Money laundering in the Russian Federation so far has been an issue related to the proceeds of crime, primarily of economic crime, or of economic and financial operations that could not be immediately classified as criminal. Such money laundering is closely intertwined with the wide-ranging political, economic, and social processes under way in the country. It has become an identifiable feature of contemporary capitalism in the Russian Federation. Money laundering exploded when market reforms were undertaken, including financial liberalization, privatization, and many others. It followed the destruction of the old public institutions, which, in many cases, were not replaced. Money laundering in the Russian Federation feeds on the perceived decline in the strength of the state and the weakening of its law enforcement institutions. It is linked to the loss of jobs and a huge shadow economy. Economic instability and crime are among the reasons for the shadow capital and its flight from the Russian Federation. Effective measures against money laundering in the Russian Federation require consideration of the whole process of reforms, particularly the requirement to build regulatory and institutional capacities for the functioning markets. There must be improvements in banking supervision, which must be coordinated with law enforcement efforts. Banking supervision in the Russian Federation cannot be limited to the traditional methods used to ensure the prudence of financial operations, since there is widespread illegality and criminality in the banking sector. 1 table, 1 figure, 69 notes, and a 50-item bibliography