A Brave New World Revisited

Volume 50 Issue 3 Article 4 2005 Revisiting Novel Approaches to Combating the Financing of Crime: A Brave New World Revisited Bruce Zagaris Follow this and additional works at: https://digitalcommons.law.villanova.edu/vlr Part of the Banking and Finance Law Commons, Criminal Law Commons, and the International Law Commons Recommended Citation Bruce Zagaris, Revisiting Novel Approaches to Combating the Financing of Crime: A Brave New World Revisited, 50 Vill. L. Rev. 509 (2005). Available at: https://digitalcommons.law.villanova.edu/vlr/vol50/iss3/4 This Symposia is brought to you for free and open access by Villanova University Charles Widger School of Law Digital Repository. It has been accepted for inclusion in Villanova Law Review by an authorized editor of Villanova University Charles Widger School of Law Digital Repository. Zagaris: Revisiting Novel Approaches to Combating the Financing of Crime: 2005] REVISITING NOVEL APPROACHES TO COMBATING THE FINANCING OF CRIME: A BRAVE NEW WORLD REVISITED BRUCE ZAGARIS* T HIS paper discusses recent approaches by the United States and international organizations in combating the financing of crime. In partic- ular, it looks at efforts to construct an international financial enforcement regime. At present, the new transnational crimes take advantage of globalization, trade liberalization and exploding new technologies to perpetrate diverse crimes and to move money, goods, services and people instantane- ously for purposes of perpetrating violence for political ends.' Transna- tional crime groups and criminals live and operate in a borderless world. Increasingly, transnational criminals are diversifying their crimes, instru- mentalities, markets and networks. Their intelligence networks and the coincidence of economic and political power enable them to quickly trans- fer parts of their operations and enterprises to territories that they can * Bruce Zagaris received his B.A., J.D., and LL.M. (tax) from George Washington University, his LL.M. (comparative) from Stockholm University, Sweden, and his LL.M. (international) from the Free University, Brussels. He did legal work in Europe and Africa for two years, including as a U.N. consultant in West Africa. He practiced customs law in San Francisco, and taught at the Law Faculty of the University of the West Indies before practicing law in Washington since 1978, currently as a partner with the law firm of Berliner, Corcoran & Rowe LLP. His practice includes counseling and defending white collar criminal cases with significant intemational elements. His work has a large focus on international tax law, including advising and negotiating agreements and serving as counsel in criminal tax litigation, especially involving requests for information and mutual assistance. He has also done a lot of work in the money laundering area (including serving as an expert witness in federal district court cases and arbitrations), counseling financial institutions and professionals, consulting in litigation, representing clients in mutual assistance cases, and consulting for governments. He has represented many governments and international organizations. He has been an adjunct professor (e.g., the Washington College of Law, American University in Washington, Fordham Law School, New York City, John Marshall College of Law, Chicago, and the University of Montana). He is founder and editor-in-chief of the International Enforcement Law Reporter. He is founder and former chair, Committee on International Criminal Law, Criminal Justice Section, American Bar Association and chair, American Bar Association; board, U.S. branch, International Penal Law Association; and chair, Committee on International Criminal Law & National Security, Section of International Law, D.C. Bar Association; and chair, International Enforcement Subcommittee, Criminal and Civil Penalties Committee, Tax Section, ABA. He has authored and edited six books and hundreds of articles. 1. Much of this introduction is adopted from Bruce Zagaris, U.S. International Cooperation Against TransnationalOrganized Crime, 44 WAYNE L. REv. 1402, 1402-05 (1998). (509) Published by Villanova University Charles Widger School of Law Digital Repository, 2005 1 Villanova Law Review, Vol. 50, Iss. 3 [2005], Art. 4 VILLANOVA LAw REvIEw [Vol. 50: p. 509 dominate (e.g., "gray areas" in which governments do not effectively con- trol, including Afghanistan and parts of Pakistan and Yemen) 2 and/or operate surreptitiously (e.g., with sleeper cells). 