Assessments Identify Need for Improvement in Russian Anti-Money Laundering and Combating Financing of Terrorism Efforts

Introduction

Recent assessments have highlighted several areas where Russia’s anti-money laundering (AML) and combating financing of terrorism (CFT) efforts require improvement. The Financial Action Task Force (FATF), MONEYVAL, and the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) are urged to closely monitor these issues and ensure that necessary reforms are implemented.

Areas for Improvement

Lack of Effective Oversight of Illegal Alternative Remittance Systems

• Despite a fairly effective system for monitoring legal money transfer service providers, Russian law enforcement agencies have been slow to investigate and address the existence of illegal alternative remittance systems.
• This lack of oversight has raised concerns about the potential for these systems to be used for illicit activities.

Ineffective AML/CFT Regime for Designated Non-Financial Businesses and Professions (DNFBPs)

• The current system has two separate regimes for financial institutions and lawyers, notaries, and accountants, with different reporting requirements.
• However, many DNFBPs have implemented the requirements in a way that does not align with the law, raising concerns about their effectiveness.

Low Numbers of Suspicious Transaction Reports Filed by Lawyers and Notaries

• The numbers of suspicious transaction reports filed by lawyers and notaries are extremely low, suggesting that the requirements may not be well-publicized or enforced.
• This lack of reporting raises concerns about the potential for these professionals to inadvertently facilitate illicit activities.

Other Areas for Improvement

Regime for Legal Persons and Arrangements

• There is a lack of information on beneficial ownership and control of legal persons, which is required by the FATF Recommendations.
• This lack of transparency has been linked to the proliferation of “one-day” firms - commercial organizations registered under fake names without any intention of conducting real business.

Non-Profit Organizations (NPOs) and High-Value Goods Providers

• The evaluations suggest that the Russian authorities need to do more to address the risk posed by NPOs and high-value goods providers.
• These entities have been linked to money laundering and terrorist financing activities in other countries, and it is essential that Russia takes steps to prevent these risks.

Conclusion

The assessments highlight several areas where Russia’s AML/CFT efforts require improvement. Experts are calling for immediate action to address these weaknesses, including the need for Russia to strengthen its regime for legal persons and arrangements, improve oversight of DNFBPs, and increase transparency in beneficial ownership and control. The FATF, MONEYVAL, and EAG should closely monitor the situation and work with Russian authorities to ensure that necessary reforms are implemented.