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What is Money Laundering?
Money laundering is a process whereby criminals disguise their ill-gotten gains so that it appears as though they have come from legitimate sources. The idea is that if criminals can’t hide their origins, they will find it harder to get away with their crimes.
Money laundering takes place in three stages: placement, layering and integration. Placement involves moving cash out of criminal hands and into those of someone else who isn’t involved in the crime, such as an employee or business partner of an offender. Layering involves making it difficult for investigators to track down where the money came from by splitting it up into smaller amounts, making transfers between different accounts and using multiple jurisdictions. Integration means returning the money to its original owner after it has been laundered so he can spend it without attracting attention.
Money laundering is different from tax evasion, which involves hiding income from tax authorities instead of disguising its source. Money laundering may be part of tax evasion if it’s used to maintain an illegal source of income — for example, if you use drug profits to buy property that you then rent out for income that you fail to report on your tax return — but not all tax evasion involves money laundering because it doesn’t always involve concealing illegal sources of income.
The term anti-money laundering is often used interchangeably with the term “financial crime”, but AML is not just about stopping criminals moving their money around. It’s also about stopping them using the banking system to launder their ill-gotten gains and make them look like they’ve come from legitimate sources.
Definition of Anti-Money Laundering
Anti-money laundering (AML) is a concept used all over the world to combat financial crimes. AML aims to prevent dirty money from being laundered through the financial system.
The goal of AML is to make it difficult for criminals to move money around and make it more difficult for them to hide their illicit activities. Anti-money laundering laws also help law enforcement agencies track down criminals who have committed financial crimes, such as drug trafficking or terrorism financing.
In this article, we will focus on the legal framework for AML in Russia and what it means for businesses operating there.
AML Legislation in Russia
Russia is among the countries that actively fight financial crimes. Russia has enacted global and local AML regulations to prevent money laundering through the financial system. The main goal of Russian anti-money laundering laws is to protect businesses and individuals from illegal activities that can lead to money laundering. The government’s efforts are aimed at identifying and preventing the use of the financial system for criminal activities such as terrorism, drug trafficking, fraud, etc.
The Russian Federation has ratified the FATF 40+9 Recommendations, founded by the Financial Action Task Force (FATF) in 1989. The FATF is an intergovernmental organization based in Paris that develops policies to combat money laundering and terrorist financing.
Anti-Money Laundering Laws in Russia
In addition, Russia has developed its own Anti-Money Laundering Law that came into force on January 1, 2006. The law defines a set of requirements for banks, financial institutions and other entities (particularly those dealing with foreign currency), which must comply with anti-money laundering procedures.
The most important requirement is to maintain records of all transactions conducted by their customers in accordance with record-keeping requirements outlined by Russian legislation on accounting and auditing practices (Russian GAAP). These records must be kept for at least five years after the transaction date or until further notice from government authorities if these authorities have requested information regarding specific transactions or accounts from you or your company prior or after conducting an audit of your business activities.
The current legislation governing AML in Russia was adopted in 2012 and implemented in 2013. It consists of two laws: Federal Law No. 273-FZ “On Combating Money Laundering and Terrorist Financing” (the AML Law) and Federal Law No. 395-FZ “On Amendments to Certain Legislative Acts of the Russian Federation Concerning Measures Aimed at Preventing the Use of the Financial System for Purposes of Money Laundering or Terrorism Financing” (the Amendments). The amendments also include a number of other legislative acts related to combating money laundering and terrorist financing.
Anti-Money Laundering Regulator in Russia
In Russia, there are two types of organizations that deal with AML issues:
- The Financial Monitoring Service (FMS) is an executive authority tasked with monitoring compliance with AML laws;
- The Federal Tax Service (FTS) is responsible for reviewing tax returns filed by banks and other financial institutions as well as assisting law enforcement agencies in investigations related to money laundering.