Russia Takes Steps to Enhance Customer Identification and Combat Money Laundering

MOSCOW - The Russian authorities are taking significant steps to strengthen their anti-money laundering (AML) framework, including enhancing customer identification procedures and improving information exchange between financial institutions and law enforcement agencies.

Progress Made in Identifying and Assessing Money Laundering Risks

According to a recent report by the International Monetary Fund (IMF), Russia has made progress in identifying and assessing money laundering (ML) and terrorist financing (TF) risks. The authorities have introduced measures to strengthen the legal framework, improve the effectiveness of the AML regime, and raise awareness among financial institutions about ML/TF risks.

Enhanced Customer Identification

One key area of focus is enhanced customer identification, particularly for foreign entities that do not have legal personality in Russia, such as trusts, foundations, and partnerships. The authorities are also working to strengthen information exchange between the Central Bank of Russia (CBR) and Rosfinmonitoring, a federal financial monitoring agency responsible for detecting and preventing ML/TF.

Proposed Legislation

A draft law has been submitted to parliament requiring legal entities to identify and document their beneficial owners and imposing penalties for non-compliance. The authorities are also working on an interdepartmental commission to combat TF and strengthening criminal penalties for involvement in terrorist activities.

Recommendations from the IMF Report

However, the IMF report notes that while Russia is making progress, there is still more work to be done to finalize and communicate the results of its National Risk Assessment (NRA) and develop a comprehensive strategy to address ML/TF risks. The authorities are encouraged to use an inclusive and multi-faceted approach to assessing ML/TF risks, relying on qualitative and quantitative information from all concerned agencies and reporting entities.

The IMF recommends that Russia:

• Adopt and communicate a national AML/CFT strategy
• Propose prioritized action items to address and mitigate identified ML/TF risks
• Implement risk-based measures

Conclusion

Overall, Russia’s efforts to enhance customer identification and combat ML/TF are a positive step towards improving its financial transparency and stability. However, further action is needed to finalize and implement the NRA results and develop a comprehensive strategy to address these risks.