*/
Jonathan Fisher QC and Anita Clifford discuss their recent experiences in Albania where they led a workshop on the challenges presented by tax evasion and money laundering in a transitional economy
Working in London, as policymakers proceed with implementing the 4th Anti-Money Laundering Directive (‘4MLD’), it is easy to lose sight of the challenges experienced by transitioning democracies in the fight against financial crime.
A recent journey to Albania to deliver a workshop on international responses to money laundering and tax evasion, which we undertook pro bono for the International Senior Lawyers Project (ISLP), presented a rare opportunity for dialogue with domestic judges and prosecutors about the unique challenges facing this small country. Over the course of two days at the Albanian School of Magistrates, thoughts were shared on how to tackle tax evasion and its interaction with the anti-money laundering regime.
Open for business
Motivations may differ but Albania, much like the UK, is making progress towards strengthening its response to the retention of illicit wealth. Following a critical assessment of its anti-money laundering (AML) effort by the Council of Europe in 2011, Albania has taken steps to address numerous weaknesses. With its sights set firmly on EU-entry negotiations and increased foreign investment, new legislative measures involve the expansion of the Albanian Criminal Code to include a wider range of predicate offences under the anti-money laundering regime, the recognition for the first time that a third party (as opposed to the predicate criminal) can commit money laundering and heightened customer due diligence obligations. Expansive technical reform has meant that in March 2015 the Council of Europe removed Albania from its watch list of member states requiring ongoing money laundering monitoring. In July 2016, the Basel AML Index 2016 identified Albania as one of a small group of ‘most improved’ countries.
This positive recognition has greatly helped Albania in promoting itself as ‘open for business’ and, more to the point, foreign investment. Certainly, Albania’s ability to execute comprehensive legal reform in a short space of time is no small feat for a country with only 2.9m people still recovering from the ravages of 50 years of Communist dictatorship.
In 2013, Albania elected Edi Rama, an artist, as Prime Minister who, mindful of Albania’s scarce resources, has set about painting some of the capital’s dilapidated buildings in brilliant patterns as a form of urban regeneration. Wedged between Kosovo, Montenegro and Macedonia, Albania is also increasingly attracting foreign tourism. Its undiscovered rugged hillside towns and Adriatic coastline – likened in ambience to the Greek Islands of the 60s – lure intrepid travellers. All of this suggests that Albania is developing great momentum.
A dark history
To achieve its full potential as an attractive destination for business, more work must be done to boost confidence in Albania’s ability to tackle financial crime. Over the course of the workshop, participants explained to us how the technical overhaul of AML laws in recent years has not always translated into changed practices. This is, in large part, due to the domestic context. Despite positive recognition in other areas, the latest corruption perceptions index published by Transparency International earlier this year ranks Albania below Brazil. Further, a regular feature of Albanian newspapers are allegations of corrupt practices in various facets of the public sector, labelled more benignly as examples of ‘clientalism’. This has, unsurprisingly, resulted in public distrust of both government and the justice system. In this respect, Albania continues to be a victim of its dark history.
Albania’s past has also meant that until the 1990s, there was no personal income tax system or centralised tax record keeping system. Experiences with oppressive government has fostered resistance to the notion of paying tax amongst some Albanians, particularly amongst those who remember the terror inflicted by the Communists and their supporters. We were told that electronic payment facilities are not widespread, and the lack of well-paid job prospects has prompted some of the younger generation to emigrate to European countries with more established economies. Moreover, Albania’s network of organised criminals has long posed a hurdle to its development and, in financial crime, prosecution rates are low. These are only some factors that have contributed to the flourishing of a large cash-based ‘black economy’, which has meant at local level an acceptance and enforcement of new laws targeting financial crime is far from straightforward.
Official statistics put Albania’s black economy at 33% of GDP but, like anything without a paper trail, its true size is difficult to discern. Albania’s high volume of cash transactions means that identifying the tax evader is notoriously difficult.
The challenges
Over lunch on the first day of the workshop, one of the delegates echoed the existence of opposition to paying tax and added that, arguably, there are greater priorities in Albania right now than prosecuting individual tax evaders. And, although tax evasion is now a predicate offence to money laundering in Albania, queries were raised about how this worked in practice and whether prosecution was always the right approach.
It follows that whilst the laws might now be tougher, tax evasion in Albania remains a significant issue and, by extension, holding the money launderer to account is far from easy. One delegate described it as like ‘the Leonardo DiCaprio movie, Catch Me if You Can’. The observation reflected two main sentiments that were expressed throughout the workshops. In a country where, it was said, everyone knows someone working ‘in the black’ and resources are scarce, how can tax evasion and AML laws properly be enforced against all of those who act contrary to them? And if they are not enforced, how can they be respected?
