ROSFINMONITORING ROSFINMONITORING ACTIVITY REPORT 2014 Moscow, 2015 INTRODUCTION In the context of the international direct executor (or co-executor) and a political and economic environment coordinator of the country’s AML/CFT existing in 2014, the risks and threats faced activities. by the national anti-money laundering The main attention was dedicated to the system remained consistently high, both consistent implementation of a risk-based at the international and domestic levels. approach, updating Rosfinmonitoring’s The efforts of Rosfinmonitoring’s goals and objectives and performance structural units and its regional offices assessment. last year were dedicated to addressing Looking back at the achievements the priority tasks identified by the of the Russian AML/CFT system in 2014 President of the Russian Federation and in general and of Rosfinmonitoring in ensuring compliance with international particular, we can say with certainty that regulations. In addressing the above we have succeeded in addressing many of challenges, the Russian Financial the challenges related to the fight against Intelligence Unit acted both as a money laundering and terrorist financing. Rosfinmonitoring’s Performance Highlights 2014 Returned to the budget 285 bn RUR Seized assets 10 bn RUR Assessed additional taxes 6.5 bn RUR Illegal encashment centers whose 90 bn RUR activities were terminated Illegal encashment centers whose 68 bn RUR activities were suspended ROSFINMONITORING Activity Report 2014 3 I. RISK-BASED APPROACH The revised FATF Recommendations, threats, their identification, as well released in February 2012, identified risk as the development of appropriate assessment and a risk-based approach as countermeasures. Concentration of essential elements of the fight against efforts on the key «areas of special money laundering and terrorist financing. attention» enables countries and AML/ This resulted in a significant tightening of CFT system participants to allocate criteria for assessing national anti-money their resources more effectively and laundering systems and effectiveness of efficiently. the AML/CFT efforts. The key requirement Rosfinmonitoring’s key task for 2014 of the international regulations now is to was to ensure the use of a risk-based show practical results. approach in all areas of its activity. A risk-based approach provides for the ranking and forecasting of CHALLENGES & THREATS The AML/CFT system in general and the should deal with such manifestations Financial Intelligence Unit in particular will face in 2015 new challenges, which in the same way we deal with terrorist will define our work priorities. It is the financing. In this context, I instruct the work aimed at eliminating these threats Ministry of Defense, Rosfinmonitoring through coordinated interagency work and other concerned agencies to develop that should be at the heart of our joint action plan both at the federal and a system of tough operational control regional level. over the use of resources from state • Combating the misuse of public defense orders. This system should funds and development of mechanisms operate along the entire supply chain. to improve the effectiveness of budget Additionally, tougher penalties should spending, including during the be imposed on those in charge of federal implementation of investment projects defense contracts implementation for and programs. The urgency of addressing these misspending every budget ruble». challenges was highlighted by Russian • Control over defense procurement. President V. Putin in his annual address to • Ensuring transparency of the financial the Federal Assembly in December 2014. system and curbing foreign currency V. Putin: «Inappropriate use or speculations. embezzlement of budget allocations for • Implementation of measures aimed at implementing the tax amnesty state defense orders should be considered and deoffshorization. Introduction of a direct blow to national security. We amendments to the Russian law that would 4 ROSFINMONITORING Activity Report 2014 allow voluntary disclosure of assets owned currency speculations. by individuals. The work in this area should • Countering the black market and illegal be carried out in such a way as to avoid the outflow of capital abroad. risk of international sanctions. • Sectoral and regional risks. • Ensuring transparency of the financial system and curbing foreign II. NATIONAL ANTI-MONEY LAUNDERING SYSTEM The joint efforts of all national AML • Regulation system participants allowed us to • Prevention achieve significant results in 2014. • Suppression Among the 3 key factors contriduting to this success were: Key Elements of Russia’s Anti-Money Laundering System Regulation Prevention Suppression • 115-FZ • Timely notification