( Photo by http://1.bp.blogspot.com/-DpddDQtDQ-g/)   Credit, finance, trade, businesses are the places where resources acquired illegally are introduced into the legal economic circuit with legal instruments. Among the most effective contrast instruments of money laundering is the so-called SOS (Segnalazione di Operazioni Sospette) that is, alert of suspect operations. An instrument which, at the beginning, met with little enthusiasm in Italy, while today, it suffers from an excess of alerts, combined with their poor quality. But the suspect is fleeting material and the very definition of the norm lends itself to different – and not yet definitive – interpretations, useful for the operators and also for the common citizen. However, the results of the use of the SOS appear quite considerable, especially in terms of seized assets and the fight against terrorism.

Credit, finance, trade, businesses are the places where resources acquired illegally are introduced into the legal economic circuit with legal instruments. Among the most effective contrast instruments of money laundering is the so-called SOS (Segnalazione di Operazioni Sospette) that is, alert of suspect operations. An instrument which, at the beginning, met with little enthusiasm in Italy, while today, it suffers from an excess of alerts, combined with their poor quality. But the “suspect” is fleeting material and the very definition of the norm lends itself to different – and not yet definitive – interpretations, useful for the operators and also for the common citizen. However, the results of the use of the SOS appear quite considerable, especially in terms of seized assets and the fight against terrorism.

It is very sad to say this with such clarity, but in the very dynamics of the financial markets there have always existed less than transparent activities, often concretizing hypotheses of crime from the legal point of view, and competitive alteration from the economic point of view.
The recycling phenomenon is one of these “dynamics”; it has been “absorbed” by the legal market, which is not able to immunize itself against the disease. It comes from the illegal market of credit, of finance, trade and enterprises..
Although it is obvious, a clarification is obligatory.The money-laundering is done on the “legal” market, with “legal” instruments, but with illegally acquired resources.It is a failure of the legal market, just the same as when other risks tied to the system occur. It can be prevented and there are the instruments.
Sometimes, however, both the Authorities of Countries which obtain indirect advantages, and the financial brokers, attracted by the collection of profits (legitimate, within limits), do not do enough in this direction.
The three EU Directives on the subject and the international recommendations have made a very clear choice for the contrast (first, for the prevention) of money-laundering.Special surveillance of many obligated parties, financial and non-financial. Controls aimed at the financial operations, but also at corporate, real-estate, professional and commercial ones.In another article, we have described those controls – recently implemented by the so-named “Third directive” – of the adequate verification and storing of the data of the clientele (1) .
The most “celebrated” and contested obligation fulfillment, however, is another: the reporting of suspicious operations (from now on referred to as SOS) – eventually made by the clientele – to the appropriate Authorities and, therefore, to the Police.
Always a contradictory reality in Italy. Very few reports at the commencement of the Legislation in 1991 until several years ago; today, perhaps too many and of poor quality. (2) .
The following intends to examine the contours, the operational implications, the criticality and the great opportunities which the reports possess and generate, more from the judicial point of view than from the economic viewpoint.

