Financial Crime World

Russia’s War on Money Laundering and Terrorist Financing: The Crucial Roles of Central Bank and Rosfinmonitoring

In the complex world of Russian finance, two essential regulatory bodies stand as the primary defenders against money laundering (ML) and terrorist financing (TF): The Central Bank of Russia (Bank of Russia) and Rosfinmonitoring.

Central Bank of Russia

The Central Bank of Russia plays a pivotal role in shaping Anti-Money Laundering (AML) regulations for financial institutions. Its responsibilities include:

  • Oversight: Ensuring institutions follow the AML standards
  • Licensing: Issuing and revoking institution licenses based on adherence
  • Collaboration: Working with other authorities for ML/TF enforcement
  • Guidance and Training: Providing banks with the latest AML best practices

Rosfinmonitoring

Rosfinmonitoring is Russia’s top agency responsible for countering ML and TF. Its duties include:

  • Analysing transactions: Investigating financial transactions for ML/TF risks
  • Enforcement: Implementing AML, CFT, and Federal Law No. 115-FZ compliance
  • EDD: Implementing Enhanced Due Diligence (EDD) measures as required by Federal Law No. 134-FZ
  • Monitoring: Tracking financial transactions for any signs of non-compliance

Federal Law No. 115-FZ

This law sets mandatory control requirements for specific transactions, which can include those that:

  • Exceed a predetermined threshold
  • Involve precious metals and stones

The authorities may deem transactions suspicious based on inconsistencies, unusual complexity, or irrational economic purpose, which, if found, can lead to:

  • Reporting: Mandatory reporting
  • Suspension: Up to two working days of transaction suspension

Measures against ML/TF

Russia can introduce special measures based on international risks, including:

  • Restrictions: Placing restrictions
  • Prohibitions: Prohibiting specific activities
  • Financial reporting: Requiring mandatory reporting
  • EDD: Enforcing enhanced customer due diligence

Entities must establish the identities of their clients, along with their representatives, beneficiaries, and beneficial owners before establishing business relations or conducting transactions.

International Cooperation

International cooperation is crucial to Russia’s efforts against ML and TF. The country:

  • Collaborates: Works with foreign states and international organizations
  • Sanctions: Implements international sanctions

Powers of Central Bank of Russia

The Central Bank of Russia holds significant power under Federal Law No. 115-FZ, including:

  • Instructing institutions: Requesting institutions to comply with international sanctions
  • Assets: Freezing assets
  • Preventive measures: Taking preventive measures
  • Lists: Providing updated lists of sanctioned individuals and entities

EDD Measures involving PEPs

Amendments to Federal Law No. 115-FZ emphasize EDD measures for foreign Politically Exposed Persons (PEPs), their relatives, and close associates. Institutions must:

  • Obtain information: Gather extensive information about the nature and purpose of the business relationship and the source of funds
  • Monitor relationships: Continually monitor these relationships for signs of non-compliance

Identifying and Preventing Transactions that Contradict International Sanctions

Institutions must:

  • Maintaining lists: Have up-to-date lists of sanctioned individuals and entities
  • Checking clients: Continuously check their clients against these lists

Consequences for Evading Financial Controls

Penalties for evading financial controls depend on:

  • Intent: The intent behind the non-compliance
  • Amount: The amount involved
  • Nature of offense: The nature of the offense

These penalties serve as a deterrent and a means of maintaining order in the Russian financial sector.

Transitional Provisions

Transitional provisions ensure that pre-existing operations can be concluded without legal consequences as long as they complied with regulations at their onset.

For further insights and details, consult the International Money-Laundering Information Network and the Federal Service for Supervision of Communications, Information Technologies, and Mass Communications (Roskomnadzor).

Additional Insights

For additional insights, consult the following resources:

  • International Money-Laundering Information Network
  • Federal Service for Supervision of Communications, Information Technologies, and Mass Communications (Roskomnadzor)