The Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, also known as the Warsaw Convention or CETS 198, is a Council of Europe convention which aims to facilitate international co-operation and mutual assistance in investigating crime and tracking down, seizing and confiscating the proceeds thereof.
This convention is the first international treaty covering both the prevention and the control of money laundering and the financing of terrorism. This instrument recognises that quick access to financial information or information on assets held by criminal organisations, including terrorist groups, is the key to successful preventive and repressive measures, and, ultimately, is the best way to stop them.
CETS 198 builds on and updates the 1990 Strasbourg Convention; it takes into account the fact that terrorism can be financed not only through money laundering from criminal activity, but also through legitimate activities. The convention also includes a mechanism to ensure the proper implementation by Parties of its provisions.
The convention was opened for signature in Warsaw on 16 May 2005 and entered into force on 1 May 2008. It was last ratified by Turkey in May 2016, bringing the number of parties to 28. It has been signed but not ratified by another 11 states plus the European Union.
History
Context Money laundering involves a series of complicated financial operations (deposit, withdrawals, bank transfers, etc.) which ultimately results in criminal money becoming "clean" and acceptable for legitimate business purposes. This laundered criminal money is recycled through normal businesses and thus may penetrate legitimate markets and corrupt entire economies.
Misuse of the financial system is not limited to money laundering schemes designed to preserve and maximise proceeds from crimes which have been committed. The financial system is misused in similar ways to fund terrorist atrocities. After the September 11 attacks, the international community rapidly recognised the important similarities between the processes involved in money laundering and in the financing of terrorism. Traditionally, the financing of terrorism stemmed from illegal activities, e.g. bank robberies, weapons and drug trafficking, etc. However, in recent years, a new phenomenon had grown: the carrying out of legitimate activities to finance terrorist actions. In this case, the phenomenon is the opposite of money laundering: the "clean" money collected through charities, legitimate commercial activities and so on, can be used to finance terrorist actions. The above considerations led to the Council of Europe's decision to update the 1990 Strasbourg Convention.
Updating the 1990 Strasbourg Convention One of the major purposes of the 1990 Strasbourg Convention was to facilitate international cooperation in the area of money laundering, which could only be accomplished if steps were taken to minimise the significant differences of approach which then existed in the domestic legal systems of member States. CETS 198 has left the general structure of the 1990 Convention untouched.
At the time of its elaboration, the Select Committee of Experts which drafted the 1990 Convention was not in a position to draw upon a settled and developed body of domestic law and practice. International cooperation in this sphere was relatively unknown. Indeed, save for the limited scope provided by the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, the area was a new one for the vast majority of members of the international community.
In the period of over ten years which had elapsed since the text of the 1990 Convention was adopted, valuable experience had been gained. The mutual evaluation procedures of the Financial Action Task Force on Money Laundering (FATF), which updated its Recommendations in 1996 and 2003, and added 8 Special Recommendations in 2001 and one more in 2004, and the similar work undertaken by the MONEYVAL, had provided valuable insights into the problems which had arisen both in the domestic implementation of anti-money laundering measures, and in international cooperation. The remits of these two evaluative bodies had also been extended to cover assessment of the effectiveness of measures taken in jurisdictions to counter terrorist financing.
Further debate on this issue had been stimulated by developments in other fora. On 26 June 2001, the European Union had adopted the Framework Decision on money laundering, the identification, tracing, freezing, seizing and confiscation of instrumentalities and the proceeds from crime. This includes, inter alia, significant movement towards a harmonised implementation of certain critical provisions of the 1990 Convention concerning action at the domestic level as well as embodying agreement on practices designed to enhance the effectiveness of international cooperation. The European Union Council Directive of June 1991 on prevention of the use of the financial system for the purpose of money laundering was also substantially amended in December 2001. At the time, the commission had presented a proposal for a Third Money Laundering Directive and a Regulation on control of cash entering or leaving the Community; these proposals were being discussed in the European Parliament and the Council of the EU and the Third EU AML Directive was adopted in 2005.
Other important initiatives that have taken place in recent years include the development and expansion of the Egmont Group of Financial Intelligence Units, the adoption of the United Nations Convention against Transnational Organized Crime, Convention against Corruption and Terrorist Financing Convention as well as the emergence of international pressure through the imposition of counter-measures on "non-cooperative countries and territories", which were not in conformity with international standards.
