Federal Financial Monitoring Service
FFMS - Rosfinmonitoring
The Federal Financial Monitoring Service (Rosfinmonitoring) reports directly to the President of the Russian Federation and is a federal executive body responsible for combating money laundering and terrorist financing.The crux of Putin's ability to punish dissenters revolves around Russia's financial intelligence unit, Rosfinmonitoring. Putin created Rosfinmonitoring - under the direct control of the president and placed it in the charge of a fiercely loyal subordinate, Viktor Zubkov. From 01 November 2001, to 09 March 2004, it was called Financial Monitoring Committee, which was led by Viktor Zubkov from the very beginning.
The agency develops and implements state policies, assesses threats to national security arising from money laundering, financing of terrorism and proliferation of weapons of mass destruction and develops measures to counter these threats. FFMS receives approximately 30,000 mandatory and suspicious transaction reports per day. The scope of the reports is comprehensive, covering operations by banks, credit institutions, realtors, and foreign exchange houses.
Clifford G. Gaddy argued that "... the Russian Financial Monitoring Service (RFM)... is Putin’s personal financial intelligence unit — he created it and it answers only to him. It is completely legitimate and is widely recognized as the most powerful such agency in the world, with a monopoly on information about money laundering, offshore centers, and related issues involving Russia or Russian nationals. An operation like the Panama Papers, which is only about financial intelligence, would have to be run out of RFM. Not the FSB, not some ad hoc gang in the Kremlin.... "
On 03 February 2016, Rosfinmonitoring hosted a meeting of FIU heads from Russia, Iraq, Iran and Syria dedicated to strengthening cooperation in the fight against terrorist financing. The meeting was part of the international efforts to combat ISIL. Yury Chikhanchin, Director of the Federal Financial Monitoring Service, emphasized the importance of coordinated joint international efforts in this area: "Given the direct impact the situation around Islamic State has on our countries, it is easy for everyone to appreciate the need for joint mechanisms required to combat this common evil, especially in the current challenging circumstances."
The year 2015 saw Rosfinmonitoring channelling significant resources to the establishment and development of a fundamentally new system of interdepartmental control over defence procurement, as required by the Federal Law "On Defence Procurement" new provisions, enacted on September 1, 2015. A list of the measures initiated as part of the new oversight system includes a network of designated banks, separate accounts for payments linked to defence procurement contracts, new requirements for mandatory transaction controls, additional grounds for transaction denial, etc. In 2015 Rosfinmonitoring monitored a total of 22,500 defence contracts worth RUR800 billion and scrutinized the activities of about 9,500 contractors.
On 23 May 2015 President Vladimir Putin signed into effect a law under which some foreign and international nongovernmental organizations (NGOs) may be declared undesirable and have their Russia-based activities banned. An NGO may be declared undesirable if it pursues activities threatening the Russian constitution, defense capability or security, according to the law, the text of which was posted on the official portal for legal information.
The law authorizes the prosecutor general and his deputies to prohibit, with approval from the Foreign Ministry, undesirable NGOs from running any programs or projects in Russia. On the other hand, a blacklisted NGO may be removed from the undesirable list.
The law prohibits banks and other financial institutions from carrying out money or property transactions where one of the parties is on the undesirable list. A financial institution that refuses to carry through such a transaction will have to report its refusal to the Federal Financial Monitoring Service (Rosfinmonitoring), and the latter will have to forward the report to the Prosecutor General's Office and Justice Ministry, according to amendments for the second reading.
If an NGO that has been put on the undesirable list continues its activities, it will face penalties - fines of between 50,000 and 100,000 for such organizations, of 20,000 to 25,000 rubles for NGO executives and of between 5,000 and 15,000 rubles for rank-and-file members, provided such activities have not included serious offenses. Having been fined twice during one a year would entail a court case, and the offender would either have to pay a fine of between 300,000 to 500,000 rubles or an equivalent of their salary or another form of income for between two and three years or to do compulsory service for a maximum of 360 hours.
A person who voluntary stops taking part in the activities of NGO that has been listed as undesirable will be exempt from prosecution unless they have committed a criminal offense.
Under any of five criteria individuals and organizations could be placed on the FFMS proscribed entities list. Appearance of an individual or organization on a recognized international organization designation, such as the UN 1267 Sanctions Committee, constitutes the first criteria. Second, placement on the entities list could come as the result of a Russian court decision. Third, the Prosecutor General can identify individuals and organizations for inclusion. Fourth, Ministry of Interior investigations serve as a basis for inclusion if subsequent court decisions do not dismiss the investigation's findings. Finally, if Russia has a bilateral information sharing agreement, with a reciprocity clause, then an individual's or organization's presence on the counterpart country's FIU list could be sufficient for inclusion on the FFMS list.
