The Russian Federal Financial Monitoring Service (“Rosfinmonitoring”) has set forth a draft law, introducing amendments to a number of legal acts and aimed at increasing the transparency of currency transactions and at strengthening anti-money laundering measures in Russia.
The most important amendments are planned to be introduced into Federal Law No. 115-FZ dated August 7, 2001 “On countering the legalization of illegal earnings (money laundering) and the financing of terrorism” (the “Money Laundering Law”). The draft bill considerably expands the list of monetary transactions subject to obligatory control by Rosfinmonitoring, such as insurance and reinsurance transactions exceeding 3 million rubles (approximately US$94,000), provision of loans with interest rate two or more times lower than the current refinancing rate, cash loans from so-called microfinancial organizations, etc. The draft bill amends the list of entities subject to the Money Laundering Law by complementing the existing list with mutual insurance companies, tax brokers, licensed non-state pension funds and mobile operators entitled to perform wireless services. Pursuant to the draft law, credit organizations would be given additional grounds for refusing to enter into or to execute a bank account contract. For example, a bank would be allowed to refuse to enter into a bank account contract where there are reasonable grounds to believe that the aim of the contract is to conduct money laundering activities. Also proposed is a prohibition on opening and operating bank accounts for anonymous owners as well as persons using pseudonyms. A draft bill will also introduce into the Money Laundering Law the concept of a “beneficial owner”, which is defined as “an individual who directly/indirectly independently/together with the affiliated persons has the possibility to direct actions (decisions) of the client. The criteria pursuant to which the person should be deemed as a beneficial owner and requirements towards his identification will be set forth by the Government of Russia and by the Central Bank of Russia (for credit organizations).
The draft law would also expand the list of predicate money laundering crimes to include evasion of taxes and customs fees, non-repatriation of foreign currency earnings from abroad and some others by introducing relevant amendments to the Russian Criminal Code.
Other amendments will likely be introduced to a wide range of Russian legal acts. These amendments are mostly aimed at broadening the authority of the law enforcement and tax authorities with respect to their access to information, covered by bank secrecy privilege, i.e. information on the flows through accounts. Therefore, the banks will have to provide the tax authorities with the information on movements on the bank accounts and bank deposits within three (3) days from the date of the inquiry. Amendments to the Federal Law “On criminal investigation” give the investigative agency the right to remove the bank secrecy privilege with respect to any bank account in court.
The proposed amendments are expected to considerably affect anti-corruption operations in Russia. The most important amendments for businesses are those that modify the regulation of banking activity. The proposed amendments would considerably affect credit organizations which would most likely be required to amend their internal anti money laundering policies and procedures for identification of customers. On one hand, the proposed changes would allow the bankers to demand disclosure of the transaction purpose from the client. On the other hand, this might raise substantial risks in terms of optimizing business, including potential delay in completing payments.
The draft law has not been submitted to the State Duma for discussion yet but is likely to be submitted in the near future. The term of the draft law adoption provided in its text is stated as autumn-winter 2012, and its date of entry into force is listed as January 2013. If adopted as currently written, the amendments are likely to result in significant changes with respect to disclosure of information and bring about certain changes in established business practices.