Law change to aid money laundering investigations

Planned legal changes aim to lay out in statute the basis upon which authorities may prosecute money laundering offences and seize the assets of criminals seeking to use the Cayman Islands financial system to hide their ill-gotten gains.

Amendments to the Proceeds of Crime Act, set to be debated in Parliament this week, will ensure that the statute makes it simpler for prosecutors to freeze accounts and confiscate funds and property, without having to prove the ‘principle offence’, as was already the case in common law.

The proposed amendments could also help Cayman in global evaluations of its anti-money laundering regime, something that is considered essential to maintaining the good standing of the jurisdiction.

The most significant changes tighten up ambiguities in the existing legal framework around the burden of proof for investigators in money laundering and asset seizure cases.

It is not necessary to prove the initial criminality in order to successfully prosecute the illegal movement of the proceeds of crime.

The amendment indicates that law enforcement need only prove that “circumstances in which the property was handled are such as to give rise to the irresistible inference that it can only be criminal property”.

In a simple hypothetical example, that could mean a traveller stopped in Cayman with a carrier bag filled with cash could be prosecuted for money laundering, without the authorities needing to prove the money was obtained through any specific criminal offence.

They would be allowed to rely on the principle of “irresistible inference” to show the court that there was no other conceivable explanation for the handling of the cash in such a manner.

The same amendment is included in the legislation for civil recovery cases. The courts could order confiscation of the funds without necessarily needing to prove that it was tied to a proven offence.

Former prosecutor Elisabeth Lees, now a financial crime specialist with Claritas Legal, said the amendments were particularly important in the Cayman Islands where the principle offence in money laundering cases may take place outside the jurisdiction.

She said Cayman investigators, tasked with unravelling the suspicious movement of money through the islands, were often several steps removed from the initial crime.

The proposed amendments to the law will mean the statute clarifies the circumstances under which investigators can tackle money laundering without having to prove the predicate offence – something that can be difficult or impossible when the original crime occurs in another jurisdiction.

Lees said it was already open to prosecutors, under a common law doctrine known as the ‘Anwoir Principle’, to pursue asset seizures and money laundering convictions without necessarily tracing the funds back to a crime.

But, she said, the changes to the legislation would “remove any ambiguity” by ensuring the principle is enshrined in statute and give further weight to Cayman’s anti-money laundering legislative framework.

In simple terms, she explained, “In order to prosecute the money laundering of the proceeds of the profits of supplying cocaine, it is not necessary to prove a conviction for the supply of cocaine or that the proceeds were the proceeds from one of a number of criminal offences.”

This was the case previously under common law and will now be contained in the statute itself.

The law already spelled out that investigators could separately rely on proof that the money came from one of a number of offences, such as corruption or the supply of drugs, and now the statute states that proof may be drawn from the “irresistible inference” from the circumstances that it is the proceeds of crime.

A handful of other changes to the legislation are aimed at tightening up the wording of various sections.

The proposed legislation is scheduled to be debated this week.