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Money laundering by filing a tax return

24 April 2019 13:21

Court of Justice in The Hague, 15 September 2017: Money laundering by filing a tax return

This was a case where fraud in medical expenses was brought to light. False invoices were made up in which more hours were charged than had been given in treatment. A substantial portion of the amounts that were deposited in the bank account of the health care provider in question carne from payments of criminal origin. The suspect (managing director of the health care provider) used the bank account for making payments for the purchase of a house and a car.
The judge ruled that this was a case of money laundering, seeing that these purchases were (in any case partially) financed by money from criminal activities, and it was no longer possible to trace whether, and if so to what degree, they had been combined with legally obtained funds. The suspect argued that income tax had been paid over the extra hours that had been invoiced. According to the judge, the fiscal declaration of that income can be interpreted as an act of concealment and considered punishable as a form of money laundering.

Commentary AMLC: The standpoint that filing a tax return gives the income as it were the appearance of legality, and thus constitutes money laundering on its own, is open to discussion. This is certainly the case given the fiscally valid concept 'fiscal neutrality': in principle, for income tax purposes it is not important whether the income has been earned by criminal actions or not. In this case, however, it does seem as though there was a substantial act of concealment that is closely related to fraud: invoices were made up for treatment that had not been delivered, the invoices were entered in the accounting system, and the income so generated was reported to the Tax and Customs Administration. In addition, several parties collaborated in carrying this out. The question remains whether, in a case like this, the charge of money laundering has some kind of added value when money laundering is so closely related to the predicate offence.