Money Laundering Scheme Case Study: Analysis and Proposed Plan

This case study analyzes a money laundering scheme involving Mr. Kozlov, who seeks to channel approximately $5 million USD through various means, including buying property, paying for his son's education, and investing in a construction company. The paper examines relevant U.S. laws, such as the Bank Secrecy Act (BSA), RICO, and the Patriot Act, to develop a viable money laundering scheme for Mr. Kozlov. The analysis considers the legal and regulatory framework, potential risks, and investigative strategies employed by law enforcement agencies. The study suggests that Mr. Kozlov should focus on paying his son's school fees or purchasing shares from less risky industries like construction to avoid triggering suspicion. The paper also references key reports and guidelines from the Financial Action Task Force (FATF) to support its findings.

Money Laundering Scheme Case Study 1
Money Laundering Schemes and Law
Student’s Name
Professor’s Name
Course Name
Date

Money Laundering Scheme Case Study 2
Introduction
The case reveals that Mr. Kozlov obtained money in corrupt way and had plans for
channeling proceeds to either buying apartment in the US, or paying his son’s education at the
university in the US during four years of his bachelor’s studies. He also has an option buy shares
of a small US construction company for his son. Achieving these goals is not easy but it is
possible if Mr. Kozlov evade some of the laws governing the utilization of money in US. The
total money laundered is approximately 5 million USD. This is a lot of money to be deposited
once in any foreign account. The goal of this paper is to develop money laundering scheme for
Mr. Kozlov.
Existing laws to consider
It should be noted that financing terrorism and extremist activities, drug trafficking, tax
crimes and related money laundering operations in many countries at different times forced the
national authorities to respond to cases of legalization of proceeds of crime. Experts note the
close connection of the latter with other socially dangerous crimes (Ivanov 2018). As the
majority of studies, as well as the study of legal acts and public opinion, show that corruption is a
predicate of money laundering. The current system of international legal instruments aimed at
combating corruption contains a number of rules on the additional criminalization of certain
forms of corruption, including money laundering. As a result, a number of convention and
national laws are in place, which may make it hard for Mr. Kozlov to channel his proceeds to any
bank. Before developing money laundering scheme for him, it is important to reflect on some of
laws and strategies formed to investigate money laundering.

Money Laundering Scheme Case Study 3
The legislative base for countering the legalization of criminal proceeds in the USA is a
set of regulatory legal acts, which include the Bank Secrecy Act-BSA (Bank Secrecy Act 1970);
RICO (Law on corrupt and racketeered organizations in 1978); The Money Laundering Control
Act (Anti-Money Laundering Act 1986); The Anti-Drug Abuse Act cash, international
experience, international seals 1988) (FATF Report 2019)..
All banks and financial institutions are required to maintain accounting records, submit
reports on suspicious transactions in the form of cash, bank spending, traveller's checks and
postal money orders in excess of $ 10 thousand in any currency, and identify new customers.
This applies to transactions of airlines, financial companies, hotels, pawnshops, restaurants and
wholesale points (Financial Action Task Force 2016).
In 1988, the Law on Strengthening the Charges of Money Laundering (The Money
Laundering Prosecution Improvement Act-MLPIA) was enacted, which expanded the scope of
anti-legalization legislation on the transport, transfer and sending of payment documents (Adam
& Russell 2011). In accordance with this law, banks are required to report to the law
enforcement authorities about all suspicious transactions worth over 5 thousand dollars, on
operations with securities - in the amount of more than 3 thousand dollars.
A mandatory requirement is that each banking institution has a special anti-money
laundering program. Section XV of the 1992 Housing and Community Development Act of 1992
expanded the definition of financial business operations and banned the activities of illegal
money transfer enterprises. If the bank is found guilty of money laundering, the federal
supervisory authority is obliged to begin the process of terminating the bank's charter or
canceling insurance of its assets (William Rees et al 2011).

Money Laundering Scheme Case Study 4
Countering the legalization of criminal proceeds is considered in the United States as one
of the main means of combating organized crime. According to the Law on Corrupt and
Influenced by Racketeers Organizations (RICO), crimes under federal criminal law include
money laundering, the limits of confiscation are expanded in civil law and criminal procedure,
types of offenses are established, which include investing money received from commission
organized crimes, in an enterprise engaged in relations between states or with foreign states
(German, 2013).
In 2001, Sec. 312 “Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct terrorism Act of 2001, USA Patriot Act of 2001) added a new
subsection (i) to section 5318 Art. 31 U.S. Code of Bank Secrecy Law . US banks are prohibited
from cooperating with foreign offshore banks that do not have a physical presence in the
jurisdiction and are not part of the regulated banking system. It should be noted that this law is
not without drawbacks associated with too broad and inconvenient for application definitions of
a correspondent account, a financial institution subject to the regulation, and a foreign financial
institution, major foreign politicians. In addition, the law does not define many important terms
in relation to non-bank financial institutions.
Proposed plan and suggestion for Mr. Kozlov
From these laws, the only viable plan for Mr. Kozlov is to evade any suspicious
activities. As revealed, all suspicious transactions worth over 5 thousand dollars, on operations
with securities - in the amount of more than 3 thousand dollars. This means that if Mr. Kozlov is
to create a viable money laundering scheme, he should limit shares to less than 3 thousand
dollars. He should also not pay his son fees once. Lastly, he should not buy apartment worth
more than 5 thousand dollars. Instead, he can buy separate apartments worth 2 thousand dollars

