Edited by Giuseppe Miceli

Recently, on the occasion of the 5th National Forum of Chartered Accountants and Accounting Experts and the responses provided by the Guardia di Finanza, the sanctioning framework applicable to anti-money laundering violations has been brought to the forefront of public attention. Given these responses, it is deemed appropriate to make some legally binding observations.

Anti-money laundering experts are well aware of the complexity of the entire regulatory framework designed by the Legislator of Legislative Decree 231/2007 and the main critical issues that arise from the operational application of those rules, especially when calculating the penalties applicable to violations of obligations and fulfillments.

One of these - probably the most long-standing - is the one concerning the applicability of the institute of legal accumulation of the sanctions – provided for by art. 8 of Law no. 689/1981 – which, according to some, should be applicable even to cases of material complicity in violations of Anti-Money Laundering regulations, as provided for by Legislative Decree 231/2007.

The author has always been a staunch supporter of the legal inconsistency of this thesis and believes, instead, that it is necessary to attribute to paragraph 3 of Article 67 of Legislative Decree 231/2007 its proper meaning, namely, that expressed in the explanatory report of the draft decree implementing the IV AML Directive, which states, with respect to the amended Article 67 of Legislative Decree 231/2007, the following: “For reasons of clarity, it was suggested that the provisions of Articles 8 and 8-bis of Law 689/1981, regarding the legal accumulation and repetition of violations, be expressly referred to.”

To sweep away attempts creative of extension of the reward mechanism of legal cumulation, operated violation of law in the presence of multiple violative conducts (so-called material competition) the author believes - and demonstrates this, in legal terms - that the reference to art. 8 of Law 689/1981, referred to in the aforementioned paragraph 3 of art. 67 of the Anti-Money Laundering Decree has the very function of reiterating the limits of its scope and that the legal cumulation of Anti-Money Laundering sanctions cannot be applied in any case, except in the presence of a formal concurrence of violations, or, in circumstances of “unity of action or omission producing plurality of violations” (See: Cass. Civ. n. 26434/14).

In fact, the element that seems to confer the greatest difficulty of interpretation appears to be contained in paragraph 3 of Article 67 of the Anti-Money Laundering Decree, which, verbatim, states: “The provisions of Articles 8 and 8-bis of Law No. 689 of 21 November 1981, regarding formal complicity, continuation and repetition of violations, shall apply.” [1].

It is therefore useful to identify the provisions of the aforementioned articles 8 and 8- [2] of Law 689/1981, containing Changes to the penal system.

For the purposes of specific interest here, it should be noted that Article 8, entitled More violations of provisions that provide for administrative sanctions, states the following verbatim: “Unless otherwise established by law, anyone who, through an action or omission, violates several provisions that provide for administrative sanctions or commits multiple violations of the same provision, is subject to the sanction provided for the most serious violation, increased up to three times.”.

Therefore, for the application of paragraph 1 of article 8, it is required that the conduct is exhausted in a single action or omission which may result in the violation of different provisions or, even, the same legal provision being violated several times.

The legal institution provided for by the aforementioned art. 8 of Law 689/1981 is the formal competition which can take two different forms:

1. formal homogeneous competition, in the event that the agent, with an action or omission, commits multiple violations of the same rule;
2. heterogeneous formal competition, in the event that the agent, with an action or omission, commits multiple violations of different rules.

As is evident, the common denominator of the two types of formal competition must be identified in that “unity of action or omission producing plurality of violations” (See: Cass. Civ. n. 26434/14).

This legal institution differs significantly from that of the material competition This occurs, however, when a person commits multiple violations as a result of multiple actions or omissions (multiple conducts). Similarly to the provisions for formal complicity, material complicity is also classified as homogeneous, if the same criminal provision is violated multiple times, or heterogeneous, if the violated provisions are different.

The distinction between the two types of competition (formal or material) takes on considerable importance, especially when applying the power to impose sanctions.

In fact, the Legislator has foreseen that when the formal competition is configured, the legal mechanism - with "reward" effects - of the legal accumulation of the penalties applicable to the types of violations committed by the perpetrator of that single act or omission. It follows that in the event of multiple violations of the same legal provision, or even violations of different provisions, where a single act or omission is involved (formal complicity), the applicable penalty would not correspond to the mathematical sum of the penalties applicable to the individual violations. Rather, the penalty envisaged for the most serious crime must be applied, increased by a percentage established by law, or, as established in paragraph 1 of the aforementioned Article 8: “increased up to threefold”.

