Financial Crime World

Belgium Cracks Down on Money Laundering and Terrorist Financing: A Look at the ML/TF Act

Money laundering and terrorist financing are significant concerns for governments and international organizations worldwide. In Belgium, these issues are being tackled head-on through the Act of 18 September 2017 on the Prevention of Money Laundering and Terrorist Financing and Restricting the Use of Cash (ML/TF Act). In this article, we explore the world of financial crime, delving into what money laundering and terrorist financing are, how criminal organizations operate, and how the Belgian authorities are combatting these illicit activities.

What is Money Laundering?

  • Money laundering is the process of introducing funds of illicit or criminal origin into the legal economy.
  • Funds can come from various sources, including organized crime, drug trade, human trafficking, prostitution, and serious tax fraud.

What is Terrorist Financing?

  • Terrorist financing involves providing or collecting funds for terrorist activities.
  • Funds can originate from criminal or legal sources.

How do Criminal Organizations Operate?

Criminal organizations engage in:

  1. Money laundering to conceal the criminal origin of their funds.
  2. Terrorist financing to hide the illegal destination of the funds.

Money Laundering

  • Consists of three stages: placement, layering, integration.
  • In the placement stage, large sums of criminal money are introduced into the financial system.
  • Layering then ensues, where the money launderer increases the number of transactions to confuse the money trail.
  • Finally, the funds are integrated into the legal economy through investments in real estate, luxury products, and setting up businesses.

Terrorist Financing

  • May only require two to three stages.
  • The placement stage may be bypassed as terrorist organizations can obtain funds from legal sources.
  • Instead, the focus is on the layering stage to obscure the money trail.

Scale of Money Laundering and Terrorist Financing

  • An estimated 400 to 1 000 billion euros in laundered funds and related terrorism financing circulating globally.
  • Equivalent to 2.5 to 5% of the world’s GDP.

Measures Against Financial Crimes in Belgium

  • The Financial Action Task Force (FATF) was established in 1989 to provide recommendations to combat money laundering and terrorist financing.
  • Belgium adopted five European directives and introduced the ML/TF Act in 2017.

Key Provisions of the ML/TF Act

  • Prevention measures targeting specific financial and non-financial professions.
  • Obliging them to implement due diligence checks, identification procedures, and record-keeping.
  • Repression measures, including Article 505 of the Belgian Criminal Code addressing money laundering and terrorist financing.

Who is Subject to the ML/TF Act?

  • Everyone, including financial and non-financial professionals.

Measures Applicable to Professions

  • Required to perform due diligence checks, including identity verification and monitoring transactions.
  • Report suspicious transactions to the Financial Intelligence Processing Unit (CTIF-CFI).

Rights of Professionals

  • Granted protection against threats and acts of aggression.
  • Judicial immunity.
  • Anonymity.

Secrecy and Role of Authorities

  • Members of CTIF-CFI, the police, and external experts are bound by professional secrecy.
  • CTIF-CFI analyzes and forwards reports of serious indications to the Public Prosecutor or the Federal Public Prosecutor.
  • They may also temporarily oppose transactions suspected of being related to money laundering or terrorist financing.

Sanctions and Enforcement

  • Professionals who fail to comply with the ML/TF Act can face penalties, including administrative fines and criminal sanctions.
  • Cash payments and donations must adhere to strict limits to prevent money laundering and terrorist financing.

Conclusion

The ML/TF Act aims to strengthen Belgium’s stance against financial crimes by imposing stricter due diligence measures, reporting requirements, and penalties to create a more transparent financial system and protect the country from the economic and social impact of money laundering and terrorist financing.