GNOSIS 2/2010
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Computer data storage The paper-trail in the fight against recycling |
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Ranieri Razzante |
The “chain of value” of the anti-recycling obligation The legislation against money laundering – meaning that of prevention – creates two types of active subjects, employed on the same ground, but from opposite visual angles (only apparently), which – as will be said further ahead –tend to be complementary: - on the one side, the Authorities, also of surveillance of the markets and financial activities, responsible for the delineation of rules of conduct and the issuance of sanctions for non-compliance with the said rules of conduct (7) ; - on the other side, the “obligated parties” [to use a common definition, even though reductive and, sometimes misleading (8) ], i.e. those financial and non-financial, which the Articles from 10 to 14 of the Decree 231, enumerate as those who are recipients of the fulfillments in the subject matter. This is the ratio of the EU directives, of the State measures, of the international Conventions and of the surveillance regulations. In Italy, in the succession of the regulations introduced by the Law N° 197/1991, by the Legislative Decree 56/2004, and, finally, by the Legislative Decree, 231/2007, the constancy of the Legislator, deferential to the Community precepts, has fixed on the three “cement blocks” on which the architrave of the prevention of recycling rests: - restriction on the transfer of cash and securities to the bearer; - identification and registration relations and operations of the clientele of the obligated parties; - the reporting of suspicious transactions. The chain closes by itself, in a logically-legal justification of extraordinary and clear evidence, where one thinks: a) of the “constrictive” effect of the passage of the cash through the traditional intermediary channels; b) of the (consequent) census of relationships and operations of a general “economic” nature through financial brokers and the new obligated parties, (on all) the freelance professionals: c) of the possibility (rectius: duty) (9) , of these, to report “suspicious” operations to the Authorities of Control, today, the UIF of the Bank of Italy. The traceability, the deterrent to antonomasia of recycling, is guaranteed by this reticular system, of which, if a fulfillment of obligation is “in default” it is easy to guess the fallibility. With these premises – necessarily synthetic – our attention must be shifted to the much reviled “Archivio Unico Informatico”, (from now on called the AUI), (in English, the Single Computer Database), gives form and substance to the obligation of registration, constituting – as we shall see – an irreplaceable database in the prevention and eventual counteraction to the “anomalous” movements of money. The detractors of the AUI Database erroneously maintain that this obligation fulfillment is useless, besides the fact that it is not adopted in the other European States. It is not seen how, even if with other variously and differently called computer systems, one can comply with Community obligations – which now we remember – of registration and, more generally, of keeping sensitive information on financial transactions (10) . The only exception (right?) was provided for the freelance professionals and those non-financial subjects, who were authorized to keep in paper form, the said Register (11) ; but still in compliance with European Union and international directives, as we shall attempt to demonstrate further on. That the fulfillment in question can, today, be muddled, due to unclear interventions of the Legislator – both primary and administrative, is beyond doubt. A rapid reference to this will be made further ahead (12) . Reconstructive work on the International Law on registration The AUI Database has, in reality “ancient” origins although it would be better to say that the obligation fulfillment to which it contributes, is historical. In fact, since 1980, the Recommendation of the European Council of the 27th of June (13) which first introduced the concept of recycling as an “international problem” (the expression is of the writer), asked the Banks to “control the identity of their clients”, “to institute mechanisms of random or systematic checking to verify the provenance of monies”. In 1988, the Declaration of the Principles of Basil (14) even made reference to the identification of the “real beneficiaries” of the banking operations, thus anticipating the most important theme of the Third European Directive, currently implemented in our System with the Legislative Decree 231/2007 (see below). The “turning point” was with the 1988 Vienna Convention (15) . It introduced a new definition of recycling but, for what concerns us here, it requested the signing States, with great insistency, for an enforcement of the measures of prevention and repression of the phenomenon. In 1989, the Gafi was created (16) , which in the subsequent year issued the precious “40 Recommendations” (17) against recycling, still today, an essential reference point for the adoption of measures on the subject by the Member States. Now, contained among these important requirements are those explicitly referable to the obligations of registration, after identification. I like to remember here the principle of the “preserving for at least six years” the “registrations” and documentation relative to them, pertinent to all the national and international transactions. In order of time, the Convention of Strasbourg of 1990 (18) merits mentioning, still dedicated to the adoption of increasingly stringent measures in the struggle against recycling, based on the international cooperation and reinforcement of the measures of prevention (among which, to be precise, the traceability ). The Community Experience The three Community directives on the prevention of the use of the financial system for recycling encompass, obviously, the major part of the principles stated at the international level, and are modelled on the European systems (19) . With regard to the “registration” the obligation for all Community Countries was immediately clear. The First Directive, the N° 91/308/CEE, acknowledged in our System with the optimum (and timely!) Law N° 197/1991 (20) , sanctioned inevitably the birth in Europe of the obligation of “Archives” (pardon the simplification). In fact, in Art. 4. It says verbatim that “The Member States ensure that the credit and financial institutions preserve – so that they can constitute an element of evidence in any investigation in matters of recycling [(21) …., regarding the operations, writings and the registrations …..the originals and copies of documents having analogous probative validity under the national law, for a period of, at least, five years from the execution of the operations”.</I>] With the Second Directive, the Law N° 2001/97/CE, acknowledged in Italy by the Law N° 56 of 2004 (22) , even extends to the European institutions, the anti-recycling regulations also to the freelance professionals, even expecting for these obligations of “registration and preservation” the transactions and their documentary evidence. The third Directive, the Law N° 2005/60/CE, recently acknowledged (is still in the adjustment phase (23) in our System with the Legislative Decree 231 of 2007, has, first and foremost, radically changed the approach – only sketched out in the two preceding Community releases – to the identification of the clientele and to the monitoring of financial and economic relations, with the purpose of fighting recycling and the financing of terrorism. At this time, not only was the existing preventive framework consolidated, but concepts like the “beneficial owner” and the “know your customer” were introduced (24) , as well as controls on common law and international companies with whom commercial relations are entertained. All this adds up to the sedimentation, within the banks and other obligated parties, of the obligation to register both what already is mandatory, and what is set by the procedure (“proceduralization”) (25) of the anti-recycling apparatus. The Directive in question provides for a formula analogous to those of the preceding I and II on the matter of preservation and registration of data (ref: Art. 30) keeping in mind that the databank of information has been enriched with all the information provided for by the adequate verification. Article 31, even imposes on the credit and financial institutions, the application in their branches in other Community Countries and/or non-Community Countries, “equivalent” measures regarding, in particular, “the adequate verification, record keeping and the preservation of documents” (26) . But it is Article 32 that furnishes a further and more significant element (rectius: confirmation) of what, in this context, we are attempting to demonstrate. The Member States are obliged to impose on their financial and credit institutions “to have at their disposal systems that allow them to respond fully and rapidly to any question of information of the UIF or any other Authority, in accordance with their National Law”. Now, to believe that the obligation to keep supplying the AUI regularly, (or other “systems”, as the directives call them) aimed at maintaining information on transactions and finalized contracts at the headquarters of the intermediary subject (with whom the customer has operated) may be, in some way, a peculiarity of the Italian regulation, frankly, does not appear tenable. The discretion conferred (moreover, always ingrained in the European Directives) to the Authorities of Control concerning the choice of the “technical” options applicable State by State has made Italy tend towards the “computerization” of the “anti-recycling accounting records” (if this definition of the registrations is passed in AUI, this last understood as an obligatory register, just like those prescribed by the tax regulations (see below, in more detail). The Italian regulations on the AUI and the “information” value of the instrument We have said that the choice of the Legislator was that of a “filing” of the data, which has been called “informatics”. The Article 2 of the “old” law 197/1991 spoke of a “single register in informatics form”, and so today, the Legislative Decree 231/2007 (see Article 37, is headed exactly “Archivio Unico Informatico” “Single Computer Database”. With systematic arrangement and clearer speech, the Legislator of the Decree 231 reiterates that “the AUI is formed and managed in such a way as to assure the clarity, completeness and immediacy of the information, their preservation according to uniform criteria, the maintenance of the historicity of the information, the possibility of obtaining integrated evidence and the facility of consultation”. It is