Fight Tax Evasion

3.3 Prosecuting Money Laundering and Corruption to Fight Tax Evasion

Where tax crimes have been recognized as a predicate offense to money laundering, a person charged with a tax offense can also be charged with money laundering. Any prosecution is dependent on the nature of the evidence obtained and the elements of the offense to be proven (OECD 2017b). Jurisdictions that recognize tax crimes as a predicate offense for money laundering, as per the Financial Action Task Force (FATF) recommendations, report that doing so enhances their ability to undertake money laundering prosecutions, increases the number of successful prosecutions, and has a deterrent effect on would-be offenders (OECD 2017b).

In advocating the need to expand the scope of money laundering predicate offenses to include tax crimes, the FATF recognized that the anti-money laundering (AML) framework could prove useful in complementing and supporting tax authorities combating tax crimes. The inclusion of tax crimes is particularly important because authorities have a wider scope to secure a conviction or impose a penalty, and avenues for international cooperation under the FATF recommendations are expanded to include tax authorities (OECD 2017b). The latter includes access to the direct exchange of information and mutual legal assistance (MLA) between tax authorities and prosecution authorities (OECD 2017b).

Many jurisdictions have enacted legislation reversing the burden of proof in corruption, money laundering, or organized crime cases by using notions such as illicit enrichment, unjustified resources, or “lifestyle” audits, as described in chapter 2, section 2.4.1.4. In some cases, the consequences may be criminal and include imprisonment, confiscation, and fines (such as for “illicit enrichment offences”1), while in others the consequences are civil (such as for nonconviction-based recovery of assets and monetary sanctions).2 These laws reflect the view that corruption or white-collar crime prosecutions justify the use of powerful legal presumptions, leaving it up to defendants to prove that the statutory presumption does not apply to their case.

In this context, investigating discrepancies between legitimate income and assets held and using these legal tools can result in the confiscation or the recovery of assets undeclared in the jurisdiction of the defendant. A similar result may be achieved from a tax proceeding, but that differs in that it is extended to also capture nontax crimes. If the assets are in a jurisdiction other than that in which the case is initiated, enforcement may require that similar illicit enrichment criminal offenses take place in both jurisdictions. See box 3.2 for country examples of tools based on illicit enrichment or possession of unjustified resources in specific circumstances.

Beyond the legislation on unexplained wealth, adding money laundering charges to the prosecution of suspected financial fraud or tax evasion often opens opportunities to extend the case to the recovery of unpaid taxes or undeclared revenue. In these situations, recovery of the proceeds of tax evasion benefits from the tools used by public prosecutors or investigating magistrates.