Financial Crime World

Russian Federation Fails to Effectively Combat Financial Crime and Terrorism Financing

Despite having a good understanding of its money laundering and terrorist financing risks, the Russian Federation has been criticized for failing to effectively combat these crimes.

Assessment by International Organizations

The Financial Action Task Force (FATF), the Eurasian Group, and MONEYVAL assessed Russia’s anti-money laundering and counter-terrorist financing (AML/CFT) system. While they found that Russia has a robust legal framework in place, there are still significant gaps in its approach to supervision and prosecution.

Recognized Risks

Russia recognizes that it faces significant money laundering risks due to corruption and its role as both a transit and destination country for narcotics trafficking. The country’s national risk assessment and law enforcement agencies have identified these risks, including terrorist financing risks.

  • Corruption: A major contributor to money laundering risks in Russia
  • Narcotics trafficking: Russia plays a significant role in the global drug trade

Challenges in Addressing Risks

Russia has struggled to effectively address these risks, particularly when it comes to freezing assets linked to terrorism, financing of terrorism, and proliferation of weapons of mass destruction.

  • Limited effectiveness in addressing terrorist financing and money laundering
  • Difficulty in recovering stolen funds for victims of crime

Financial Intelligence Unit

The country’s financial intelligence unit, Rosfinmonitoring, has excellent use of financial intelligence. However, this has not been enough to prevent significant money laundering and terrorist financing.

  • Excellent use of financial intelligence by Rosfinmonitoring
  • Limited impact on preventing money laundering and terrorist financing

Priorities for Improvement

Russia needs to focus more on investigating and prosecuting complex money laundering cases, especially those involving foreign transactions. The country also needs to strengthen its oversight of the banking sector and enhance its approach to supervision.

  • Investigate and prosecute complex money laundering cases
  • Strengthen oversight of the banking sector
  • Enhance approach to supervision

Room for Improvement

Russia has not fully addressed all areas of weakness identified by the FATF. The country still lacks awareness in certain sectors, such as mining precious metals and stones, about their role in money laundering and terrorist financing.

  • Lacking awareness in certain sectors (e.g., mining) about money laundering and terrorist financing risks
  • Need for improvement in licensing and sanctions for non-compliance with AML/CFT requirements

Conclusion

Russia has failed to address all areas of weakness identified by the FATF. The country needs to take concrete action to address these issues, including enhancing its approach to supervision, prioritizing investigating and prosecuting complex money laundering cases, and strengthening its oversight of the banking sector.

  • The FATF adopted this report at its October 2019 Plenary meeting
  • Russia must take concrete action to address these issues