Published on December 19, 2023.

by Miguel Cassagne (head of "CASSAGNE Consultores")

1. Introduction.

Money laundering is a transnational offense that can be a manifestation of transnational organized crime. This is why it has garnered the attention of the international community as a whole, as reflected in the creation of normative standards aimed at global legal harmonization and collaborative, systematic efforts to combat this practice.

Money laundering poses a threat to the stability and credibility of a country's financial sector and the world at large, with repercussions extending to the normal development of life and business in jurisdictions where it occurs or has effects.

Argentina is not immune to the international influence shaping the treatment of money laundering over the years. This influence has impacted the local configuration of the criminal offense at various historical junctures.

2. Evolution of its Treatment in Argentine Criminal Legislation.

A retrospective analysis of the evolution of the typical offense of Money Laundering in our domestic legal framework, particularly in its criminal aspect, will reveal how this evolution has been guided by the political will to align with and adhere to international parameters set and updated in international conventions and recommendations issued by the Financial Action Task Force (FATF), an interjurisdictional group established at the initiative of the G7 in Paris in 1989, of which Argentina has been a full member since 2000.

·        First Stage: Law 23,737 (1989) - Art. 25.

The initial incorporation of the subject matter occurred through the enactment of Law No. 23,737 in 1989, a law that responded to and was consistent with a recommendation previously formulated in the United Nations Convention against Illicit Traffic in Narcotic Drugs held in Vienna the previous year (1988).

In this regard, the aforementioned Convention, in Article 3, subsection b), stipulated that each party would take necessary measures to classify as criminal offenses under its domestic law the conversion or transfer of assets with knowledge that such assets originated from drug trafficking, with the intent to conceal or disguise the illicit origin of the assets or to assist anyone involved in the commission of such offenses in avoiding legal consequences.

Until that moment, offenses unrelated to drug trafficking, such as tax evasion, fraud, kidnapping, and robbery, were not classified as money laundering offenses, according to the Vienna Convention.

In line with the agreement in the Convention, Law 23,737, in its Article 25, established that:

"Article 25. ? Anyone who, without having participated or cooperated in the commission of the acts provided for in this law, intervenes in the investment, sale, pledge, transfer, or assignment of the profits, things, or assets derived from those acts, or the economic benefit obtained from the offense, provided they knew or suspected its origin, shall be punished with imprisonment for two to ten years and a fine of six thousand to five hundred thousand australes. The same penalty shall apply to anyone who buys, keeps, hides, or receives said profits, things, assets, or benefits, knowing their origin or having suspected it. For the purposes of the application of this article, it shall not matter that the originating act of the profits, things, assets, or benefits occurred in foreign territory."

The offense was defined as the action of anyone who, without having participated in the preceding offense of illegal drug trafficking ("acts provided for in this law"), intervened in the investment, sale, transfer, or assignment of profits, things, or assets derived from it, or the economic benefit obtained from the offense, provided they knew or suspected its origin.

The criminal description was characterized?and differs from what will occur in subsequent legislative reforms?by: (1.) The limitation to considering only illegal drug trafficking as a necessary predicate offense for the offense to be constituted (concealment); (2.) The requirement that the perpetrator knows the illicit origin of the funds in which they participated for investment, sale, etc., or suspected it; (3.) The limitation on the potential perpetrator of the offense, restricting it to anyone who has not been part of the preceding offense (self-concealment was prohibited); and (4.) The fact that the purpose was not focused on trying to give a semblance of legality to property obtained unlawfully (this was not mentioned in the text of the article describing the offense), but rather, on participating in the described actions with property derived from the offense of illegal drug trafficking without reporting it.

? Second Stage: Law 25,246 (Official Gazette 10/05/2000) ? incorporates Article 278 of the Argentine Criminal Code.

The criminal treatment of concealment in the previously described manner is then modified in the year 2000, once again not as a result of issues within the Argentine domestic legal system but as a means of adapting to new treatment methods agreed upon in international conventions.

