Russia, under pressure from Western democracies, adopted a new law Tuesday meant to combat money laundering.
Officials here say the law brings Russia into compliance with standards drawn up by an international convention on money laundering, the term for transferring illegally obtained funds through a chain of bank accounts to make it appear legitimate. Russia promised in 1999 to meet the standards.
But as late as this spring, Russia had not passed the necessary legislation and the Financial Action Task Force, an agency set up by the Group of Seven industrial countries, placed Russia on a blacklist of countries not following the rules. Russian officials said Tuesday that their country should now be removed from that list.
The legislation, which was signed into law by President Vladimir Putin, requires banks and other financial institutions to report to the government any customer transactions of more than 600,000 rubles (US$$20,500). Officials say they will scrutinize cash purchases of stocks and foreign currency as well as cash transfers and check deposits under the law.
But the new law does not spell out how banks are to make reports, and analysts said there was little chance of the law having much effect.
Russian financial laws are typically enforced only sporadically by weak justice institutions, and economic crimes are rarely prosecuted here. Enforcing the new law would entail a high level of cooperation between federal and local agencies and access to computerized databases, both of which are lacking.
"We don't expect large-scale implementation," said Alexei Zabotkine, chief economist at the United Financial Group, a Moscow investment bank. "The law is more for foreign consumption than for real action."
Russia's bewildering tax system, frequent changes of government and shaky banks have led business people and ordinary citizens alike to look for safe havens outside the domestic financial system for their savings and investments. Zabotkine estimates that some US$15 billion in such savings is stashed abroad, or under a mattress, mainly to escape tax and Russia's brittle foreign-currency regulations. According to a finance ministry official, only about 1 percent of such hidden money is associated with criminal groups.
"The main problem in Russia is not money laundering," Zabotkine said. "It's that corruption and high instability cause people to keep their money abroad."
Criminals would be unlikely to turn to Russian banks to hide their gains, Zabotkine said, because the banks are closely watched by the Russian central bank, and concealing big bank transactions would be very difficult.
A finance ministry official said the government would soon begin giving special scrutiny to transactions involving the Group of Seven's list of offshore tax havens.
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