INTRODUCTION

The transnational characteristics of money laundering and terrorist financing have forced international and regional organizations to actively cooperate in the development of a countering framework. The Financial Action Task Force on Money Laundering (FATF) and its recommendations have played the most significant role in the development of the European Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) Directives. The Directives’ primary elements are the criminalization of money laundering and terrorist financing and the preventive duties of the private sector. This chapter will evaluate the history of the current AML/CFT legislation and highlight certain specifics, such as the eff ectiveness, transparency, risk-based approach (RBA) and the challenges with respect to fundamental rights and freedoms.

THE EMERGENCE OF A GLOBAL APPROACH TO COUNTER MONEY LAUNDERING AND TERRORIST FINANCING

The evolution of technology and internationalization of the financial market go hand in hand with burgeoning criminal finance (Pieth 2004). The number of cross-border financial transactions has multiplied rapidly, thanks to the speed with which businesses can transfer large amounts of money, with a click of the mouse, to anywhere in the world (Fijinaut 2000). Together with other financial instruments, such as bank-to-bank loans, international mortgages and over-the-counter derivatives, this may ease the commission of financial offences. With the cross-border dimension of the transaction, national legislation and enforcement authorities often fall short in fighting this kind of illicit behaviour. It is, therefore, unsurprising that money launderers and terrorist financiers have little difficulty in finding loopholes in domestic jurisdictions. Evidently, the fight against these crimes requires an international approach, which encompasses cooperation and the implementation of international legislation (Mitsilegas 2003; Gilmore 2004).

Mature, transnational criminal organizations are a big concern, as they “have developed extremely complex organizational structures, reminiscent of multinational corporations […] designed to maximize profits and minimize risks” (Gilmore 2004). Even though these organizations appear most effective in their home states (Europol 2013), because of their long-established networks, they are often involved in cross-border crimes to maximize their profits.