easy to see that the dictation responds to that of the Community, referred to above. To repeat ‘the freedom of choice of form’, is not excessive, it is guaranteed by the Directives de quibus. It must be said that the basic criteria for the “management of sensitive information” within the structures delegated to the anti-recycling obligation fulfillments are of external and internal usefulness. They serve to limit the risk (and to enhance the knowledge of the clientele) in the banks and in the other involved intermediaries, and are undoubtedly useful to the Forces of Law and Order and the Judiciary in the reconstruction of movements ascribable to suspicious operations both ex ante and ex post with respect to investigations (27) . Not to mention the general informative-statistical value, and, we should say, strategic, of the data of the AUI for the aggregation provided for by Art. 40 of the regulations in force. The UIF was recipient for some time, bi-monthly, through suitable procedure (28) ; a sort of “copy” of the data collected by the intermediaries is sent to the Authority in order that any deriving evidence can be used for “analysis aimed at bringing to light eventual phenomena of re-cycling or of terrorist financing in the ambit of certain territorial areas” or for the performance of its other institutional tasks provided for by Article 6 of the Decree 231/2007. But the real turning point of this formulation lies in the introduction of two regulations, ex se already significant of the validity of the approach of the Italian Legislator, which this present work has the ambition to reaffirm. The first is that – of para. 6 of Article 36 of the Decree – which allows the use of the information contained in the AUI for “fiscal purposes”. It is a too “polemicized” regulation, since said use –already allowed by the fiscal regulations themselves – does not violate any principle of confidentiality or contradiction. The Guardia di Finanza, during the examination of the AUI for other purposes, when acquiring information of infractions of tax regulations, certainly cannot – in face of the evidence – “ignore” the existence of possible crimes (29) ; in such a case, it assumes another of its functions, that of the taxation police, and with the “rituality” provided for, both by the regulations in matters of tax assessment on incomes and VAT, and by the discipline within the Corps, acquires the relevant information and proceeds through the appropriate departments of the Corps (as well as the appropriate rules of the law) (30) . Besides, in these cases, the cross checking activity with the data contained in the “Register of transactions and financial relations” (31) of the Revenue Agency constitutes, today, the standard of tax and financial investigations. But the second citation of the AUI is even more “revolutionary” (32) . We refer to Article 2, para 8, of the Provisions of the Bank of Italy, N° 895 of the 23rd December, 2009, bearing “Implementation Provisions for the obligation of preservation and registration of data of the AUI and for the simplified modalities of registration in Article 37, paras 7 and 8 of the Legislative Decree 21st November 2007, N° 231”. [(33) </I>]. It states verbatim: “(…) the recipients shall make available to the competent Authorities the information contained in the Single Computer Database for the purposes of the search and acquisition of evidence and of the sources of evidence during the course of criminal proceedings, both in the phase of preliminary investigations and in the subsequent trial phases, also for the application of the measures of prevention”. The regulation is too new to be adequately commented. We may, however, limit ourselves to observe that the experience of the AUI has been “rewarded”, making it become even a source of evidence in trials for crimes of money laundering or, even if the money laundering did not take place, for crimes believed to be introducing and/or connected to money laundering. Not by chance then, that the AUI constitutes an official register entry comparable to those of the taxation procedure is proven by the application, during the course of investigations (rectius: formal accusations) also on infractions of the anti-recycling regulations (34) , the formal accusation/notification on the counts of the crime under Article 44, Criminal Code, “Falsehoods in registers and notifications”, where it is provided for that “Anyone who, being a subject by law obliged to make registrations, subject to the inspection of the Authorities of Public Security (…), writes, or leaves written, false indications is punished with imprisonment up to six months or with a fine up to 309 euro”. [(35) </I>]. This is worth ad abundantiam the inclusion of the AUI among the preventive and repressive Intelligence instruments, which the fight against recycling must hold in due consideration, but without translating it – and here the effort must be from the regulatory Bodies – into tiring procedures founded on algorithms and rules which have very little to do with said logic (36) .
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(1) On the theme of interlacement between tax crimes and recycling, (see various authors). The Functions of financial-economic Police in the European context: profiles of contiguity between anti-money laundering and combating tax evasion, from a comparative perspective. Scuola di Polizia Tributaria della Guardia di Finanza Roma, 2007.