These are important questions facing judges, prosecutors, and lawmakers in Albania. On paper, the nexus between tax evasion and money laundering is clear. 4MLD establishes that tax evasion is a predicate offence to money laundering. Undeclared income however generated is illicit and the use, transfer, or concealment of the money amounts to money laundering. Individuals, including professional advisers, who assist in using, transferring, or concealing illicit profit are also exposed to criminal liability. But in a country where non-declaration or under-declaration of income is endemic and public resources limited, how to change social attitudes to taxation, highlight the link between tax evasion and money laundering, and identify the type of offender deserving of investigation and prosecution are live issues.
A bright future
During our time in Albania, we were struck by the country’s obvious desire to come to terms with its past, with remembrance as integral to moving forwards. Our second day coincided with the opening of a museum in a former top secret nuclear bunker in Albania’s capital, Tirana, which documented the political persecution of Albanian citizens during the second half of the 20th century. Called BunkArt 2, the museum is intended as a memorial to the tens of thousands of people who were tortured and executed by the communist regime. The dome of the bunker displays photographs of political opponents who were murdered during this time. We learnt that the last concentration camp in Albania was not dismantled until as late as 1991.
As Albania leaves its dismal past behind, the future looks bright. In the fight against financial crime, the next significant step will be the transposition of 4MLD into law. However, for tax evasion and money laundering to be effectively targeted in Albania, the starting point must be to recognise the distinct challenges which it faces, and which are different from highly developed economies in Western Europe. If our experiences in Albania is anything to go by, Albania is rising to the challenge. And, working with ISLP and some very helpful support from the British Embassy in Tirana, we were delighted to have been afforded an opportunity to assist in this vitally important task.
Contributors Jonathan Fisher QC (Bright Line Law and Red Lion Chambers) and Anita Clifford (Bright Line Law) support the International Senior Lawyers Project
A recent journey to Albania to deliver a workshop on international responses to money laundering and tax evasion, which we undertook pro bono for the International Senior Lawyers Project (ISLP), presented a rare opportunity for dialogue with domestic judges and prosecutors about the unique challenges facing this small country. Over the course of two days at the Albanian School of Magistrates, thoughts were shared on how to tackle tax evasion and its interaction with the anti-money laundering regime.
Open for business
Motivations may differ but Albania, much like the UK, is making progress towards strengthening its response to the retention of illicit wealth. Following a critical assessment of its anti-money laundering (AML) effort by the Council of Europe in 2011, Albania has taken steps to address numerous weaknesses. With its sights set firmly on EU-entry negotiations and increased foreign investment, new legislative measures involve the expansion of the Albanian Criminal Code to include a wider range of predicate offences under the anti-money laundering regime, the recognition for the first time that a third party (as opposed to the predicate criminal) can commit money laundering and heightened customer due diligence obligations. Expansive technical reform has meant that in March 2015 the Council of Europe removed Albania from its watch list of member states requiring ongoing money laundering monitoring. In July 2016, the Basel AML Index 2016 identified Albania as one of a small group of ‘most improved’ countries.
This positive recognition has greatly helped Albania in promoting itself as ‘open for business’ and, more to the point, foreign investment. Certainly, Albania’s ability to execute comprehensive legal reform in a short space of time is no small feat for a country with only 2.9m people still recovering from the ravages of 50 years of Communist dictatorship.
In 2013, Albania elected Edi Rama, an artist, as Prime Minister who, mindful of Albania’s scarce resources, has set about painting some of the capital’s dilapidated buildings in brilliant patterns as a form of urban regeneration. Wedged between Kosovo, Montenegro and Macedonia, Albania is also increasingly attracting foreign tourism. Its undiscovered rugged hillside towns and Adriatic coastline – likened in ambience to the Greek Islands of the 60s – lure intrepid travellers. All of this suggests that Albania is developing great momentum.
A dark history
To achieve its full potential as an attractive destination for business, more work must be done to boost confidence in Albania’s ability to tackle financial crime. Over the course of the workshop, participants explained to us how the technical overhaul of AML laws in recent years has not always translated into changed practices. This is, in large part, due to the domestic context. Despite positive recognition in other areas, the latest corruption perceptions index published by Transparency International earlier this year ranks Albania below Brazil. Further, a regular feature of Albanian newspapers are allegations of corrupt practices in various facets of the public sector, labelled more benignly as examples of ‘clientalism’. This has, unsurprisingly, resulted in public distrust of both government and the justice system. In this respect, Albania continues to be a victim of its dark history.