Indeed, the international community, following the Vienna Convention, evolved towards an approach in which offenses classified as money laundering had to extend beyond drug trafficking offenses. As a consequence, in the FATF Recommendations and other international instruments, the definition of underlying offenses adopted in Vienna expanded to include other serious offenses.

This is reflected in the Palermo Convention of 2000, which required all participating countries to consider "the widest range of predicate offenses.

Additionally, in its 40 Recommendations, FATF specifically included the definitions of money laundering presented in the Vienna and Palermo Conventions, listing various categories of offenses to be considered as predicate offenses for money laundering.

FATF expressed that each country, in deciding which offenses to cover as predicate offenses, could define them in accordance with its domestic laws.

Once again, Argentina, driven by the goal of complying with and adapting to the modalities agreed upon in the United Nations Convention against Transnational Organized Crime, approved in Palermo, Italy, in 2000, and the aforementioned FATF Recommendations, as the country became a full member of FATF in that year, enacted Law No. 25,246 (the constitutive framework of Argentina's current Anti-Money Laundering system). Through this law, Argentina, among other aspects, incorporated the offense of money laundering into the Argentine Criminal Code for the first time.

With the enactment of this law, the money laundering offense was restructured and classified under the new Article 278 of the Argentine Criminal Code, located within the Title XI on "Crimes against Public Administration," rendering the previous scheme ineffective.

Despite maintaining money laundering as an aggravated form of concealment, the new treatment expanded the predicate offenses beyond just illegal drug trafficking to include any offense within the criminal justice system.

In this regard, the aforementioned Article 278 of the Argentine Criminal Code stated in its text that:

"...a) Anyone who converts, transfers, administers, sells, encumbers, or otherwise applies money or any other type of property derived from an offense in which they did not participate, with the possible consequence that the original or substitute assets acquire the appearance of lawful origin and provided their value exceeds the sum of fifty thousand pesos ($50,000), either in a single act or through the repetition of interconnected events, shall be punished with imprisonment for two to ten years and a fine of two to ten times the amount of the transaction; b) The minimum penalty on the penal scale shall be five (5) years of imprisonment when the perpetrator commits the act habitually or as a member of an association or gang formed for the continued commission of acts of this nature; c) If the value of the assets does not exceed the amount indicated in this paragraph a, the perpetrator shall be punished, as appropriate, in accordance with the rules of Article 277."

While the new text introduced the current definition of money laundering (previously omitted) ? referring to the action of giving the appearance of legality to property of illicit origin ? it still treated money laundering as a form of concealment and excluded the perpetrator of the predicate offense as an active subject of the offense?retaining the privilege of self-concealment.

? Third Stage: Law 26,683 (June 2011). Money Laundering as an Autonomous Offense.

As expected, the context of this stage is also marked by international developments, especially Argentina's low rating in the 3rd Round of Mutual Evaluations conducted by FATF, leading the country to be placed on the FATF Grey List in October of that year.

In light of this, starting from 2010, Argentina, in its commitment to addressing deficiencies identified in its Anti-Money Laundering and Counter-Terrorist Financing system, embarked on a process of refining and improving the system. This effort included a deeper adaptation of its domestic legislation to comply with FATF Recommendations.

In this context, and for this purpose, among other measures taken, Argentina enacted Law No. 26,683 in June 2011.

Through this law, the typical treatment of money laundering was modified, ceasing to be treated as concealment (repealing the old Article 278 of the Argentine Criminal Code) and being considered as an autonomous offense defined in the terms of the new Article 303 of the Argentine Criminal Code introduced through the aforementioned law?as we know it today.

3. Current Treatment: Brief Description of the Money Laundering Offense as Established in Article 303 of the Argentine Criminal Code.