(2) The writer believes that the choices in the matter are necessarily (if not exclusively) influenced by the different option one is given, not chosen, in the ambit of the actions of government of the economy and of respect for the Law. The statutory provisions are tied to the typologies of the crime as the phenomenology of the crime is conditioning for the preparations of the right measures of contrast. In fact, for recycling, the development of the international regulations (and then Italian) appears to be, until today, solely the fruit of the incessant changeability of the behaviour and instruments utilized to implement them. And it could not be otherwise, given the peculiarities of the crime in question; without a doubt, the most complex and chameleon-like of the financial crimes. (3) On this point, amplius, R. Razzante. The sanctioning effectiveness of the measures against recycling: some reflections in “The Administrative Responsibilities of the Companies and Institutions” N° 1, 2009, pgs. 45-54. (4) Copious literature on this topic and we refer you to that cited in our “The Anti-recycling Regulations in Italy, Giappichelli, Turin, 2006. Torino, 2006. (5) On the relations between these two crimes. Recently, R. Razzante. “The Role of Information in the Mifid System; and in the fight against recycling in IR Top, Investor Relations, N° 3-4, 2009, pgs. 21-25. (6) On this point, finally, R. Razzante (edited by) The Financial Litigation in the Mifid era, Giappichelli, May, 2010, (with the most authoritative bibliography cited therein). (7) Of course, it does not concern rules contained only in the criminal code, but in the Instructions of Control of the Bank of Italy and of the other authorities of the sector, as well as of the professional orders and representatives of the obligated parties. This without forgetting that under Art. 7. of the Legislative Decree 231/2007, the Guardia di Finanza “acquired” the qualification of Control Authority in the field, with the principal consequence that the relevant formal accusations to the “obligated parties” can also concern the very essence of the control system and the organization of the single companies, other than criminal or administrative violations. On this aspect, our Comment sub Article 7, in “Commentary on the Anti-recycling Regulations” Cedam, 2009. (8) The “obligated parties” of the anti-recycling regulation, in a strictly legal sense would be, indeed, all the citizens (also non-residents – if one thinks of payments and transfer of funds) who make transfers of money or goods equal to or above 5000 Euros (today, by virtue of the recent modification to Article 49, of the decree brought by the Legislative Decree N° 78, of the 31st May, last) between private individuals. It is not superfluous to remember, above all, after the mentioned legislative modification, which seems to have also that “social” evidence that should characterize the fight against recycling and tax evasion, that the limitation to said transfers is required by the regulations against recycling and the financing of terrorism. Who then are the more “honoured” by the Article under discussion? They are the above mentioned subjects, who through prepared system of control, contribute with the “active collaboration” to the prevention and, indirectly, to the fight against the crimes in question. For further reading, we refer you to our “Recycling, the Big Business” in this Review, N° 2, 2008, pgs. 159-171; for a more detailed review of the bank control systems against this kind of crime, see, among others, M.Arena- R. Razzante “Anti-money laundering legislation and criminal liabilities of companies, Esselibri Naples, 2009; R. Razzante “Money Laundering and internal controls” in Bancario, N° 1, 2010. (9) If it can been seen as an “opportunity”, we believe it can be effectively seen as the synthesis of a duty that combines with a very dutiful choice, from the viewpoint of “possibility” which the law offers. We have expounded in these terms since our ‘Observations’ on the new system of reporting suspicious transaction, in Law of the Bank and the Financial Market, N° l, 1998, and in all the publications that resulted from it. (10) There are traces of the registration obligation in all anti-recycling regulations of the principal European Countries, of the United States and some non-Community States. For example, in Spain, the obligation of record keeping is not limited to copies of identity documents, but extends to the documentation that permits the reconstruction of the single transactions. Data such as beneficiary, address, currency (…) and allow the reconstructing of the trail in the case that it originated in previous transactions. Additionally, the probative value of kept records is required so that, if necessary, they can be used in judicial proceedings. (FATF-GAFI, Third