The Federal Law No. 115-FZ of August 8, 2001 “On countering legalization of illegal earnings (money laundering) and financing of terrorism” is a key national law regulating the prevention, detection and suppression of activities related to illegal money circulation. The monitoring function is assigned to the Federal Financial Monitoring Service (Rosfinmonitoring).
Rosfinmonitoring’s public annual report 2015 lists a number of illegal activities related to money laundering and terrorism financing:
- Illegal receipts of budget funds devoted to support of economic sectors;
- Cash withdrawals via consumer credit cooperatives, microfinance institutions, mail transfers;
- Tax evasion involving the sales of precious metals and gems on the market or through the banks;
- Placement of funds in the non-State pension funds for later use in the extremely risky investment projects with the aim of no return;
- Participating in the withdrawal of funds abroad under the guise of securities purchases;
- Using of bank paying agents, factoring companies as a source of cash withdrawal;
- Kickbacks received from intermediation to win state procurement including subsequent transfers of funds to offshore jurisdictions via affiliated companies (fraudulent entities often referred to as “fly-by-night” – companies) etc.
As a result of the diligent efforts by the Regulator (the Central Bank of the Russian Federation) and Rosfinmonitoring, two main trends have emerged in financial markets:
- Unscrupulous companies have begun to move transactions to larger financial institutions with the aim to become undetectable amongst the huge volume of financial transactions;
- Illegal transactions are being moved to non-bank credit institutions
The following measures are undertaken by the regulator to identify noncompliance of Anti-money laundering laws:
- Tightening of fiduciary requirements for financial institutions
- Licenses revoked: In 2015 licenses of 43 banks were revoked because of non-compliance of anti- money laundering and for financing of terrorism; 47 banks – for making dubious transactions
In 2015 financial services institutions refused to:
- Sign new client agreements with 142,000 companies
- Make financial transactions in 94,000 cases
and terminated bank account agreements in 23,000 cases.
The 2015 figures are 2-3 times higher than in 2014. It became also evident that bank payment agents and factoring companies used illegal schemes to withdraw funds up to US$102 million.
The multitude of fraudulent schemes and the growth in the number of interventions performed by the regulator highlights the necessity to verify the legitimacy of counterparties to avoid doing business with illegal/fraudulent entities and, consequently, to mitigate the risk of future losses.
The Information and Analytical system Globas-i® http://www.credinform.ru/en-US/globas provides the ability to verify counterparties before signing the contracts with Russian entities including the monitoring of their activities. This on-line solution permits the identification of linkages between counterparties and their affiliated companies (by owners and CEOs), to identify liquidated, or newly registered and offshore companies. Globas-i® system may identify signs of fraudulent activities; predict potential bankruptcies and other indications of unscrupulous activities.
The detailed data on arbitration proceedings will help to determine if a counterparty is listed as a defendant in disputes with the Federal Tax Service on matters related to VAT reimbursement, charges of additional income tax (these can mark using of fraudulent schemes). It is also possible to identify linkages between public tender sellers and buyers, to compare the market price of products and services with the price offered by the winner and determine other suspicious factors in the counterparty’s activity.
Source: Credinform Russia