The historical background of money laundering legislation began with the drug trade. Initial anti-money laundering (AML) efforts were introduced primarily to prevent drug cartels from being able to process money gained from illegal drug activity, which cartels often used to build larger drug businesses.
The key historical turning point of AML legislation is the Vienna Convention of 1988, where 43 countries agreed on an approach to address money laundering rather than solely focusing on drug trafficking and related monetary issues. Shortly thereafter, the Group of Seven’s Financial Action Task Force (FATF) issued a report specifically addressing money laundering, citing 40 recommendations that needed to be implemented by the international community to effectively address this issue. These recommendations have driven the structure of the AML regimes of Canada, the United States, and the United Kingdom.
Canada’s AML legislative system was originally designed to address drug offences, but underwent two major changes. The initial change occurred with the adoption of Part XII.2 into the Criminal Code, which specifically criminalised laundering and possessing the proceeds of crime. Part XII.2 also granted powers to law enforcement to detain, search and seize property from anyone thought to be in possession of the proceeds of crime, expanding the scope of enforcement powers available in Canadian law against money laundering. The second major change occurred in the early 2000s with the adoption of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. This law is Canada’s current AML regime and implements various tools, such as reporting and record-keeping obligations, additional offences, and administrative monetary penalties to strengthen enforcement against money laundering. Furthermore, this legislation created the Financial Transactions and Reports Analysis Centre, Canada’s special intelligence unit, which has responsibility for reviewing reports and conducting preliminary investigations into money laundering.
Currently, money laundering prevention efforts focus on increasing international cooperation and addressing terrorist financing. The FATF and World Bank have consistently advocated international unity in addressing organised crime and money laundering by terrorist organisations as a necessary precursor to making any significant change in this global issue. Although there is some harmonisation among countries such as Canada, the US and the UK, there are various other countries, such as the Cayman Islands, whose legislative system is not harmonised.
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