MOSCOW – The early 1990s were a time when crime penetrated the Russian economy and money started flowing out of the country, whose legislation was lagging far behind the world’s anti-money laundering laws.

As a result, the Financial Action Task Force on Money Laundering (FATF) put Russia on the black list of “tax havens” in 2000, which led to various discriminatory measures against Russian financial institutions.

In the last several years, Russia has done a great deal to remedy the situation. In 1999 it signed the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, in line with its obligations as a CoE member. One direct result of ratifying the Convention was the creation of national anti-money laundering legislation.

In 2001, Moscow adopted a law “On Countering the Legalization (Laundering) of Criminal Incomes.” Since money is mostly laundered through fiscal agencies, the law is aimed at acquiring and analyzing information about their financial operation. It includes a list of controllable transactions and a list of organizations that must inform the state about such deals.

The relevant organizations are lending establishments, professional players on the securities market, insurance, lease, mail and telegraph communications companies, and other non-lending organizations that transfer money, as well as pawn shops.

The law stipulates that transactions involving upwards of 600,000 rubles ($21,413, or 17,549 euros) are to be controlled.

The Federal Service of Financial Monitoring (FSFM), which was charged with combating money laundering, collects, processes and analyzes information about financial transactions. If it finds reasons to suspect money laundering, it forwards relevant information to law enforcement agencies.

This is nothing less than a system of financial intelligence similar to the one used in the U.S. As a result, Russia was removed from the FATF black list in 2002 and became a full member of the organization in 2003. In 2005, the FSFM filed 800 money-laundering suits and forwarded cases worth $20 billion to law enforcement agencies.

FSFM head Viktor Zubkov said that the world recognized Russia’s anti-money laundering efforts.

FATF President Professor Kader Asmal praised Russia’s initiative of creating a Eurasian Group to combat money laundering and terrorism financing (Eurasian Antiterrorist Group, EAG). The 2005 plans of its members – Russia, Belarus, Kazakhstan, Kyrgyzstan, China and Tajikistan – include the proliferation of the FATF Forty Recommendations on combating money laundering and Eight Special Recommendations on terrorism financing.

In summer 2005, Russian President Vladimir Putin approved a Concept of the National Strategy of Combating Money Laundering and Terrorism Financing. The FSFM has submitted a five-year action plan for its implementation. The plan’s four basic strategies include the improvement of anti-money laundering legislation and relations with law enforcement agencies, professional training and re-training of specialists (including investigators and prosecutors), and the strengthening of international cooperation.

Russia is creating an interdepartmental commission on combating money laundering and terrorism financing that is to coordinate effective interaction of federal authorities and the Central Bank of Russia in this sphere.

Russia’s first training and methods center is being established at the FSFM to train some 4,000-5,000 specialists within a few years.

The FSFM has also formulated proposals on solving the most pressing problems of anti-money laundering operation. Service head Viktor Zubkov said the main problem was the fly-by-night companies set up to launder money, or fictitious companies that use lost or misplaced documents to get official registration. To limit the possibilities of such fly-by-night companies, the FSFM has suggested giving financial investigators the right to freeze money on the accounts of suspected companies for up to 45 days. “This would be a good start for opening a financial investigation,” Zubkov said. “I am convinced that nobody will come to collect 90% of such money, which would be subsequently transferred to the budget.”

The FSFM has also suggested a clampdown on cash settlements. In particular, the Finance Ministry and the Central Bank should “draft a program of reducing the volume of cash in the national economy, which amounts to some 40% of money circulation.” But these suggestions have not been formalized so far.

The Russian Interior Ministry reports that some 150-160 billion rubles ($5.71 billion, or 4.68 billion euros) are laundered in Russia annually, but experts put the figure at about 400 billion rubles ($14.28 billion, or 11.7 billion euros).

Money laundering remains an acute problem in Russia. It is directly connected to combating terrorism and crime financing and seriously affects market stabilization and the attraction of foreign investment.

(Source: RIA Novosti)