President of Russia Vladimir Putin: Mr Chikhanchin, good afternoon. Go ahead, please.
Head of Federal Service for Financial Monitoring Yury Chikhanchin: I would like to report on the national anti-money laundering system’s performance in the recent period.
Vladimir Putin: Please.
Yury Chikhanchin: Here are the main points. One has to do with the situation on the FATF international platform, the intergovernmental organisation that handles money laundering and financing of terrorism.
Russia’s FATF membership has been suspended; as it is, we are only allowed to work in the regional Eurasian group, which also includes China, India, Central Asian republics, and Belarus. Our opponents continue to take steps to completely exclude us from FATF and put us on the blacklist. But we are still cooperating with ministries and agencies. So far, we have been able to prove that FATF is a technical platform, and the Russian Federation meets its standards when it comes to our national anti-money laundering system.
A similar situation is observed on another international platform, the Egmont Group, which facilitates cooperation between financial intelligence units from about 170 countries. Here, too, an attempt has been made to exclude Russia, but the member countries have not made this decision. However, the group suspended our membership and disconnected us from the Egmont network, which deprived us of the opportunity to receive the requested information online.
However, we are looking for other options and channels, especially since as of the time of suspension, Russia was working with more than 50 countries, and was involved in almost 700 financial investigations and about 230 criminal cases.
Therefore, we believe that such steps benefit only the criminal world. Moreover, Rosfinmonitoring and the FSB have recently been investigating a case where Russian citizens and foreigners have created a so-called call centre in one of the European countries, where more than a hundred people have fraudulently obtained money under the guise of charity. We made a request to that country, even two requests, but have received no answer. We realise that this inaction plays into the criminals’ hands. Nevertheless, we continue our work.
In October, the leaders of the CIS states signed an agreement on establishing an international risk assessment centre. The centre has already been launched. With my colleagues from the CIS, we have analysed all criminal cases and identified the countries to which criminals siphoned money, as well as the banks and contractors involved. We are currently working on these countries. Dozens of financial investigations have been started. This is working.
The analysis I mentioned allowed us to identify the countries and banks that required closer attention, and to inform ministries, government agencies and strategic institutions that they should consider this a risk. Here in the presentation, you can see the dynamic. If you look at these countries and banks, there has been a sharp decline.
Of course, our opponents have been asking questions and saying that our system for countering money laundering is ineffective, but I can assure you, they are deeply mistaken. Indeed, we had certain problems in 2022, when sanctions were imposed on Russian banks and some customers migrated to smaller regional banks.
We have taken major efforts in cooperation with the Central Bank, and today I can say that around 90 percent of the financial institutions and organisations in the country are quite law-abiding. We continue to work with the remaining 10 percent. This year alone, this mechanism allowed us to prevent the shadowing of around 320 billion. It became possible thanks to the joint action with the Central Bank and developing a know-your-customer mechanism.
We have shut down ten shadow platforms with a turnover of 28 billion [rubles] to date, and have opened (or are preparing to open) about 1,500 criminal cases in cooperation with the Interior Ministry, the Federal Security Service and the Investigative Committee. Eleven billion has been recovered in favour of the state budget.
We take action to prevent fraud in financial markets, particularly, the operation of pseudo-brokers and pyramid schemes. There are two nuances here. First, almost all of them operate online and are hard to expose but we are working on it. Second, these scams are luring in a great number of so-called drops who voluntarily provide their identification data for shadow schemes at a small fee. Finally, people who are unaware of this simply take the bait. Their number has tripled this year.
The worst thing is that a great number of young people take part in such schemes, ruining their lives and credit history. In the future it will be difficult for them to open bank accounts, take out loans, etc. But in cooperation with law enforcement agencies, we have managed to expose 14 pyramid schemes and opened 380 criminal cases against their organisers and participants. Two billion in funds has been seized.
There is another mechanism which has become quite effective. During our previous meeting, I reported on attempts to involve courts.
Vladimir Putin: You mean to use the judiciary to illicitly collect payments?
Yury Chikhanchin: Yes, by filing fake documents. Today, there is a method for working with the courts, and these practices have already prevented 94 billion from being injected into the informal economy. This goes to say that we have very positive…
Vladimir Putin: This goes to say that you prevented them from getting their hands on these funds. Is that so?
Yury Chikhanchin: Yes.
We have been carrying on with our efforts regarding cryptocurrencies. Due to insufficient regulation, the number of suspicious transactions has doubled. They mostly have to do with drugs, fraud and corruption.
Vladimir Putin: You mean laundering proceeds from drug trafficking?
Yury Chikhanchin: Yes. Unfortunately, terrorists also use these tools.