The conditions of the inception of the obligation

Since the Directive 91/308/EEC, after the alarms from the UNO and the European Council (3) ,the obligation of reporting was provided for as binding to the inception of certain conditions, in fact, never amended over time, even with the subsequent and already named Directives.
In considering, it is significant to find the following statements:
“(…) that an obligatory system of the reporting of suspicious operations which ensure the transmission of the information to the Authorities above mentioned, without alerting the concerned clients is the most effective way to realize such cooperation; that a special safeguard clause is necessary to exonerate the credit and financial institutions, their employees and administrators from responsibility for the violation of the prohibition to divulge the information”.
In Article 6 of the Community Provision one reads the following:
“The Member States ensure that the credit and financial institutions and their administrators and employees collaborate fully with the Authorities responsible for the fight against recycling:
-communicating to such Authorities, on their own initiative, any fact that can constitute indications of recycling;
- supplying to these Authorities, upon their request, all the necessary information in conformity with the established procedures of the legislation in force.
The information referred to in the first paragraph is transmitted to the Authorities responsible for the fight against recycling of the Member State in which territory the body which transmitted the information is situated. Such transmission is normally made by the person or persons designated by the credit and financial bodies, in accordance with the procedures provided for in Article 11, Point 1.
The information supplied to the Authorities in conformity with the first paragraph is utilized exclusively for the purposes of the fight against recycling. However, the Member States may provide that such information be utilized also for other purposes”.
In the Third Directive, “child of the 11th of September 2001” (attack on the Twin Towers USA), does not give up and strengthens the idea on the instrument:
“The suspicious operations must be reported to the Financial Information Unit (FIU), which is used as the national center to receive, analyze and communicate to the competent authorities, the reports of suspicious operations and other information that regards potential cases of recycling or the financing of terrorism. This should not compel the Member States to modify their actual reporting systems if the report is made through the Public Prosecutor or other authorities of the Police Forces, and if the information is transmitted – promptly and unfiltered – to the FIU, allowing them to carry out their activities correctly, among which, the international cooperation with other FUIs” (Considering 29).
In addition, Art. 20 of the Provision under review prescribes thus:
“The Member States require the institutions and the persons subject to the present Directive to pay special attention to every activity that they consider particularly likely, by its nature, to have a connection with recycling or with the financing of terrorism and, in particular, to the complex operations or those of unusually high amounts of money, as well as to all unusual patterns of transactions which do not have an evident economic scope or do not have an objective which is clearly lawful”.
A legal obligation, without doubt, which, however, must be placed in its correct context, given that it will still generate doubts of “”legitimacy”, but only because it has not been fully perceived in its absolute “administrative” essence, and not investigative or criminal, even though these latter implications are desirable and, indeed, are proving to be much more meaningful than was commonly considered.


