Title: FATF Report: Russia’s Progress in Enhancing its Anti-Money Laundering and Counter-Terrorist Financing Regime
First Follow-Up Report with Re-Ratings (December 2023)
Introduction
The Financial Action Task Force (FATF) has published the first follow-up report on Russia’s progress in enhancing its Anti-Money Laundering/Counter-Terrorist Financing (AML/CFT) regime since the Mutual Evaluation Report (MER) was approved in October 2019. This report evaluates the advancements made by the Russian Federation in addressing the shortcomings identified in the MER and reconsiders ratings based on significant improvements. Additionally, it examines changes to Russia’s AML/CFT framework regarding new FATF requirements.
Findings
In October 2019, the MER led to the Russian Federation being given a regular follow-up status. A team of experts from Uzbekistan, India, China, and the EAG Secretariat analyzed Russia’s request for technical compliance re-ratings and prepared this report. Sections III and IV of the report focus on improvements addressing deficiencies in Recommendations 6, 7, and 25, as well as ensuring compliance with new requirements under Recommendation 15.
Table 1: Technical Compliance Ratings as of October 2019
The MER identified multiple areas in which the Russian Federation needed improvement. However, efforts have been made to rectify these deficiencies.
Changes to Improve Technical Compliance
Addressing Deficiencies
According to Section III of the report, the Russian Federation submitted changes aimed at rectifying the deficiencies noted in the MER and ensuring compliance with new requirements under Recommendation 15. For instance, amendments were made to Federal Law No. 115-FZ concerning the implementation of United Nations Security Council (UNSC) sanctions lists. These amendments ensure stricter application of freezing measures for all individuals and organizations.
Additionally, improvements were made in applying targeted financial sanctions (TFS) in the Russian Federation, as requested under Recommendation 6. Now, the country provides for the immediate application of TFS in accordance with UNSCR 1373.
However, there are still some concerns regarding the application of TFS during non-working hours for reporting entities that do not provide services and the need for more detailed regulation and improvement of individuals’ liability to cover all possible cases of TFS violations.
Recommendation 15 Compliance
The report acknowledges the Russian Federation’s progress in addressing deficiencies that were not consistent with the standards of Recommendation 15, which requires the implementation of measures to identify and prevent the establishment and operation of Money Value Transfer Services. Improvements include adopting measures to identify and verify the identities of customers and beneficial owners before opening customer accounts, conducting ongoing customer due diligence, and implementing risk-based controls.
Conclusion
The Russian Federation has made substantial progress in addressing the deficiencies identified in the MER, as evidenced by upgrades to technical compliance ratings for Recommendations 6, 7, and 25. However, there are still minor concerns, particularly regarding individual liability and non-compliance during non-working hours. The Russian Federation continues its efforts to fully adhere to the FATF Recommendations in future reports.