The aforementioned Article 303 states:

"Article 303: ...1) Anyone who converts, transfers, administers, sells, encumbers, disguises, or in any other way puts into circulation in the market assets derived from a criminal offense, with the possible consequence that the origin of the original or substitute assets acquires the appearance of lawful origin, provided their value exceeds the sum of three hundred thousand pesos ($300,000), either in a single act or through the repetition of interconnected events, shall be punished with imprisonment for three (3) to ten (10) years and a fine of two (2) to ten (10) times the amount of the transaction. 2) The penalty provided for in paragraph 1 shall be increased by one-third of the maximum and half of the minimum in the following cases: a) When the perpetrator commits the act habitually or as a member of an association or gang formed for the continued commission of acts of this nature; b) When the perpetrator is a public official who committed the act in the exercise of his functions or on the occasion of his functions. In this case, he shall also suffer a special disqualification penalty of three (3) to ten (10) years. The same penalty shall apply to anyone who acted in the exercise of a profession or occupation requiring special authorization. 3) Anyone who receives money or other assets derived from a criminal offense, with the purpose of applying them in an operation of those provided for in paragraph 1, giving them the possible appearance of lawful origin, shall be punished with a prison sentence of six (6) months to three (3) years. 4) If the value of the assets does not exceed the amount indicated in paragraph 1, the perpetrator shall be punished, as appropriate, with a prison sentence of six (6) months to three (3) years. 5) The provisions of this article shall apply even if the preceding criminal offense has been committed outside the spatial scope of this Code, provided that the act that typified it has also been sanctioned with a penalty in the place of its commission."

In light of this wording, let's review the figure contained therein:

What is the protected legal interest?

The answer to this can be found in the new Title XIII incorporated into Book II of the Criminal Code by the aforementioned Law 26,683 (within which Article 303 is located), referring to "Crimes against the economic and financial order."

In other words, the inclusion of this offense is an attempt to preserve a supra-individual or collective legal interest, whose infringement operates to the detriment of the formally established economic and financial stability, security, and development.

How is the offense of Money Laundering classified in Article 303 of the Argentine Criminal Code?

As the action of someone "...who converts, transfers, administers, sells, encumbers, disguises, or in any other way puts into circulation in the market assets derived from a criminal offense, with the possible consequence that the origin of the original or substitute assets acquires the appearance of lawful origin, provided their value exceeds the sum of three hundred thousand pesos ($300,000), either in a single act or through the repetition of interconnected events."

From the above description, it is observed that:

(a.) Regarding the perpetrator of the offense, and unlike the treatment given in the repealed Article 278 of the Criminal Code (where those who had participated in the preceding offense were considered excluded, as an expression of the privilege of self-concealment), no specific qualification is required for the active subject, so any person can commit the offense, whether or not they participated in the preceding offense.

(b.) The offense is configured by the action of transforming assets derived from a criminal offense and giving them a lawful appearance through the acts described in Article 303.

(c.) The transformation object falls on any of the "assets derived from a criminal offense" (whether the original assets or the substitutes derived from them), with "assets" understood as assets of any kind.

(d.) The offense must be intentional, as the perpetrator must know the illicit origin of the assets and intend for these illicit assets to appear lawful.

(e.) The offense is only consummated when the actions mentioned in Article 303 are carried out on assets of illicit origin with sufficient potential to produce the result that these assets appear lawful.

Therefore, being result-oriented actions, it allows for attempted commission (unlike the offense of financing terrorism, which does not allow for attempted commission?whether or not the offender was able to finance the terrorist organization they intended to finance).

(f.) The specified penalty of imprisonment for 3 to 10 years and a fine of 2 to 10 times the amount of the transaction allows for both aggravating and mitigating circumstances.

- The aggravating circumstances would be if the offense is committed habitually, as a member of a criminal association, and/or by a public official (in which case the penalty will be increased by one-third of the maximum and half of the minimum, in addition to the special disqualification penalty of three (3) to ten (10) years for public officials).