Drafting of the Warsaw Convention Discussion within the Council of Europe started as early as 1998 on the advisability of drafting an updating Protocol to the 1990 Convention and on the scope of such an exercise should it be undertaken. Given differences of view among member States, a questionnaire-based enquiry was conducted on the subject in 2000. It emerged from this enquiry that a clear majority of States were in support of an early opening of negotiations on a protocol. The Reflection Group on the advisability of drawing up an additional protocol to the convention on laundering, search, seizure and confiscation of the proceeds from crime (PC-S-ML) submitted its report to the CDPC at its 51st plenary session on 17–21 June 2002 and made specific suggestions as to the possible content of such a treaty.
The European Committee on crime problems (CDPC) entrusted at the end of 2003, the Committee of experts on the revision of the convention on laundering, search, seizure and confiscation of the proceeds from crime (PC-RM) to draw up such a protocol.
These terms of reference were revised in March 2004 and read as follows: "Within the context of the negotiations of the draft Protocol, consideration should be given to the introduction of provisions concerning the prevention of money laundering and the financing of terrorism:
a. as regards preventive measures, consideration should be given, for instance, to introducing a context-setting provision or provisions on measures of prevention to facilitate subsequent coverage of the treatment of the powers and duties of FIUs, particularly those dealing with the duty to control (identification and verification of the identity of clients, identification of beneficial owners, suspicious transactions' reports), the definition of FIUs and the principles of co-operation between them, as well as transparency of legal entities. Such provision or provisions, if introduced, should make appropriate reference to existing international standards and, particularly, a reference to the FATF recommendations on money laundering and terrorist financing either in the Preamble to the Protocol or as a self-standing provision;
b. as regards financing of terrorism, consideration should be given to introducing one or several provisions ensuring the application of the provisions of the 1990 Money Laundering Convention to the fight against the financing of terrorism and which, while giving added value, are in full conformity with internationally accepted standards, including the UN International Convention on the suppression of the financing of terrorism;
c. a mechanism should also be found to ensure that the Convention, as revised by the Protocol, could be adapted accordingly, should the internationally accepted standards referred to therein be changed."
The PC-RM developed a text which both added to and modified provisions of the 1990 Convention. Owing to the extent of the modifications envisaged and the enlargement of the scope of the treaty to include issues concerning the financing of terrorism, the drafters felt that this text should be a self-standing Convention, rather than a Protocol to 1990 Convention. The CDPC approved this convention on 11 March 2005 and transmitted it to the Committee of Ministers for adoption. The Committee of Ministers adopted this convention on 3 May 2005.
General considerations
At the time of drafting, there was no single dedicated international treaty covering both the prevention and the control of money laundering and the financing of terrorism. The existing legally binding international instruments provided for a range of specific measures which focused on law enforcement and international cooperation (e.g. criminalisation of money laundering, confiscation, provisional measures, international cooperation), but the preventative aspects were mostly left unregulated by international law or addressed in somewhat general terms.
Since the adoption of the 1990 Convention, money laundering techniques and anti-money laundering strategies had significantly evolved. For example, laundering techniques increasingly targeted the non-financial sector and used professional intermediaries to invest criminal proceeds in the legitimate economy. Many jurisdictions had set up Financial Intelligence Units to process suspicious or unusual transaction reports and thus triggered more laundering investigations. Those changes needed to be followed up by reassessing the convention's focus, adjusting some of its requirements and supplementing it with additional provisions. In addition, some of these changes had already been included in standards set by other international fora (European Union, United Nations, FATF), which a new convention could not ignore. Rather, the text of the new Convention brought into line with these new developments to ensure mutual consistency with these standards and to make possible harmonised domestic responses in an appropriate legal format.
Owing to the efficiency shown in practice of anti-money laundering techniques to combat also the financing of terrorism, the Warsaw aimed to expand the scope of its predecessor in order to be used in the fight against terrorism and its financing, while taking into account existing international instruments (e.g. the 1999 UN Terrorist Financing Convention). The events of 11 September 2001 had forced countries around the globe to take quick action to freeze terrorist funds and it appeared that many of them had serious difficulties in coping with this requirement: some were unable to rapidly trace property or bank accounts; others had to stretch the limits of legality to respond to requests or provide the evidence requested. The world had realised that quick access to financial information or information on assets held by criminal organisations, including terrorist groups, was a key to successful preventive and repressive measures and for disrupting their activities.