The SOS in Italy

Omitting the semantic evolution of the Italian norm which, from 1991, introduces the obligation of reporting “suspicious operations” (4) , let us go to the present formulation.
Article 41 of the Legislative Decree 231/2007 provides that:
“Art. 41. Reporting of suspicious operations
1. The subjects indicated in Articles 10, para 2, 11, 12, 13 and 14 send a report of suspicious operation to the FIU when they know, suspect, or have reasonable grounds for suspecting that there are in progress, or have been performed, or attempted, operations of recycling or financing of terrorism.
The suspicion is derived from the characteristics, entity, nature of the operation or from any other circumstance known in virtue of the functions exercised, taking into account also the economic capacity and the activity performed by the subject in question, on the basis of the elements available to the reporters, acquired in the ambit of the activity performed, or following the conferment of an assignment. An element of suspicion is the frequent or unjustified recourse to cash operations, even if not in violation of the limits set down in Art. 49, and, in particular, the withdrawal or deposit of cash with finance brokers of amounts equal or superior to 15,000 euro.
1-bis. The content of the reports is defined by the FIU with its instructions under Article 6, para 6, letter e-bis).
2. For the purpose of facilitating the individuation of suspicious operations, on the proposal of the FIU, periodically up-dated indicators of anomaly are issued:
a) for the subjects indicated in Art. 10, para 2, from the letter a) to letter d), and letter f), for the financial brokers and the other subjects who carry out financial activities, referred to in Art 11 and for the subjects indicated in Art. 13, para 1, letter a), although, at the same time, enrolled in the Register of Auditors, with provision of the Banca d’Italia;
b) for the professionals referred to in Art. 12 and for the auditors indicated in Art. 13, para 1, letter b), with Decree of the Minister of Justice, after consultation with professional bodies:
c) for the subjects indicated in Art. 10, para 2, letters e) and g) and for those indicated in Art. 14 with Decree of the Minister of the Interior.
3. The indicators of anomaly elaborated under Paragraph 2 above, are subjected, before their issuance, to the Committee of Financial Security to ensure the coordination.
4. The reports are made without delay, where possible, before performing the operation, as soon as the subject responsible for the reporting learns of the suspicious elements.
5. The subjects responsible for the obligation of reporting must abstain from performing the operation until they have made the report, except when said abstention is not possible in view of the normal operation, or when it can obstruct the investigations.
6. The reporting of suspicious operations made, pursuant to and for the purposes of this Chapter, does not constitute violation of the obligations of secrecy, of the professional secret or of eventual restrictions to the communication of information imposed by contract or legislative, regulatory or administrative provisions and, if put into effect for purposes specified therein and in good faith, does not entail responsibility of any kind”.
This legislation should be analyzed point by point, but not so much because there is a need – although it would be strange not to think so – to further clarify the legal borders of an obligation which is now very much in the spotlight, but rather to understand the economic rationale of protection of the integrity of the market. Frankly, however, the writer foresees that the legal epistemology will lead, automatically, to the purpose just explained.
First and foremost, from Paragraph 1, all the obligated parties of the anti-recycling legislation (5) must “direct” an SOS to the FIU under specific conditions, which we shall now examine.
The sending implies an appropriate means/instrument, and the FIU makes it available, in a new modality, essentially consisting of a direct electronic flow. The modality results, therefore, typified, in the same manner as all communications of surveillance (6) from and to the Banca d’Italia and the Authorities of the sector (7) . The biggest problem is “when” the SOS should be released.The legislation does not make this clear, with respect to the previous provisions. It spoke of operations which “lead to the belief” that the financial sources were illegal see Art. 3 of the Law N° 197/1991) (8) . Today, the suspicion is “qualified”, with a mutation (which is also genetic) of the proposition of the obligation of SOS: and, in fact, should be used when one “knows, suspects or has reasonable grounds for suspecting” that “there are in course or have been performed or attempted” recycling operations or the financing of terrorism. The formulation of the text is evidently imprecise, as well as misleading, for a series of reasons, which the writer will attempt to explain here, as follows:
“to know” that behind a banking, financial, real-estate or commercial operation is hidden the utilization of money deriving from any non-culpable crime (9) equals reporting the fact to the Police Authorities, not to make a mere surveillance report (10) .
For as much as one wishes to contribute a milder and less weighty significance to the verb “to know”, above all, for the purposes relevant here, it evokes much more those formulas referred to in Articles 330 and 331 of the Code of Criminal Procedure. In the first, reference is made to the crime reports that the Public Prosecutor and the Investigative Police “take on their own initiative” or “receive” in the ways therein enumerated (11) . In the second, it concerns the “report on the part of public officials and appointees of the public service”, who, in the exercise of their functions, have news of a crime. It is to be done, even in the cases in which “the person to whom the crime is attributed is not individuated” (see para 1) (12) . This, of course, can never be ontological to the SOS! Both because – as already mentioned – it regards reports and operations (13) , and because it is requested of subjects who are not public officials. If then we go ahead on the obligations of reporting notitiae criminis, they weigh also on private citizens (Art. 333 Code of Criminal Procedure) who have such knowledge.
While an anomaly in the conduct of a client may appear clearly evident, which also translates into suspicion about his real activity, it cannot be concretized in a crime report (14)it cannot be quite so clear for everyone what the Banca d’Italia has recently reiterated in its “Instructions for the reporting of suspicious operations,” published in the Official Journal N° 230 of the 1st October 2010 resolution 616 of 24th August 2010).
In the Document, Article 7, para 1, it stipulates specifically that:
“The reporting of suspicious operations is an act distinct and separate from the report of criminally relevant facts. The reporting is made independently of the eventual report to the Judicial Authorities”.
All this has always been, however, but the Authority has underlined it here more clearly, since the circumstance had given rise to numerous misunderstandings (15) .
As far as the notion of “suspicion” is concerned, enriched also by the alternative declination of possession of “reasonable grounds for suspecting”, the space for treatment would be even wider. For this, but principally, not to transcend the legal framework, the result of which could most likely be outside the spirit of this paper, we must limit ourselves to the demonstration of the evanescence of the formula adopted by the Legislator, but here, with slight guilt. Yes, because, if nothing else, the nomen iuris assigned to the communication in question is precisely that of reporting “suspicious” operations, historically earned from the cited European Directives. But, above all, because the suspicion hides (rectius: underlies) a subjective evaluation by the reporter, inherent not only the aspects of the operation which are evident to him, but a systematic consideration of subjective and objective elements provided for by the same Article under review.
In the first paragraph, the Article relates (16) the ‘suspicion’ in question, to the “characteristics, entity, nature of the operation or to any other circumstance known in virtue of the functions exercised”, also taking into account the “economic capacity and the activity performed by the subject in question”. But the “reasonable grounds for suspecting” are what lead to more than a few perplexities on the logical configuration of the reporting obligation by the subject who must fulfill it.Without wasting time in constructions tied to the Italian language, it is sufficient to think – in our opinion – that it is certainly not diversifying to have a suspicion, or rather, doubt or grounds for having it! Precisely because this suspicion is not “qualified” by an activity of judicial investigation from within the reporting institution.


