Title: FinCEN Warns of Money Laundering Risks in Russian Transactions: Serious Deficiencies in Russia’s Counter-Money Laundering System Identified
FinCEN’s Advisory Against Money Laundering Risks in Russian Transactions
The Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury has issued a warning [FinCEN Advisory Issue 25] to banks and financial institutions about the significant deficiencies in Russia’s counter-money laundering systems.
Concerns Over Russia’s Counter-Money Laundering Systems
Russia’s financial regulatory framework faces serious systemic problems. The country lacks appropriate legislation and regulations to counter money laundering, making it non-compliant with international standards set by the Financial Action Task Force (FATF). More specifically, Russia exhibits the following issues:
- Lack of a Comprehensive Penal Code Provision Criminalizing Money Laundering: There is no comprehensive penal code proposal that criminalizes money laundering, making it difficult to enforce anti-money laundering (AML) regulations effectively.
- Weak Customer Identification Measures: Inadequate customer due diligence policies leave Russia’s financial institutions vulnerable to money laundering activities.
- No Reporting Suspicious Transactions: Currently, there is no requirement for financial institutions to report suspicious transactions.
Exacerbating Factors
Russia’s inability to provide timely and effective evidence for foreign money laundering investigations and the absence of a fully operational financial intelligence unit dedicated to fighting money laundering further exacerbate these issues.
FATF’s Identification of Russia as a Non-Cooperative Entity
The international organization, FATF, has identified Russia as a non-cooperative entity in the fight against money laundering. FATF was founded in 1989 to counter money laundering.
Addressing Money Laundering Deficiencies
Russian authorities have announced plans to enact comprehensive legislation to bring their counter-money laundering programs in line with international norms. This will involve suspicious transaction reporting and strengthening supervisory and regulatory systems. The Central Bank of Russia has taken initial steps to provide guidance to financial institutions, requiring them to report transactions involving specific jurisdictions and monitor irregular financial transactions.
Advisory for Financial Institutions Operating in the US
Financial institutions operating in the US are advised to exercise caution when dealing with transactions originating in, routed through, or involving entities and individuals from Russia. They should consider the impact of inadequate counter-money laundering controls in Russia and scrutinize transactions for potential illegal activities.
- Instances of Suspicious Transactions: Instances of suspicious transactions, regardless of the reporting obligations or not, should receive enhanced scrutiny.
No Discouragement of Legitimate Business Activities
FinCEN emphasizes that this advisory does not discourage legitimate business activities and that all reports related to transactions as described herein should be submitted to comply with suspicious transaction reporting regulations. U.S. officials are prepared to offer technical assistance to help Russian authorities improve their counter-money laundering systems.