AML Compliance Guidelines: Russia

Regulatory Bodies in Russia

The Central Bank of the Russian Federation (Bank of Russia)

The Central Bank of the Russian Federation (Bank of Russia) is responsible for establishing AML regulations for financial institutions. It supervises banks to ensure compliance with these standards. The Bank issues and can revoke licenses based on AML adherence. It also coordinates with other authorities for AML enforcement. Lastly, the Bank provides guidance and training for institutions on AML best practices.

Rosfinmonitoring (Federal Financial Monitoring Service)

Rosfinmonitoring is Russia’s lead agency for combating money laundering and terrorist financing. It analyzes financial transactions, ensures institutions comply with AML, CFT, and Federal Law No. 115-FZ, and enforces Enhanced Due Diligence as outlined in Federal Law No. 134-FZ.

Federal Law No. 115-FZ

Transactions Subject to Mandatory Control

• Enumerates specific types of transactions that are subject to mandatory control, including transactions exceeding a certain monetary threshold and transactions involving precious metals and stones.

Grounds for Implementing Mandatory Control

• Transactions become suspicious due to inconsistencies in transactional behavior, unusual complexity, or seemingly irrational economic purpose, among other criteria.

Suspension of Transactions

• Authorities may suspend a transaction for up to two working days if there’s suspicion related to money laundering or financing terrorism, pending further investigation.

Reporting of Information

• Entities are obligated to send reports about controlled or suspicious transactions immediately but no later than the working day following the day of the transaction.

Measures for Countering the Legalization (Laundering) of Proceeds from Crime and Financing of Terrorism

• The Russian Federation can introduce special preventive measures based on international risks. These can be restrictions or prohibitions on transactions, mandatory financial reporting, or enhanced customer due diligence.

Measures to Identify Clients, Representatives of Clients, Beneficiaries, and Beneficial Owners

• Entities are required to take measures to establish the identity of their clients and, if needed, representatives, beneficiaries, and beneficial owners, especially before establishing business relations or conducting transactions.

International Cooperation

• Emphasizes the commitment of the Russian Federation to cooperate with foreign states and international organizations in combating money laundering and financing terrorism.

Amendments to Law by the Central Bank

• The Central Bank is granted the power to instruct financial institutions on specific actions that need to be taken to comply with international sanctions. This might include stopping transactions, freezing assets, or enforcing other preventive measures.
• The Central Bank can demand additional documentation or information from financial institutions to ensure their operations comply with the established international sanctions.
• Article 115-FZ implicitly permits the Central Bank to collaborate with foreign financial watchdogs, ensuring cohesive implementation of sanctions.

Amendments to the Federal Law on Countering Money Laundering and Terrorism Financing (115-FZ)

• Enhanced Due Diligence (EDD): This part lays out the specifics of EDD, which includes additional checks on foreign politically exposed persons (PEPs), their relatives, and close associates. Financial institutions might need to obtain more information about the nature and purpose of the business relationship, the source of funds, and continuously monitor these relationships.
• Transaction Restrictions: Institutions must have mechanisms in place to identify and prevent transactions that may contradict international sanctions. It’s essential for them to have updated lists of individuals and entities subjected to these sanctions and continuously check their clients against these lists.
• Reporting Obligations: Financial institutions are required to promptly inform the Federal Financial Monitoring Service about operations that were halted due to suspicions related to international sanctions.

Changes to the Criminal Code

• Criminal Liability: This section defines the thresholds and conditions under which evasion of financial controls becomes a criminal offense. It takes into consideration the intent, the amount involved, and the nature of the evasion.
• Penalties: Depending on the offense’s gravity, penalties can range from monetary fines to deprivation of the right to hold specific posts or engage in certain activities, to even imprisonment. The specifics will detail the duration or amounts associated with each type of offense.

Transitional Provisions

• Completion of Pre-existing Operations: This is about operations that began before the enactment of this law. The stipulation ensures that such operations, even if they don’t align perfectly with the new regulations, can be concluded without legal consequences, as long as they were compliant at the time they were initiated.

References:

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