How not to be a money launderer - extract
Introduction to this internet version.
The first edition of How not to be a money launderer was published in 1996, just two years after the UK implemented the first EU Money Laundering Directive, passing major amendments to the Criminal Justice Act 1998 and bringing into force The Money Laundering Regulations 1993. But, because of the EU Directives and the impact of the Basel Accord and the 40 Recommendations from the Financial Action Task Force, there was rapid globalisation of similar regulatory regimes, although the legal regimes were to prove much more difficult to implement in many countries.
Two years later, a revised Second Edition was published.
Since then, many of the things that the book said would happen have happened. For example, I said that "Wilful Blindness" would become a core part of counter-money laundering laws around the world. That has happened: almost all law now says something like "has reasonable cause to believe." I said that we would see a move from the US Dollar to the Euro as an alternate currency of choice for criminals. That's happened, too. And I said that we would see moves towards an ASEAN version of the EU, despite denials at that time. That's under serious discussion now. The suggestion there would be a development of a currency bloc based on the Chinese yuan within 25 years was met with near-derision yet that is now beginning to be talked about, too.
I said that the terms "placement, layering and integration" were better regarded as "hiding, moving and investing" - and those terms are being used in official documents, including some published by the US government.
I also outlined a raft of money laundering schemes explaining why how they would work and why they would become popular. They have - although during the interim there have been many who have publicly said the schemes were unlikely or produced low risk. And I discussed at length the money transfer systems of hawala etc., largely ignored at the time, and now they are regarded as serious threats.
Perhaps the most important concept introduced in the book was that compliance was not enough: that dealing with money laundering was a question of risk management. In 1994, when I first raised it, that concept was radical; by the time of the first edition, it was still widely regarded as a maverick suggestion; by the time the second edition was published in 1998, it was already being discussed by leading regulators and then, as we know, it became the primary approach that financial institutions were required to adopt.
The book was successful and, because we marketed not only through distribution channels but also by direct sales, we had a very clear picture of who was buying it. The answer is that several people who have, in the meantime, become known for their presentations bought this book as their first or an early introduction to the issues that counter-money laundering raised.
The book was a particular success in Hong Kong where it sold more copies that it sold anywhere else in the world except the UK. In fact, it sold to every continent except Antarctica, I guess that was because penguins don't do risk management or compliance.
How not to be a money launderer remains, so far as I know, the only text book on the subject which was aimed at those who have to understand and implement laws but who are not lawyers. Others have written story books but text books have all been dry legal tomes.
In the original introduction, I said that I would feel I had hit my market when I saw a copy on the desk of a motor mechanic for the law goes beyond the financial sector, a view that many lawyers denied for more than a decade. My explanation has now been vindicated.
And as the work I published has come true, many have claimed its concepts as their own. Some have stolen sections from this, and other works, wholesale and put their own name on it.
And so, the book, in its entirety but without its appendices because the laws there set out are now far out of date, is offered here so that readers can see for themselves where so many of the things they now regard as normal appeared almost a decade and a half ago, in a law book that was written for non-lawyers. The version published here is the second edition.
And if I see it on the screen of a mechanic in the back streets of a city somewhere near the South China Sea, I'll be very happy.
Nigel Morris-Cotterill
Kuala Lumpur, Malaysia
November 2009
Now available for Kindle and the Kindle reader for PC, How Not To Be A Money Launderer (the avoidance of money laundering and fraud in your organisation).
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