Financial Crime World

Russian Federation Under Scrutiny for Combating Financial Terrorism: FATF Report Reveals Room for Improvement

Understanding of Money Laundering and Terrorist Financing Risks

A recent report by the Financial Action Task Force (FATF), the Eurasian Group, and MONEYVAL has highlighted the Russian Federation’s understanding of its money laundering and terrorist financing risks. While Russia recognizes that it faces significant money laundering risks due to corruption and narcotics trafficking, there are areas where it can improve its approach to supervision and prioritize the investigation and prosecution of complex money laundering cases.

Russia has established policies and laws to address these risks, with a legal framework in place supported by strong domestic coordination and cooperation. The country’s anti-money laundering (AML) and counter-terrorist financing (CFT) framework is robust, but there are areas for improvement.

Enhancing Asset Freezing and Sanctions

The report notes that Russia needs to enhance its ability to freeze assets linked to terrorism, financing of terrorism, and proliferation of weapons of mass destruction. Additionally, the country’s sanctions for banks that do not comply with AML/CFT requirements are not effective or dissuasive.

International Cooperation

Russia cooperates with foreign counterparts through over 100 international cooperation agreements with its financial intelligence unit, Rosfinmonitoring. Authorities in Russia make excellent use of financial intelligence, based on a wealth of collected data and analyzed with sophisticated technologies to contribute to money laundering and terrorist financing investigations.

Investigating and Prosecuting Complex Money Laundering Cases

Despite these efforts, the report notes that Russia needs to focus more on investigating and prosecuting complex money laundering cases, especially those involving money being laundered abroad. The country has prioritized returning funds to victims of crimes, but needs to redirect its efforts towards combating financial terrorism.

Licensing Regime Deficiencies

The report also identifies deficiencies in Russia’s licensing regime for financial institutions. Additionally, there are concerns over the country’s mining sector, which is a significant center for precious metals and stones. According to the report, this sector’s understanding of risk does not align with Russia’s risk assessment.

Way Forward

Since its last assessment in 2008, Russia has strengthened its understanding of money laundering and terrorist financing risks and developed a robust legal framework to address them. However, the country needs to address the areas of weakness identified in the report. The FATF adopted this report at its October Plenary meeting, providing a roadmap for Russia to improve its efforts in combating financial terrorism.

Roadmap for Improvement

The report provides a roadmap for Russia to:

  • Enhance asset freezing and sanctions
  • Improve investigation and prosecution of complex money laundering cases
  • Address deficiencies in licensing regime for financial institutions
  • Align the mining sector’s understanding of risk with Russia’s risk assessment

By addressing these areas, Russia can strengthen its efforts in combating financial terrorism and improve its global reputation.