Albania’s past has also meant that until the 1990s, there was no personal income tax system or centralised tax record keeping system. Experiences with oppressive government has fostered resistance to the notion of paying tax amongst some Albanians, particularly amongst those who remember the terror inflicted by the Communists and their supporters. We were told that electronic payment facilities are not widespread, and the lack of well-paid job prospects has prompted some of the younger generation to emigrate to European countries with more established economies. Moreover, Albania’s network of organised criminals has long posed a hurdle to its development and, in financial crime, prosecution rates are low. These are only some factors that have contributed to the flourishing of a large cash-based ‘black economy’, which has meant at local level an acceptance and enforcement of new laws targeting financial crime is far from straightforward.
Official statistics put Albania’s black economy at 33% of GDP but, like anything without a paper trail, its true size is difficult to discern. Albania’s high volume of cash transactions means that identifying the tax evader is notoriously difficult.
The challenges
Over lunch on the first day of the workshop, one of the delegates echoed the existence of opposition to paying tax and added that, arguably, there are greater priorities in Albania right now than prosecuting individual tax evaders. And, although tax evasion is now a predicate offence to money laundering in Albania, queries were raised about how this worked in practice and whether prosecution was always the right approach.
It follows that whilst the laws might now be tougher, tax evasion in Albania remains a significant issue and, by extension, holding the money launderer to account is far from easy. One delegate described it as like ‘the Leonardo DiCaprio movie, Catch Me if You Can’. The observation reflected two main sentiments that were expressed throughout the workshops. In a country where, it was said, everyone knows someone working ‘in the black’ and resources are scarce, how can tax evasion and AML laws properly be enforced against all of those who act contrary to them? And if they are not enforced, how can they be respected?
These are important questions facing judges, prosecutors, and lawmakers in Albania. On paper, the nexus between tax evasion and money laundering is clear. 4MLD establishes that tax evasion is a predicate offence to money laundering. Undeclared income however generated is illicit and the use, transfer, or concealment of the money amounts to money laundering. Individuals, including professional advisers, who assist in using, transferring, or concealing illicit profit are also exposed to criminal liability. But in a country where non-declaration or under-declaration of income is endemic and public resources limited, how to change social attitudes to taxation, highlight the link between tax evasion and money laundering, and identify the type of offender deserving of investigation and prosecution are live issues.
A bright future
During our time in Albania, we were struck by the country’s obvious desire to come to terms with its past, with remembrance as integral to moving forwards. Our second day coincided with the opening of a museum in a former top secret nuclear bunker in Albania’s capital, Tirana, which documented the political persecution of Albanian citizens during the second half of the 20th century. Called BunkArt 2, the museum is intended as a memorial to the tens of thousands of people who were tortured and executed by the communist regime. The dome of the bunker displays photographs of political opponents who were murdered during this time. We learnt that the last concentration camp in Albania was not dismantled until as late as 1991.
As Albania leaves its dismal past behind, the future looks bright. In the fight against financial crime, the next significant step will be the transposition of 4MLD into law. However, for tax evasion and money laundering to be effectively targeted in Albania, the starting point must be to recognise the distinct challenges which it faces, and which are different from highly developed economies in Western Europe. If our experiences in Albania is anything to go by, Albania is rising to the challenge. And, working with ISLP and some very helpful support from the British Embassy in Tirana, we were delighted to have been afforded an opportunity to assist in this vitally important task.
Contributors Jonathan Fisher QC (Bright Line Law and Red Lion Chambers) and Anita Clifford (Bright Line Law) support the International Senior Lawyers Project
Jonathan Fisher QC and Anita Clifford discuss their recent experiences in Albania where they led a workshop on the challenges presented by tax evasion and money laundering in a transitional economy
Working in London, as policymakers proceed with implementing the 4th Anti-Money Laundering Directive (‘4MLD’), it is easy to lose sight of the challenges experienced by transitioning democracies in the fight against financial crime.
The beginning of the legal year offers the opportunity for a renewed commitment to justice and the rule of law both at home and abroad
By Louise Crush of Westgate Wealth Management sets out the key steps to your dream property
A centre of excellence for youth justice, the Youth Justice Legal Centre provides specialist training, an advice line and a membership programme
By Kem Kemal of Henry Dannell
By Ashley Friday of AlphaBiolabs
Providing bespoke mortgage and protection solutions for barristers
Joanna Hardy-Susskind speaks to those walking away from the criminal Bar
Tom Cosgrove KC looks at the government’s radical planning reform and the opportunities and challenges ahead for practitioners
From a traumatic formative education to exceptional criminal silk – Laurie-Anne Power KC talks about her path to the Bar, pursuit of equality and speaking out against discrimination (not just during Black History Month)
James Onalaja concludes his two-part opinion series
Yasmin Ilhan explains the Law Commission’s proposals for a quicker, easier and more effective contempt of court regime