Mutual Evaluation Report, 23rd June 2006). In Russia, a “transaction record” is explicitly provided for, for at least 5 years, containing a series of information elements on the operations (substantially, those of the directive and of the GAFI (FATF-GAFI, Second Mutual Evaluation Report, 20th June, 2008). In Germany, all the information, of which we already know, including the beneficial owner, must be record (FATF-GAFI Mutual Evaluation Report, 19th February, 2010). In the USA the record of transactions is, obviously, provided for, with also the description of the methods used to verify the identity. Everything with the specific requisites, especially stringent, of the USA Patriot Act (FATF-GAFI, Third Mutual Evaluation Report, 23rd June, 2006). In the United Kingdom, clear reference to procedure for the maintaining of data relevant to anti-recycling is contained in Part 3, of the Money-laundering Regulations of 2007, N°. 2157. (11) See on this theme, R. Razzante, Anti-recycling and freelance professionals, in Law and Economics of the Insurances, N° 1, 2003. Pgs.141 et seq. (12) In the “White Book on the Anti-recycling Regulations” which the Italian Association of Anti-recycling Directors has just issued, a series of criticisms and solution proposals are contained, which the application of the regulations on ‘registration’ has generated and is creating for the operators. For reference, please go to www.airant.it . (13) Act R 80/10 named Measures against the transfer and the custody of funds of criminal origin. On international reconstruction, one sees, in particular, F. DePasquale-M. Condemi (edited by), Features of the international discipline of prevention and contrast of recycling and the financing of terrorism. Workbooks of legal research of the Bank of Italy, N° 60, 2008; more synthetically, our Anti-recycling Regulations in Italy, pgs- 30-52, but also F. Vedana, D. Contini. And R. Lenzi, the Banking and Trust Secret in Italy and abroad. Egea, Milan, 2008 (14) For the “Prevention of the Criminal Use of the Banking System for the Purposes of Recycling Money” dated 12th December, and in some way acknowledged in Italy by the Law N° 55, 1990. On this last, reference can be found, ex multiis, to P.L. Vigna The Codes for the Criminal Hearing, Laurus Robuffo, 2008, just as to G. Nanula, “The Fight against the Mafia”, Giuffré, Milan, 2009. (15) Convention of the United Nations against the illegal traffic of drugs and psychotropic substances adopted at Vienna in 20th of September, 1988, and enforced in our Country with the Law 328, 5th November, 1990. (16) To which site we refer you for the “strategic” information on the fight against international recycling. For its present composition and functions, the effective reconstruction of M. Gara-A, Pavesi, The Financial Action Group, in F. DePasquale- M. Condemi, pgs. 51-197. (17) Which we remember having been revisited, both in 1996 and in 2003, and then integrated with the 9 “Special Recommendations” on the financing of terrorism. (18) Convention of the European Council of 8th November, 1990, ratified in Italy by the Law N° 328, 9th August, 1993. (19) So as not to risk repeating ourselves, we refer to what has already been written in The Anti-recycling Regulation in Italy. Work cited and also to the bibliography contained therein. (20) On this Normative text, by now all repealed, we have allowed ourselves to refer to, more for “nostalgic” motives, our Anti-recycling Regulations in Italy, Giappichelli, Turin, 1996; furthermore, more authoritatively, to G.M. Flick, Financial Intermediation, Information and fight against recycling, in Rivista della Società, 1991, pg. 433, et seq; G. Amato, “The Recycling of Dirty Money”, Laurus Robuffo, Rome, 1993; pgs. 965 et seq. (21) The choice of italics is ours to underline to our gentle reader, to highlight what we shall resume later. (22) For a synthesis of the other new elements brought by the Regulations in question, see R. Razzante. The new parties obligated to the Anti-recycling Regulations, in La Società, N° 7, 2004. Besides D. Mancini, The extension of the anti-recycling obligations and the innovations of the Legislative Decree 56/2004, in Rivista GdF, N° 4/2004. (23) In fact, the original Decree was subject of a first corrective intervention through the Legislative Decree 151 of the 25th September, 2009, and while we are writing, by the Legislative Decree N° 78 of the 31st May, 2010. The new elements were the subject of a first comment in R. Razzante – D. de Palma, The Legislative Decree 78/2010. The traceability of the payments and the modifications to the Anti-recycling Decree, in Guide to Tax Controls. N° 7/2010. (24) Not applicable for the English translation (25) 25 Of this “proceduralization”, we have outlined the process with its impact on the governance of the banks, in Article 