the offence in question as legal property, which cannot be made 'dirty' retroactively, that is to say, as a result of the failure to fulfil the obligation to the tax authorities and the commission of the tax evasion (example: An accountant in the course of his lawful activity does not submit an income tax return for his income, but neither does he submit periodic VAT returns for transactions with clients of his accounting business. At the time of receiving the income and the corresponding VAT and before the deadlines for submitting the relevant declarations have expired, which determine whether the tax evasion offence has been committed, he has already put the capital received on the market, which, at the time of receipt, was 'clean' and cannot therefore be made 'dirty' retroactively in order to raise the question of its legalisation, as it was legal from the outset). Exceptions are, of course, the cases of receiving a VAT or other tax refund by deceiving the tax authorities and the issue of a false or forged tax document for a fee, as these cases do indeed involve an increase in the perpetrator's assets and not an avoidance of a reduction in them.

In this regard, accepting the lack of possibility of legalisation with tax evasion as a basic offence, the verdict of the Council of State in the case of the Council of State (No. 112/2016) stated that "In most cases of tax evasion, legalisation is not possible due to the lack of property derived from criminal activity (see definition of property in article 4(1) of Law 3691/2008), and criminal origin is provided for in all the ways of committing the offence under article 4(1) of Law 3691/2008. 2 as an element of the objective circumstance (in the modes of commission of para. 2 a', b' and c', the relevant element of the objective circumstance is implicitly derived from the reference to it as the object of the perpetrator's knowledge, whereas in case d' the origin of the property from criminal activities is directly provided for as an element of the objective circumstance). In particular, the benefit, the enrichment of the tax evader does not constitute property and even property derived from the tax evasion and, as a logical consequence, there is no material object or, more generally, no property that can be legitimised (see G. Triantafillou, op. cit., p. 722 et seq.). In other words, the existence of property income is required for the establishment of the objective basis for the money laundering of proceeds of crime and it is not sufficient to have a property benefit in the form of the attenuation of the reduction of the perpetrator's property from the commission of a criminal act (Council of State, 2175/2005, Criminal Procedure Code, 2005, p. 1151), the saving of the tax evader's expenditure, i.e. the benefit (see Art. 904 et seq. CC) equal to the amount of tax he avoided paying, cannot be the subject of laundering. Consequently, it follows that no laundering operation can take place on saved expenditure. On the contrary, property derived from the basic crime of tax evasion can only exist on an increase in the assets of the offender's property (e.g. This can only occur on the acquisition of ownership of a thing or a claim), but it can only occur on the receipt of a VAT refund or other withheld and imposed taxes, fees and contributions by misleading the tax authorities, since in this case the offender directly and immediately acquires property derived from the commission of the tax evasion, Similarly, it is also conceivable that the offender is committing the offence of money laundering in the case of the issue of fictitious and false invoices, where the offender receives remuneration for issuing them from the beneficiary, since the object of the money laundering is not a tax amount but the offender's own remuneration'.

6. In particular, the freezing of assets by the President of the Anti-Money Laundering Authority prior to the accused becoming a defendant and the defendant's means of defence: Article 42 par. 42.7 of Law 42.7 of the Law. 4557/2018 provides for the possibility of freezing bank accounts, securities, safe-deposit boxes and financial instruments in general, as well as the prohibition of transfer of any asset, following an order issued by the President of the Anti-Money Laundering Authority. The conditions for the application of the provision are (a) the conduct of an investigation by the authority to identify money laundering or predicate offences, (b) the existence of reasonable suspicion that a predicate offence or money laundering act has been committed and (c) the existence of an emergency (e.g. risk of immediate disappearance of assets through repeated transfers and concealment of traces of offences by the perpetrators).  This is a measure taken by the authority against a suspect in order, in the course of its investigation, to (a) gather information and evidence of the commission of key offences and money laundering operations and (b) to immobilise the suspect's assets, keeping them intact while preventing him or her from using the financial (banking) system in particular. 

It is worth noting that this measure may be ordered before any judicial proceedings and even before the perpetrator has acquired the status of an accused person following a criminal prosecution. The person against whom the measure has been imposed is absolutely legally unable to dispose of and use the frozen assets. However, he may, a) exercise the right to exercise the right to seize the property provided for in Art. 4 of Law no. 4557/2018 an appeal before the competent judicial council within 20 days from the service of the authority's order requesting the lifting or limitation of the freezing (because, for example, the frozen property has a legal origin, as when it was acquired at a time prior to the commission of the main offence, or because it is not related to the benefit allegedly obtained, as is the case l. (b) to request the issuing authority to revoke the order issued on the grounds of new facts concerning the suspect or members of his family.

Indeed, the courts lift the freezing order imposed when the legal conditions for imposing it have not been fulfilled. Specifically, in CoP 3216/2019, it was held that bank deposits that enter the accounts with a guaranteed legal origin, which is undoubtedly evident from the relevant justification, cannot be the product of legalisation. The extract from the judgment reads as follows: 'In particular, it is apparent from the copy of the statement of movements of the frozen account that, every fortnight, the Ministry of Infrastructure and Transport pays into that account, under the heading 'salary', the salary of the applicant, as a civil servant of the public body in question. The sums of money which are periodically deposited in the bank account referred to above, the origin of which is certainly established above, as being approved as salary payments from a public body, cannot, by definition, in accordance with the lessons of common experience and the rules of reason, be connected with an illegal activity of money laundering, in particular that of passive bribery in the present case, or be the offspring of such an illegal practice'. 

Finally, the release of assets to satisfy the living needs of the alleged perpetrators is very common. In this regard, the Court of Appeal of the Republic of Serbia, in its judgment 1374/2020, held that "Such freezing, however, without a description of the assets and the purpose which they fulfil, does not fulfil the purpose of the law, because it cannot be determined whether they can be used for the financing of terrorism, nor whether from them and any income from them the applicant covers the general necessary costs of living, maintenance or operation, the costs of his legal assistance and the basic costs of maintaining the frozen assets. In those circumstances, and in view of the fact that in the present application and in his statement of claim the applicant has specified that the main claim in the application is the release of his two accounts, namely his account with Piraeus Bank, with a balance of EUR 889.68 on 27-7-2020, and his account with Eurobank, with a balance of EUR 1 on 27-7-2020. 334,02, in order to meet his livelihood needs, he must: (a) uphold the present application; (b) reform the decision of 26/25-6-2020 of the B Unit of the Anti-Money Laundering Authority, which rejected the application of 10-6-2020 of the applicant before the B Unit of the Anti-Money Laundering Authority to lift the freezing of his assets and the prohibition of the movement of accounts ...".

7. Instead of an epilogue: From what has been said above, it is clear that the criminal provisions of Law no. 4557/2018 describe one of the most difficult offences to standardize due to its complexity and diversity of appearance in practice. And many of the core offences described in the list of No. 4 raise concerns about whether they can generate "dirty" property. Such are the tax offences mentioned herein. The truth is how, through the relevant multifaceted legislation, the legislator tries to identify every form of money laundering (by including in the core offences even cases that cannot be reconciled with other legislative assessments and definitions) and to provide for every criminal manoeuvre of perpetrators. Furthermore, the prosecuting authorities, with extreme frequency, take unbearable measures of procedural coercion against the suspects on a set of assets, indiscriminately, often freezing property of legal origin. However, through the appropriate legal remedies provided to the accused and after appropriate legal assistance, the latter may be able to demonstrate the legality of his transactions and claim the correct interpretation and application of the relevant criminal provisions.