Financial Crime World

Russia’s Money Laundering Schemes Exposed: Experts Call for Enhanced Supervision and Investigation

A recent report by the Financial Action Task Force (FATF), Eurasian Group, and MONEYVAL has highlighted significant concerns over money laundering and terrorist financing risks in the Russian Federation. Despite acknowledging its vulnerabilities, Russia has been urged to enhance its approach to supervision and prioritize the investigation and prosecution of complex money laundering cases.

Key Findings

  • The report highlights Russia’s recognition of its substantial money laundering risks due to corruption and narcotics trafficking.
  • Russia has identified and understands these risks through its national risk assessment and collaboration with law enforcement agencies.
  • Experts warn that Russia needs to address gaps in freezing assets linked to terrorism and proliferation, as well as ensure the extension of this obligation to all natural and legal persons.

Cooperation and Progress

  • Russia has cooperated with foreign counterparts through over 100 international agreements, making excellent use of financial intelligence collected from a wealth of data analyzed using sophisticated technologies.
  • The country has prioritized recovering funds for crime victims, returning around EUR 816 million annually.
  • However, it is advised to focus more on investigating and prosecuting complex money laundering cases, particularly those involving foreign transactions.

Challenges and Recommendations

  • Russia’s strengthened oversight of the banking sector has mitigated risks associated with criminal ownership or control. However, deficiencies in licensing remain, and sanctions for non-compliance with anti-money laundering (AML) and counter-terrorist financing (CFT) requirements are deemed ineffective.
  • Experts recommend addressing identified areas of weakness, including enhanced supervision and investigation of complex cases.

Historical Context

  • Russia’s understanding of money laundering and terrorist financing risks has improved significantly since its last assessment in 2008, with a robust legal framework established to address these threats.
  • However, the country needs to take concrete steps to combat money laundering and terrorist financing.

Conclusion

The FATF adopted this report at its October 2019 plenary meeting, underscoring the urgent need for Russia to take concrete steps to combat money laundering and terrorist financing. The report highlights both progress made by Russia in addressing these threats and areas where improvement is needed. It is essential that Russia addresses these weaknesses to ensure a safer and more secure financial system.

Recommendations:

  • Enhance supervision of complex money laundering cases
  • Prioritize investigation and prosecution of complex money laundering cases
  • Address gaps in freezing assets linked to terrorism and proliferation
  • Ensure extension of this obligation to all natural and legal persons
  • Strengthen oversight of the banking sector
  • Improve licensing practices
  • Implement effective sanctions for non-compliance with AML/CFT requirements