Published: 05.11.2020

On November 5, 2020, the Association of Russian Banks held the 18th Conference on Credit Institutions’ Compliance with AML/CFT Requirements. The event was attended by Yu. Chikhanchin, Director of Rosfinmonitoring, and G. Neglyad, State Secretary and Deputy Director.

Speech of Yu. Chikhanchin, Director of the Federal Financial Monitoring Service:

We see how the world is changing. New challenges and threats arise in absolutely all areas. Globally speaking, destructive processes and terrorist activities are escalating, enormous resources are redirected to fight the pandemic. In light of this, the anti-money laundering system should not be side-lined.

Moreover, over the last two years foreign partners have become increasingly interested in Russian individuals involved in the so-called laundromats. Global money-laundering networks are now in the focus of the international community, with attention mostly paid to certain banks previously involved in such activities as well as to financial intermediaries. The efforts made by financial intelligence and law enforcement authorities have demonstrated that there is no Russian, Moldavian or Kyrgyz laundromat since this problem knows no boundaries and nationalities.

Thanks to information received from banks, we manage to thwart schemes of the above-mentioned laundromats and to suppress illegal activities of a number of shadow platforms at the national level. Besides, we have managed to prevent the transfer of more than RUR 25 billion abroad and the illegal cash-out of around RUR 60 billion.

Prompt cooperation with banks has enabled us to suppress activities taken by a group of companies that transferred billions of Rubles to Central Asian countries.

All this shows that the financial monitoring primary element is of critical importance in this area. If a trans-border channel of the credit institution’s system does not work, then you may expect a request from a foreign correspondent bank next day, and we may expect it from our colleagues from financial intelligence. This makes Russian banks highly vulnerable since they risk becoming a link in the global money-laundering infrastructure.

Current events unfolding in some states of the Eurasian region also deserve increased attention and control from Russian banks.

Destabilising and destructive activities require financial support, and when payments are forwarded to these countries, it is necessary to understand clearly their purposes and destination. It is vital to understand here how effective the foreign beneficiary bank’s internal control system is, how adequate supervisory and control mechanisms of foreign regulators and law enforcement structures are, and what risks you will face in the future.

Internally, the landscape of risks is also changing. The pandemic and restrictions associated with it force us to act more promptly.

This allowed us to focus our attention on new indicators and to adjust additionally the system back in April.

First and foremost, new shadow and criminal schemes are disguised as a fight against the coronavirus and support for citizens and business. It applies to both cash-out and tax evasion schemes and often to embezzlement of funds allocated by the state, and sometimes it is just fraud against certain individuals.

Credit institutions’ additional attention towards these transactions helped us mark high-risk financial flows and target them more effectively.

Special control jointly with persons involved in the anti-money laundering system is organised with the use of state funds allocated for the largest infrastructure projects to achieve national development goals.

Financial institutions are required to consider this task as strategically important. Experience is already built up: we have a system for monitoring state defence order and state procurement where your information is invaluable. It helps us identify inconsistencies in calculations, diversion of funds into deposits, misuse of public funds. This information is in great demand among law enforcement authorities which – given the received information – have opened this year alone more than 120 criminal cases against those who attempted to steal public funds. Approximately RUR 108 billion out of those funds has already been arrested, and confiscation sentences amounting to RUR 10 billion have been imposed.

Following financial investigations conducted by Rosfinmonitoring where your information was used, we have managed to return more than RUR 18 billion to the budget in 2020 alone

We should take into consideration that money laundering means and tools are constantly changing. Shadow entities demonstrate a high level of adaptation to defensive and preventive mechanisms. For instance, we have recently observed an increased involvement of non-residents in suspicious schemes. These are not companies that invest money into the Russian economy, manufacture products, or provide services. This is a new type of transit companies. They incorporate into money siphoning, cash-out, and tax evasion chains. There is generally no information about non-residents in government databases, and it complicates risk assessment at the outset.

Now special attention should be paid to transactions involving the turnover of crypto-assets. The regulation system in this area is still in development. However even now we can witness increased risks of cryptocurrency being used in drug trade, corruption schemes, and terrorist financing. 

Just a while ago we and the Ministry of Internal Affairs identified a criminal group engaged in the drug industry whose total money laundering volume amounted to RUR 2.5 billion. The group partially used cryptocurrency in its settlements. The main goal of such schemes is related to contactless sales via the Darknet and the involvement of young people who easily learn how to use new technologies. We are working with a number of foreign colleagues on this case.

We appreciate it that some credit institutions sent their suspicious transaction reports thereby helping us reveal a large-scale scheme.

International practice shows that banks learn to identify persons involved in cryptocurrency transactions by mostly paying their attention to fiat money exchange offices. Experts presume that the monthly turnover of international criminal groups engaged in drug trade involving cryptocurrency now exceeds USD 1 billion.

We would be most grateful if, under the current circumstances, financial institutions and, first of all, credit institutions start monitoring high-risk activities and help identify persons involved in such schemes.

Let me give you some examples. The analysis of suspicious transaction reports (STR) received from banks enabled us to identify an illegal online bookmaker that caused more than RUR 62 billion in criminal damages. The investigation is now international. Criminal proceedings were instituted, and more than RUR 1.5 billion was arrested.

We have identified terrorist financing channels involving national and international financial systems. Your information has helped us expose more than 70 individuals engaged in terrorist financing or attempted terrorist financing over the last years. Criminal cases have been opened against these persons, more than 20 of them are already convicted. We use the information above to identify close associates of designated persons.

I would like to suggest that we address the issue concerning further cooperation with compliance representatives of banks under the auspices of the Expert Advisory Group of the National Anti-Terrorist Committee (NAC) for Combating the Financing of Terrorism where in 2019 our colleagues presented very remarkable practical examples of the identification of persons involved in terrorist activities.

The International Compliance Council of the countries of the Eurasian Group (EAG), a FATF-style regional body, actively starts its work today, and we invite you to participate in it. Foreign countries’ experience will be useful to you.

In conclusion, I would like to note that the development of new cooperation formats between the state and the private sector is especially important in the current situation. The Association of Russian Banks traditionally plays a key role in this.

The Russian anti-money laundering system celebrates its 20th anniversary next year. I believe that we have laid a solid foundation for further progressive development.

I wish you and your family good health so that we could overcome this difficult period.