Federal Law No 115-FZ "On Combating Money Laundering and the Financing of Terrorism" (the Anti-Money Laundering Law) came into force on February 1, 2002 and has, since then, been revised a number of times to reflect global developments in this area. It is the primary legislative act of the Russian Federation aimed at the prevention of money laundering activities and the financing of terrorism, and it is supported by numerous recommendations, binding instructions and regulations of the Central Bank and other authorities. The Anti-Money Laundering Law applies to individuals and legal entities engaged in transactions with money (and other assets) in the Russian Federation, to regulated entities and the state authorities responsible for monitoring money laundering activities in the Russian Federation, as well as to Russian subsidiaries of foreign financial institutions (banks, funds, insurance companies, pawnbrokers, etc.). It sets out mandatory internal procedures and reporting requirements pertaining to suspicious transactions or otherwise monitored transactions.
The following groups of companies and persons are required to perform due diligence by ascertaining the identity of a customer (and a beneficiary) and monitoring transactions for suspicious activity:
• financial institutions such as banks and non-banking credit organisations, professional participants in the securities market, insurance and leasing companies, postal and other non-credit organisations that deal with the transmission of money (the regulated entities), Russian subsidiaries of foreign financial institutions; and
• advocates, notaries and persons performing legal and accounting services in respect of the documentation prepared by them for their clients or acting on their clients' behalf, i.e., providing intermediary services in respect of the envisaged transmission of money (the professional advisers).
For these purposes, both the regulated entities and the professional advisers are obliged to develop and implement sophisticated internal regulations and procedures, as well as to maintain a sufficient level of education and training on these matters for relevant employees.
The regulated entities must identify and report transactions of a suspicious nature to the Federal Financial Monitoring Service (Rosfinmonitoring), a designated monitoring authority. Such transactions include, among others, cash or non-cash transactions equal to or exceeding RUB600,000 (as at December 31, 2010, approximately €15,000), and immovable property transactions equal to or exceeding RUB3,000,000 (as at December 31, 2010, approximately €75,000) or the equivalent of such amounts in any other currency. In the event that 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.
Professional advisers' obligations to identify their customers, apply internal control requirements and keep the relevant records are triggered in the case of the following transactions:
1. those relating to immovable property;
2. assets, funds and securities management;
3. management of the bank and depo accounts;
4. formation of capital for the creation and management of companies; and
5. creation, management and sale and purchase of companies.
If a professional adviser has grounds to believe that any of the above transactions or arrangements has been made for the purposes of money laundering or the financing of terrorism, that professional adviser must report the transaction to the appropriate responsible authority (Rosfinmonitoring). Russian anti-money laundering legislation upholds international practice and provides for advanced identification and control procedures in respect of politically exposed persons.
The Central Bank and other Russian authorities may undertake preventative and/or enforcement measures in respect of a regulated entity (and its employees) that are involved in transactions which infringe the anti-money laundering legislation. Such measures may include: informing such entity of the Central Bank's concern regarding its activities; suggesting that the entity provide the Central Bank with a programme for improvement; and/or establishing additional measures to monitor the entity. In relation to the regulated entity (and its employees), enforcement measures may also include the imposition of a penalty and/or the withdrawal of the regulated entity's banking licence (or, in the case of employees, competency certificates and/or deprivation of right to maintain certain activities or hold particular offices). The Criminal Code of the Russian Federation provides for criminal liability upon breach of the anti-money laundering legislation, which includes penalties and imprisonment.
In respect of professional advisors, although Russian law clearly prescribes that they should comply with the requirements pertaining to the monitoring and control of suspicious transactions, they are not subject to any liability for non-compliance (as confirmed by the limited court practice), and therefore the liability which applies to the monitoring persons only encompasses regulated entities and their employees.
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