Law tax

European Union law, tax offenses and subsequent money laundering

Nicola Sharp of Rahman Ravelli details a case which confirms that EU law cannot prevent tax offenders from being prosecuted for money laundering.

In a ruling, the European Court of Justice (ECJ) said European Union law does not prevent authorities from accusing tax offenders of subsequent laundering of their illegal earnings.

The publication of the ECJ ruling resulted from a case brought by Romanian prosecutors against a person convicted in 2018 of money laundering resulting from tax evasion. A Romanian court had referred the case to the Court of Justice to seek its opinion on whether the anti-double criminality provisions meant that a tax evader could not be convicted of laundering the proceeds of his tax evasion.

This request for a preliminary ruling concerned the interpretation of Article 1 (3) (a) of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of financial system for the purposes of for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council and repealing Directive 2005/60 / EC of the European Parliament and of the Council and Commission Directive 2006/70 / EC.

Any interpretation had to be examined in conjunction with Article 4 of Protocol No.7 to the Convention for the Protection of Human Rights and Fundamental Freedoms, which provides:

“No one shall be liable to be retried or punished in the framework of criminal proceedings under the jurisdiction of the same State for an offense for which he has already been definitively acquitted or convicted in accordance with the law and criminal procedure of that state.

Context of the case

On November 15, 2018, a regional court in Romania sentenced an individual, named LG, to 21 months imprisonment for money laundering between 2009 and 2013. The money laundered came from tax evasion by LG. Criminal proceedings relating to tax evasion were closed after LG repaid the amounts owed.

The regional court found that LG had failed to register tax documents proving the collection of income in the accounts of a company it managed – an activity characterized as tax evasion under Romanian law. The money from the tax evasion was transferred to the bank account of another company, which was managed by a person called MH. It was later withdrawn by LG and MH.

The regional court ruled that Mr. H. helped LG launder the money. But he ordered MH’s acquittal as it had not been proven that he was aware that LG had laundered money from tax evasion.

Referring to the ECJ, a higher Romanian court explained that it was seeking an interpretation of directive 2015/849 – even if this directive had not been transposed into Romanian law within the time limit – because this directive defines the ‘money laundering offense in the same manner as Directive 2005/60, which was in force at the time of the events which led to the first legal action.

The referring court held that Article 1 (3) (a) of Directive 2015/849 had to be interpreted as meaning that the perpetrator of the money laundering offense could not also be the perpetrator of the predicate offense (in this case, tax fraud). He quoted the sentences “knowing that such property is derived from criminal activity” and “or to assist any person involved in the commission of such activity to avoid the legal consequences of that person’s action” from the Article 1 (3) of Directive 2015/849, specifying that they only have meaning if the perpetrator of the predicate offense is a different person from the person who committed the money laundering offense.

The decision of the ECJ

In examining the arguments of the referring court, the Court of Justice stated that it is apparent from the wording of Article 1 (2) (a) of Directive 2005/60 that, for a person to be considered as having committed money laundering, within the meaning of this provision, that person must know that the property comes from a criminal activity or from an act of participation in such an activity. But she added that such a condition only requires that the perpetrator of the money laundering offense be aware of the criminal origin of the property in question – it does not exclude that this person may also be the perpetrator of the money laundering. offense which generated the criminal offense. product to be bleached.

In its conclusions, the Court (Second Chamber) held that Article 1 (2) (a) of Directive 2005/60 / EC must be interpreted as not excluding national law which provides that the infringement money laundering may be committed by the perpetrator of the criminal activity from which the money in question originated.