Meeting for Preparation for the FATF Fourth Round of Mutual Evaluations Held in the Ural Federal District

On July 25, 2018, the coordination meeting with the regional law enforcement and supervisory authorities, chaired by Nikolai Tsukanov, the Plenipotentiary Representative of the RF President in the Ural Federal District (UFD), was held in Yekaterinburg city as part of preparation for the FATF (Financial Action Task Force) fourth round of mutual evaluations.

Under this round of mutual evaluations, the FATF assessment team plans to visit the Russian regions soon. In this context, pursuant to the instruction of the Head of the RF Presidential Administration Anton Vaino a series of meetings is held in the Federal Districts under Rosfinmonitoring stewardship for proper preparation of the local law enforcement and supervisory agencies for the upcoming mutual evaluation.

In his opening remarks, Nikolai Tsukanov stated that not only the international prestige of Russia, but also the status of the national AML/CFT system will depend on the outcomes of this evaluation.

“The assessors will focus on results of the efforts pursued for elimination of money laundering risks. They will also review such issues as the demand for and use of financial investigation materials by the law enforcement and supervisory authorities, investigations into money laundering and terrorism financing cases and confiscation of proceeds and instrumentalities of crime”, said the Plenipotentiary Representative of the RF President in UFD, and pointed out that the information available as of today indicates insufficient effectiveness of the AML/CFT system in the Ural Federal District.

On July 25, 2018, the coordination meeting with the regional law enforcement and supervisory authorities, chaired by Nikolai Tsukanov, the Plenipotentiary Representative of the RF President in the Ural Federal District (UFD), was held in Yekaterinburg city as part of preparation for the FATF (Financial Action Task Force) fourth round of mutual evaluations.

Under this round of mutual evaluations, the FATF assessment team plans to visit the Russian regions soon. In this context, pursuant to the instruction of the Head of the RF Presidential Administration Anton Vaino a series of meetings is held in the Federal Districts under Rosfinmonitoring stewardship for proper preparation of the local law enforcement and supervisory agencies for the upcoming mutual evaluation.

In his opening remarks, Nikolai Tsukanov stated that not only the international prestige of Russia, but also the status of the national AML/CFT system will depend on the outcomes of this evaluation.

“The assessors will focus on results of the efforts pursued for elimination of money laundering risks. They will also review such issues as the demand for and use of financial investigation materials by the law enforcement and supervisory authorities, investigations into money laundering and terrorism financing cases and confiscation of proceeds and instrumentalities of crime”, said the Plenipotentiary Representative of the RF President in UFD, and pointed out that the information available as of today indicates insufficient effectiveness of the AML/CFT system in the Ural Federal District.

The State Secretary, Deputy Director of Rosfinmonitoring Pavel Livadny informed the meeting that RF President Vladimir Putin approved the Concept of Development of the Anti-Money Laundering and Counter-Terrorist Financing System on May 30. The Concept focuses on five risk areas.

“Primarily, these are the risks present in the financial sector, risks related to misuse of budgetary funds, associated corruption risks, terrorist financing risks and risks related to illicit trafficking of narcotic drugs”, explained Livadny.

He emphasized that it is necessary to mitigate these risk to the maximum possible extent, on one hand, and to demonstrate to the FATF the effectiveness of the existing AML/CFT system, on the other hand.

“The evaluation that will be conducted by the FATF should demonstrate to the international community that our actions are consistent with our statements. We cannot afford to lose our face” said Pavel Livadny.

He reminded that the main goal of the AML/CFT system is to deprive criminals of the proceeds of their crimes and prevent them from introducing these proceeds into the official financial system. According to the Deputy Director of Rosfinmonitoring the system in place in Russia is of preventive and protective nature, however, the actual crime situation shows that the taken preventive measures are not always effective.

