Financial Crime World

Economic Activity Lacking Oversight in Russia

Despite being tightly regulated, a recent report has highlighted the lack of proper supervision over certain economic activities in Russia. The report, which covers anti-money laundering (AML) and counter-terrorism financing (CTF) measures in the country, reveals that legal professionals providing corporate services are not adequately supervised.

According to the report, these legal professionals are obliged entities under AML/CTF laws, but they cannot be relied upon to hold accurate and current basic or beneficial ownership information. This lack of oversight has raised concerns about the potential for illegal activities to go undetected.

Russia’s Cooperation with International Partners Praised

In other areas, Russia has been praised for its cooperation with international partners in fighting money laundering and terrorist financing. The country’s mutual legal assistance system is considered effective, with swift execution of extradition requests and timely provision of information on asset tracing.

  • Russia’s ability to conclude over 100 international cooperation agreements with foreign financial intelligence units (FIUs) has also been commended.
  • The report notes that the country’s supervisory approach needs refinement to ensure it is more risk-sensitive and independent from prudential supervision.

Recommendations for Improvement

To address these concerns, the report recommends five priority actions for Russia:

  1. Refine Supervisory Approach: Ensure adequate AML/CTF inspections by refining the supervisory approach.
  2. Prioritize Complex Money Laundering Cases: Prioritize investigations and prosecutions of complex money laundering cases linked to proceeds generated in Russia.
  3. Analyze Sources of Funds: Ensure that authorities fully analyze sources of funds and potential links to predicate offenses when investigating shadow financial schemes.
  4. Implement Terrorist Financing Sanctions Regime: Implement the Terrorist Financing Sanctions (TFS) regime without delay and require all natural and legal persons within Russia to freeze assets.
  5. Strengthen Obligated Entities’ Understanding: Strengthen obliged entities’ understanding of beneficial ownership requirements and their implementation, particularly in identifying legal persons owned or controlled by sanctioned entities.

Conclusion

While Russia has made progress in fighting money laundering and terrorist financing, there are still areas that require improvement to ensure the country’s economic activity is properly supervised and regulated. By implementing these recommendations, Russia can improve its AML/CTF regime and reduce the risk of illegal activities going undetected.