Money Laundering, Tax Evasion,

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Money Laundering, Tax Evasion, Capital Flight,
Tax Havens, the Rule based and the Risk Based
Approach Keep it Simple by Brigitte
Unger Paper prepared for the TNI Seminar on
Money Laundering, Tax Evasion and Financial
Regulation, 12th and 13th June 2007, Amsterdam,
organized by Tom Blickman
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Overview From the old to the new AML regime in
Europe

• Assessment of money laundering and tax policy
• a. Reporting, blacklisting, endangered groups,
  compliance to FATF recommendations, crime and
  proceeds,
• b. tax evasion c. tax havens
• d. Assessment and the change from the rule based
  to the risk based approach
• 2. Conceptual confusion about money laundering
  and tax evasion
• 3. Differen interpretations of actors to fill
  the gap
• 4. Possible solutions

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Amazon.com 110 new 222 second hand
CAIMAN.com Amazon.co.uk 59,9 new 137 second
hand Amazon.de 92 new 194 second hand
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1. a. Assessment of AML through reporting
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1. b. Blacklisting

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1.c. Assessment through compliance

• Source Arnone and Paoan (2006)

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1.d. Another way of measuring complianceFerwerda
and Bosma 2006
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1.e. Index of Attractiveness
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1.e.Assessment of tax evasion
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1.f.Assessment of tax havens

• Number of double tax treaties (greater leverage
  effect)
• NL 80-100, Belgium has 66, Denmark has 78 and
  the UK has 110.
• withholding tax on dividends, royalties and
  interest
• Tax exemptions
• Effective corporate tax and income tax rates
• Micro and macro calculations
• Problem of effective tax rates
• Netherlands statutory corporate tax from 34 to
  31 planned to go down to 25
• Netherlands effective corporate tax rage
• 1,7 (SOMO) 7 (Sinn) 20 (de Mooij) 30
  (Report Dutch Min.F.)

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Special Purpose Entities gross transactions in
billion Euro
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Assessment problems will increase when switching
from a rule based to a risk based approach

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2. Conceptual Confusion
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2. Conceptual Confusion

• With regard to money laundering and tax evasion
• Third EU AML Directive effort to harmonize ML
  definition. But not for tax evasion
• national souvereignty

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3. Different interpretations to fill the gap

• Naylor dont question the background of the
  money.
• More difficulties to assess AML due to risk
  based approach is accompanied by simplification
  trends in implementation and enforcement.
• More freedom, more efficiency but more
  arbitrariness and less fairness
• Increased role of the courts instead of politics
• Van Waardens lawyocracy
• Eventually risk based approach will become again
  a rule based approach

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4. Possible solutions

• Should tax evasion be part of money laundering
  or of corruption?
• Keep it simple A Tobin tax instead
• For Europe EU law is stronger than UN Convention
• (enforcement by Commission, Council, Court)
• UN Convention problem of finding enough support
  by member countries
• New Council of Europe Convention on Laundering,
  Search, Seizure and Confiscation of the Proceeds
  from Crime and on the Financing of Terrorism of
  2005 signed by 27 countries, ratified so far
  only by Romania and Albania.
• Soft law as a first step?

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THANK YOU !
Prof. Dr. Brigitte Unger Utrecht School of
Economics Janskerkhof 12 3512BL Utrecht The
Netherlands 31-(0)30-253-9809 B.Unger_at_econ.uu.nl