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Russian Federation Tightens Screws on Financial Crime
In an effort to prevent financial crime, the Russian government has introduced robust regulations aimed at combating money laundering, terrorist financing, and proliferation of weapons of mass destruction.
The Threat of Financial Crime
According to experts, legalization of criminally obtained proceeds poses a significant economic threat, closely linked to corruption, tax evasion, and illicit activities such as narcotics trafficking. The integration of illegal funds into the economy undermines financial and social relationships, threatening national stability.
Federal Law No. 115-FZ
To address this issue, Russia has adopted Federal Law No. 115-FZ, which establishes fundamental provisions for countering money laundering and financing of terrorism. A set of regulatory acts has also been introduced to implement these laws.
The Russian Anti-Money Laundering (AML)/Countering the Financing of Terrorism (CFT)/Combating Proliferation of Weapons of Mass Destruction (CPF) System
The Russian AML/CFT/CPF system is a complex network involving:
- Federal executive bodies
- The Bank of Russia
- Government organizations
- Banks
- Non-bank financial institutions
Bank of Russia Takes Center Stage
As a key participant in the Russian AML/CFT/CPF system, the Bank of Russia plays a crucial role in regulating bank and non-bank financial institutions’ activities. The central bank’s primary objective is to mitigate money laundering/terrorist financing risk in the financial sector.
Measures to Prevent Money Laundering/Terrorist Financing
To achieve this goal, banks and non-bank financial institutions are required to implement measures aimed at preventing the use of the Russian financial system for illegal purposes. These include:
- Identifying customers
- Monitoring transactions
- Reporting suspicious activities to the Rosfinmonitoring (Russian Financial Intelligence Unit)
KYC Platform Launched
In a significant development, the Bank of Russia launched the Know Your Customer Platform (KYC Platform) on July 1, 2022. This system provides essential information about potential and existing clients’ risk level involvement in suspicious transactions.
Currency Control Measures
The Bank of Russia is also responsible for monitoring foreign exchange transactions carried out by banks and non-bank financial institutions. Currency control measures are an integral part of the state policy aimed at ensuring the stability of the Russian currency and the domestic foreign exchange market.
Conclusion
The Russian Federation’s efforts to combat financial crime demonstrate a commitment to maintaining national stability and preventing illicit activities. The introduction of robust regulations and measures aimed at mitigating money laundering/terrorist financing risk is a significant step towards ensuring the integrity of the financial system.