Matter Of The Domestic Law
As a matter of the domestic law of a country, the reach of its legislation will depend partly on its terms, and partly on how it is interpreted. For example, the US Money Laundering Control Act of 1986 contains a specific declaration of extraterritorial jurisdiction over prohibited conduct if 'the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States'. In one sense this is a clear claim to extraterritorial jurisdiction. In another sense, much depends on what conduct is regarded as occurring in part in the United States
The United States takes the view that the Act applies to transactions involving foreign banks and foreign nationals situated abroad if, for example, one foreign national transfers funds from one foreign location to another foreign location via the United States. An example would be a payment in US dollars between foreign banks routed through the CHIPS system in New York. Under US law, laundered money never becomes clean, and New York prosecutors now seize the balance in New York correspondent accounts on the basis that they facilitated the money-laundering transactions.
There is a serious legal question whether it is legitimate for the United States to assert jurisdiction in such cases, although one has a considerable sympathy for the prosecutors.
If legislation is unclear, administrative practices and judicial decisions will shape its interpretation. Presumptions of statutory interpretation may enter the process, for example, that legislation is intended to extend to the territory of a country, but not outside; and to persons and matters within that territory, but not to others [not even to nationals outside the territory). At the end of the day, however, such presumptions are only one aspect of how a court will construe legislation.
Experience in the banking area suggests that courts will not be slow to give legislation an extraterritorial effect.
Illustrative are two cases from England, which traditionally has taken a fairly strict view. In the first, the decision from which the facts of Case 3 are taken, an English court held that the English companies legislation extended to a Luxembourg bank
ith no presence in the United Kingdom. Nourse J reasoned that the :ompany in which the relevant shares were held was an English company the articles of which constituted a contract with its members, the )roper law of which was England.
The registered holder of the shares had :omplied with the search notice, by declaring that it held the shares for a Luxembourg bank 'for account client'. The registered shareholder was thus a trustee. The trust property being situated in England, and the trustees being resident there, the bank's beneficial interest was thus in England.
Moreover, Nourse J held that the phrase 'any person' in the statute was wide enough to include a true foreigner, although criminal proceedings for disobedience of the company's notice could not be taken against it. In reaching this conclusion, Nourse I was refreshingly candid about the policy underlying his conclusions. 'Why should a true foreigner, while able to enjoy all the benefits of holding shares in an English company, be intended to escape the burdens'.
Policy also loomed large in a decision of the English Divisional Court on the reach of the drug-trafficking legislation. That empowers the authorities to apply to a judge for a production order for the purpose of an investigation into drug trafficking. On ordinary principles, such an order overrides bank confidentiality. An officer of the bank and an account holder were indicted in the United States for money-laundering and drug offences.
While searching the bank official's premises in England, customs officers saw files in a locked cabinet relating to the bank accounts of General Noriega, who had been named in another indictment in the United States relating to drug trafficking.
The Divisional Court held that the legislation extended to investigations being conducted by authorities of other countries, and that the UK authorities could make the information available to the foreign enforcement authorities.
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