Pursuant to the Regulations on the Federal Financial Monitoring Service, approved by Presidential Decree No. 808 dated June 13, 2012, the functions of the Federal Financial Monitoring Service are as follows:
- monitor legal entities’ and individuals’ compliance with Russia's anti-money laundering and terrorist financing legislation, and prosecution of violators;
- submit draft versions of federal laws, presidential and government acts and other documents concerning its activities to the President of the Russian Federation and the Government of the Russian Federation for consideration;
- issue regulations concerning its activities;
- collect, process and analyze data on transactions with monetary funds or other assets that are subject to monitoring in accordance with applicable Russian state and federal laws;
- verify the information on transactions with monetary funds or other assets, including by request of additional customer transaction data from organizations and entities carrying out transactions with monetary funds or other assets in accordance with the established procedure, as well as information about account (deposit) activity of credit institutions' customers;
- identify indicators of potential money laundering and terrorist financing activity in transactions with monetary funds or other assets;
- exercise control over transactions with monetary funds or other assets in accordance with applicable Russian laws and regulations;
- receive, including in response to requests, from the federal bodies of state power, bodies of state power of constituent entities of the Russian Federation, local government bodies and the Central Bank of the Russian Federation the information concerning its activities, except for private personal data;
- assess the threats to national security posed by money laundering and terrorist financing and submit the annual report on such threats and measures to neutralize them to the President of the Russian Federation;
- keep a record of organizations carrying out transactions with monetary funds or other assets without having a designated oversight body in the main field of activities;
- suspend transactions with monetary funds or other assets in accordance with applicable Russian laws and regulations;
- prepare and implement measures aimed at the prevention of violations of Russia's legislation governing the combating of money laundering and terrorist financing;
- coordinate activities of the federal bodies of executive power in areas within its purview;
- work closely with the Central Bank of the Russian Federation on the issues within its purview;
- cooperate and share information on matters within its purview with competent authorities of foreign countries in accordance with international treaties of the Russian Federation or based on the principles of reciprocity;
- engage on behalf of the Russian Federation in cooperation with international organizations, public authorities, businesses and private individuals of foreign states on matters within its purview;
- disseminate information to law enforcement authorities based on sufficient grounds to suspect the transactions (deals) of being linked to legalization (laundering) of criminally gained proceeds or terrorism financing, as well as make disclosures at requests of law enforcement authorities in accordance with applicable federal laws and regulations;
- create a unified information system to cover the designated field of its activities;
- create and maintain the federal database and ensure the methodological unity and coordinated functioning of the information systems existing in the areas of its activity;
- ensure an adequate storage and protection mode for data constituting a state, service, banking, tax, commercial or communication secret, as well as any other confidential information obtained in the course of its activities;
- participate in the development and implementation of international cooperation programs, as well as in the preparation and conclusion of international, including interagency, treaties and agreements governing matters within its purview;
- engage, including on a contractual basis, in the prescribed manner and in strict compliance with the law governing the protection of state or other secrets the services of scientists, experts, research institutes and other organizations to conduct expert examinations, develop training programs and teaching manuals, software and information applications and create information systems in the field of financial monitoring;
- place in the prescribed manner orders and conclude state procurement contracts for the supply of goods, performance of work and provision of services in areas within its purview, as well as to research contracts and other types of civil contracts;
- carry out the functions of a chief steward and recipient of budgetary funds allocated in the federal budget for the needs of Rosfinmonitoring;
- ensure timely and proper processing of citizens' requests, effective decision-making and provision of timely feedback;
- provide mobilization training to Rosfinmonitoring's staff;
- conduct civil defense drills involving Rosfinmonitoring's staff;
- provide vocational, retraining and advanced training and internship opportunities for Rosfinmonitoring's federal civil servants;
- carry out in accordance with the laws of the Russian Federation the work on compiling, storing, recording and using Rosfinmonitoring's archival documents;
- exercise other powers in areas within its purview.
Russia's financial system does not attract a significant portion of legal or illegal depositors, and therefore Russia is not considered an important regional financial center. Criminal elements from Russia and neighboring countries continue to use Russia's financial system to launder money because of familiarity with the language, culture, and economic system. The majority of laundered funds do not appear to be from activities related to narcotics production or trafficking, although these activities occur.
Experts believe that most of the illicit funds flowing through Russia derive from domestic criminal or quasi-criminal activity, including evasion of tax and customs duties and smuggling operations. Despite making progress in combating financial crime, Russia remains vulnerable to such activity because of its vast natural resource wealth, the pervasiveness of organized crime, and a high level of corruption. Other factors include porous borders, Russia's role as a geographic gateway to Europe and Asia, a weak banking system with low public confidence in it, and under-funding of regulatory and law enforcement agencies. However, due to rapid economic growth in various sectors, the number of depositors has steadily been increasing.
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