A coordination meeting with representatives of the law enforcement and supervisory authorities of the region dedicated to the preparation for the fourth round of mutual assessment of the Financial Action Task Force (FATF) took place under the chairmanship of N. Tsukanov, Presidential Plenipotentiary Envoy to the Ural Federal District, in Yekaterinburg on July 25, 2018.
It is planned that evaluators are going to visit the constituent entities of the Russian Federation as part of this round of the FATF evaluation. In this regard, as instructed by A. Vayno, Chief of Staff of the Presidential Executive Office, the federal districts are hosting a series of meetings in cooperation with representatives and under the guidance of Rosfinmonitoring focused on the high-quality preparation of the local law enforcement and supervisory authorities for the forthcoming evaluation.
N. Tsukanov said in his opening speech that both the prestige of Russia on the international stage and the state of the national AML system depend on the results of this evaluation.
‘Experts will focus on the result of the elimination of money laundering risks. They will look into such areas as the demand by the law enforcement and supervisory authorities for the results of financial investigations, investigations into money laundering and the financing of terrorism, confiscation of proceeds of crime and instrumentalities’, the Presidential Plenipotentiary Envoy to the Ural Federal District said, stressing that information available at this meeting ‘speaks to the fact that the anti-money laundering system in the Ural Federal District is operating inadequately’.
For instance, as he explained, the available potential of financial intelligence is not utilised to its full extent. According to the materials of financial investigations conducted by the Interregional Directorate of Rosfinmonitoring for the Ural Federal District, there were opened 71 criminal cases in the first half of 2018, of which only 6 cases (less than 1% from all financial investigations) are related to the liquidation of funds. Moreover, federal district courts did not even confiscate seized funds and other property at all.
P. Livadnyy, State Secretary – Deputy Director of Rosfinmonitoring, said to the participants that V. Putin, President of the Russian Federation, approved the Development Concept of the System for Anti-Money Laundering and Combating the Financing of Terrorism on May 30. There are 5 risk areas at the heart of the concept.
‘First of all, these include risks in the financial sector, risks related to the use of budget funds, corruption risks related to the two risks above, terrorism financing risks and risks in the field of illicit drug trafficking’, P. Livadnyy explained.
He stressed that, on the one hand, it is necessary to decrease the level of the said risks to the greatest possible extent and, on the other hand, to show to the FATF that the existing AML system is efficient.
‘The FATF evaluation should demonstrate to the international community to what extent our words match our actions. We cannot fail”, P.V. Livadnyy stated.
He reminded that the key objective of the AML system is to deprive a criminal of the proceeds of his or her wrongful acts or of the inflow of such funds into the legal financial system. According to the Deputy Director of the Russian financial intelligence unit, the current Russian system is preventive and restrictive. However, as the criminological environment shows, prevention can by no means always be effective.
He also called for the strengthening of supervisory activities. ‘From the point of view of the FATF, it is of prime importance that financial institutes and other subjects of anti-money laundering activities establish the beneficiary owners of businesses, i.e. individuals, from among their clients. It is important to improve the quality of reports of dubious transactions coming to Rosfinmonitoring’, P. Livadnyy emphasised.
The Deputy Director of Rosfinmonitoring declared that the overall results of the Russian AML system ‘impress the international community’, especially in terms of the level of coordination, cooperation and unity of its bodies. ‘Although the practical part can and must be better’, he added.
‘The anti-money laundering system is one of the most efficient tools that enable us to purge the economy of criminality and shady funds. Let us all help our country’, P. Livadnyy appealed to the participants.
G. Bobrysheva, Deputy Director, also summed up the meeting with the supervisory authorities and the regional private sector, which took place the day before at the Ural Main Directorate of the Central Bank of the Russian Federation, and once again reiterated the special role of financial institutes in AML/CFT
A. Kardapoltsev, Head of the Interregional Directorate for the Ural Federal District, said that the continuous improvement of the process of identifying immediate risks and threats, including regional ones, in the area of money laundering and the financing of terrorism should remain one of the basic vectors for the members of the anti-laundering system in the Ural Federal District in the lead-up to the fourth round of the FATF expert mission.
‘It can be said for the moment that the outlined concerted efforts helped to build reliable barriers that obstruct the inflow of proceeds of crime into the credit and financial sphere of the region. This is evidenced by the decreasing number of dubious transactions, including the ones related to the illicit cash-out and offshoring of funds’, A. Kardapoltsev reported.
The illicit cash-out figures dropped by more than 2 times in 2017; there was a decline in the volume of funds withdrawal abroad from the region and Russia last year, namely by more than 2 times as compared with 2016 and by 8 times as compared with 2015.
The Head of the Interregional Directorate emphasized the activation and involvement of reporting subjects in distant cooperation with the use of the Personal Account on the website of Rosfinmonitoring.
Rosfinmonitoring is a centre for the assessment of threats to national security arising from money laundering, financing of terrorism and proliferation of weapons of mass destruction and for the development of measures to counter these threats.
In 2018, the Russian Federation is going to be evaluated by an on-site evaluation mission of the Financial Action Task Force (FATF), following the results of which the degree of compliance of the Russian Federation with the international standards in anti-money laundering and combating the financing of terrorism (AML/CMT) will be determined.
According to the outcomes of the previous assessment in 2008, the FATF experts identified a number of shortcomings (including inadequate transparency of information on beneficial owners and control over legal entities), which led to the placement of Russia on regular monitoring.
In September 2014 after the successful presentation of the third Russian follow-up report to the MONEYVAL plenary meeting, our country was removed from the regular monitoring until the next evaluation. If an FATF compliance rating is low in 2018, an enhanced monitoring regime and economic sanctions introduced will be introduced.
Considering the importance of the upcoming preparation for the FATF evaluation, the President of the Russian Federation formed a special committee with representatives of the General Prosecutor’s Office of the Russian Federation, Ministry of Internal Affairs, Federal Security Service, Federal Customs Services, Investigative Committee, Federal Tax Service, Russian State Assay Chamber, Federal Service for Supervision of Communications, Information Technology, and Mass Media, Ministry of Justice of the Russian Federation and the Central Bank. The commission is headed by the Director of Rosfinmonitoring.
The commission is tasked with ensuring teamwork and coordination of the activities of all state authorities and organisations participating in the preparation for the FATF evaluation.
The methodology for assessing the AML/CFT systems was approved by the FATF in 2013 and involves the consideration of two complementary components: technical compliance and effectiveness.
Technical compliance is meeting the FATF 40 Recommendations, while effectiveness is a capacity of the anti-money laundering system’s participants to achieve immediate outcomes (IO) related to the elimination of money-laundering and terrorism financing risks.