52 of the Legislative Decree 231/2007: the ambiguity of the Bodies “in charge” of management control, in The Administrative Responsibilities of the Companies and Institutions, N° 2/2009, pgs. 133 et seq. (26) Concerning para. 1. of the cited Article. (27) Ex ante if one considers the effect of a report on a suspicious operation, which then becomes the object of deeper enquiries, with the decisive countercheck of the AUI and of its registrations: ex post if an investigation is already ongoing and the contribution of the bank is asked for the reconstruction of the “trail” of the money, something is undoubtedly facilitated by the traces on the AUI. The express prevision of the use of the Databank constitutes further validation in the “in depth operating” phase of the SOS of the GdF, such as the Circular of the same Commander General of August 2008. (28) A procedure called “SARA” for which we refer you to the Internet site of the Authority, which disciplines the technical modalities with special circulars, which we feel we can save you the description. Not, however, without citing the last circular of the 27th April, 2010, which implements significant modification to the procedure in question. In particular, referring to the inclusion of the operations among the aggregated data (equal or superior to 15000 Euros, made by listed companies, as well as the cash operations which in any case are not aggregated together to exceed the threshold of registration. This speaks volumes for the support that, today, is felt AUI must give to the control of financial movements. (29) Given that the tax crimes are well-defined cases by our System by the Decree N° 74/2000, and constitute, under the Article 648 bis, Criminal Code – assumed crimes of re-cycling. See our Comment sub-Article 36, in Commentary on the new regulations against recycling (already cited). (30) In the interests of space, unfortunately, in this article, it is not possible to enter into a deeper analysis of the cited Regulations, for which we refer you ex plurimis to S. Capolupo, Recycling and Tax Evasion, in Il Fisco, N° 33/ 2007. G. Nanula Recycling, the Normative evolution and the use of the data for fiscal purposes, in Rivista GdF, N° 1/2008; D. Donato in, Tax circumvention and evasion and recycling in international relations in Rivista GdF N° 5/2007; B. Assumma in, Relations between recycling of illicit proceeds and tax monitoring, in Rivista GdF, N° 1/2007. O. Cocuzza, in the banking secret between the struggle against recycling and tax evasion, EPC Libri, Rome, 1993. (31) For the right “emphasis” to the Register of transactions and financial relations one can see what we asserted in the Register of accounts and deposits: “take a look, which do you see?” In Civil Archives N° 2/ 200, pgs. 155-157. as well as, for brevity, the literature quoted in the Commentary cited in the footnote 30. Finally, L. Galluccio-G. Putzu, Financial investigations in the GdF procedures, in Guide to the Fiscal Controls, N° 6/2010, pgs. 38-44. (32) As remarked by R. Razzante, the anti-recycling archives enter in the criminal trials, Il Sole 24 Ore, 5th January, 2010. (33) Published in the G.U. N° 102, May 4th, 2010 and issued in execution of the delegate contained in Art. 7. Para 2, of the Decree 231/2007. (34) In jurisprudence, for references on the value of the AUI, see for all Cass. Pen. Section 1, 26th February 2007, N° 7952. (35) The typical case is of the omitted registration of the actual subject who has worked at the bank counter, or the indication as “exhibitor” of a person who was not present at the front office/counter. In this case the probative value of the AUI leads us to the hypothesis of fraud, which often underlies intentional involvement by employees of intermediaries in facts of recycling. On this point, R. Razzante, The effectiveness of sanctioning measures against recycling – some reflections, work already cited. (36) In fact, a simplification would be desirable, in addition to that which is contained in the cited Instructions of the Bank of Italy, of the “tracings” of AUI, of the power procedures, and of the scaling for the obligated parties. The discussion is still open about the inclusion, which became obligatory on June 1st last, of the name of the “beneficial owner” of the relations opened with the financial intermediaries. Established that it is not a violation of privacy – insomuch as the data in question is contained in obligatory formulas for the client, with the information below, under the Legislative Decree 196/2003, which, of course, does not provide consent - some problems could be created with the banking secret in hypothesis of access to the data by persons other than the managers of the relation (obviously within the structure of the intermediary). The investigation utility, on the contrary, appears evident. |