Money Laundering Scheme Case Study 5
from different real estates. However, this option is not feasible because if a multidisciplinary
group involving asset managers are utilized, the suspicious activity of buying an apartment may
be detected. As revealed in FATF report, investigation of money laundering may include the use
of experts in financial analysis, forensic accountants, forensic computer specialists, and asset
managers (FATF 2012). There are also experts that analyze volumes of financial, banking,
business and accounting documents, including wire transfers. This makes the option of school
fees the most feasible option because many people pays for school fees.
Mr. Kozlov also ought to be cautious and beware of the possible operational strategies
used by investigative agencies. As revealed in FATF (2012), investigative agencies have
mechanism for finding out the origin of money, beneficiaries, and deposits. To evade this, Mr.
Kozlov should not leave any suspicious “paper trail” because investigators rely on paper trail as
evidences when carrying out investigations. By considering this option, it turns out that Mr.
Kozlov should choose the option of pay his son’s school fees because there will be no much
paper trail that can attract attention of investigating agencies.
Lastly, Mr. Kozlov should take not of risk factors associated with money laundering
proceeds. Mr. Kozlov should know the kind of industries to purchase shares because some
industries are not riskier. Extractive industries, for example, are not very risk (FATF 2012).
Construction industry is also the suitable target for Mr. Kozlov because it was ranked to be most
likely to accept bribes internationally (FATF 2012). Using family members, according to FATF
report could predispose them to risk. However, the case of school fees may not attract any
suspicion. Based on these analysis, Mr. Kozlov have two viable options. The first option is to
purchase shares from less riskier industries such as construction and extractive industries. The
second option is to pay for his son school fees.

Money Laundering Scheme Case Study 6

Money Laundering Scheme Case Study 7
References
Adam G. & Russell G S. (2011). Handbook of Global Research and Practice in Corruption.
Edward Elgar.
FATF Report (2019). Professional Money Laundering.
http://www.fatfgafi.org/media/fatf/documents/Professional-Money-Laundering.pdf
Financial Action Task Force (2016), “Anti-Money Laundering and Counter-Terrorist Financing
Measures - United States Mutual Evaluation Report” [US Mutual Evaluation Report (2016)]
(FATF, 2016) at 64-65, online: <http://www.fatf
gafi.org/media/fatf/documents/reports/mer4/MER-United-States2016.pdf>
German, P. M. (2013). Proceeds of Crime: The Criminal Law, Related Statutes, Regulations and
Agreements. Carswell.
Ivanov E. (2017). How much hard law is good for anti-corruption compliance. FSPA Blog post,
5 June http://www.fcpablog.com/blog/2017/6/5/eduard-ivanov-howmuch-hard-law-is-good-for-
anti-corruption.html
Ivanov E. (2018). AML/CFT and anti-corruption compliance regulation: two parallel roads?
IACA Research Paper Series No. 2/2018:
http://iaca.int/images/Research/Research_paper_02_Eduard_Ivanov_final.pdf
Ivanov E. (2019). Overview of anti-corruption compliance standards and guidelines. Practical
tool. IACA 2019.
https://www.iaca.int/images/Research/Overview_of_Compliance_Standards_and_Guidelines.pdf

Money Laundering Scheme Case Study 8
William Rees et al, (2011). Blackstone’s Guide to the Proceeds of Crime Act, 4th ed. Oxford
University Press.
FATF (2012). Operational Issues Financial Investigations Guidance. Retrieved from:
https://www.fatf-gafi.org/media/fatf/documents/reports/Operational%20Issues_Financial
%20investigations%20Guidance.pdf
FATF (2011). Laundering the Proceeds of Corruption. Retrieved from: https://www.fatf-
gafi.org/media/fatf/documents/reports/Laundering%20the%20Proceeds%20of%20Corruption.pdf
FATF (2012). Specific Risk Factors in Laundering the Proceeds of Corruption Assistance to
Reporting Institutions. Retrieved from:
http://www.fatf-gafi.org/media/fatf/documents/reports/Specific%20Risk%20Factors%20in%20the
%20Laundering%20of%20Proceeds%20of%20Corruption.pdf