Federal Law No. 115-FZ “On Combating Money Laundering and the Financing of Terrorism” (the “AML Law”) came into force on 1 February 2002, and has been revised a number of times to reflect the global developments in this area.
It is the primary legislative act in the Russian Federation aimed at preventing money laundering activities and the financing of terrorism, and is supported by numerous recommendations, binding instructions and regulations of the CBR and other authorities.
The AML Law applies to individuals and legal entities engaged in transactions with monies (and other assets) in Russia, as well as so-called “regulated entities” and the state authorities responsible for monitoring money laundering activities in Russia. It provides for mandatory internal procedures and reporting requirements in the event of any suspicious or otherwise monitored transactions.
Financial institutions, such as banks and non-banking credit institutions, professional participants of the securities market, insurance and leasing companies, postal and other non-credit institutions that deal with the transmission of money (the “Regulated Entities”), are required, with limited exceptions, to perform due diligence by ascertaining the identity of a customer (and beneficiary) and monitoring transactions for suspicious activity. To ensure compliance, most Regulated Entities are obliged to develop and implement sophisticated internal regulations and procedures. They must also maintain a sufficient level of education and training on these matters for relevant employees.
In addition, according to recent amendments to the AML Law, Regulated Entities which are members of a banking group or a banking holding1 are entitled to exchange client information to identify clients as required by the AML Law (provided that they comply with certain requirements). However, this new rule does not allow the transfer of client information to foreign parent banks or foreign members of a banking group.
The Regulated Entities must identify and report transactions of a suspicious nature to the Federal Financial Monitoring Service, a designated monitoring authority. These transactions, among others, include cash or non-cash transactions of at least RUB 600,000 (EUR 8,580) and immovable property transactions of at least RUB 3m (EUR 42,900), or the equivalent of these amounts in foreign currency. If one of the parties to a transaction is suspected of being related to terrorist activity, the transaction is subject to mandatory control regardless of the amounts involved.
The Russian anti-money laundering legislation is consistent with the relevant international practice and provides for advanced identification and control procedures in respect of foreign politically exposed persons (so-called “PEPs”).
The CBR may undertake preventative and/or enforcement measures in respect of a Regulated Entity involved in transactions that infringe the anti-money laundering legislation. These measures may include:
- informing the entity of the CBR’s concern regarding its activities;
- suggesting that the entity provides the CBR with a programme for improvement; and
- establishing additional monitoring measures.
Enforcement measures may also include the imposition of a penalty and the withdrawal of the banking licence. The Russian Criminal Code provides for criminal liability for breaches of the legislation on anti-money laundering and this includes penalties and imprisonment for the bank’s management.