- The mitigating circumstance would apply if the value of the assets subject to the typical action is less than the sum of $300,000. (in which case the penalty would be reduced to a prison sentence of 6 months to 3 years). In this case, it is observed that this amount (now completely devalued) was understood by the legislator at the time as a limit to consider that exceeding this value would affect the protected legal interest related to the economic and financial order, while committing the offense for lower amounts would not deserve the original, unmitigated penalty for not affecting that economic order, although it would still be a typical and punishable action (and therefore subject to mitigation).

4. Money Laundering as a Process: What Are Its Stages?

Beyond the analysis of the criminal type established in Article 303 of the aforementioned Argentine Criminal Code, money laundering involves an entire "process" that the launderer must undergo and carry out to enjoy the proceeds of crimes without leaving traces of their origin, thus reducing the risks of detection.

Like any process, it is divided into stages. Generally, when explaining the laundering process for didactic purposes, it is considered to consist of the following three stages, whether or not they occur in a particular case:

· Placement Stage:

This is regarded as the initial phase of the process, wherein the launderer introduces assets from the criminal activity into the financial system (legal financial circuit), usually?though not exclusively?through a financial institution.

 

· Layering Stage:

The second stage, where the assets already entered into the financial system are further separated from their illicit origin through multiple transactions, making their tracing more challenging. Similar to the previous stage, layering can take various forms of operation.

 

· Integration Stage:

This is the final stage of the process, occurring when the "cleaned" funds are reintroduced into the economy as legitimate income or investments.

These three stages can also be observed in the schematics of the crime of Financing of Terrorism. It should be noted that in this offense, during the initial placement stage, the use of money or goods obtained both legally and illegally may be involved. In the third integration stage, it involves the distribution of funds to terrorists and supporting organizations.

Money laundering can occur anywhere globally and may even involve multiple countries in a single money laundering action, depending on where any of the aforementioned stages occur.

Generally, launderers choose to commit these types of offenses in jurisdictions with complex financial systems, lax, ineffective, or corrupt preventive systems.

5. Some of the harmful effects produced by Money Laundering:

Money laundering is a complex offense that initially may not be taken very seriously by the general public, often viewed as relatively new compared to other common crimes. It is sometimes referred to as a victimless crime because the immediate harm to a specific individual is not immediately apparent.

However, when the crime is committed, the victims are much more numerous than any other crime, as it is an offense against society as a whole, against economies, and the Rule of Law (as previously mentioned, it is considered an offense against the economic and financial order in Argentine Criminal Code).

Money laundering threatens the stability of economies and national security worldwide, including Argentina. These illegal practices not only impact the financial system but also generate detrimental consequences affecting various aspects of society. From financial corruption to economic inequality, erosion of trust, unfair competition, and markets.

These pernicious effects create an adverse environment for the country's growth and prosperity, leading to an increase in criminal activity, as criminal organizations tend to settle in jurisdictions where (due to lenient law enforcement and prevention systems) they are allowed to use and launder the proceeds of their criminal activities.

In this sense, when each money laundering offense is committed, it allows criminals to maintain control over their source of resources and provides them with legitimate coverage for their source of income. When this happens, committing crimes becomes more attractive, as it encourages, as mentioned earlier, the rise of organized crime.

Therefore, not detecting or combating this crime is a way of promoting the criminal's business, which is to commit crimes because nothing affects their profits. It promotes crimes that affect millions of people, such as drug consumption, human trafficking, slavery, sexual exploitation of children and adults, organ trafficking, crimes, extortion, kidnappings, fraud, etc.

As mentioned earlier, the crime of Money Laundering undermines the integrity of the financial system because, in countries with small economies and small financial systems, illicit money deposited in financial institutions could be withdrawn unexpectedly in response to factors unrelated to market issues or the normal course of business activities. This could lead to liquidity problems or even bank runs.

