Foreign banks prepare to conquer Russia

[FaGal]

Russian capital flight rises
www.guardian.co.uk - Mark Milner - June 14, 2005 - The Guardian


Capital flight from Russia is heading towards levels not seen since just before the financial crisis in 1998, according to a leading debt-rating agency.

About $33bn (£18.2bn) was moved abroad last year, underlining concerns about the business climate and the lack of trust in the country's institutions and its property rights, Fitch Ratings said in a report issued yesterday.

The agency calculates that capital flight has reached $100bn over the last four years. "Not only is it [capital flight] unusually large, but it is also rising. Last year's total was the highest since 1997, when Russians headed for the exits before the 1998 default and devaluation," said Edward Parker, senior director in Fitch's sovereign group.

Fitch said Russia's current account surplus and its foreign reserves meant that the extent of the capital flight did not pose a near-term "external financing risk", but it said that if the money had not been sent offshore it could have been usefully invested in Russia.

Fitch notes that while Russians are moving capital out of the country, money is still flowing the other way as Russian companies borrow from abroad. "Private-sector external debt has more than doubled in just two years, from $48bn to $106bn at end 2004," Mr Parker said.

"It is revealing that Russian companies are borrowing on such a scale at the same time as moving retained earnings offshore and out of reach of the state - a trend which has accelerated since the start of the Yukos affair."

Mikhail Khodorkovsky, former boss of oil company Yukos, was sentenced a fortnight ago to nine years' imprisonment for tax evasion and fraud. His arrest in 2003 caused concern among investors, who feared it signalled a change in the Kremlin's attitude towards Russia's business elite.

Economists said it was impossible to tell what proportion of cash was being invested outside Russia to diversify risk and how much was down to lack of confidence.

[FaGal]

Foreign investments in Russian economy to reach $100 billion next year
english.pravda.ru - June 14, 2005

The notorious Yukos case has not become the key factor in determining the investment climate in Russia


The economy of present-day Russia can be described as highly differentiated and complicated. The Russian administration is trying to balance between a variety of economic trends, giving world news agencies and foreign observers an opportunity to express their own interpretation of the current state of economic affairs in Russia. Nevertheless, no one doubts that the government controls and affects the nation's economy.

Economic changes in the country and the improving living standard can be seen clearly. US Secretary of State Condoleezza Rice said in one of her recent interviews that a lot of things had changed for the better in Russia over the recent several years. Ms. Rice noted that queues in Russian furniture stores prove the increasing purchasing capacity of the population and the expansion of the Russian middle class. On the other hand, Condoleezza Rice pointed out the considerable life quality difference between Russian cities, where the middle class was being formed, and villages, where the majority of people still live below the poverty line. It is noteworthy that the USA had a similar experience in the 1920s and 1930s, when industrial capital was developing in the States. The economic phenomenon of that period was reflected in classic American literature. The Russian government has been trying to smooth out negative consequences in the development of large industrial centers, introducing special programs for the support of provincial towns.

The outflow of capital, which Western specialists probably view as negative, is another typical trend of the present-day Russian economy. About 100 billion dollars haven flown out of Russia over the recent four years, which became a record level achieved since 1997, Fitch agency said. The agency believes that such an impressive number testifies to the hostile investment climate, which was particularly ruined by the Yukos case. However, investments in the Russian economy have been growing as well, although at a much slower pace. It would be logic to surmise that the Russian economy absorbs the money, which it can process at the moment, pushing excessive funds abroad. In addition, the government does not tend to keep the money in the country, but supports their export, the director of the Expert Institute, Andrey Nashchadin said. The practice is used to weaken the inflation pressure. The Russian government plans to liberalize the currency legislation in 2006 instead of impeding the capital outflow.