The following: “Factor C”

The formula recently added to the above mentions Paragraph 1 deserves its space.
We are speaking of the “sources of suspicion” constituted by movements in cash, equal to or above 15,000 euro, as introduced by the Law N° 122/2010, conversion of the law Decree 78/2010 (17) .
Although the Circular of the Treasury Department of the Mef (18) furnished certain clarification on the contents of the integrative period of Art. 1, certain specific criticisms are a must.Meanwhile, regarding law – the systematic collocation. The indicators of anomalies have always been supplied by the Banca d’Italia, not by the Legislator, since one starts from the assumption that this last knows, through the FIU, the most recurrent cases to be submitted for verification and exemplification. The proof is the Art. 6, para 7, letter b) of the Decree 231/2007, which assigns to the Unit the elaboration and diffusion of “models and schemes of anomalous behaviour on the economic-financial level referable to possible activities of recycling and financing of terrorism.But the treatment becomes more serious if one looks closer at the vocabulary used, and at the content (preceptive?) of the “thinking” of the compiler.First of all, the frequent use of cash cannot constitute, secundum legem, an element of “suspicion”, if anything, of “anomaly”. The indicators, mentioned above, are, in fact, recommended by Banca d’Italia – not obliged as elements of “signalling automatism”! (reporting automatism).The term, therefore, is legally erroneous before being logically incorrect. In fact, logic dictates that the frequent use of cash cannot be held to be (even) anomalous (unjustified perhaps), in withdrawal and depositing amounts equal or superior to 15,000 euro. The quantitative reference is, first of all, inconsistent, since the amount set down for the limitations to the use of cash and bearer bonds is 5,000 euro, while 15,000 is that for the registration of operations in the Single Computer Database (19) .
This legislation has produced a useless, as well as a damaging, proliferation of ‘reports of suspicious operations’ to the FIU, for the simple “withdrawal” or “deposit” of cash. After the interpretation of the Mef, it is to be hoped that such event does not have repetition.
It is evident that the use of cash is critical and symptomatic in itself, but when not concretely justified, and often irrespective of the amounts (20) ,), given that the real recycler subdivides with skill and by now, with the exception of certain almost “typified” cases(21) , does not use currency. It is true, we are a Country which still uses cash extensively: but not for this are we more exposed to the risk of the recycling of others (22) .
The Banca d’Italia, in the Document cited here various times, dedicates a specific section to the anomalies of cash, in itself, however, not valid from the view point of the above contested legislation.Concerning the point 9) of the examples de quibus, entitled, “The repeated and unjustifiable use of cash money, especially if it is for significant amounts or involves recourse to banknotes of high denomination”.
Like any other “family” of indicators, also this is divided in “sub-indices”, where, compared to the preceding version of the Decalogue of 2001, the reference to a certain kind of operation stands out, which has become increasingly frequent in recent years: the use of the same cash for the balances of credit cards (23) .
These operations have become anomalous in this way: the frequent depositing of cash accompanied by equally frequent cash withdrawals through Bancomat (cash dispenser) or usage of POS, particularly, if done on the same day.


The use and utility of the SOS

In its last semi-annual Bulletin, the FIU informs us that the SOS have, at the 31st December 2010, reached 37,321 units (37,047 for re cycling and 274 for financing of terrorism), 26,758 of which were transferred to the investigative bodies (24) .
71.17% of the SOS comes from credit institutions and 7.71% from the Post Office. Low intake from the other obligated subjects (insurances, sim, trusts and free-lance professionals).
Lombardy, Piedmont, Emilia Romagna and Lazio stand out for the highest number of SOS and to justify such data, it is simply sufficient to look at the recent chronicles and at the Reports of the investigative bodies (25) .
As far as the financing of terrorism is concerned, the reports have, for the most part, concerned companies or individuals of Pakistani and Egyptian nationalities, and other Middle-east Countries; those attributed to Italians cannot be ignored ( approximately a third of the total).125 reports examined by the investigators have become crime reports.
In 2009, the number of persons reported were 1,166, of which 176 were arrested for recycling, with relative asset seizures of 302 million euro (26) .
These could seem modest figures, especially if the criminal procedures were then further deducted; the volume of assets seized from organized crime, supplied by the SOS – maybe not definitive, but co-essential – were large. Furthermore, the other SOS were not “trashed”, but have served to highlight types of administrative violations, when not criminal, for example, for tax evasion.With an effect of “crowding out” the criminal economy, which does not seem, in any way, negligible.