He also called for enhancing the supervisory efforts. “It is of particular importance, from the FATF standpoint, that financial institutions and other obliged entities properly identify beneficial owners of their corporate customers, i.e. natural persons. It is also important to improve quality of suspicious transaction reports submitted to Rosfinmonitoring”, stressed Pavel Livadny.

The Deputy Director of Rosfinmonitoring said that, in general, the performance the Russian AML/CFT system “impresses the international community, especially in terms of coordination and cooperation among all government authorities and agencies engaged in combating money laundering and terrorist financing. “However, the practical results may and should be better”, added Livadny.

“The AML/CFT system is one of the most effective tools that enable to flush criminals and “shadow” funds out of the economy. Let’s jointly help our country”, appealed to the meeting participants Pavel Livadny.

After that, the Deputy Director of Rosfinmonitoring Galina Bobrysheva summarized the outcomes of the meeting with the representatives of the supervisory authorities and private sector held on the previous day at the Ural Branch of the RF Central Bank, reiterating the special AML/CFT role played by financial institutions.

The Head of Rosfinmonitoring Interregional Department in the Ural Federal District Alexey Kardapoltsev pointed out that, in the lead-up to the on-site mission under the FATF fourth round of mutual evaluations, one of the main areas on which the AML/CFT stakeholders in the UFD should focus on is the ongoing improvement of the process of identifying the existing and emerging ML/TF risks and threats, including the region-specific ones.

“Today, we can state that the cooperative efforts enabled us to erect reliable barriers for preventing criminal proceeds from penetrating into the District financial sector. This conclusion is supported by the decreasing volume of shadow transactions, including transactions involving illegal cash conversion and movement of funds abroad”, said Alexey Kardapoltsev.

The volume of illegal cash conversion transactions shrank more than twofold in 2017, while the volume of funds moved abroad from the District also decreased more than twofold in 2017 compared to 2016, and eightfold compared to 2015.

The Head of the Interregional Department separately noted more active engagement of the supervised entities in cooperation in the remote mode through the mechanism of personal accounts opened on Rosfinmonitoring website.

For Reference:

Rosfinmonitoring is the national center for assessing threats to the national security arising from money laundering, terrorist financing and proliferation financing and for developing measures to address these threats.

In 2018, the FATF (Financial Action Task Force) assessment team with visit the Russian Federation for conducting mutual evaluation, the outcomes of which will form the basis for the conclusion about level of compliance by Russia with the international anti-money laundering and counter-terrorist financing (AML/CFT) standards.

Following the previous mutual assessment conducted in 2008, the FATF assessors identified a number of deficiencies (including inadequate transparency of information about beneficial owners and persons who control legal entities), which entailed placement of Russia in the regular follow-up process.

In September 2014, after the third follow-up report of the Russian Federation was adopted by the MONEYVAL Plenary, Russia was removed from the regular follow-up process until the next mutual evaluation. If Russia receives low rating of compliance with the FATF requirements in 2018, it will be placed in the enhanced follow-up process and be subject to economic sanctions.

Given the importance of preparation for the upcoming mutual evaluation by the FATF, the RF President established the special Commission composed of the representatives of the RF General Prosecutor’s Office, Interior Ministry, Federal Security Service, Federal Customs Service, Investigative Committee, Federal Tax Service, National Assay Chamber, Federal Service for Supervision of Communications, Information Technologies and Mass Media, Ministry of Justice and Central Bank. The Commission is chaired by the Director of Rosfinmonitoring.

The Commission is tasked with ensuring consistent and coordinated efforts of all government authorities and organizations involved in preparation for the FATF mutual evaluation.

The Methodology for assessing AML/CT system was adopted by the FATF in 2013 and includes assessment of two complementary elements: technical compliance and effectiveness.

Technical compliance refers to implementation of the requirements set forth in 40 FATF Recommendations, while effectiveness refers to ability of the AML/CFT system stakeholders to achieve the Immediate Outcomes (IO) in addressing ML/TF risks.

Federal Financial Monitoring Service