The Yukos case has definitely affected the Russian economy, although it did not became the key factor in determining the investment climate in Russia. Russian Minister for Finances, Aleksei Kudrin, believes that foreign investments in Russia might reach 100 billion dollars in 2005. There is nothing strange about the careful approach of the Russian government to large-scale investments in economic projects. Furthermore, Russian enterprises can afford saving debts to modernize their production, taking into consideration the increased gold and forex reserves. The foreign debt of the USA has been growing during the recent several years. The national wealth of the USA, however, has been growing a lot faster in comparison with the foreign debt, which saves the USA from default.

Nevertheless, Russia has a lot of economic problems to deal with nowadays. They are mainly connected with the weak process of the economic diversification. Russia presumably exports raw materials. Minister Kudrin said that the 5.8-percent economic growth was a stable forecast, although Kudrin added that a higher level of progress could be achieved too. It is noteworthy that last year's growth was registered on the level of 7.1 percent. There are certain problems with the recreation of the transparent economic capital. Spokespeople for the Russian Office of the Prosecutor General say, however, that the department is currently targeting other prominent Russian businessmen. According to Minister for Finances, Aleksey Kudrin, a lesser interference of this agency in the economy may speed up the economic development. To crown it all, Russia stands on the verge of important economic changes, such as the WTO membership and the completion of a series of reforms. Unlike several smaller states, which are incapable of affecting their macroeconomic indexes, the Russian economy depends on the government's decisions and will. Russia has all opportunities to slow down the progress of one economic field, focus attention on another one and accomplish necessary goals.

[FaGal]

FSB Raids St. Petersburg Banks
Source: www.themoscowtimes.com, By Irina Titova, Staff Writer, June 17, 2005


ST. PETERSBURG -- Federal Security Service agents raided the offices of some of the city's banks and the St. Petersburg stock exchange building on Wednesday and Thursday as part of a money-laundering investigation, the FSB said Thursday.

Valery Kuznetsov, a regional spokesman for the FSB, said investigators were targeting a fraud ring that had been involved in illegally claiming value-added-tax rebates and then transferring the money abroad.

In comments on NTV television, Kuznetsov said that several city bank accounts had been seized, along with millions of dollars' worth of rubles and other currencies. He added that among the FSB targets had been the St. Petersburg Futures Exchange bourse and several banks, including the Northwestern Investment and Industrial Bank and the East Bridge Bank.

In footage shown on NTV, masked agents put piles of cash into bags and used electric saws to open safes.

Interfax reported that the FSB had opened a criminal case against the fraud ring under article 172 of the Criminal Code, which deals with illegal banking activities.

But Yevgeny Antifeyev, general director of the St. Petersburg Futures Exchange, said Thursday that the stock exchange had not been raided.

"The FSB indeed carried out raids on Wednesday in the building where our office is located. But it raided different commercial organizations -- not us," Antifeyev said.

He said he was surprised to hear the stock exchange mentioned in media reports.

"This has brought us indirect damage because people have been calling all day long inquiring why the FSB raided us," Antifeyev said. He insisted there was no disruption of trade and the exchange had suffered no monetary losses.

The FSB said that it had detained more than 20 people for questioning in the raids, and seized armored cars that had been part of money trafficking operations, Interfax reported.

During the course of the investigation, 100 million rubles ($3.5 million) and several million dollars' worth of other currencies from suspect accounts were seized, the FSB said.

Meanwhile, Valery Kalachyov, chairman of the East Bridge Bank, said in a statement that there was no probe into the bank's St. Petersburg branch. Kalachyov said that some bank documents had been seized by the FSB, but said that they concerned the activities of three companies that banked with its St. Petersburg branch.

Bank employees gave the FSB information about the opening of those accounts, but no employees were detained and no criminal cases brought against them, Kalachyov said.

He said the bank had cooperated fully with the investigation.

Alexander Mirtskhulava, president of the St. Petersburg-based Northwest Investment and Industrial Bank, said by telephone Thursday that the FSB had carried out searches at the bank on Wednesday.