of • Closed over 15 • 134-FZ the CB and government encashment centers • 110-FZ authorities with operations worth • 173-FZ • Consideration over 90bn RUR of issues by IWG, IC, • Frozen accounts and • 376-FZ committees and expert assets of over 1,500 • 403-FZ groups of the federal persons linked terrorism • 213-FZ, etc. and national levels Reduction in the volume of dubious transactions – by 100% Reduction in the volume of illegal encashment transactions – by 50% Reduction in the volume of fund transfers to overseas jurisdictions – by 70% ROSFINMONITORING Activity Report 2014 5 STATUTORY REGULATION The most obvious result of is the adoption regulations and draft Rosfinmonitoring’s standard-settingregulations designed to establish legal activity aimed at mitigating money framework for ML/FT risk mitigation. laundering and terrorist financing risks Key Risk Sectors INTERNATIONAL LEGAL RISKS FINANCIAL INSTITUTION-RELATED RISKS BUDGET RISKS ECONOMIC SECTOR/INDUSTRY-RELATED RISKS REGIONAL RISKS TERRORIST AND EXTREMIST FINANCING RISKS REGULATION IN THE INTERNATIONAL LEGAL SECTOR Federal Law No. 173-FZ of June Under FATCA, «foreign financial 28, 2014 «Concerning the specifics institutions» are required to report to the of conducting financial transactions U.S. tax authority information about U.S. with foreign nationals and legal accounts, including accounts of certain entities, amendments to the Russian foreign entities with substantial U.S. Code of Administrative Offences and ownership. invalidation of certain provisions of Russian financial institutions failing Russian legislative acts» to register until May 5, 2014 on the U.S. In 2010 the U.S. adopted the Foreign Internal Revenue Service website for the Account Tax Compliance Act (FATCA), purpose of entering into an agreement whose purpose is to improve tax with the IRS will, starting July 1, 2014, collection and tighten financial sector face a 30% withholding on payments controls not only in the territory of the of U.S. income made to their accounts, U.S. but also abroad. or the closure of their accounts in U.S. 6 ROSFINMONITORING Activity Report 2014 financial institutions as well as in financial out transactions and terminate the contract institutions of other countries complying with him unilaterally. The customer’s with FATCA. consent to the transfer of information to a According to Federal Law No. foreign tax authority also constitutes his 173-FZ, Russian financial institutions consent to the transfer of information to the may transfer information to a foreign tax competent authorities (Rosfinmonitoring, authority only with the consent of the non- the Bank of Russia and the Russian Federal resident customer. However, in the case of Tax Service). non-cooperation, they can refuse to carry REGULATION CONCERNING ACTIVITIES OF FINANCIAL INSTITUTIONS Federal Law No. 461-FZ of December Federal Law No. 484-FZ of December 29, 2014 «Concerning the introduction of 29, 2014 «Concerning the introduction amendments to certain legislative acts of amendments to certain legislative of the Russian Federation» expanded the acts of the Russian Federation» made list of entities covered by Federal Law No. it mandatory for persons providing 115-FZ of August 7, 2001 «On combating services related to organized trading money laundering and terrorist financing» in commodity and (or) financial (hereinafter «Federal Law No. 115-FZ») markets, as well as persons entitled to to include communications service provide clearing services, to submit providers occupying a senior position in to Rosfinmonitoring upon request a public communication network who information on traders and their are entitled to independently provide customers. data communication services and who provide services under contracts with individual subscribers. REGULATION IN THE PUBLIC SECTOR AND INDUSTRY-SPECIFIC SEGMENTS OF THE ECONOMY Federal Law No. 213-FZ of July 21, certain legislative acts of the Russian 2014 «Concerning the opening of bank Federation» assigned transactions accounts and letters of credit and the relating to adding/withdrawing funds conclusion of bank deposit agreements to accounts/letters credit of business by business companies which are of entities of strategic importance for strategic significance for the defense the defense industry complex and the security of the Russian Federation, as industry complex and the security of well as companies under their direct or the Russian Federation and concerning indirect control, to transactions subject the introduction of amendments to ROSFINMONITORING Activity Report 2014 7 to mandatory control. notify Rosfinmonitoring of any opening, Federal Law No. 213-FZ also amended closing, changing the details of accounts the Administrative Offenses Code of and covered