Completely opposite effects, however, arise when multiple actions or omissions result in the violation of multiple provisions or multiple violations of the same legal provision (material cumulation). In such circumstances, the sum of the penalties provided for each violation committed must be applied, without any reduction being possible.

In mathematical jargon, we could say that: formal competition is to legal cumulation as material competition is to material cumulation.

However, the same cited art. 8, this time, in paragraph 2, identifies the exception to this rule, establishing that what is provided for in paragraph 1, that is, the application of the penalty provided for the most serious crime increased up to three times, applies "Also [For] whoever, through multiple actions or omissions, in pursuance of the same plan implemented in violation of provisions establishing administrative sanctions, commits, even at different times, multiple violations of the same or different provisions of law regarding compulsory social security and assistance"[3]In other words, in relation to violations of the rules on mandatory social security and assistance, even in the presence of material complicity, the legislator has provided for the application of a single sanction which is calculated on the basis of the criteria of legal cumulation, therefore, the penalty foreseen for the most serious crime is applied with an increase corresponding to a quota established by law.[4].

The exception provided for in paragraph 2 of Article 8 of Law 689/1981 is, however, an exception that clearly and precisely defines the scope within which the legal cumulation of sanctions can be applied even in the presence of material concurrence of violations. Certainly, the reference to Article 8 of Law 689/1981 expressed in Article 67, paragraph 3, cannot be considered sufficient to derogate from those precise limits of application.

Nor can one attempt to apply - not even by analogy - the provisions of Article 81 of the Criminal Code regarding the continuity between crimes, both because the aforementioned Article 8 of Law 689/81 expressly provides for this possibility only for violations relating to social security and welfare (with consequent evidence of the legislator's intent not to extend the provisions of legal cumulation to other administrative offenses), and because the morphological difference between criminal offenses and administrative offenses does not allow, through an analogical integration process, the favorable provisions provided for in criminal matters to be extended to the subject of administrative offenses (Cass. 12974/2008; 12844/08 and Cass. 20222/2011).[5].

Nor can the reference to another provision of the same decree 231/2007 constitute a derogation from this regulatory principle, by virtue of which a more markedly rewarding variant of the legal cumulation is applied both in the case of formal competition and in the case of material competition, this is paragraph 5 of art. 58 of Legislative Decree 231/2007 containing Failure to comply with the provisions relating to the obligation to report suspicious transactions, which, although without explicitly referring to art. of Law 689/1981, establishes that: "Only the sanctions provided for in this article shall apply to those obligated parties who, through one or more actions or omissions, commit, even at different times, one or more violations of the same or different provisions of this decree regarding customer due diligence and retention, resulting in, as an immediate and direct consequence, failure to comply with the obligation to report suspicious transactions." .

The provision expressed in the aforementioned paragraph 5 of Article 58, in fact, constitutes a typical case in which the same individual who has committed multiple crimes through one or more actions or omissions will only be subject to the sanction provided for failure to comply with the SOS obligation.

In conclusion, we report two examples of violations of the Anti-Money Laundering legislation that cannot raise any doubts whatsoever. Indeed, it is immediately clear that the more trivial these examples may seem, the more unlikely it will be to classify multiple violations as a formal act of complicity, hoping—in vain—that the cumulative legal application of applicable sanctions will be.

Example #1: multiple violations of paragraph 5 of art. 49 of Legislative Decree 231/2007 which states: Bank and postal checks issued for amounts equal to or greater than €1.000 must indicate the name or company name of the beneficiary and a non-transferability clause..

Suppose that John, in need of purchasing a property, issues three checks in the same context and immediately following each other, each for an amount greater than €1.000, failing to include the required transferability clause on the three checks. Regardless of whether the three checks are addressed to the same beneficiary, for example, the seller of the property, or rather, the first to the seller, the second to the real estate agent, and the third to the notary, these are three distinct acts, each in violation of Article 49, paragraph 5.[6] There is no doubt, however, that the correct application of the Anti-Money Laundering sanctions framework must be based on the application of as many sanctions – three – as there are violations (material accumulation), generating, moreover, the consequent effects in relation to the application of the reduced sanction pursuant to Article 68 of the Anti-Money Laundering Decree, as well as the fine pursuant to Article 16 of Law 689/1981.