He said that about 25 masked men had surrounded the bank and that he had invited them in. The FSB then produced a warrant to seize one of the bank's accounts. However, the account had been closed at the end of last year, Mirtskhulava said.

The FSB then showed Mirtskhulava a search warrant and forbade him from using the telephone. All the employees of the bank were told to leave their posts and were gathered in one room, Mirtskhulava said.

"In general, the FSB was trying to accuse the bank of illegal banking activities, charging it with making secret deals with some of the clients," Mirtskhulava said.

Later, the FSB named 10 people, believed to be clients at the bank, whose activities it wanted to investigate in connection with money laundering. But some of the people named had never been bank clients, while several others had their accounts closed in 2003 or 2004, Mirtskhulava said.

In the process of the raid, the FSB took cash from several money safes that did not belong to the people it had named as under investigation, he said.

Mirtskhulava said he personally was always "afraid of keeping clients that might be running money laundering schemes through the bank," and purposefully avoided such clients.

The bank will focus on "repairing the inevitable damage to its reputation" and will aim to get back to normal as soon as possible, he said.

[FaGal]

Russia Is A Safe Haven For Foreign Investments: Putin
www.neftegaz.ru - June 27, 2005


Russia has a right to expect more foreign investment because of its strong economy, the President Vladimir Putin said on Sunday after the meeting with key world businessmen.

Speaking to German companies’ chiefs form natural gas producing giant E.ON-Ruhrgas and electrotechnical concern Siemens, a day after he held similar talks with top executives from the U.S. companies, Putin repeated a promise to create better conditions for business through extensive reform.

Rusian president did not mention the Yukos case at the meeting, which has been frightening the foreign investors during the last 2 years. Thus, assuring the investors in Russia’s safety for business was the top task of the talks.

“We are preparing additional, highly essential steps for institutional reform and lessening bureaucracy, strengthening the rights of proprietors, breaking up monopolies and also a clearer regulation of the work of tax bodies,” Putin, quoted by the Reuters agency, said.

He pointed to Russia’s strong economic indicators such as an annual growth rate of around 5.5 percent, gold and foreign exchange reserves of $150 billion and a significant cut in external debt since 1999, as reasons why his country should appear attractive to investors. “This all creates conditions for developing cooperation and I think that we have a right to count on more investment,” he said.

[FaGal]

Russia's roulette for foreign investors
www.theglobeandmail.com - By WENDY STUECK - June 27, 2005

Some companies see warning flags in resources; others see huge potential, WENDY STUECK reports


VANCOUVER - Nearly 10 years ago, Toronto-based Archangel Diamond Corp. and its two Russian partners discovered the Grib Pipe, believed to be one of the biggest diamond deposits ever found in western Russia.

But no one knows its size for sure because a licence dispute between Archangel and its partners has stalled work on the deposit since 1998.

And as the wrangle drags through international arbitration panels and American courts -- where Archangel in 2001 filed a lawsuit claiming more than $1-billion (U.S.) in damages -- the company can only stew and count its mounting legal bills.

"Frustrating as this is for the long-suffering shareholders of Archangel, it must also be a concern for the Russian government, a government that continues to maintain that it is keen to encourage foreign direct investment," president and chief executive officer Ray Clark wrote in a letter to shareholders this spring.

"In this regard, Archangel's long-running dispute with its joint venture partners . . . cannot be a helpful signal for sending to the world."

Exactly what kind of signals Russia is sending to the world, and to foreign investors, is a hot topic in the global resource sector. The recent conviction of oil tycoon Mikhail Khodorkovsky on fraud, tax evasion and other charges -- widely seen as a slap from Russian president Vladimir Putin to a would-be political rival -- raised questions about Mr. Putin's commitments to political and economic reform.

But where some companies see warning flags, other companies see a welcome mat, or at least a country so rich in resources it is too important to ignore.

