Publication: Monitor Volume: 7 Issue: 120

Russia has again been included on a list of noncomplying countries in the fight against money laundering that is compiled each year by the Financial Action Task Force (FATF), the intergovernmental body set up by the G-7 countries in 1989 to combat money laundering.

The FATF’s “Review to Identify Noncooperative Countries or Territories,” which was released today, takes Russia to task for, among other things, absent or ineffective regulations and supervision for all its financial institutions concerning money laundering, lacking “an efficient mandatory system for reporting suspicious or unusual transactions to a competent authority,” an “obvious unwillingness to respond constructively to requests” from abroad for action against money laundering, having “inadequate or corrupt professional staff in either governmental, judicial or supervisory authorities or among those responsible for anti-moneylaundering compliance in the financial services industry” and lacking a “financial intelligence unit” to collect, analyze and disseminate information about suspicious transactions. The FATF’s list of countries with “serious systemic problems” in terms of money laundering also included Bahamas, the Cayman Islands, the Cook Islands, Dominica, Israel, Lebanon, Liechtenstein, the Marshall Islands, Nauru, Niue, Panama, the Philippines, St. Kitts and Nevis, and St. Vincent and the Grenadines (Financial Action Task Force, “Review to Identify Noncooperative Countries or Territories: Increasing the Worldwide Effectiveness of Anti-Moneylaundering Measures,” June 22). Earlier this year, the FATF named the Bahamas, Cayman Islands, Cook Islands, Israel, Liechtenstein, the Marshall Islands and Panama as having made some progress in enacting anti-moneylaundering measures (Reuters, February 1).

Estimates of the levels of money laundering in Russia vary, but tend to be high. Prosecutor General Vladimir Ustinov, for example, who advocates tightening controls over hard currency transactions and offshore and foreign banking activities by Russian companies and individuals, recently estimated that US$20-US$25 billion is laundered annually through Russian financial institutions and that criminal groups were laundering US$12 billion per year in Cyprus alone. During an international conference on the illegal economy held in St. Petersburg earlier this month, Pino Arlacchi, head of the UN Office for Drug Control and Crime Prevention, cited estimates that up to US$100 billion had been laundered in Russia in a single year. The level of capital flight from Russia reportedly reached record levels last year, despite overall improvements in the economy: President Vladimir Putin put the total for 2000 at US$20 billion. According to some estimates, capital flight from Russia over the last decade may have totaled anywhere from US$250-US$500 billion (Moscow Times, June 6, 22; see also the Monitor, March 26).