The limits of the law : an analysis of the inter-relationship of the criminal and civil law in the control of money laundering

• Date: 01 January 2001
• Published date: 01 January 2001
• DOI: 10.10520/EJC73782
• Pages: 1-29
• Author: B.A.K. Rider

THE LIMITS OF THE LAW

An analysis of the inter-relationship of the

criminal and civil law in the control of money

laundering

B A K Rider

Director: Institute of Advanced Legal Studies, University of London;

Executive Director: Centre for International Documentation on Organised

and Economic Crimes; University of Cambridge; honorary professor:

Mercantile Law, University of the Free State.

Introduction

In recent years the divide between areas of law, which have hi-

therto been perceived, in most systems of jurisprudence, as rela-

tively and mutually distinct, has narrowed and in some instances

all but disappeared. This tendency is perhaps no more drama-

tically illustrated than in, what for a better description, might be

termed the area of financial regulation. When the present author

started teaching a course at the University of Cambridge on finan-

cial services regulation in 1979, the perception among those of his

colleagues who regarded such things, was that this formed part of

the corpus of corporate law. Of course, this analysis is only partly

justified, and beyond the area of corporate finance law is miscon-

ceived. On the other hand, the commercial lawyers, who — at

least in Cambridge — have been regarded or perhaps more accu-

rately tolerated, as being a little more academically respectable

than pure corporate lawyers,1were distinctly unsympathetic to the

notion that financial services law is in part akin to banking law and

therefore a subject more suited to mercantile law. Given the au-

thor’s predilection to weigh more heavily those aspects of the law

that are protective of society, rather than facilitative of enterprise,

it is not surprising that he ventured more and more into the realm

of prohibitions, sanctions and even the criminal law.

Take for example, the abuse of price sensitive information2ob-

tained by those in a confidential position, by virtue of that privile-

ged relationship, to trade, on the basis of that information, in cor-

porate securities — in other words, insider dealing. Is this properly

1

1See B Rider (Ed) The Realm of Company Law (1998) Kluwer, Intro-

duction.

2See generally B Rider and H L French, The Regulation of Insider Tra-

ding (1979) Macmillan, B Rider.

regarded as a matter for the traditional law relating to directors

and officers, and thus, company law, or given the fact that most

countries today seek to curb such activity on the basis that it

harms confidence in the integrity of public markets, a matter of

public, and in particular criminal law?3

While such a debate may appear somewhat academic, even if it

does result in the demarcation of courses and the like, it can and

occasionally does have a very real practical significance. For

example, in some jurisdictions, such as the USA, the Federal Le-

gislature is competent to legislate on matters pertaining to inter-

national trade and finance, and thus, the protection of the markets,

but not matters of traditional company law. On the other hand, it

has been contended, in jurisdictions, such as Canada,4that given

the uncertainty attaching to the Federal Legislature’s competence

in regard to the financial markets, it is better to consider insider

abuse a matter of company law. Similar issues arise, in the con-

text of the competence of specific organs of the European Union

and, of course, are not uncommon in the demarcation of compe-

tence between domestic agencies, whether of law reform or enfor-

cement.

In Britain, until very recently, because it has long been considered

right to inhibit insider abuse, on the basis that it does undermine

confidence in the integrity of the nation’s capital markets, by result

to the criminal law.5 Therefore, in Britain insider dealing has been

regarded as a serious criminal offence since 1980, and although

the enforcement of the criminal law has encountered very signifi-

cant problems, the relevant government department opposed the

suggestion, even by House of Commons Select Committees,6that

thought should be given to adopting procedures akin to those

used seemingly with greater effect in the USA, involving essen-

tially civil enforcement. The Department of Trade took this stand

on the basis that what is in issue is a public wrong, and it is there-

fore the province of the traditional criminal law to vindicate it.7

2

3Trading (1983) Jordans and B Rider and TM Ashe Insider Crime

(1994) Jordans. B Rider and HL French “Should Insider Trading Be

Regulated Some Initial Consideration” (1978) 95 SALJ 79.

4Multiple Access v McCutcheon (1977) 78 DLR (3rd) 701 revg. 65 DLR

(3rd) 577 and see B Rider (1982) 3 The Company Lawyer 284.

5See B Rider and TM AShe The Fiduciary The Insider and the Conflict

(1995) Brehon, Sweet & Maxwell chl3.

6Company Investigations 2 May 1990 HMSO. 7.

7Company Investigations August 1990 Cml 149.