Vancouver-based Bema Gold Corp. has jumped wholeheartedly into Russia, where the company has built one mine and is working on another.

Bema CEO Clive Johnson said concerns about Russia have been overblown, pointing out that international banks recently lent Bema $150-million in bridge financing for its Kupol project and are in talks to finance the rest of the mine.

Canada's biggest gold producer, Barrick Gold Corp., is also keen on Russia. Barrick opened a Moscow office this year and has bought stakes in two London-listed mining companies that have Russian assets.

Kinross Gold Corp. struggled through legal quagmires of its own in Russia in the 1990s.

New chief executive officer Tye Burt, who joined Kinross in March, had been pondering whether to turn the lights out in Russia after the company's Kubaka mine winds down this year. He recently decided to stay put.

"We like Russia, we understand the business environment and Kinross has a long-term track record there. And we don't want to allow that to dissipate," Mr. Burt said.

Kinross plans to explore around its current operations in the hopes of finding new deposits and is also open to working with other players on joint ventures, he said.

Toronto-based High River Gold Mines Ltd., which bought a stake in a Russian gold producer in 1995, has since increased its holdings and is building a new mine in Siberia.

Other companies, however, wouldn't touch the country with a barge pole.

At a mining conference in New York earlier this month, Pierre Lassonde, president of Denver-based gold giant Newmont Mining Corp., cited Russia's reputation for "bandit capitalism" and said Newmont would, for now, put its money elsewhere.

Vancouver-based Pan American Silver Corp., the poster company for Russian troubles during the 1990s after it lost control of the rich Dukat silver deposit, is spending its money in Argentina and Mexico.

Vancouver-based Goldcorp Inc., the new million-ounce producer on the gold scene since acquiring the former Wheaton River Minerals Ltd. earlier this year, is focusing on development projects in Mexico and Brazil.

A string of international companies have run into problems in Russia, Goldcorp CEO Ian Telfer said.

"I'm sure at some point they will get it sorted out, but we're likely going to wait a little bit longer," before getting involved, he said.

Patience, and a powerful backer, are helping Archangel keep up its fight for rights to the Grib Pipe.

Archangel's controlling shareholder is a subsidiary of diamond giant De Beers SA, which has provided financial support to keep Archangel afloat.

One of the parties in the Grib Pipe dispute is Russian oil company OAO Lukoil, which is also wrangling with Calgary-based oil producer PetroKazakhstan Inc. over assets in Kazakhstan.

Russia's enticing frontier

Russia is considered one of the most resource-rich, underdeveloped mineral regions of the world. Drawn by that potential, an increasing number of foreign investors, including Canadian companies, are venturing into the country. Here's a snapshot of some of the projects.

The Grib Pipe

Diamonds

Discovered in 1996

Undeveloped

Archangel Diamond Corp. and its Russian joint venture partners have been in a legal dispute since 1998.

Julietta mine

Gold

In production since 2001

Majority-owned by Bema Gold Corp.

Kupol project

Gold

Discovered in 1995

Expected start-up by 2008

Flagship project for Bema Gold Corp.

Sukhoi Log deposit

Gold

A major deposit, but plans by the Russian government to put it up to tender have been repeatedly postponed. Canada's Barrick Gold Corp. and Russia's Norilsk Nickel, which has been boosting its gold assets, have been named as potential bidders.

Dukat mine

Silver

The world's third-biggest primary silver deposit and for year the cautionary tale for would-be foreign investors. Pan American Silver Corp. spent millions on the project in the 1990s, but lost control of the mine in a legal battle and wrote off its $37-million (U.S.) investment in 2000.

But last year, Pan American sold its remaining 20-per-cent stake to its Russian operator for $43-million and is to receive up to $22.5-millio in future payments from the project - meaning its Russian adventure wasn't as disastrous as it might have been.

Kubaka mine

Gold

Discovered in 1979

In production since 1997

Scheduled to close by year-end

Owned by Kinross Gold Corp., which has been thinking of getting out of Russia but recently decided to boost exploration there, hoping to find more minable deposits.

