Publication: Monitor Volume: 7 Issue: 189

A planned new financial watchdog agency to fight against moneylaundering has become the subject of major bureaucratic in-fighting. Since the start of the year, the Finance Ministry, Interior Ministry and Tax Police, among others, have reportedly been vying to take control over the formation of the proposed anti-moneylaundering organ, and the competition apparently increased this past summer, after the State Duma passed an anti-moneylaundering bill. The Finance Ministry has penned a draft law, “On an authorized organ to counteract the legalization of revenues received illegally,” which would set up such a body under its auspices, to be called the Committee for Financial Monitoring (KFM). The ministry is proposing that the KFM be headed by Yury Lvov, a deputy finance minister who formerly headed Gazprombank, a financial structure closely linked to Russia’s natural gas monopoly. According to a report published today, Aleksei Kudrin, who is both Russia’s finance minister and a deputy prime minister, conducted a closed meeting at the end of last week during which he urged various governmental agency heads to come up with ways to grant the new organ powers aimed at “uncovering and blocking channels for financing terrorists.”

For its part, the Interior Ministry reportedly opposes giving a “civilian” agency authority to combat terrorism and suspects that Kudrin was simply using the issue to widen the KFM’s powers. Deputy Interior Minister Nikolai Bobrovsky wrote a letter to the Finance Ministry criticizing various aspects of the Finance Ministry’s draft law on the KFM. Bobrovsky’s complaints included the fact that, according to the Finance Ministry’s concept, the new body will not have the right to investigate illegal revenues resulting from tax evasion, violations of customs regulations or failure to remit hard currency revenues received abroad, and thus will not include officials from the Tax Police and State Customs Committee. Bobrovsky urged creating an organ to include all government agencies that are currently involved one way or another in fighting moneylaundering–something very much like the Interior Ministry’s own Inter-agency Center (MVTs), which was created two years ago to battle moneylaundering, but has since languished.

In response to Bobrovsky’s complaints, an anonymous Finance Ministry official said that in proposing the KFM, his ministry was strictly following the letter of the new anti-moneylaundering law, which does not does not include in its definition of money laundering funds received through the violation of tax or currency laws (see the Monitor, July 16). At the same time, the Finance Ministry official said the functions of the KFM could be widened and specialists from additional special services brought into its ranks, but that this would be a decision the president would have to make (Vremya Novostei, October 15).

Last month, the Paris-based Financial Action Task Force (FATF), which is an arm of the Organization for Economic Cooperation and Development (OECD), ruled that Russia, despite its passage of anti-moneylaundering legislation, had not done enough to be taken off the list of “noncooperative” nations in the fight against moneylaundering. The FATF, however, did not impose sanctions on Russia–something it had threatened against Russia, the Philippines and the Pacific island of Nauru for their failure to battle moneylaundering. Besides these three countries, the FATF’s blacklist also includes the Cook Islands, Dominica, Egypt, Guatemala, Grenada, Hungary, Indonesia, Israel, Lebanon, the Marshall Islands, Myanmar, Nigeria, Niue, St. Kitts and Nevis, St. Vincent and the Grenadines and Ukraine (Moscow Times, September 10).