Example #2: violations of the provisions of paragraph 2 of art. 49 of Legislative Decree 231/2007 which states that: "For the money transfer service referred to in Article 1, paragraph 1, letter b), number 6), of Legislative Decree 27 January 2010, n. 11, the threshold is 1.000 euros."[7].

Well, in this case, there are three possible hypotheses.

• In the first, we will assume that Gaius turns to the service of money transfer To make three money transfers, each of which was less than the €1.000 threshold but intended for the same recipient, and on close dates, with intervals of less than seven days between each transfer. In short, let's assume that Caio implemented – as a result of the three money transfers – a split transaction.[8]The configuration of the fractional operation does NOT imply that “unity of action or omission producing plurality of violations”, that is, the formal participation to which – only – the legal accumulation of applicable sanctions must be linked. Rather, the occurrence of a split transaction constitutes the specific type of anti-money laundering violation, provided for in paragraph 2 of Article 49 and to which the sanction provided for in Article 63, paragraph 1, is associated. Proof of this is the definition of "split transaction" contained in the Anti-Money Laundering Decree, which, otherwise, would be meaningless.
• In the second, we will assume that Sempronio turns to the service of money transfer To make three money transfers, each of which is less than the €1.000 threshold but destined for the same recipient, on separate dates, with intervals of more than seven days between each transfer. In this case, if the Anti-Money Laundering investigation fails to demonstrate the artificial nature of the splitting,[9], that is, "the existence of the fractional operation"based on the criterion teleological which comes to fruition “when there are elements to consider it as such”, no objection can be made against Sempronio.[10]
• In the third, we will assume that Tullio turns to the service of money transfer To make three money transfers, each amounting to or exceeding the threshold of €1.000, to the same recipient (or different recipients) on separate dates, with intervals of less than seven days between each transfer. Therefore, the inspectorate is unable to challenge the artificial nature of the splitting (since the conditions for a split transaction do not exist). In this case, each of the three transfers made by Tullio will be subject to challenge.[11]such transfers ultrathreshold they configure the material competition and, therefore, the material accumulation of sanctions will result.

What has been demonstrated, in line with the regulatory provisions and - if this were not enough for someone - with the unwavering jurisprudential orientation of the Court of Cassation, is that it only remains to acknowledge that the institute of the so-called "legal accumulation" of sanctions CANNOT be applied in the field of Anti-Money Laundering and that not even in the case of money transfers (in cash, ex paragraph 1 of art. 49 or through money transfer, ex (paragraph 2 of art. 49) can there ever be a formal concurrence (neither homogeneous nor heterogeneous) of the contested violations. This is because – it is worth repeating – if each individual transfer were subthreshold Only the possible artificial splitting would be relevant and, therefore, the specific case of a split transaction, provided that the sum of the transfers exceeds the prescribed threshold. Whereas, however, if each of the transfers were ultrathreshold, the fractional operation not being configured and not even “unity of action or omission producing plurality of violations” and since the uniqueness of the violating intent, which does not serve as a unifying element for the purposes of the sanction under Article 8, is irrelevant, the material concurrence must be acknowledged and, therefore, the material accumulation of sanctions must be applied.

Furthermore, the impossibility of cumulating anti-money laundering sanctions remains categorically excluded even in relation to the hypotheses of material complicity in the violations referred to in Legislative Decree 231/2007, as the scope of the provisions of Article 8, paragraph 2, of Law 689/1981 is absolutely incapable of extending beyond the scope of mandatory social security and assistance.

AUTHOR'S NOTES

[1] The explanatory report of the draft decree implementing the IV AML Directive states, with respect to the amended art. 67 of Legislative Decree 231/2007, the following: for reasons of clarity, it has been suggested to expressly refer to the application of the provisions of articles 8 and 8-bis of Law 689/1981, regarding the legal accumulation and repetition of violations. It is believed that this reference to Law 689/1981 has the precise function of reiterating the limits of its scope.