3 While the U.S. government has determined that transnational organized crime and terrorism are national security threats and has implemented various initiatives to combat transnational organized crime and terrorism, 4 the U.S. government is ac- tively seeking more significant policy and legal initiatives to conceptualize and establish effective international enforcement regimes. Some policy- believe that many more transformations in the U.S. legal system makers 5 are required to combat the new transnational crimes. The international community and countries such as the United States have enacted a substantial amount of new legislation and have developed initiatives to combat new transnational crimes, such as cybercrime, intellectual property crimes, international tax crimes, terrorism and organized crime. 6 Globalization, free trade and information technology have facili- tated borderless transnational criminal operations. As transnational crime, especially terrorism, increases and transnational criminal groups proliferate, national governments are challenged to prevent and combat transnational criminals who operate in a borderless world. Cybercrime exemplifies the difficulty that occurs when the law tries to keep pace with the tremendous changes in technology that enable criminals to perpetrate diverse crimes, such as theft of money in bank ac- counts, identity theft, pornography, hate crimes and a vast range of new criminal behavior. The international community is struggling to develop an enforcement regime, whereby they can use the new technology to assist 2. See GRAY AREA PHENOMENA: CONFRONTING THE NEW WORLD DISORDER (Max G. Manwaring, ed. 1993) (discussing gray area phenomena, whereby terrorists and criminals use portions of countries not effectively controlled to hide and operate criminal enterprises). 3. See, e.g., Peter A. Lupsha, Transnational Organized Crime Versus the Nation- State, 2 TRANSNAT'L ORG. CRIME 21, 21-48 (1996) (analyzing threat of sleeper cells in nation-states and suggesting steps that must be taken to combat them). 4. See Interview with the Hon. Richard A. Clarke, Special Assistant to the President and Senior Director, Global Issues and Multinational Affairs, National Security Council, Nov. 30, 1995, 1 TRENDS IN ORG. CRIME 5-9 (1996). 5. See, e.g., SENATOR JOHN KERRY, THE NEW WAR: THE WEB OF CRIME TH4AT THREATENS AMERICA'S SECURITY 31 (1997). 6. On October 22, 1995, President Clinton used the occasion of his fourteen minute speech before the fiftieth anniversary of the U.N. to announce a number of new initiatives against transnational organized crime. See Remarks of President Clinton to the United Nations on the Occasion of the 50th Anniversary of the Creation of the United Nations, 31 WEEKLY COM. PREs. Doc. 1909 (Oct. 22, 1995) [hereinafter Re- marks to the U.N.]. A later executive order extended economic sanctions against certain Colombian narcotics trafficking organizations. See Blocking Assets and Prohibiting Transactions with Significant Narcotics Traffickers, Exec. Order No. 12,978, 60 Fed. Reg. 54,579 (Oct. 21, 1995) [hereinafter Anti-Drug Trafficking Ex- ecutive Order]. For the text of President Directive 42 on transnational crime, see White House, Presidential Directive on International Organized Crime, Summary Sheet, Oct. 22, 1995 [hereinafter PresidentialDirective]. https://digitalcommons.law.villanova.edu/vlr/vol50/iss3/4 2 Zagaris: Revisiting Novel Approaches to Combating the Financing of Crime: 2005] A BRAvE NEW WORLD REVISITED in the identification, investigation and prosecution of the cybercriminals. In this regard, the proposed Council of Europe Convention Against Cyber- crime provides a strong potential mechanism. Intellectual property and counterfeiting crimes have grown tremen- dously in the last couple of decades. Criminals counterfeit everything from software to cosmetics and clothing. The international community and governments have tried a combination of international trade law, such as Trade in Related Intellectual Property Services (TRIPS) and the North American Free Trade Agreement (NAFTA), to criminalize transnational intellectual property crimes. For instance, in the United States, trade associations such as the International Intellectual Property Associa- tion and the Motion Picture Society of America have exerted pressure on the U.S. government to bring an action against Mexico because of the alleged lack of criminal prosecution by the Mexican government against persons who intentionally violate intellectual property law. Indeed, these same U.S. trade associations succeeded in persuading the NAFTA signato- ries to include provisions requiring criminal prosecution and civil action against violators of intellectual property law. Money laundering is an example of the type of crime that governments and the international community have criminalized only since the mid-1980s. Through international conventions, such as the 1988 U.N. Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Sub- stances,

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