3.4 Pursuing Tax Offenses in Parallel with Money Laundering

Such investigative techniques often lead to uncovering information, documentation, and evidence involving the enablers who provided the main defendant with technical advice. Enablers could include financial institutions, lawyers, accountants, trust and company service providers, and real estate agents. Expanding investigations and prosecutions to cover these enablers is key to successful prosecution because these defendants are often tempted to cooperate with authorities and provide evidence against the main defendants in return for fewer or less serious charges and sentences. This factor may prove invaluable in cases in which prosecutors need to convince judges (and sometimes jurors) of the accuracy and seriousness of the facts.

Recovering proceeds from enablers and other professionals may also be an effective asset recovery option for authorities. In particular, facilitators with deep pockets, such as banks, that risk criminal prosecution based on the role they played in money laundering schemes may prefer to cooperate with authorities and pay large sums in settlements or deferred prosecution agreements.3 Such an arrangement could also deter professionals from playing a role in facilitating the hiding of illicit wealth and assets.

3.4 Pursuing Tax Offenses in Parallel with Money Laundering

As indicated in chapter 2, tax crimes and money laundering cases often involve individuals or companies that have large undeclared estates or assets (including bank accounts) in tax havens or in countries with lax tax regimes, or that create fake documents to justify the origin of foreign assets. Following an extensive investigation, authorities are often able to map the complex structures through which an individual may be holding and hiding assets, perhaps across several jurisdictions and through a variety of legal vehicles. As a result, prosecutors aiming to recover the proceeds of a crime will need to make strategic decisions to maximize the chances of successful asset recovery.

There are many potential benefits to prosecuting money laundering and tax offenses in parallel, even though extra resources may be required. At a minimum, this choice will allow the tax administration to tax the undeclared income and recover penalties in parallel administrative tax proceedings (see case 2 in the appendix) while the criminal prosecution follows its course. In some jurisdictions such as France, criminal prosecutors can charge the defendant with tax evasion in addition to money laundering, and tax authorities can claim restitution of unpaid taxes during the criminal trial. In some jurisdictions, the same agency may be tasked with conducting both avenues. See box 3.4 for country examples.