Keep the red flag flying

‘A riddle wrapped in a mystery inside an enigma’ – Churchill’s summation of Russia is an apt description of its non-transparent financial crime agenda. In carrying out due diligence and monitoring, there are, though, patterns that AML professionals should heed as Rosie Hawes and Lisa Osofsky of Control Risks explain.

Lisa Osofsky (lisa.osofsky@control-risks.com) is a Regulatory Advisor for Control Risks and Rosie Hawes (rosie.hawes@control-risks.com) is a consultant within Control Risks’ corporate investigations department in Moscow

The history – gaining acceptance on the world stage

It has been more than ten years since the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an advisory counselling caution, if not avoidance, in entering into transactions involving the Russian Federation (Advisory 25, July 2000). Specifically, the Advisory stated that it was issued “to inform banks and other financial institutions operating in the United States of serious deficiencies in the counter-money laundering systems of the Russian Federation.” The deficiencies listed included a lack of anti-money laundering (AML) laws and procedures. Within two years, on 1 February 2002, Russia enacted a law against money laundering (Countering Legalisation of Criminal Income & Terrorist Financing), which corresponded broadly with the Financial Action Task Force’s (FATF’s) original 40 Recommendations for stemming money laundering and financial crime. On 11 October 2002, FATF removed Russia from its list of non-cooperative countries and territories (NCCTs) in the fight against money laundering and by November 2002 FinCEN had withdrawn Advisory 25.