AML and CTF law and regulation in Russia

Federal Law No. 115-FZ “On Combating Money Laundering and the Financing of Terrorism” dated 7 August 2001 (the AML Law) and ancillary normative acts.

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The Federal Financial Monitoring Service (the FFMS) is the main AML/CTF supervisory authority that conducts financial intelligence investigations, collects data, and monitors transactions of controlled entities in accordance with the AML Law.

Other authorities monitor compliance with the AML Law as part of their competences, including the Central Bank of Russia (the CBR), the Federal Tax Service, the Federal Bailiff Service, and the Federal Customs Service.

The AML Law contains a limited list of legal entities engaged in transactions with money and other assets falling under the regulation of the AML Law. This list includes 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 sending of money (the Regulated Entities). 

The AML law set up reporting and other obligations of the Regulated Entities, notaries and professional advisers performing legal and accounting services (the Reporting Entities).

The Reporting Entities are obliged to identify their clients and obtain information regarding their UBOs, as well as collect and maintain such information.

They must provide a regulating authority (at its request) with any information regarding their clients’ transactions and their UBOs, however there is no central register for such disclosure.

The AML Law provides for “simplified” identification of the client, which can be done, by sending the documents required for the client’s identification at the onboarding stage online.

Simplified identification can be undertaken by using the client’s account with the Unified System of the Identification and Authentication (maintained by Russian state authorities) or by using electronic signatures (as provided in more detail in the AML Law), without the need for the client’s physical attendance on the premises of the Reporting Entities .

However, the use of simplified identification is limited by the amount of the transaction, e.g. it can be used only for the provision of consumer loans up to RUB 15,000 (approx. EUR 200) and is available only for certain kinds of financial services, although the list of such services is regularly extended. In addition, simplified identification cannot be relied on if a transaction has the characteristics of a suspicious transaction.

In addition to the obligation to identify the client and its UBOs, the Reporting Entities are also required to monitor their clients’ transactions for suspicious activities, take steps to freeze suspicious assets (when required) and develop and implement sophisticated internal regulations and procedures.

In addition to the requirements set out in the AML Law, the Regulated Entities must develop and implement their own internal risk assessment programs, based on the FFMS Recommendations for Development of Criteria for Identification and Determination of Unusual Transactions adopted on 8 May 2009 (as amended). In addition, several CBR regulations establish requirements for internal control and client identification procedures for credit institutions.

In August 2011, the FFMS issued a regulation establishing a list of transactions that are considered to represent significant risks of money laundering. There are 27 types of activities on the list, including transactions made in cash, international economic activities, gambling, tourist activity, certain real estate transactions, etc.

The main CTF measures that can be implemented under the AML Law include the mandatory control of certain transactions, freezing funds and other assets, and suspending or refusing to perform suspicious operations.

The Reporting Entities are obliged to inform the FFMS of any operation which is subject to compulsory control. In addition, they can suspend an operation and should inform the FFMS if they have information indicating that any of the parties to the contemplated operation may be participating in terrorist activities, or if it is explicitly or implicitly controlled by such a person or organisation.

The Russian Criminal Code provides for criminal liability for breaches of the legislation on anti-money laundering, including penalties and imprisonment for a Reporting Entity’s management.

The CBR may also take preventative and enforcement measures against a Regulated Entity involved in transactions which are contrary to the AML Law. These measures include: 

• informing the Regulated Entity of the CBR’s concern regarding its activities; 
• suggesting that the Regulated Entity provides the CBR with a programme for improvement; and
• establishing additional monitoring measures over the Regulated Entity.

CBR enforcement measures may also include the imposition of a penalty and the withdrawal of the relevant licence from a Regulated Entity.