On Participation in ARB Conference on Banks' Compliance with AML/CFT Regulations

Rosfinmonitoring Director Yu. Chikhanchin took part in the 15th annual conference "Topical Issues of Credit Institutions' Compliance with the Russian AML/CFT Regulations", held on April 21 under the patronage of the Association of Russian Banks.

ARB President G. Tosunyan thanked all conference participants, reminding them of the importance of communication, questions and dialogue to tackle the common problem of business and state security.

Rosfinmonitoring Director noted that the revocation of 300 bank licenses in recent years has resulted in loss of some public trust in the banking system, which now needs to be restored.

"The prospect of the upcoming assessment of Russia's AML/CFT system, scheduled for the next year, requires us to demonstrate its effectiveness," said Mr. Chikhanchin. "Given credit institutions' status as the key targets of the primary financial monitoring efforts, the main burden of responsibility for improving transparency of the financial system by safeguarding it against illicit capital lies on the banking sector."

Rosfinmonitoring Director drew participants' attention to the following key FATF requirements that should be in focus of the current efforts:

  • Transparency of financial institutions, to ensure they are not under criminal control;
  • Effectiveness of the system for identifying criminal proceeds and their reporting to the designated body.

Yu. Chikhanchin praised the high quality AML/CFT work carried out by the majority of the country's banks, a fact that was instrumental in identifying the culprits behind the recent terrorist attack in St. Petersburg.

Among the key areas of banks' activity identified by Rosfinmonitoring Director are:  transparency of financial institutions, defense against illegal actions – including by the credit institution's management – detection of illegal transactions, assessment of the customer risks, freezing of terrorist assets, mitigation of risks posed by new technologies, and identification of the sources and tracking the movement of clients' funds.

Yu. Chikhanchin recalled Rosfinmonitoring launching a secure personal area – where companies can see how they are rated by authorities with respect to several dozen indicators and learn about emerging risks – which is currently being used by approx. 30,000 financial organizations. The next step would be to launch a feedback channel to facilitate key intelligence sharing.

Rosfinmonitoring Director also reminded participants that banks would soon have access to information on other credit institutions' refusals to open accounts for clients, stressing that the inclusion of any client on that list does not mean that this client should be denied service, but rather that the bank should exercise enhanced due diligence. Rosfinmonitoring is also working on the development of financial profiles of terrorists, which will allow the agency to target those involved in terrorist activities. The near-term plans include drafting regulations designed to avoid repeat identification of holding companies and development of a UN lists-based freezing procedure targeting individuals involved in the proliferation of weapons of mass destructions.

Rosfinmonitoring Deputy Director P. Livadny mentioned the need to provide information on customer beneficiaries and the plans to set up a registry of such information. Additionally, he broached the subject of remote account opening by legal entities and associated risks. He also drew participants' attention to the procedures for freezing the assets of persons involved in terrorism, control of auditors and other issues related to regularity improvements. At the same time, he stressed that the agency's goal was to reduce regulatory pressure while protecting the interests of the state.