Introduction

The comprehensive national regime on anti-money laundering and combating the financing of terrorism (AML/ CFT) has to be based on universally accepted approaches to legal definition of relative offences, establishment of preventive and institutional measures, and methods of interaction with foreign counterparts. It is vital to know that these approaches, partially summarized by the Financial Action Task Force (FATF) in its documents, are subject to swift changes, because the international community has to respond to emerging threats of transnational organized crime and terrorist networks, that try to exploit the internationalization of finance and trade. Over the past decade developing countries have achieved a lot in setting up national AML/CFT regimes, yet ongoing reforms and instability in the world economy still pose threats to local financial intermediaries. An important goal of developing countries is to eliminate the abuse of the financial system which will allow their transnational corporations (TNCs) to achieve better results in foreign market expansion.

Training of staff for AML/CFT-related organizations is an important prerequisite for achieving effectiveness in combating organized financial crime and terrorism. Sources of information and documents in English are frequently used in this field, therefore it is of crucial importance for a university student to receive an advanced linguistic training. The curriculum should also include taking courses on AML/CFT in English.

Despite the availability of writings on AML/CFT in the English language, it is often quite difficult for a student to understand complicated logical links in the text. This does not only arise from limited knowledge of the foreign language itself, but is also related to concise presentation of text and the lack of structuring intended for educational purposes. One such example is the FATF Recommendations, which were greatly improved after the changes of February 2012, yet require additional visual study materials for better understating. International organizations have published some AML/CFT textbooks in English, but they have not been primarily designed to be used by foreign-speaking students.

The Institute of Financial and Economic Security at the National Research Nuclear University MEPhI is the only Russian university that offers a major in AML/CFT. Advanced linguistic studies and teaching of fundamental courses in English is an important part of the curriculum. The university has direct links with the Rosfinmonitoring, the Russian financial intelligence unit (FIU), where students can get on-the-job training and seek employment.

This textbook is comprised of educational materials used in teaching the course on the international AML/CFT framework in English. The author has attempted to visualize logical links between terms and categories and to compile a list of key works and key questions to be used for intermediate and final tests. Readers are strongly advised to use this book along with information from trusted sources on the Internet. In particular, the sources of information include sites of studied international organizations, where one can find extensive information on history and activities of these bodies. Full texts of official documents and other relevant recommendations, principles, and guidelines should also be studied.

The author expresses appreciation to Sherry Brock and Wane Brock for their support and advice. Their encouragement and motivation has helped to facilitate all aspects of this book.

Lecture 1. The evolution of money laundering and AML/CFT measures

Key words

• Al Capone

• Meyer Lansky

• Watergate Scandal

• criminal offence

• administrative offence

• tax evasion

• bootlegging

• racketeering

• extortion

• laundromat

• mob

• predicate offence

• gambling

• U.S. Bank Secrecy Act

• U.S. Money Laundering Control Act

• international convention

• international organization

• Warsaw Convention

• FATF Recommendations

• Financial Action Task Force (FATF)

• money laundering (ML)

• anti-money laundering (AML)

Key Questions

• When did activities indirectly related to money laundering first appear?

• List the three main stages of money laundering evolution.

• What is the difference between possessing proceeds of a criminal or an administrative offence?

• How did Al Capone become an influential mobster?

• What did Al Capone do during prohibition?

• Why was it not possible to convict Al Capone for bootlegging, racketeering, extortion, and sexual exploitation?

• Is Al Capone’s commingling of funds in the laundromat business a fictitious story?

• What was Al Capone convicted of?

• What arguments did Al Capone’s defense use during the trial?

• How did Meyer Lansky become the “Mob’s Accountant”?

• When did Meyer Lansky acquire a gambling franchise in Cuba?

• Why did Meyer Lansky use a bank in Switzerland to channel his money?

• What was Meyer Lansky convicted of, and how was he penalized?

• What was the purpose of transferring funds to Mexico during the Watergate Scandal?

• When did the term “laundering”, with reference to money, first appear?

• What was the first national law to limit bank secrecy? What were the banks required to do under it?

• When did the term “money laundering” first appear in judicial context?

• When and where was the first AML law passed?

• What was the first international convention to cover issues related to money laundering? What was the purpose of the convention?

• Name the first convention to set up AML measures.

• When did the first international AML standards appear?

• Which body passed the first international AML standards?

• Which international conventions dealt with issues of transnational organized crime and corruption?

• When did the first sources of the international law, related to countering the financing of terrorism, appear?

• What is the Warsaw Convention, and why was it adopted?

• When were the FATF Recommendations last revised?

• How were the FATF Recommendations were last restructured?

• What was the reason for the latest revision of the FATF Recommendation?