Money laundering

Set out at Article 324-1 of the Criminal Code, the offence of money laundering has the particularity (shared with the offence of handling stolen goods) of being a consequence offence. It is only possible to launder the direct or indirect proceeds of a crime or offence. In other words, money laundering presupposes the existence of a prior offence.

A consequence offence in its own right

In settled case law, recently recalled (Crim., 18 March 2020, appeal no. 18-86491), the Criminal Chamber of the Court of Cassation considers that "the characterisation of the offence of money laundering, while it does not require that the perpetrators of the principal offence be known, nor that the circumstances of its commission be fully determined, does require the fraudulent origin of the laundered assets to be established". The prior offence does not have to be actually punished, but the unlawful origin of the funds must still be characterised.

In the case at hand, an individual had been convicted of laundering the proceeds of tax fraud (at a time when prosecution for laundering of tax fraud allowed prosecutors to bypass the difficulties of prosecuting tax fraud due to the so-called "verrou de Bercy", which, until the Law of 23 October 2018, made public action subject to a prior complaint by the tax administration with the favourable opinion of the Tax Offences Commission).

The Court of Appeal had inferred the existence of tax fraud "from the concealment of the sum of 76,000 euros liable to tax, and the guilty intent (...) from the repeated failure to declare the import of that sum, the size of the concealed amount, and the desire to evade the statutory reporting obligations set out in Articles 464 and 465 of the Customs Code and Articles L.152-1 and L.152-4 of the Monetary and Financial Code".

The requirement to characterise the prior offence

The Court of Cassation held that the mere reference to "the failure to declare the funds to the customs authorities at the time of their transfer" is not enough to characterise the offence of tax fraud. The offence of tax fraud is defined not in the Customs Code or the Monetary and Financial Code, but in precise provisions of the General Tax Code to which the Court of Appeal made no reference. The decision is therefore quashed.

While the fraudulent origin of the laundered assets must be established, the prior offence does not have to be actually punished, nor must French courts have jurisdiction to prosecute it.

Fraudulent origin of funds: recent input from the Court of Cassation

This is recalled by the Criminal Chamber (Crim., 1 April 2020, appeal no. 19-80875): "the provisions defining money laundering, a general, distinct and autonomous offence, do not require that the offence which generated the laundered sums have taken place on national territory or that French courts have jurisdiction to prosecute it". Consequently, the financial public prosecutor has jurisdiction, under Article 705(6) of the Code of Criminal Procedure, to prosecute the laundering of money from misappropriations of public funds committed on Russian territory. The seizure of real-estate assets in France, presumably acquired with that money, is therefore justified as targeting assets that are the object of laundering of the direct or indirect proceeds of the offence, especially since the proportionality review, in principle applicable to seizure and confiscation, is excluded where it concerns the proceeds of the offence (Crim., 3 May 2018, appeal no. 17-82098; recently Crim., 15 January 2020, appeal no. 19-80891).

As to its material element, money laundering can take several forms set out in the two paragraphs of Article 324-1 of the Criminal Code. Under the first paragraph, money laundering consists of "facilitating, by any means, the false justification of the origin of property or income belonging to the perpetrator of a crime or offence which generated a direct or indirect profit"; under the second, it consists of "assisting in an operation of investment, concealment or conversion of the direct or indirect proceeds of a crime or offence".

Practical consequences for the defence

On the second paragraph, the Criminal Chamber recalled (Crim., 18 March 2020, appeal no. 18-85542) that the conduct described is distinct, so the investment operation, which "consists in particular of putting into circulation in the financial system assets derived from the commission of a crime or offence (...) does not require (...) that a concealment of the unlawful origin of those assets be established".

Consequently, against the ground of appeal that criticised the appeal judgment for convicting the defendant of laundering funds from his own fraud where only the use of funds or assets from an offence had been established, the Criminal Chamber holds that "the operation of depositing or transferring the proceeds of a crime or offence into an account, including the account of the perpetrator of the underlying offence, which causes unlawful funds to enter the banking circuit, constitutes a laundering operation".

In doing so, the Court of Cassation reaffirms its flexible reading of the material element of money laundering, which ultimately amounts to any form of reinjection of dirty money into the legal circuit, including self-laundering (see Crim., 14 January 2004, appeal no. 03-81165; Crim., 20 February 2008, appeal no. 07-82977; Crim., 14 June 2017, appeal no. 16-84921).