[2] The art. 8-  of the aforementioned Law no. 689/1981 was introduced by art. 94 of the legislative decree no. 507 of 1999, is titled Repeated violations and provides – precisely – the effects of the repetition of administrative violations, as well as – in paragraph 4 – the hypothesis in which violations subsequent to the first should not be evaluated, for the purposes of repetition “when they are committed in close time and can be traced back to a unitary planning”For the purposes of this analysis, it is not considered necessary to delve into the provisions of Article 8-  and to focus, instead, attention on the content of art. 8. The institution of the repetition of violations referred to in art. 8- , paragraph 4, Law no. 689/1981, with which the legislator intended to give a reduced importance to the continuation with regard to all administrative offences, providing that, in the case of violations subsequent to the first one, the same are not evaluated for the purposes of repetition when they are committed in close time and are considered attributable to the same unitary planning, was not foreseen in function of the application of a single and reduced sanction in its overall quantitative determination, but rather as a situation that prevents the production of the effects that would otherwise result by virtue of the recognition of "repetition", governed by the same art. 8-  (Cass. no. 5252 of 2011). It follows that the aforementioned uniqueness of the violating intent does not operate as a unifying element for the purposes of the sanction of the previous art. 8 (Cass. no. 2657 of 2012).

[3] Article 8, paragraph 2 provides for legal cumulation applicable – also – to material contributions, but only in matters of mandatory social security and assistance, and case law confirms this limit.

[4] With Order No. 21738 of September 6, 2018, the Court of Cassation, upholding the contents of an injunction issued by the Provincial Labor Directorate of Pavia, stated that the provision for cumulative sanctions is absolutely undisputed in case law. This provision applies only in the case of formal concurrence (homogeneous and heterogeneous) between contested violations, that is, only in the case of multiple violations committed through a single act or omission. The provision cannot be extended to the case of material concurrence—concurrence between violations committed through multiple acts or omissions—excluding the analogous application of Article 81 of the Criminal Code regarding the continuation of crimes, both because the aforementioned Article 81 of the Criminal Code provides for the possibility of a continuation of crimes. Article 8 provides for this possibility only for violations relating to social security and welfare (with evidence of the legislator's intention not to extend the provisions of legal cumulation to other administrative offences), and because the morphological difference between criminal offences and administrative offences does not allow for the provisions envisaged in criminal matters to be extended to the subject of administrative offences through an analogical integration procedure (see most recently Cass., 3 May 2017, no. 10775).

[5] As for the continuation, the consolidated orientation of the Constitutional Court (order no. 421 of 1987) and of the SCC (Cass. no. 24655 of 2008; Cass. no. 10775 of 2017) is firm in the morphological difference between criminal offenses and administrative offenses, which does not allow for the analogous application of art. 81 of the Code of Civil Procedure, as a favorable rule provided for in criminal matters.

[6] The example provided here is closely analogous to an appeal against a traffic violation report for driving past two traffic lights located along the same road at two different intersections, despite a red light prohibiting the traffic from passing. In this case, the Court of Cassation, with ruling no. 20222/2011, reiterated the following principle: "With regard to administrative sanctions, the provision set forth in Article 8 of Law No. 689 of 1981, in providing for the applicability of the so-called "legal cumulation" of sanctions in the sole case of formal concurrence (homogeneous or heterogeneous) among the contested violations, cannot legitimately be invoked with reference to the different case of material concurrence."

[7] This example also applies to the type of offence provided for in paragraph 1 of the aforementioned art. 49 of Legislative Decree 231/2007.

[8] As defined by Legislative Decree 231/2007, art. 1, paragraph 2, letter v) “split transaction: a transaction that is single in terms of economic value, of an amount equal to or greater than the limits established by this decree, carried out through multiple transactions, each lower than the aforementioned limits, carried out at different times and within a limited period of time set at seven days, without prejudice to the existence of the split transaction when there are elements to consider it as such".

[9] This is due to the fact that the uniqueness of the violating intention does not operate as a unifying element for the purposes of the sanction of the previous art. 8 (Cass. no. 2657 of 2012).

[10] This is due to the fact that the uniqueness of the violating intention does not operate as a unifying element for the purposes of the sanction of the previous art. 8 (Cass. no. 2657 of 2012).

[11] The inspection body may proceed with the reporting in a single document, within which three separate findings will be raised.