Egyptian Courts Should Permit Money Laundering Convictions without Conviction on the Predicate Offence

Prosecuting money laundering and corruption are inextricably interwoven. Corrupt officials, like other sophisticated criminals, frequently resort to various forms of money laundering to conceal their ill-gotten funds. That is why the UN Convention Against Corruption (UNCAC) adopted a specific article addressing money laundering. One of the legal challenges in prosecuting money laundering, however, is proving that the property involved is the proceeds of a crime. And one of the ongoing legal controversies on this point concerns whether proving that element of the money laundering offense requires, as a prerequisite, a prior or simultaneous criminal conviction for the predicate offense. Different legal systems have taken different positions on this question, which is perhaps unsurprising. More striking is the fact that, within Egypt right now, this question has divided the circuits of the Court of Cassation (the highest Egyptian criminal court), with no immediate resolution in sight.

One circuit has adopted a “restrictive approach” that requires a prior or simultaneous conviction of the predicate offense as a precondition for a money laundering conviction.  Although a majority of lower courts apply this restrictive approach, another circuit has held—in the case against former President Mubarak’s Minister of interior—that although the prosecution must prove beyond a reasonable doubt the illicit origin of the money to secure a money laundering conviction, the prosecution can establish this fact in other ways; a prior conviction for the underlying offense is not necessary. This division of opinion has persisted despite the fact that there is a provision calling for the Court of Cassation’s General Assembly to vote on controversial matters. Unfortunately, the Court does not apply this provision rigorously.

Although both positions have some merit, the Court of Cassation’s General Assembly–or, if it fails to act, the Egyptian legislature–should reject the restrictive approach and allow the prosecution to prove the elements of money laundering, even in the absence of a conviction for the predicate offense. The purported disadvantages of that approach are greatly exaggerated, and it would enhance the Egyptian government’s capacity to combat high-level official corruption, as well as other serious offenses.

The most common argument in favor of the restrictive approach runs as follows: If the courts do not wait to see if there is a conviction on the predicate offense before allowing the prosecution to secure a money laundering conviction, then it is possible that the defendant could be convicted of money laundering (which, again, requires that the assets are the proceeds of a crime), but might subsequently be acquitted of the predicate offense. But this, the argument goes, would lead to a contradiction between the two rulings.

That argument has some superficial appeal, but it has a number of problems. For one thing, the likelihood of the above scenario actually occurring seems minimal, and it has never actually occurred (at least not in Egypt). And even if it did happen occasionally, such occurrences would likely be very infrequent. On the other side of the ledger, the costs of the restrictive approach are considerable:

  • First, the restrictive approach impedes transnational asset recovery efforts, as Egypt would not be able to seek recovery of assets stashed abroad until the conclusion of the domestic trial on the predicate offense, as well as a simultaneous or subsequent conviction on the money laundering offense–and all this might take years.
  • Second, largely because of the preceding point, international agreements and standards–to which Egypt is a party–call for the liberal approach rather than the restrictive approach. Article 14(4) of the UNCAC declares that, in addressing money laundering and similar matters, States Parties should “use as a guideline the relevant initiatives of regional, interregional and multilateral organizations against money laundering.” The language of the provision could be understood to direct Egypt to adopt the measures adopted in the UN’s Model Legislation, as well as the recommendations of the Financial Action Task Force (FATF). Article 3(8) of the Model Legislation provides that proving the illicit origin of the proceeds shall not be hinged on conviction of the predicate offence. A similar provision can be found in the FATF Forty Recommendations and the accompanying interpretive notes. Though this provision of UNCAC is not directly binding under Egyptian law, the liberal approach is more consistent than the restrictive approach with Egypt’s existing international commitments.
  • Third, although the restrictive approach might on its face seem more defendant-protective, under some circumstances it might actually make defendants worse off. In many cases, a domestic money laundering charge is accompanied by orders freezing the assets located within Egypt. Even if the defendant believes he is innocent, and believes he could defeat the money laundering charge if it went to trial, he must wait until the conclusion of the predicate offense trial, which might take years. Thus, perversely, the restrictive approach–and the additional legal tools that have been deployed to make it workable–may ultimately deprive many defendants of their right to swift justice.

