A ‘Risky’ Risk Approach: Proportionality in ML/TF Regulation

Harvey, Jackie, van Duyne, Petrus and Gelemerova, Liliya (2018) A ‘Risky’ Risk Approach: Proportionality in ML/TF Regulation. In: The Handbook of Criminal and Terrorist Financing Law. Palgrave Macmillan, London, pp. 345-374. ISBN 978-3-319-64497-4

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Abstract

Looking back over the past half century, industrialised countries have gone through an interesting transition: from welfare state to a risk control society. One form of risky conduct most worrying to the authorities was the recreational use of psychoactive substances, a concern with long historical roots.1 Correlated with this development was the stark increase of crime or, at least, deviant and risk-seeking conduct. To manage these risks requires action by the State, however, such intervention should be proportionate to the risks it aims to control.

Proportionality matters in the relationship between the government and the public. Though it is not operationalised it evolves alongside political and legislative developments. However, in the field of money laundering it is questionable whether this principle is met. A review of the Regulatory Impact Assessments for UK Money Laundering Regulations in 1993 and 2001 showed costs to be significantly understated and benefits unquantified, merely promising sweeping protections for society.2 This way of dealing with proportionality to justify enhanced measures reduces it to an empty formula. We are of the opinion that the proportionality principle is too important to be ignored, especially in the (global) anti-money laundering (AML) policy which since 2001 additionally encompasses the financing of terrorism. This regime has now been made more targeted by the new risk-based approach. The question is whether this approach has achieved the right proportionality.

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