[FaGal]

Banks offer Russia billions in loans despite fears

Wed Aug 17, 2005 9:20 AM ET



By Elif Kaban

MOSCOW (Reuters) - Lured by booming oil prices and friendly Kremlin ties, Western banks want to extend Russia the largest loans in its history, brushing aside fears of bad debts, the ghosts of fallen YUKOS and high levels of borrowing.

The biggest loans include $7 billion to fund Russia's purchase of a 10.7 percent stake in gas monopoly Gazprom, $2 billion for state oil firm Rosneft and up to $10 billion for Gazprom to buy oil firm Sibneft.

One group of banks even temporarily waived covenants protecting their rights in a dispute over a defaulted loan with Rosneft so they could lend it even more money, bankers said.

Bankers say such compromises are critical to winning the Kremlin's favor and doing business in Russia, the world's largest gas producer and second-largest exporter of crude oil and a booming market for banks awash with money to lend.

One banker likened the interlocking financial interests to a close-circle medieval dance, with everyone tied in it together.

"We are all locked in a circle of Farandole, holding each others' hands. But it could all end in tears," he told Reuters.

Rosneft's creditors are dangerously exposed, warned Elena Anankina, credit analyst at international rating agency Standard & Poor's, who said the deals looked risky when stress-tested.

"Banks perceive a high degree of Kremlin support but there's no guarantee on Rosneft debt if things go wrong," she said. "All these deals are intertwined. Banks are taking big credit risk."

A sharp drop in oil prices could quickly change the logic of many of the loans, as could a repeat of the YUKOS affair.

Several banks have failed to recoup $482 million lent to YUKOS and secured by the exports from oil company's main asset, Yugansk, which was acquired by Rosneft.

Rosneft's refusal to repay the loan put it in technical default with the creditor banks and prevented it from borrowing more.

To resolve the problem, the creditor banks have temporarily waived some of their restrictive covenants in return for a pledge by Rosneft to pay interest on the loan, bankers said.

That settlement, bankers hope, will ensure the success of a five-year, $2 billion loan secured by Rosneft's oil exports, which is about to go into senior syndication.

MORTGAGED TO THE HILT?

Worryingly for bankers, Rosneft has already sold to China 50 million tonnes of its oil exports over the next five years, or 13 percent of its output over that period, for $6 billion.

And Rosneft's assets are also being offered as collateral by Russia's privatisation agency as it seeks to raise $7 billion to fund the state's purchase of a 10.7 percent stake in Gazprom.

That is being raised by Rosneftegaz, a special purpose shell vehicle set up by the state in which Rosneft has been parked.

Banks leading that deal are working to build a syndicate to share the risk, but not everyone is comfortable.

"The situation is very messy," said one senior banker at a major European bank who asked not to be identified. "The concern is that Rosneft is very highly leveraged and you have two very big deals coming at the same time, Rosneftegaz and Gazprom."

There is only so much money the Russians can raise from the same set of assets, said another banker.

"Rosneft is already in a credit mess. By collateralising it even more, too much weight is being put on the life boat. If things go wrong, or if oil prices fall, things can turn very ugly. There wouldn't be sufficient collateral for everyone."

Rosneft's net debt jumped to $22.65 billion in 2004 from $4.24 billion in 2003 after it bought Yugansk for $9.4 billion, three times its book value at the time.

IN WITH THE KREMLIN?

For banks, the Kremlin holds the key to some of the biggest Russian corporate finance deals which are all state mandates as the government increases its grip over Russia's energy riches.

As a result, some have found themselves at the center of highly sensitive, controversial and legally risky situations surrounding the YUKOS carve-up which outspoken Russian liberal Andrei Illarionov has likened to "the fraud of the year."