Thus in my view, the liberal approach is better than the restrictive approach. But even if I’m wrong about that, the current situation, in which different circuits of the same court adopt different rules, is clearly untenable. There are two ways to solve the problem. First, the Court of Cassation’s General Assembly could finally invoke the almost-abandoned provision whereby members of all circuits convene to vote on principles in controversy. Alternatively, the legislature could intervene–as it has in at least three other instances involving similar points of legal confusion–with a clearly-worded statutory amendment. Until one or the other of these things happens, the confusion will persist–and since most courts apply the restrictive approach, money laundering cases will keep piling up for years, pending the of the predicate corruption crime.

4 thoughts on “Egyptian Courts Should Permit Money Laundering Convictions without Conviction on the Predicate Offence

  1. I’m hesitant to weigh in with an opinion, given my ignorance of the Egyptian legal system, but to me your arguments for favoring the liberal over the restrictive approach are persuasive.

    If, however, the Egyptian courts and legislature are not convinced — if they are worried about the possibility of inconsistent criminal verdicts — would one possible alternative be expanded use of civil asset forfeiture proceedings? Because of the lower burden of proof in the civil proceeding, there would not be any necessary contradiction between a judgment that the government had proved, by a preponderance of the evidence, that certain assets were the proceeds of criminal activity, and a verdict that the government had failed to establish, beyond a reasonable doubt, that the (pre-forfeiture) owner of those assets had committed the crime. Of course, that very fact raises a concern I’ve discussed in earlier posts, about the potential for civil forfeiture proceedings to erode traditional safeguards for defendants, but if we decide those concerns are not sufficiently compelling, how much would this approach help address the problems you see with the restrictive approach?

    • Thanks for your comment. Civil forfeiture is a topic that has high potential in transnational assets recovery, however, under the Egyptian law there is a major obstacle that faces civil forfeiture that makes take equally dependent on the outcome of the criminal trial of the predicate crime. According the Egyptian criminal procedural code , art 265, if a deciding A civil case overlaps or dependent on a matter which is tried before a criminal court, the civil court must suspend any decision on the case in order to await judgment in the criminal proceedings on which the civil case will be based. If the criminal court established, beyond reasonable doubt, that the crime did not take place or that the defendant did not do it. These findings are binding on the civil trial. While if the criminal trial found the evidence is not sufficient to establish a certain conclusion beyond reasonable doubt, the civil court is free to establish the facts with the lower civil evidentiary threshold.In sum, the civil court—same as money laundering criminal court—has to await the predicate crime’s trial.

  2. Thanks for this incredibly interesting post Mohamed. I found a number of the arguments you laid out in favor of the liberal approach, particularly the notion that it may in fact be more advantageous to/protective of defendants to be very compelling. However, I was wondering if you could potentially expand upon your suggestion that an argument in favor of rejecting the restrictive approach is the fact that it “impedes transnational asset recovery efforts.” If your suggestion that it is highly unlikely that an individual will be found to be guilty of money laundering but not the predicate offense is correct, then isn’t the only impediment that the restrictive approach imposes on transnational asset recovery simply the amount of time that it will take to recover the funds rather than the probability of retrieving them? (Here I am assuming that if, under the liberal approach, you would be able to retrieve the funds after proving that the defendant was guilty of money laundering, you would similarly be able to prove that the predicate offense had occurred and, as such, could, under the restrictive approach, also gain access to these funds a year or two later). Obviously it is important to retrieve improperly obtained/laundered funds in a timely manner if possible. However, unless we have concerns that asset freezes are ineffective, is there any reason to believe that there is a significant difference from the perspective of either the country bringing these suits or anticorruption efforts generally between retrieving these funds shortly after a money laundering suit is brought or a year or two later? If not, then it would appear that the most striking difference between the restrictive and liberal approaches is the degree to which they provide adequate protections to defendants, in which case your fascinating suggestion that the liberal approach may actually provide more effective safeguard for defendants becomes an even more important point in favor of the liberal approach.

  3. Mohamed, I am hoping you could clarify something for me about the Egyptian legal system. Are there are different standards in Egypt for bringing a predicate offense case and a money laundering case? (Are there, for example, greater procedural safeguards if the defendant risks jail?) I could envision scenarios under which a politically motivated prosecutor threatens to (or does) freeze assets in a money laundering case (even if the case were destined to loose down the line), but would be unable to bring a ‘more serious’ predicate offense case. Of course if they had similar procedures, this would not be much of an issue.

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