However, thanks to the software solution you approved we have been able to launch, together with VTB, a transparent blockchain which enables us to investigate crypto-related cases. Moreover, about 7,000 law enforcement officers and officials from other relevant agencies are currently connected to this blockchain. We have also connected six countries, and they use it too. This enables us to file criminal charges against suspects.
I would like to say a few words about our efforts on the budget. Thank you for your decision to enable treasury institutions to oversee the banking sector, which enables us to monitor over 1.5 million contracts of various kinds.
Vladimir Putin: What is their total worth?
Yury Chikhanchin: We are monitoring contracts worth about 6.5 trillion rubles.
By working with the Bank of Russia and law enforcement agencies, we have been able to deliver on this objective. In particular, we worked with the Anti-Monopoly Service to crack down on illegal trade transactions worth a total of almost 30 billion, saved another 30 billion in budget resources, and worked with the Interior Ministry, the Federal Security Service and the Investigative Committee on about a thousand budget-related cases. This helped the budget recover about 190 billion rubles.
As far as our performance is concerned, we have been working with the Central Bank and the Taxation Service to reduce cash-out transactions with budget funds by 20 percent and the use of straw companies by 10 percent.
We have been doing the same work with defence procurement, which has already saved us 6.5 billion rubles in 2023. I have to say that the relevant mechanisms are in place and are effective, and the number of crimes related to defence procurement is declining. But most importantly, we managed to reduce overdue receivables.
Vladimir Putin: For the Defence Ministry?
Yury Chikhanchin: Yes. We have been working with the Defence Ministry, the Prosecutor General’s Office and the Federal Security Service, as you can see in the presentation. Since 2020, the occurrence declined three-fold. This year alone, we closed 43 major contracts for a total of 50 billion rubles.
We continue working in the new constituent entities. We have launched fiscal and banking support there as well. We control almost 1.7 trillion rubles in total along with hundreds of different foundations that assist with the region’s restoration.
We are closely cooperating with Marat Khusnullin’s team and commission. The result is that, as of today, we have prevented the embezzlement of almost 14.5 billion rubles and opened criminal cases.
We have started working on the mandatory selling of foreign currency by Russian exporters, as per your executive order. We are cooperating with the Government, specifically, with the Finance Ministry, the Ministry of Economic Development and the foreign currency control bodies such as the Central Bank.
What have we achieved? First of all, First Deputy Prime Minister Andrei Belousov coordinates this work. We have created an account system for working with exporters and developed the procedure regulating interaction with authorised persons. The executive order appoints persons authorised to work with exporters. A methodology for monitoring the mandatory sale of foreign currency has been approved. The methodology is working. Monitoring parameters have been determined. We have identified all parent and subsidiary structures, including non-residents. We are adjusting the counter-laundering system to integrate with the foreign-currency revenue monitoring mechanism. We have identified all the banks. I can say that we have done serious work.
Vladimir Putin: Has the number of banks increased?
Yury Chikhanchin: Yes, it is around 300 banks to date.
We are working hard and meeting with exporters. Here I want to thank the Russian Union of Industrialists and Entrepreneurs and Mr Shokhin personally. We meet with him as well. Overall, I should say that all the exporters understand the purpose of this. There are some nuances; we have already accessed the documents, the investigation, but it is a working mechanism. Your executive order on additional workforce has been signed. We will use all these resources.
We are working to improve financial literacy and security. Together with the Government, we have created a committee on the Financial Literacy Olympiad, supervised by Mr Chernyshenko on behalf of the Government. The Ministry of Education and the Ministry of Higher Education are the primary parties helping us, of course, along with the International Study Centre, the Financial University, the Peoples’ Friendship University and MEPhI. This year, participants from 19 countries participated in the Olympiad. You attended its plenary session.
Vladimir Putin: The Olympiad movement includes 6 million people, doesn’t it?
Yury Chikhanchin: Yes, it does.
Vladimir Putin: Incredible. It is a big number.
Yury Chikhanchin: Yes. These are financial literacy lessons. As many as 19 countries are involved. We have received applications from 25 countries for the next Olympiad.
We are also working on the initiative proposed by Brazilian student Augusto. He proposed creating an international movement. I will report on this later.
We have launched an ICT platform for school and university students, developed by Promsvyazbank at your instruction. We are grateful to the bank.
In addition to our work with students and schoolers, we have launched a similar project called New Generation, in cooperation with the Federal Agency for the CIS Affairs, Compatriots Living Abroad, and International Humanitarian Cooperation (Rossotrudnichestvo), for financial intelligence specialists. Seven countries are involved, and more countries want to join. This is an outline of our work.
Vladimir Putin: Thank you.