YUKOS was crushed with a $27 billion bill for unpaid taxes and its owner Mikhail Khodorkovsky jailed for tax evasion and fraud.

"Big investment banks have been supine about YUKOS," said John Paul Smith, fund manager at London-based Pictet Asset Management running $5.5 billion of assets.

"People assume YUKOS won't happen again. But I don't see any guarantee. I think the risk won't go away for a very long time."

[FaGal]

Embattled Russian bank stops accepting deposits
en.rian.ru - February 27, 2006


MOSCOW - Moscow-based Neftyanoi (Oil) Bank announced Monday that it had temporarily stopped receiving deposits from private customers.

On December 8, police raided Neftyanoi Bank and seized documents that prosecutors said proved the bank was involved in money laundering.

"Investigators said the documents seized from Neftyanoi Bank were evidence that it had used fake companies and their accounts to conduct illegal bank transactions and launder money," The Prosecutor General's Office said in a news release.

However, the bank's press secretary said the prosecutor's office had not presented any documents that would corroborate the charges.

Neftyanoi Bank was founded by a group of fuel and energy companies in 1991. Its current shareholders are construction and developer companies. As of April 2005, the bank's equity funds aggregated $58 million and its assets totaled $224 million. The bank has authorized capital of $54 million and financial investments valued at $96 million.


Money laundering an acute problem in Russia
www.tehrantimes.com - February 28, 2006


MOSCOW – The early 1990s were a time when crime penetrated the Russian economy and money started flowing out of the country, whose legislation was lagging far behind the world’s anti-money laundering laws.

As a result, the Financial Action Task Force on Money Laundering (FATF) put Russia on the black list of “tax havens” in 2000, which led to various discriminatory measures against Russian financial institutions.

In the last several years, Russia has done a great deal to remedy the situation. In 1999 it signed the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, in line with its obligations as a CoE member. One direct result of ratifying the Convention was the creation of national anti-money laundering legislation.

In 2001, Moscow adopted a law “On Countering the Legalization (Laundering) of Criminal Incomes.” Since money is mostly laundered through fiscal agencies, the law is aimed at acquiring and analyzing information about their financial operation. It includes a list of controllable transactions and a list of organizations that must inform the state about such deals.

The relevant organizations are lending establishments, professional players on the securities market, insurance, lease, mail and telegraph communications companies, and other non-lending organizations that transfer money, as well as pawn shops.

The law stipulates that transactions involving upwards of 600,000 rubles ($21,413, or 17,549 euros) are to be controlled.

The Federal Service of Financial Monitoring (FSFM), which was charged with combating money laundering, collects, processes and analyzes information about financial transactions. If it finds reasons to suspect money laundering, it forwards relevant information to law enforcement agencies.

This is nothing less than a system of financial intelligence similar to the one used in the U.S. As a result, Russia was removed from the FATF black list in 2002 and became a full member of the organization in 2003. In 2005, the FSFM filed 800 money-laundering suits and forwarded cases worth $20 billion to law enforcement agencies.

FSFM head Viktor Zubkov said that the world recognized Russia’s anti-money laundering efforts.

FATF President Professor Kader Asmal praised Russia’s initiative of creating a Eurasian Group to combat money laundering and terrorism financing (Eurasian Antiterrorist Group, EAG). The 2005 plans of its members – Russia, Belarus, Kazakhstan, Kyrgyzstan, China and Tajikistan – include the proliferation of the FATF Forty Recommendations on combating money laundering and Eight Special Recommendations on terrorism financing.

In summer 2005, Russian President Vladimir Putin approved a Concept of the National Strategy of Combating Money Laundering and Terrorism Financing. The FSFM has submitted a five-year action plan for its implementation. The plan’s four basic strategies include the improvement of anti-money laundering legislation and relations with law enforcement agencies, professional training and re-training of specialists (including investigators and prosecutors), and the strengthening of international cooperation.

