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DUMA PASSES MONEY LAUNDERING BILL
by Maria Berdnikova

July 13, 2001 MOSCOW (MT~Wire) Russian Duma today approved the bill intended to combat money laundering on third and final reading by a more than 2 to 1  vote margin (244 deputies voting for, 107 against and one abstention.) The bill requires banks, insurance companies and other financial institutions to report large financial transactions by the customers and provide identity of clients who purchase securities or hard currency for cash. The approval of the Federations Council (Duma's upper house) is still required before the bill may be presented to President Putin for signature. Putin is expected to quickly  sign the bill into law.  

The bill is a product of the US pressure on Russia to come up with an anti-money laundering legislation that is more closely resembles Western standards. A series of financial scandals in the 1990s involving the alleged money laundering by Russians of billions of dollars through the Bank of New York implicated several leading figures.

In February of last year, BoNY’s former senior vice president, Lucy Edwards pled guilty to a variety of federal charges, including money laundering and fraud. BoNY itself has not been charged with wrongdoing and is reported to be cooperating with ongoing investigations by the FBI and the Federal regulators.

The new bill, gives the Russian Government the right to scrutinize all financial transactions exceeding 600,000 rubles (approximately $21,000) and other reporting requirements, including:

-    deposits and withdrawals upon bank accounts;
-    transactions involving foreign currency;
-    purchasing securities for cash;
-    transactions involving numbered accounts

-    using cash as starting "authorized" capital for a new business;
-    transaction involving funds transfers in commercial accounts where companies       were established less than three months.

Russian financial institutions also would be required to demand identification from customers seeking to open a numbered account or establish an "agent account" in the name of another person.

But many of the amendments that have been adopted may reduce the effectiveness and enforcement of the legislation. For example, the bill exempts transactions that occur in the customs or offshore areas. Nor does it require banks and casinos to file suspicious activity reports. Emanuel Zeltser of the American Russian Law Institute who helped draft portions of the bill characterized the new bill in its final form as "a step in the right direction", but was skeptical that it would do much to curb capital flight or tax evasion. 

In deliberating the proposed bill, Duma deputies found themselves between the rock and the hard place. On one hand the US and Western industrial nations threatened to  impose sanctions on Russia if it failed to pass. On the other the Government was leery to pass any legislation that would alarm businessmen that their bank accounts would be frozen if suspicious transactions are reported, something that could further weaken Russian private banking sector. 

Russian mobsters, many with close ties to the government, have worked money- laundering scams for the past decade by funneling billions of dollars from drug-trafficking, prostitution and corruption into Western banks so they can make the money appear "clean."

 

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