Russia set for tough new money laundering stance

Russia set for tough new money laundering stance

Jul 28 2010 Martin Coyle

Russia is set to introduce tough new anti-money laundering legislation to bring the country into line with Financial Action Task Force guidelines. The country was only removed from FATF’s blacklist in 2002 after it made pledges to reform its AML laws. The changes to legislation, which were signed by Russian president Dmitry Medvedev this week, represent the country’s attempt to clean up its reputation, which has been besmirched with the perception that the country is awash with dirty money. The changes will be enacted in 180 days and will herald a crackdown on Russian citizens attempting to use companies outside Russia to launder money. For example, Cyprus is a favourite destination for Russian money launderers. Until now the local or destination bank would take action against the launderers but no action would be taken in Russia. The government is introducing more onerous disclosure requirements to eradicate these unscrupulous practices.

“The new law will make it more difficult for Russian citizens and Russian companies with overseas subsidiaries to launder money using overseas bank accounts. In that regard, not only will the overseas financial institutions scrutinise certain transactions, but the Russian government will also now have the chance to do so as well,” Daniel Klein, co-founder of Russian law firm Hellevig, Klein & Usov in Moscow, told Complinet.

The changes, which will also affect foreign institutions in Russia, will ensure that firms cannot reveal to their clients what steps they are taking to prevent money laundering. There will also be a requirement that closer monitoring takes place on transactions that involve countries not on the FATF safe list. Warnings can be issued to those that circumvent the rules.

“Money laundering in Russia has been decreasing over the years but is still a very significant problem. The new law will further tighten the screws both on money laundering from hard-core criminals as well as companies just trying to cut corners and save on taxes,” Klein said.

Russia’s current AML legislation was amended in 2004 to broaden the list of companies captured. More recently institutions have been ordered to report suspicious transactions involving around €15,500 to the Federal Financial Monitoring Service.