Russia is creating an interdepartmental commission on combating money laundering and terrorism financing that is to coordinate effective interaction of federal authorities and the Central Bank of Russia in this sphere.

Russia’s first training and methods center is being established at the FSFM to train some 4,000-5,000 specialists within a few years.

The FSFM has also formulated proposals on solving the most pressing problems of anti-money laundering operation. Service head Viktor Zubkov said the main problem was the fly-by-night companies set up to launder money, or fictitious companies that use lost or misplaced documents to get official registration. To limit the possibilities of such fly-by-night companies, the FSFM has suggested giving financial investigators the right to freeze money on the accounts of suspected companies for up to 45 days. “This would be a good start for opening a financial investigation,” Zubkov said. “I am convinced that nobody will come to collect 90% of such money, which would be subsequently transferred to the budget.”

The FSFM has also suggested a clampdown on cash settlements. In particular, the Finance Ministry and the Central Bank should “draft a program of reducing the volume of cash in the national economy, which amounts to some 40% of money circulation.” But these suggestions have not been formalized so far.

The Russian Interior Ministry reports that some 150-160 billion rubles ($5.71 billion, or 4.68 billion euros) are laundered in Russia annually, but experts put the figure at about 400 billion rubles ($14.28 billion, or 11.7 billion euros).

Money laundering remains an acute problem in Russia. It is directly connected to combating terrorism and crime financing and seriously affects market stabilization and the attraction of foreign investment.

[FaGal]

Two-thirds of Russian banks involved in money laundering
english.pravda.ru - May 23, 2006


The Director of the Department for Financial Monitoring and Currency Control of the Central Bank Elena Ishchenko announced yesterday that two thirds of Russian banks are complicit in money laundering. According to her, last year the Central Bank examined the activity of 797 credit organizations and in 90-95% of cases questions arose concerning actions taken against the legalization of their income. The regulator employed various measures, ranging from the usual orders to correct the infringement to revoking the bank’s license. According to Ms. Ishchenko, in the last year the Central Bank imposed 284 fines, in 238 cases took the decision to prohibit banks from carrying out certain types of operation, issued 373 orders to correct the infringements which had been detected, and in 14 cases withdrew their license. Participants in the market, admittedly, do not see anything terrible about this statistic and note that now, in contrast to events of the last two years, the regulator is reporting on successes in the fight against money laundering more circumspectly.

In the view of the analyst for Troika Dialog Sergey Donskoy we should not dramatize the situation: “The question is what to consider as an infringement”. According to the Deputy Leader of the Federal Financial Monitoring Service (FFMS) Dmitry Skobelkin, “among the banks which are violating the “anti-laundering” law, there are credit organizations which are neither organizing nor actively participating in dubious activities, but who are let down by their clients”. Each case should be examined separately, since revoking a bank’s license is the equivalent of a “death sentence”, he thinks. In connection with this, Mr. Donskoy continues, “many Russian banks really are legalizing revenue, and it is good that the Central Bank is examining their activities”.

Bankers themselves are actively helping the authorities to expose the dubious operations of their clients. According to Mr. Skobelkin’s figures, the volume of information sent in by banks to the FFMS doubled last year, to 3 million reports. However, ‘Rosfinmonitoring’ is not too happy with such an increased activity on behalf of the banks. About 5% of the data received from banks contains technical mistakes. “This either shows that the banks are insufficiently aware of the demands of how the information should be presented, or that they are deliberately clogging up our base with incorrect reports,” speculates Skobelkin.

Representatives of both the Central Bank and the FFMS are guardedly commenting on the results of their activities, and are not planning to shock the public with announcements about black lists and the imminent withdrawal of banks’ licenses. “The regulator is now pursuing a more cautious policy with regard to announcing the results of their fight against money laundering and is not going to pinpoint their attention on any specific cases,” says Mr. Donskoy. “At least the story of the last two years is not being repeated, when information about black lists became one of the reasons for the instability in the banking sector.”