In conclusion, money laundering negatively affects the country in terms of investment and sustainable growth, attracts international criminal organizations, and hinders the recovery of a damaged reputation.

Studies in the field have indicated that money launderers charge between 10% and 15% of the sums involved. This "laundering" price will vary and depend on the effectiveness of a country's anti-money laundering regulation. The more effective the regulation, the more expensive it will be for criminals to "launder" their illicit resources.

6. Statistical Data on Money Laundering Worldwide and in Argentina.

While, by its very nature, Money Laundering is intended to be secretive, as criminals do not record their operations or publish their gains and often use multiple countries to conceal their assets, taking advantage of differences in various preventive regimes, it is challenging to obtain precise global estimates on the amount of laundered assets or on terrorism financing.

However, a 2021 report by the Panel on International Financial Accountability, Transparency, and Integrity (FACTI) indicated that worldwide money laundering represented 2.7% of the Gross Domestic Product (GDP), equivalent to approximately $1.6 trillion lost due to money laundering by criminals, including drug traffickers and organized crime.

While acknowledging that the figures are no more than estimates due to the secrecy of the crime, the report highlighted that between $20 billion and $40 billion are allocated annually to bribes for public officials, revealing that governments lose between $500 billion and $600 billion each year due to the transfer of profits from multinational companies to other countries.

On a local level, according to the First National Risk Assessment Report on Anti-Money Laundering Prevention in Argentina, approved by a decree of the Executive Power published in 2022, a total of 1,386 money laundering cases initiated between 2017 and 2020 were identified, with an estimated annual amount affected by money laundering during that period exceeding ONE BILLION SIXTY-NINE MILLION UNITED STATES DOLLARS (USD 1,069,524,179.95).

 

Furthermore, the mentioned National Risk Assessment Report interestingly highlights data associated with Argentina's own idiosyncrasies. It reflects that of all identified money laundering cases with a known precedent offense, 42% are related to assets from tax crimes (tax evasion and others), 29% to drug-related crimes, 10% to property crimes, and 9% to customs offenses (smuggling and others).

7. Additional Aspects to Consider Regarding Money Laundering.

The offense of money laundering sets itself apart from other crimes due to the diverse ways in which it can be committed and the varied profiles of those who engage in it. In this regard, the commission of this offense may involve both highly reputable institutions and individuals of impeccable appearance.

Contrary to common belief, this crime does not always necessitate international transactions for its commission, as it can occur within the borders of a single country.

Moreover, the processes of globalization and technological revolution have enabled criminals to attain increasingly international levels, and the financial aspects of criminal activity have become more intricate due to significant technological advancements.

The proliferation of international banks worldwide, coupled with the recent surge in the development of virtual assets, virtual asset service providers, and the microcosm of cryptocurrencies, has facilitated the transmission and concealment of the origin of funds.

Hence, the international financial system has recognized that, to tackle the issue of money laundering, it must continue to be addressed from a global, systematic, and coordinated perspective. This involves the establishment of common norms or guidelines that are regularly updated by studying new methods that criminals develop or intend to develop for money laundering. These updated standards and recommendations are then incorporated into the legal frameworks of individual jurisdictions.

8. Conclusion.

A detailed examination of the evolution of Argentina's domestic legal framework reveals a dynamic response aligned with the aforementioned paragraph. The country's system for the repression and prevention of money laundering is likely to continue evolving, refining itself, and staying current in an effort to align with the parameters suggested by the Financial Action Task Force (GAFI) and other international bodies associated with this subject matter. As mentioned earlier, these international organizations are consistently studying the evolution of criminal practices and the actions of offenders, which they subsequently integrate into the standards that they continually update.

Ultimately, the effectiveness and success of the Argentine system will always be linked to the maintenance and updating of Argentina's approach to preventing and punishing this crime. This circumstance hinges on the political will of the country to align itself and adapt to the collaborative and systematic efforts on the international stage.

MIGUEL CASSAGNE

December 17, 2023.